[Senate Hearing 111-303]
[From the U.S. Government Publishing Office]
S. Hrg. 111-303
OFFSHORE ENERGY PRODUCTION
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
TO
RECEIVE TESTIMONY ON ENVIRONMENTAL STEWARDSHIP POLICIES RELATED TO
OFFSHORE ENERGY PRODUCTION
__________
NOVEMBER 19, 2009
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Amos, John F., President, SkyTruth, Shepherdstown, WV............ 28
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Cruickshank, Walter, Deputy Director, Minerals Management
Service, Department of the Interior............................ 6
Dorgan, Hon. Byron L., U.S. Senator From North Dakota............ 3
Hrobsky, Jon, Director, Policy & Government Affairs, National
Ocean Industries Association................................... 65
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 5
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 2
Odum, Marvin E., President, Shell Oil Company, Houston, TX....... 14
Rainey, David, Vice President, Gulf of Mexico Exploration, BP
America, Inc., Houston, TX..................................... 35
Short, Jeffrey, Pacific Science Director, Oceana, Juneau, AK..... 42
APPENDIX
Responses to additional questions................................ 69
OFFSHORE ENERGY PRODUCTION
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THURSDAY, NOVEMBER 19, 2009
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10:35 a.m. in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. All right, thank you all for coming. This is
a hearing on environmental stewardship and offshore oil and gas
development. These are vitally important issues to the long-
term sustainability of our ocean resources and, obviously, to
our national energy policy.
It's my hope that as part of this hearing we can focus on
the facts surrounding offshore oil and gas production and its
impact on the environment. At the end of the hearing, I hope
we'll have a better understanding of these issues that will
help us in the upcoming debate on these subjects on the Senate
floor. In the hearing, we're following up on issues that were
raised during the markup of our energy bill.
Policy suggestions were made by Senator Dorgan and others
about ways of addressing environmental concerns in this area.
These ideas included limitations on structures within the line-
of-sight of the coastline and the creation of ``no
development'' buffer zones of various sizes between the coast,
and actual production activities offshore. I think we all
agreed that such discussion would benefit from a better
understanding of the facts involved and that a hearing that
would focus on these issues would be useful.
The witnesses bring a wide variety of expertise to the
subject. We have representatives from the Department of the
Interior's Minerals Management Service, the oil and gas
industry, experts on ocean resources conservation. Each of
these witnesses has significant technical and scientific
experience with oceans and energy development.
We look forward to a productive discussion. Let me call on
Senator Murkowski for any comments she has.
[The prepared statement of Senator Bingaman follows:]
Prepared Statement of Hon. Jeff Bingaman, U.S. Senator From New Mexico
Welcome, everyone, to this Full Committee hearing on environmental
stewardship and offshore oil and gas development. The issues we will
discuss today are vitally important both to the long term
sustainability of our ocean resources and to our national energy
policy. They are much debated, but unfortunately often with more heat
than light on all sides.
It is our hope in this hearing to move away from rhetoric and to
focus on the facts surrounding offshore oil and gas production and its
impact on the environment. At the end of this hearing I hope that we
will have a better understanding of these issues that will guide our
work on the Committee and in the Senate going forward.
In this hearing we are following up on some issues raised during
the markup of our energy bill earlier this year. Policy suggestions
were made by Senator Dorgan and others about ways of addressing
environmental concerns in this area. These ideas included limitations
on structures within the line of sight of the coastline and the
creation of no-development ``buffer zones'' of various sizes between
the coast and production activities. I think we all agreed that such a
discussion could benefit from a better understanding of the facts
involved, and that a hearing focused specifically in this area would be
useful.
I look forward to hearing more about the environmental concerns
presented by offshore development, the technologies and procedures
available to address those concerns, and policy ideas to further
environmental protection in the context of this development. It is my
hope that we can use our time today to focus on these issues in
particular, given the need for additional factual information in this
area.
The panel of witnesses here today brings a wide variety of
expertise to these issues. We have representatives from the Department
of the Interior's Minerals Management Service; the oil and gas
industry; and experts on ocean resources conservation. Each of these
witnesses has significant technical or scientific experience with
oceans and energy development, and we look forward to a productive
discussion.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. Again,
appreciate you convening this very important and timely
hearing.
I wasn't sure that we were actually going to be returning
to the OCS development this year after completing our energy
bill, but I'm glad that we're continuing the conversation.
To start, I want to again congratulate you and Senator
Dorgan for working with Republicans to advance an offshore
production title in the energy bill. I think we recognize that
there's a need for balance in resource production with our
responsibility to protect the environment. I do hope that we
can improve on that production title and get the energy bill
that we worked so hard on signed into law.
We have got a duty to prevent and ameliorate environmental
harm, and certainly buffer zones are one of the many ideas that
can help protect our coastal areas. But, as we consider our
options, I think we need to recognize that some of these ideas
make more sense than others. I'm glad that we have the panel
here to explore some of those in greater detail.
Our committee has also debated revenue sharing. I believe
it's critical to environmental stewardship. Revenue sharing
should be thought of as a collaboration between the Federal
Government and coastal producing States necessary to secure
meaningful production and to ensure that States and communities
can study and adjust for any environmental impacts they might
face.
I'm proud of the bill that Senator Landrieu and I
introduced, and I would remind my colleagues that there is a
real and continuing need to reach agreement on this issue,
because it's not going away. In the meantime, I am compelled to
voice my growing concern over this administration's approach to
OCS. It's now been over a year since the offshore moratoria
were lifted. This committee has voted for greater offshore
production to boost our economy and our energy security. But,
there have been many executive actions, and perhaps a few that
have not been taken, that appear to be taking us in an opposite
direction.
As we speak, the President's Ocean Policy Task Force is
developing recommendations that could effectively zone the
oceans, in much the same way a local government could plan and
zone a city.
In September, the NOAA Administrator signed a letter to MMS
criticizing most of the 5-year plan and suggesting its own set
of deferrals, removals, and buffer zones. Then there's the EPA,
which has taken its authority for the permitting of OCS
development outside of the Gulf of Mexico, and run with it. The
agency has taken nearly 4 years now to consider an air permit
for exploratory ships in our extremely remote Arctic areas.
Some 200,000 miles, mostly offshore in resource-rich area
of Alaska, had been proposed as critical habitat for polar
bear. The Interior Department has committed to viewing all of
its actions through the lens of climate change. Then hanging
over all of this is Interior's coming release of the revised 5-
year plan, which will rank the sensitivity of coastal areas as
a result of litigation by environmental groups.
So, Senator Dorgan's proposal for line-of-sight
restrictions and a 25-mile buffer zone is really just one of
the many pending limitations. But, at least it's originating
here in the Energy Committee, where it can be properly vetted
and debated. As we do, I think that we need to keep in mind
just how many others are seeking authority that could be used
to make the development process more complex than perhaps it
should be. Instead of allowing many different agencies to
control pieces of the offshore development process, we should
be consolidating management, preferably to just one agency
under this committee's jurisdiction.
We'll have to work hard to restore our authority over the
OCS, but it would be better for both resource development and
environmental stewardship if we did. I don't think that these
goals are mutually exclusive, although perhaps some policies
might tip that balance too far in one direction.
I'm glad we're having the opportunity to explore this here
today, Mr. Chairman. Thank you.
Mr. Chairman. Let me--since we don't have many members, let
me just see if Senator Dorgan would like to make a statement--
and Senator Menendez, as well--before we hear from the
witnesses.
STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH
DAKOTA
Senator Dorgan. Mr. Chairman, thank you. I asked for this
hearing because I think, in the midst of discussion about
climate change and energy policy, the issue of energy security
will almost certainly require us to pursue the production of
new energy from virtually every source. The question is, How do
we produce additional energy, American-produced energy, in a
manner that is in harmony with our responsibilities for
environmental stewardship?
During the debate earlier this year, I withheld an
amendment that would have established in a requirement--a
requirement that would set new standards on how oil and gas
would have been produced on the Outer Continental Shelf, based
on various types of technologies, in terms of projects--a
project's distance to shore. I withheld that amendment, and yet
you indicated you would hold this hearing.
I requested this hearing really to focus on the technical
issues of environmental stewardship, rather than to rehash the
tired questions and old questions, but ones that won't go away
in other hearings, I assume, on State revenue sharing, royalty
reform, the 5-year planning process, and so on.
I think this question of environmental stewardship, and the
technical questions that relate to that, vis-a-vis, line-of-
sight and 25 miles verses 45 miles, et cetera, are very, very
important.
I do want to mention that, during the 2005 hurricane
season, when Katrina and Rita tore through the Gulf of Mexico,
we had some damage to facilities in the Gulf--168 platforms had
some damage, 55 rigs, 560 pipeline segments--and yet there were
no major oil spills. The total amount of petroleum that was
spilled as a result of the two most vigorous storms in many,
many, many decades was 15,000 barrels. That's about the size of
an Olympic-size swimming pool. So, it suggests--and, I think,
clearly suggests--that the technology has advanced in a very
significant way. As a result of that, I offer the amendment
that would open up the eastern Gulf. That had a 45-mile buffer
zone, in the amendment that I offered. That eastern Gulf
amendment, as you know, passed this committee.
The question with respect to the Outer Continental Shelf,
all of which is now open, and the production in the Outer
Continental Shelf, is, What would be done with respect to a
buffer zone there? The amendment that I had offered would have
restricted surface presence, have ``no surface presence'' on
line-of-sight. It would have had a 25-mile-plus ``no surface''
restriction. But, I think it is important for us to have a
discussion in a committee hearing like this. What about these
buffer zones? What are the consequences of them? How do we do
the things that are necessary to unlock the opportunities so
that we can produce more American energy?
Mr. Chairman, you and I and Senator Domenici and Senator
Talent were the first to offer legislation to open up Lease
181. A portion of that is now open as a result. In my judgment,
more of those areas will become open on the Outer--well, more
of those areas in the eastern Gulf will become open--all of it
will become open as a result of our amendment if we get our
bill to the floor at some point. Then the rest of the Outer
Continental Shelf is open. So, the question is, How do we
produce? With what environmental stewardship requirements do we
begin this venture to produce more American energy?
So, I thank you very much for calling this hearing, and
look forward to the witnesses' testimony.
Mr. Chairman. Thank you.
Senator Menendez, did you wish to make a statement before
the witnesses----
STATEMENT OF HON. ROBERT MENENDEZ, U.S. SENATOR FROM NEW JERSEY
Senator Menendez. Very briefly, Mr. Chairman. Thank you for
the opportunity.
You know, for those of us who look at States, like New
Jersey, with a coastal line that is a national treasure and
incredibly important to our economy and tourism, and the
fishing industries that are economic engines of our State, we
have concerns for any threat or risk to our shore. That is
taken as seriously as the desire to produce energy. We don't
think it's an unfettered concern or an unreasonable concern.
You know, there's natural disasters. Hurricane Katrina and
Rita alone spilled some 9 million gallons of oil and--offshore
and onshore operations. We see that, in fact, this is--
recently, the National Academy of Sciences study showed us that
current cleanup methods are still incapable of removing more
than a small fraction of the oil spilled in marine waters.
We look at the testimony this committee just most recently
had, once again, where we had the Energy Information
Administration say that the total unfettered drilling that some
would seek on the Outer Continental Shelf would have no
significant impact on domestic oil and natural gas production
or prices. Or prices.
Finally, I look at just what happened in Australia, with an
entity that is state-of-the-art and is operating here in the
United States, and I see millions and millions of oil spilling
and weeks before, in fact, they cap it off.
So, I know everybody says that can't happen here. But, the
fact is that it has happened. MMS has over 40 documented spills
of 47,000 gallons or more in the last decade or two--couple of
decades, I should say.
So, you know, when I look at Rita, Katrina, I look at just
what happened in Australia, it's a real cause for concern.
So, I appreciate the balance that you've brought to the
panel, Mr. Chairman, in today's hearing, and look forward to
the witnesses.
Mr. Chairman. Very good.
Let me introduce our witnesses, and then we'll hear from
them. Dr. Walter D. Cruickshank is here. He is deputy director
of the Minerals Management Service in the Department of
Interior.
Thank you for being here.
Mr. Marvin Odum, who's not a regular witness, but a welcome
witness here. He has been here before. He's president of Shell
Oil Company in Houston.
Thank you for coming.
Mr. John Amos is president of SkyTruth in Shepherdstown,
West Virginia.
Thank you for being here.
Mr. David Rainey is vice president of Gulf of Mexico
Exploration with BP America.
Thank you for coming.
Mr. Jeffery Short is Pacific Science Director for Oceana,
which is located in Juno, Alaska.
Thank you very much for being here.
If each of you could take 5 or 6 minutes and give us the
main points you think we need to understand about these issues,
that would be greatly appreciated. Your full statements will be
included in the record, so you don't need to go through it all
with us. But, what are the main things we need to understand
when we consider this set of issues.
Mr. Cruickshank, you wish to go ahead?
STATEMENT OF WALTER CRUICKSHANK, DEPUTY DIRECTOR, MINERALS
MANAGEMENT SERVICE, DEPARTMENT OF THE INTERIOR
Mr. Cruickshank. Thank you, Mr. Chairman, Senator
Murkowski, and members of the committee. Appreciate the
opportunity to discuss the Minerals Management Service's
stewardship in promoting environmentally responsible energy and
mineral development of the Outer Continental Shelf.
MMS's responsibilities extend over about 1.7 billion acres
of the Outer Continental Shelf, or OCS. These responsibilities
range from the initial resource assessments through the
exploration, development, production, and, ultimately, the
decommissioning of offshore facilities. We are charged with
managing access to, and development of, oil and gas, renewable
energy, and marine minerals in a manner that is operationally
safe, environmentally sound, prevents waste, and provides a
fair return to the public for its resources.
For over 50 years, the Department of the Interior and MMS
have overseen the OCS program by enforcing regulations,
developing standards, and conducting environmental and
technological research. The committee asked me to highlight
MMS's stewardship role with respect to oil and gas resources. I
will provide a brief overview of three areas: how we determine
which areas to lease, our environmental protections and
standards over energy development, and our research programs.
More detail on these topics can be found in my written
statement, which I have submitted for the record.
The OCS accounts for about 27 percent of the oil and 14
percent of the natural gas produced in the United States. We
manage access to this oil and gas through our 5-year OCS Oil
and Gas Leasing Program. In developing this program, we
evaluate the economic, social, and environmental values of all
the resources of the ocean and the OCS, and we look at the
potential impact of oil and gas exploration on these resources
and on the marine, coastal, and human environments. After a 5-
year program is finalized, there is further environmental
review and consultation with other Federal agencies, State,
local, and tribal governments, and other stakeholders before
holding any individual lease sale. As a result of this process,
additional areas may be excluded from leasing and mitigating
measures may be required to address any potential impacts from
exploration and development.
MMS's responsibilities do not end when the leases are
executed. We oversee a regulatory program that mixes
prescriptive requirements and performance-based goals: failsafe
mechanisms, including emergency shutoff valves and other safety
equipment that are tested regularly; a robust inspection and
enforcement program, which conducts over 25,000 inspections per
year; conservation requirements to ensure the greatest ultimate
recovery of oil and gas from developed fields and to limit the
flaring and venting of natural gas; oil-spill planning and
response, including plans for responding to worst-case
scenarios, and we conduct over 30 unannounced spill drills
every year to test the capabilities of implementing those
plans. All of this is done in coordination with other Federal
agencies and State governments.
We also administer a comprehensive environmental studies
program that has invested about $840 million in research to
support our stewardship role. We conduct studies in a variety
of subject areas, including marine mammals, benthic biology,
physical oceanography, fates and effects of discharges, and
socioeconomics. Our research has added significantly to the
scientific knowledge of the marine environment. For example,
nearly 300 new marine species have been discovered as a result
of the MMS studies.
Our goal is to provide the information necessary for
decisionmaking and in an adaptive management framework, and to
develop workable solutions, such as mitigation measures, for
activities that could impact the environment.
MMS also funds research into operational safety, pollution
prevention, and oil-spill response and cleanup through its
technology, assessment, and research program. As part of this
program, MMS manages the Ohmsett wave and test tank facility in
New Jersey, which provides oil-spill response testing,
training, and research opportunities to all comers.
One of the best examples of MMS's environmental stewardship
is the Flower Garden Banks in the Gulf of Mexico, the
northernmost coral reef in North America's continental shelf.
Starting in the 1970s, the Department of Interior began
extensive studies and monitoring of these coral reefs, leading
to the development of ``no activity zones'' and buffer zones of
up to 4 miles where drilling discharges are handled in a manner
to prevent contact with the coral reefs. In 1988, MMS
established a monitoring program that now represents the
longest continuously operating coral reef monitoring program in
the world. After the Flower Garden Banks became a national
marine sanctuary in 1992, MMS partnered with NOAA to ensure
continued protection of these reefs, which now have a higher
cover of living coral than other reefs off Florida and most
areas of the Caribbean. They're considered among the healthiest
coral reefs in the world, while coexisting with oil and gas
activity.
In conclusion, the Department of the Interior and MMS are
poised to continue our commitment to environmental protection
and safe operations. We look forward to working with the
committee as we move forward with our OCS oil and gas renewable
energy and minerals programs.
Mr. Chairman, this concludes my remarks and I would be
happy to answer questions.
[The prepared statement of Mr. Cruickshank follows:]
Prepared Statement of Walter Cruickshank, Deputy Director, Minerals
Management Service, Department of the Interior
Thank you, Chairman Bingaman, Senator Murkowski, and members of the
Committee, for the opportunity to discuss the Minerals Management
Service's (MMS) stewardship in promoting environmentally responsible
energy and mineral development on the Outer Continental Shelf (OCS).
The Department of the Interior (Department) and its agencies,
including the MMS, are public stewards for much of our nation's natural
resources. The Department manages 500 million acres of land, one-fifth
of the land mass of the U.S., and over 1.7 billion acres of the OCS.
About 1/3 of the nation's domestic oil and gas production comes from
Federal resources managed by the Department.
This land base includes areas that boast some of the best renewable
energy resources available for development today. On the OCS, the
Department of Energy's National Renewable Energy Lab has identified
more than 1,000 gigawatts of wind potential off the Atlantic coast, and
more than 900 gigawatts of wind potential off the Pacific coast.
Secretary Salazar is committed to taking the initiative in these areas
by contributing to a clean energy-based economy that promotes
investment and innovation here at home and in an environmentally
responsible manner. Collectively, the Administration's efforts to
develop a clean energy economy will generate jobs, improve our energy
security by reducing our dependence on oil, and reduce greenhouse gas
emissions.
We recognize that we will likely be dependent on conventional
sources of energy--oil, gas and coal--for a significant portion of our
energy for some time to come. Therefore, it is important that the
Department continue careful stewardship of energy resources on public
lands, both onshore and on the OCS. With these objectives in mind, the
Department has been actively engaged in the Interagency Ocean Policy
Task Force. The Task Force, established by President Obama is led by
the White House Council on Environmental Quality and charged with
developing a recommendation for a national policy that ensures
protection, maintenance, and restoration of the ocean, our coasts and
the Great Lakes. It will also recommend a framework for improved
stewardship, and effective coastal and marine spatial planning designed
to facilitate better management of multiple uses of the oceans, coasts,
and Great Lakes, including oil and gas operations and emerging
renewable energy resources well into the future. We strongly support
this coordinated approach to sustainable management of our ocean,
coastal, and Great Lakes resources.
The MMS is charged with managing access to and development of the
Nation's energy and mineral resources on the Federal OCS in a manner
that is operationally safe and environmentally sound, prevents waste,
and provides a fair return for public resources. MMS is also
responsible for the management of the mineral revenues generated from
Federal and American Indian lands onshore and the Federal OCS.
For 50 years, the Department of the Interior and MMS have overseen
the OCS oil and gas program by enforcing regulations, developing
standards, and conducting technology and environmental research. The
Committee has asked me to highlight MMS'sstewardship role in managing
OCS oil and gas resources. I will focus on three areas (1) how MMS
determines which areas to lease to meet the Nation's energy needs; (2)
the environmental protections and standards for developing OCS energy
and mineral resources; and (3) MMS research programs.
determining areas to lease
The MMS has cradle-to-grave management and oversight responsibility
for oil and gas leasing, exploration, and development on the OCS.
Section 18 of the OCS Lands Act requires the Secretary of the Interior
to prepare a 5-Year oil and gas leasing program (5-Year Program) that
consists of a 5-year schedule of proposed lease sales that shows size,
timing, and location of leasing activity as precisely as possible. The
OCS Lands Act mandates that the 5-Year Program must balance the
priorities of meeting national energy needs, ensuring environmentally
sound and safe operations, and assuring receipt of fair market value to
the taxpayer. Before any particular lease sale is considered, it must
be included in an approved 5-Year Program.
The process to develop a 5-Year program includes three separate
comment periods, two draft proposals, a final proposal, and the
development of an environmental impact statement that informs the
Secretary's decision making. During this process MMS evaluates the
economic, social, and environmental values of the renewable and
nonrenewable resources in the OCS and the potential impact of oil and
gas exploration on other resource values of the OCS and the marine,
coastal, and human environments. Throughout the stages of developing
the plan, MMS analysis is based on science and research obtained
through the MMS Environmental Studies Program, Technology Assessment
and Research Program, and studies from other sources such as other
Federal and State agencies, the National Academy of Science, and
universities.
In order to balance the priorities of national energy needs,
environmental protection and receipt of fair market value, the OCS
Lands Act requires the Secretary to consider information on the
geographical, geological, and ecological characteristics of each
region; equitable sharing of development benefits and environmental
risks; regional and national energy markets; other uses of the OCS;
interest of potential oil and gas producers; the laws, goals and
policies of the affected states; the relative environmental sensitivity
and marine productivity of different areas of the OCS; and the relevant
environmental and predictive information for different areas of the
OCS.
The 5-Year Program initiates the process of deciding how, when and
where it is appropriate to offer oil and gas leases on the OCS. As the
leasing process moves forward, the potential areas to be offered for
lease cannot be expanded from those available in the previous step
without re-initiating the development of a new 5-Year Program. Thus,
the entire leasing process proceeds from broad-based planning to a
narrower focus as actual development is proposed. For example, it was
at the final proposal stage of the current 2007-2012 5-Year Program,
that the area 25-miles seaward of the coastline of the Chukchi Sea
Planning Area was deferred from leasing activity to reduce potential
environmental impact to the resources. For the Beaufort Sea Planning
Area, the Barrow and Kaktovik bowhead whale hunt areas were also
excluded from leasing. In the Central Gulf of Mexico Planning Area, the
proposed final program included the commitment reached with the
Governor of Alabama to avoid surface occupancy in a 15-mile area
offshore Baldwin County, Alabama in order to mitigate visual impacts;
this stipulation has been consistently included at the lease sale stage
for all sales in this area since 1999.
After a new 5-Year Program is finalized, there is further
environmental review and consultation with other Federal agencies and
state, local and Tribal governments before holding any individual lease
sale. As with the 5-Year Program development, the individual sale
process is conducted in an open, transparent, predictable manner. From
the Call for Information/Nominations to the Final Notice of Sale, the
individual lease sale process, described in section 19 of the OCSLA,
includes many opportunities for public input, in addition to the
opportunities offered by necessary procedures under the National
Environmental Policy Act and Coastal Zone Management Act. In all, there
are eight opportunities for public comment before a final decision is
made to hold any OCS sale. As a result of environmental review and
consultations in this pre-lease sale process, additional areas may be
excluded from leasing and mitigating measures may be required to
address any potential impacts from oil and gas exploration and
development. For example, MMS has for decades ensured protection of the
Flower Garden Banks in the northwest Gulf of Mexico, by prohibiting
leasing in the immediate area and restricting activities in a
surrounding buffer zone.
oversight of ocs leases
MMS's stewardship responsibilities do not end once leases are
executed; they have only begun. The Department of the Interior's OCS
regulatory program has been in existence for 50 years. The program
continues to evolve with the goals of improving effectiveness and
efficiency and ensuring preparedness for new technological challenges
such as deep water or Arctic operations.
Our regulatory framework encompasses a variety of components which
address environmental, safety, and conservation issues. This framework
includes a three-tiered approach to regulation, relying upon
prescriptive requirements, performance-based goals, and consensus-based
technical standards incorporated into MMS regulations. (A consensus-
based technical standard is an industry standard where all concerned
parties are given a voice in its development. While this process seeks
agreement with most participants, it also resolves or mitigates the
objections of the minority. MMS has incorporated 97 such standards into
our regulations. The MMS continually reviews these regulations to
update and revise them to ensure that they include the most effective
requirements for promoting safety and environmental protection on the
OCS.)
Plan Submissions
Once a lease has been issued, a lessee/operator must submit plans
for MMS approval before beginning any activity. The lessee/operator
must meet certain criteria documented in a site-specific Exploration
Plan (EP) before beginning exploratory drilling on a lease. If
exploration results are favorable, the lessee/operator moves to the
production and development phase of its operations. The lessee/operator
must submit a Development and Production Plan (DPP) or a Development
Operations Coordination Document (DOCD).
In water depths greater than 400 feet, the lessee/operator must
also submit a Deepwater Operations Plan (DWOP) and a Conservation
Information Document (CID). The purpose of the DWOP is to ensure that
MMS has sufficient information to review any development project that
uses non-conventional production or completion technology (in most
cases, floating or subsea production systems) from a total system
approach. MMS evaluates the system to determine whether the project
will be properly developed, particularly from the standpoint of
operational safety and environmental protection issues. The purpose of
the CID is to ensure that all economically producible reservoirs are
developed.
Each EP, DPP or DOCD must demonstrate that the proposed activities
are conducted in a manner that--
Conforms to Federal laws and regulations
Is safe
Prevents waste, conserves natural resources, and protects
Federal interests
Does not unreasonably interfere with other uses of the OCS
Does not cause undue or serious harm or damage to the human,
marine, or coastal environment.
An Application for Permit to Drill (APD) must be submitted to MMS
for each and every well drilled on the OCS. Written approval is
required before an operator may begin to drill any well, sidetrack,
bypass or to deepen a well. The MMS requires each lessee/operator to
take necessary precautions to keep wells under control at all times.
The oil spill financial responsibility requirements must also be met.
Fail-Safe Mechanisms
Drilling and production safety equipment used on the OCS must be
designed, installed, used, maintained, and tested in a manner to assure
the safety and protection of the human, marine, and coastal
environments. All wells open to hydrocarbon-bearing zones below the
surface must be equipped with safety devices that will shut off the
flow from the well in the event of an emergency, unless the well is
incapable of flowing. All surface production facilities, including
separators, treaters, compressors, headers, and flowlines, must be
designed, installed, and maintained in a manner that provides for
efficiency, safety of operations, and protection of the environment.
Surface-and subsurface-controlled safety valves and locks must conform
to the requirements of MMS regulations. Production facilities also have
stringent requirements concerning electrical systems, flowlines,
engines, and firefighting systems. The safety-system devices are tested
by the lessee at specified intervals.
Inspections
MMS conducts announced and unannounced inspections of OCS
facilities and any vessels engaged in drilling or downhole operations
to determine whether an operator's performance is acceptableyear-round.
Surprise unannounced inspections foster a climate of safe operations,
maintain an MMS presence, and focus on operators with a poor
performance record. Noncompliance with requirements for specific
installations or procedures is followed by prescribed enforcement
actions consisting of written warnings or shut-ins of platforms, zones
(wells), equipment, or pipelines. In the event noncompliance is
detected, the inspector takes the appropriate enforcement action. If an
operator is found in violation of a safety or environmental
requirement, a citation is issued requiring that it be fixed within 7
days. The violation may call for the particular well component,
production component, or the entire complex to be shut in.
The Secretary also has other remedies, including the assessment of
civil penalties for failure to comply with responsibilities under the
law, a license, a permit, or any regulation or order issued.
Coordination
Throughout the 5-Year Program, individual sale, and regulatory
processes, MMS consults with various Federal, state, and local agencies
that share a stewardship role in managing the OCS. MMS consults with
the National Oceanic and Atmospheric Administration (NOAA) and the U.S.
Fish and Wildlife Service to meet the requirements of the Endangered
Species Act. MMS meets with tribal leaders in accordance with
government-to-government consultation requirements and to incorporate
their views in decisions. MMS and other agencies routinely collaborate
to develop Memoranda of Agreement on various areas of overlapping
responsibility.
Exploration and production activities proposed to MMS for approval
must undergo environmental reviews by other federal agencies in
compliance with more than ten statutes, executive orders and
international agreements, in addition to the extensive environmental
analysis required under NEPA. For example, proposed activities are
examined for potential impacts to endangered and threatened species and
habitat under the Endangered Species Act, to fish and habitat under the
Magnuson-Stevens Fishery Conservation and Management Act, and to
cultural resources under the National Historic Preservation Act.
Evaluations of potential effects on marine mammals, birds, coral reefs,
water quality, air quality, Indian sacred sites, and environmental
justice also take place under separate consultation processes. Further,
MMS coordinates with affected states under the Coastal Zone Management
Act to ensure any MMS-approved activities are consistent with a state's
federally-approved coastal management program. All of these
environmental reviews are considered by MMS, along with the NEPA
analysis, to make decisions on whether to approve an activity, and if
so, what mitigation and monitoring measures must be put in place to
eliminate or minimize any potential for adverse affects to these
valuable marine resources.
In addition, in 2004, MMS entered into a Memorandum of
Understanding with the U.S. Coast Guard (USCG). MMS interacts with the
USCG on a multitude of mission areas at all levels from Headquarters
down to the field units. For example, MMS has been authorized to
oversee the Fixed Platform Self-Inspection Program on behalf of the
USCG, and frequently exchanges information with the USCG to clarify
policy issues and provide compliance statistics. MMS also interacts
with the USCG at the Region and District levels to coordinate
overlapping areas of offshore inspection and accident investigation
field activities.
The MMS has been consulting with the military for more than 25
years at both the planning and operational stages to ensure that each
agency meets the requirements of its mission while not unduly
interfering with the other. Coordination under a 1983 MOA between the
Department and the Department of Defense has yielded no serious
conflict. For example, seven military communication towers installed by
the U.S. Air Force offshore Mobile, Alabama support Air Combat
Maneuvering Instrumentation; MMS coordinates with the Air Force to
ensure non-interference with military operations in that area. Oil and
gas activities are restricted so that no activity can take place within
500 feet of a tower site, and unobstructed lines of sight must be
maintained between towers. The MOA is in the process of being updated
to more accurately reflect the current status of the OCS and the new
offshore renewable energy program.
Conservation of Resources
Part of the MMS mission is to manage ocean energy and mineral
resources on the OCS to enhance public benefits, promote responsible
use, and realize fair value. In order to accomplish this, MMS
emphasizes the importance of conservation principles, which maximize
the ultimate recovery of oil and natural gas from currently producing
reservoirs. Sound conservation practices also ensure that the Nation
reaps the full benefits of OCS development, including royalty revenues
to the U.S. Treasury as well as domestic energy.
Through regulation and oversight, MMS requires a lessee/operator to
conform to sound conservation practices that ensure all recoverable oil
and gas reserves are produced and enhanced recovery is used whenever
possible. Enhanced recovery operations include a variety of methods
that alter the natural forces in a reservoir to increase the ultimate
recovery of oil and gas. To this end, in water depths greater than 400
feet, operators must submit conservation information documents (CID).
The CID's submitted by the operator undergo a detailed review by a
multidisciplinary team composed of a petroleum engineer, a geologist
and a geophysicist. This team reviews the CID to ensure that all
economically producible hydrocarbon-bearing zones are developed in an
efficient manner. Waste of hydrocarbons could occur if producible
hydrocarbon reservoirs are bypassed.
In addition, all requests to revise or abandon projects in
deepwater are reviewed to ensure that wells are not prematurely
abandoned before all economically producible reserves are recovered as
outlined in the CID.
In addition, MMS is revising its regulations on flaring and venting
of natural gas. Flaring and venting are only allowed after receiving
prior approval from MMS (MMS may deny a request to flare or vent). The
new regulations will set clearer limits on natural gas flaring and
venting and require operators to report the amount of natural gas they
flare separately from the amount of natural gas they vent. In addition,
we will require operators to install natural gas flare/vent meters on
any facility that processes more than 2,000 barrels of oil per day.
These changes will give MMS better data on natural gas flaring and
venting operations on the OCS.
Oil Spill Planning and Preparedness
The Oil Pollution Act of 1990 and Executive Order 12777 gives DOI/
MMS authority over oil spill planning and preparedness for facilities
in state and Federal offshore waters that handle, store, or transport
oil (excluding deepwater ports). The MMS Oil Spill Program was
established to oversee planning and preparedness activities of
operators of regulated facilities in offshore waters. The goal of the
program is to ensure that, during a response, those who will operate
oil spill response equipment or serve on management teams are prepared
to do so in a manner that prevents or minimizes safety hazards to
responders and the public, and negative impacts to the environment.
Affected offshore operators must prepare an oil spill response plan
for MMS approval that includes details on how they will respond to a
worst-case discharge scenario from both near-shore and far-shore
locations. Contents of oil spill response plans include spill
management team members, certification of contracts with oil spill
removal organizations, notification requirements, sensitive resources,
dispersant use plans, platform and pipeline information, and specific
emergency management procedures. On an annual basis, MMS conducts over
30 unannounced oil spill drills to verify that operators are prepared
to quickly and efficiently respond to a spill from one of their
facilities.
mms research programs
The MMS is a leading participant in and supporter of scientific
research relating to the ocean environment. Environmental stewardship
is emphasized in all phases of OCS activity from the development of the
5-Year Program through platform decommissioning and removals. A
fundamental goal of MMS's Environmental Studies Program is to develop
workable solutions for those activities in the OCS that could adversely
affect environmental resources. Since the program'sinception in 1973,
more than $867 million has been spent on environmental research to
manage development of offshore energy and mineral resources. This
allows MMS to determine how to maintain safety and environmental
protection while approved exploration and development continue. In
fiscal year 2008 alone, 29 environmental studies were contracted at
nearly $16 million, and MMS completed 320 environmental assessments and
two full, detailed environmental impact statements.
In many areas, MMS research has added significantly to scientific
knowledge of the marine environment. Nearly 300 new marine species have
been discovered as a result of the MMS studies. One of these
discoveries is the fascinating ``iceworm,'' that lives on the surface
of frozen methane hydrate in deep waters of the Gulf of Mexico.
One of the most important focuses for scientific study in the
Alaskan offshore area has been the bowhead whale. Distinctive for its
huge, comb-like baleen and thick blubber, the bowhead migrates annually
between the Canadian Beaufort Sea and the Bering Sea. This large whale
is vitally important to Alaska Native subsistence hunters and coastal
villages in Alaska that are located along the migration route. The
whale is protected by U.S. laws and has been designated as an
endangered species. Since 1979, the MMS has funded and for many years
conducted the ``Bowhead Whale Aerial Survey Project''to survey the
bowhead whales'fall migration through the Western Beaufort Sea. During
many summers between 1979 and 1991, the MMS funded aerial surveys in
the Chukchi Sea for marine mammals. Since 2008, MMS has funded the
``Chukchi Offshore Monitoring in Development Area''to provide aerial
surveys of the migration in the Chukchi Sea Planning Area. This project
is coordinated through NOAA's National Marine Mammal Laboratory. The
MMS uses the aerial survey information from the Beaufort and Chukchi
Seas in the environmental review of OCS activities. Further, the
information is available for any other entity to use and is posted on
MMS website and the NOAA Fisheries Alaska Fisheries Science Center
website.
The MMS also funds research into operational safety, pollution
prevention, and oil spill response and cleanup capabilities through its
Technology Assessment and Research (TAR) Program. In fiscal year 2008,
the MMS funded 29 TAR studies at nearly $3 million. The components of
the TAR Program include the Operational Safety and Engineering Research
program that addresses technological issues associated with the
complete spectrum of oil and gas operations ranging from the drilling
of exploratory wells to the removal and decommissioning of facilities
on the OCS; the Oil Spill Response Research (OSRR) program that covers
a wide spectrum of oil spill response issues to improve the knowledge
and technologies used for the detection, containment and cleanup of oil
spills that may occur on the OCS; and the Renewable Energy Research
program that addresses technology and engineering issues associated
with renewable energy projects on the OCS.
This research enables MMS managers to make better decisions in
evaluating operational proposals and enables regulators to consider the
latest technological advancements in enacting new regulations. As a
result, the MMS has a robust regulatory system designed to prevent
accidents and oil spills from occurring. This includes redundant well
control equipment, emergency plans, and production safety systems as
well as a host of other requirements. This has proven effective both in
the wake of hurricanes in the Gulf of Mexico and in the Arctic
conditions on the Alaska OCS.
Through the OSRR program, MMS also manages the Ohmsett wave and
test tank facility at the Naval Weapons Station Earle Waterfront in
Leonardo, New Jersey. Ohmsett provides oil spill response testing,
training, and research opportunities to government, industry, academia,
and private organizations on a reimbursable basis. Standard test
protocols are used at Ohmsett to evaluate oil spill containment booms
and skimmers. Ohmsett provides the intermediate step between small-
scale and open water testing of equipment. An estimated 95% of the
performance data on mechanical equipment used today was obtained at
Ohmsett. Ohmsett is also developing the capability to test renewable
energy wave and current systems.
examples of mms stewardship of leased areas on the ocs
One of the best examples of MMS environmental stewardship is at the
Flower Garden Banks in the Northwest Gulf of Mexico. These two banks
are the northernmost coral reefs on the continental shelf of North
America and have a higher cover of living coral than other reefs off
Florida or most areas of the Caribbean. They are considered among the
healthiest coral reefs in the world. They also lie in an area of the
Gulf of Mexico with extensive hydrocarbon reserves.
Beginning in the early 1970s, MMS initially required extensive
monitoring studies of the reefs related to each energy development
activity, typically many miles away. This requirement was later dropped
and buffer zones were developed to prevent any possible impacts to the
coral habitats from energy development activities including physical
contact as well as discharges from drilling activities. Required
protection measures range from specific areas where no activity of any
kind is allowed, up to a four-mile radius where all drilling discharges
are required to be transported or shunted to near the sea bed in deeper
water preventing any transport onto the coral reefs.
Even though surrounded by numerous active oil and gas platforms,
these coral reefs remain extremely healthy, while the majority of coral
reefs all over the world suffer from extensive mortality due to heat
stress and land-based sources of impacts. One existing platform
structure is located just one mile from the coral reef at the East
Flower Garden Bank. This platform predates, and is located inside the
boundaries of the Flower Garden Banks National Marine Sanctuary. It has
served as a research station in the past through cooperative
arrangements with industry. Although MMS began research and monitoring
at the Flower Gardens in the 1970s, both NOAA and MMS began sharing the
expense of annual monitoring of the reefs beginning shortly after their
designation as a sanctuary in 1992.
The MMS has also been a leader in the protection of deep-sea
biological communities, particularly chemosynthetic communities and
cold water corals. Chemosynthetic communities (animals living
independent of photosynthesis required by most all other life on earth)
were first discovered in the Central Gulf of Mexico during an MMS-
funded study of the deep continental slope in 1984. MMS recognized the
importance of these unusual habitats and this particular project was
extended specifically to study these new communities for the first
time. Through MMS studies, chemosynthetic communities in the Gulf of
Mexico are the best understood ecosystems of their kind anywhere in the
world. Avoidance regulations were established beginning in 1988 and
adapted over time as we learned more about these communities, leading
to increased buffer distances from both energy production discharge
locations and physical impacts such as anchors.
MMS has also been at the forefront of the study of cold water
corals beginning in the 1990s. The most extensive deep coral habitat in
the Gulf of Mexico was discovered in 1,500 feet of water southeast of
Louisiana in 1993, during a standard visual survey required by MMS
prior to operations. Through an adaptive management approach,
regulatory policies are being revised to incorporate recent MMS
scientific findings. Two recent studies have determined that very
sensitive deepwater coral habitats occur as shallow as 300 meters.
Amending MMS's regulatory policies to require review for these coral
habitats beginning at 300 meters rather than 400 meters, will result in
extended avoidance and buffer distances from all potential deep water
coral habitats and protect these corals.
Historic preservation is another aspect of MMS's protection of
theoffshore environment. The MMS considers the effect of all its
actions, including lease sales, studies and permits, on the cultural
heritage of the Nation. To meet this responsibility, it requires the
oil and gas industry to conduct marine remote-sensing surveys that may
identify shipwrecks. As a result, a highly sought-after World War II
German submarine, the U-166, was discovered 45 miles from the mouth of
the Mississippi River through the joint efforts of MMS and the oil
industry charged with conducting the surveys. The U-166, the only
German submarine sunk in the Gulf of Mexico, rests in the crater it
created when it was sent to the bottom by a depth charge in the summer
of 1942, shortly after the U-166 torpedoed and sank the passenger
freighter S.S. Robert E. Lee. The wreckage of the submarine was found
in 5,000 feet of water. The U-boat's whereabouts had long been disputed
and it was thought to lie far from its actual resting-place. MMS
archaeologists were part of the scientific team that was instrumental
in locating and identifying the World War II U-boat. The discovery
solved a 59-year old mystery and ended decades of fruitless searching.
In addition, we have just finished the third year of a four-year
project jointly sponsored by MMS and NOAA's Office of Ocean Exploration
and Research, to better understand ocean ecosystems, corals and
submerged historic and cultural resources in the Gulf of Mexico. By
working together, we combine our talent, funding and physical resources
to meet important objectives for both agencies with better results and
lower costs than either agency could realize alone.
conclusion
The Department and MMS are poised to continue their vital roles in
managing OCS conventional and renewable energy resources. The magnitude
and complexity of being a responsible steward requires a continued
commitment to environmental protection and safe operations on the OCS.
The MMS takes OCS stewardship responsibilities seriously and is
committed to regulating the development of the Nation's energy and
mineral resources through measures to ensure environmental protection
and safe operations, continued research, and requiring fair returns and
accurate accounting of revenue generated from the Federal resources.
We welcome your input on our Nation's energy initiatives and look
forward to working with the Committee as we move forward with our OCS
energy and minerals programs. Mr. Chairman, this concludes my remarks.
I would be happy to answer any questions.
Mr. Chairman. Thank you very much.
Mr. Odum, please go right ahead.
STATEMENT OF MARVIN E. ODUM, PRESIDENT, SHELL OIL COMPANY,
HOUSTON, TX
Mr. Odum. Thank you, Chairman Bingaman, Ranking Member
Murkowski, members of the committee. Thank you for the
opportunity to testify today on environmental stewardship as it
relates to offshore oil and gas production.
I'd like to begin by sharing a couple of relevant
statistics. Global energy demand is projected to increase by 50
percent over the next 20 years, and could double by the year
2050. The world faces a daunting challenge, how to meet this
escalating demand in ways that protect the environment.
Now, it's very clear that we will need a wide range of
energies, particularly over the next several decades, including
alternatives, renewables, nuclear, and more oil and gas from
the Outer Continental Shelf. Now, fortunately, we're not forced
to choose between OCS development or the environment. We can
have both.
Today, I would like to address questions that often come
with discussions of OCS exploration and production, and explain
some of the technologies and safeguards that Shell and the
industry have in place to protect the environment.
As a frame of reference, more than 30,000 wells have been
drilled in the Gulf of Mexico, and thousands of scientific
studies have been conducted by government, academia, and
industry, and have shown that we can, and do, manage and
mitigate environmental impacts responsibly. Our record
continues to improve.
We recognize, in the context of a comprehensive energy
policy, that we need to address the challenges of climate
change. Shell agrees that we must reduce CO2
emissions by developing a full range of low-carbon energies,
along with effective mitigation technologies for fossil fuels
like carbon capture and sequestration, all preferably within a
phased-in cap-and-trade program to protect American jobs and
our economy.
Now, we should take action on these issues now, but not at
the expense of further development of the OCS. Access to the
vast resources in the OCS is critical. We need it and it's good
for this country. Developing more of our own resources will
reduce imports, create jobs, provide energy security, and help
our balance of trade. It will allow these resources to be
developed in a manner that fits our environmental goals and
avoid the hypocrisy of being willing to buy from other
countries rather than produce our own resources.
Our industry can develop offshore resources with a
footprint that is smaller than ever before. As an example,
Shell's Perdido project, in the ultradeep Gulf of Mexico--an
example is that project. Three different offshore fields,
covering about 90 square miles, will be tied into a single
facility located in 8,000 feet of water, 200 miles offshore.
Now, technically, this single surface point could reach oil and
gas volumes within a 30-mile radius.
Offshore oil and gas facilities are complex and highly
sophisticated. It's critical that they be designed, installed
and operated for safety and environmental protection. Control
practices are built on the principle of redundant barriers. For
example, exploration and production wells entail multiple
layers of protection, such as proper engineering, materials
design, and training of staff, realtime monitoring of multiple
data points, both at the surface and deep in well bores, and
that's used to detect variations in performance and mitigate
those items before they become problems. Multiple mechanical
barriers, such as pressure-sealed well casing, blowout
preventers, and subsurface safety valves, are utilized.
Now, despite these safeguards, it is necessary to be
prepared to react and mitigate if an oil spill occurs. Now, we
are prepared to respond quickly with the right skills and
equipment. In Alaska, that means a response time of 1 hour or
less.
Now, discharges in the ocean are often cited as a concern.
Now, this is a highly and effectively regulated activity. Any
discharge or emission must meet Clean Water Act and Clean Air
Act requirements. The EPA and the MMS impose tight controls on
allowable discharges and emissions based upon sound science.
Now, regulations require drilling fluids, for example, to
be tested for composition and pass a battery of tests for
toxicity to marine life and biodegradation rate in the
environment before they can be discharged.
Noise is also cited as a concern with respect to marine
mammals. In Alaska, Shell has a monitoring program that
includes marine mammal observers, both on board vessels and in
aircraft, as well as an unprecedented network of seafloor
acoustic recording devices to capture the sounds of whales,
other animals, and human activity, helping us understand their
distribution, their abundance, and the migration routes, as
well as document any subtle behavioral changes that they might
make in response to our activity.
Shell and the industry take very seriously our
responsibility to develop offshore resources with careful
regard for the environment. If the government chooses to
develop parts of the OCS, which is essential to meeting
America's energy needs, then the OCS leasing program should be
truly supported. When a lease sale is held, the government
should be prepared to do the required permitting and
environmental work in a timely manner by ensuring the necessary
financial and human resource support. The regulatory system has
worked well in the Gulf of Mexico for 50 years. The Federal
system for the Alaska OCS, by contrast, is in need of
attention.
In addition, the government should provide revenue sharing
for impacted coastal communities, not just the Gulf Coast
States. Some argue that revenue sharing takes money out of the
Federal treasury. I believe revenue sharing is essential to
enable offshore development and will bring additional revenues
into the Federal treasury.
In summary, we must stop ignoring the fact that oil and gas
will play a major part in meeting America's energy demands for
several decades as we transition to a more sustainable energy
future. Our economy's health and our Nation's security demand
and deserve nothing less.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Odum follows:]
Prepared Statement of Marvin E. Odum, President, Shell Oil Company,
Houston, TX
Mr. Chairman and members of the Committee, I appreciate the
opportunity to testify today about environmental stewardship and
offshore oil and gas development.
This hearing is timely and some might say urgent. World energy
demand will double in the next 40 years. This demand can only be met if
all sources of energy and efficiency are accessed. We cannot ignore the
fact that oil and gas will play a major part in meeting America's
energy needs for decades to come. The United States has vast oil and
gas resources on the Outer Continental Shelf (OCS).
There is some hypocrisy in locking these resources away while
relying on resources produced in other countries. Instead, we should
embrace policies that provide access to our own oil and gas resources.
Let's be clear. As a responsible integrated energy company, Shell
recognizes that access alone will not solve our energy challenges. We
also need alternatives and renewables and effective mitigation
technologies, such as carbon capture and storage (CCS), operating
within a workable, phased-in cap-and-trade program that best addresses
CO2 emissions and protects our economy.
Access to our natural resources will also contribute to U.S. energy
security and contribute to economic health by creating U.S. jobs and
improving our balance of trade.
The record clearly shows that offshore development can occur in an
environmentally responsible way. We should demand no less.
There are those who promote a ``do nothing'' approach to OCS
development. Perhaps they have an outdated view of how the oil and gas
industry operates today. I appreciate the opportunity to provide the
facts because the facts show that environmental stewardship and oil and
gas activity are not mutually exclusive. We do not have to choose
between OCS development or the environment. We can access OCS resources
and be good environmental stewards.
I am hopeful that this hearing will advance discussion so that we
can come together around the facts, reject the myths and move forward
on solutions that will fuel economic growth.
Today I will discuss three major points.
First, the vast U.S. oil and gas resources that can and must
play a critical role in meeting that future energy demand and
in fueling the economy
Second, the oil and gas industry's environmental record on
the Outer Continental Shelf and the role of technology and
science in environmental stewardship
Third, the steps that industry and governments can take to
ensure environmentally sound development of the OCS.
about shell
Before addressing these points, let me provide background about
Shell. We are an integrated oil and gas company, dedicated to meeting
ever-growing energy needs efficiently and responsibly. Shell puts
safety, sustainability, the global search for viable new energy sources
and innovative technologies at the heart of how we do business.
We have a robust portfolio in the Americas that consists of
offshore and onshore exploration and production, unconventional
resource development, oil products manufacturing and distribution,
chemicals, LNG, hydrogen and renewables, including wind and biofuels.
In 2009, we expect to invest about $31 billion worldwide to develop a
broad portfolio of energies.
the ocs: meeting energy demand and driving economic growth
In summary:
Global demand for energy will continue to grow, and existing
and developing energy sources may well struggle to keep up with
demand. Consistent with the desire to transition to a low
carbon energy mix as soon as possible, oil and gas resources
will be needed for decades to come.
The U.S. has vast oil and gas resources on the Outer
Continental Shelf, and it is within government's ability to
reduce imported energy with more domestic supplies.
Domestic oil and gas production provides energy security,
improves the balance of trade figures, creates jobs, generates
federal revenue and drives economic stability.
Global Energy Demand
The world must grapple with the reality that global energy demand
is projected to increase by roughly 50 percent over the next 20 years
and could double by 2050. As the global recession fades and economies
recover, demand will accelerate. A key driver will be the strong
economic growth and a vast, emerging middle-class in the developing
nations.
Just last week, the International Energy Agency warned that rising
crude prices could hamper economic recovery. In raising its daily oil-
demand forecast by 140,000 barrels, the agency projected that demand
for oil will increase to 86.2 million barrels a day next year because
of emerging markets.
U.S. OCS Resources
The U.S. imports approximately 60 percent of its petroleum needs.
This is not necessary and can be turned from a problem into an
opportunity. The U.S. has vast oil and gas resources. According to the
U.S. Minerals Management Service (MMS), there are 420 trillion cubic
feet of natural gas and more than 86 billion barrels of oil yet to be
discovered on the Outer Continental Shelf, including Alaska. To put
that into perspective, that is enough natural gas to heat 100 million
homes for 60 years and enough oil to fuel 85 million cars for 35 years.
My belief is that these resource estimates will continue to increase as
we develop the technology to discover and produce them.
Summarized here is the resource potential in four key offshore
areas of the United States: the Gulf of Mexico, Alaska, the Atlantic
Coast and the Pacific Coast.
Gulf of Mexico.--This is the heartland of the U.S. offshore
activity. The industry has been exploring for and producing in
the Gulf for more than 50 years. Although records from the
early days of near-shore production are incomplete or
unavailable, we know from MMS and Energy Information
Administration (EIA) records dating back to 1980 that the Gulf
of Mexico has produced more than 10 billion barrels of oil and
more than 73 trillion cubic feet of natural gas. The Gulf of
Mexico remains a significant petroleum province. The MMS
estimates that there are 45 billion barrels of oil and more
than 233 trillion cubic feet of gas. Combined, this is the
equivalent of more than 86 billion barrels of oil remaining.
With new technology enabling development of deepwater and
ultra-deep water, I believe these estimates could be low.
Shell has been a leader in Gulf of Mexico production. More
than 80 percent of our OCS leases are in deep and ultra-deep
water. In the coming months, the Shell Perdido project will
initiate production with a nameplate capacity of 130,000
barrels equivalent per day. It will be the world's deepest
drilling and production facility and include the deepest subsea
well.
Shell-operated production in the Gulf of Mexico averages more
than 400,000 barrels of oil equivalent per day. In fact, our
Mars Platform produces about 3 percent of all U.S. crude
production and nearly 1 percent of the nation's total daily
crude oil usage.
Alaska OCS.--Alaska's OCS has world-class oil and gas
potential, holding an estimated 27 billion barrels of oil and
132 trillion cubic feet of natural gas. Exploring for oil and
gas offshore Alaska is not new. A total of 30 wells have been
drilled in the Beaufort Sea and five wells drilled in the
Chukchi Sea. In the 1980s, Shell acquired federal leases in the
Beaufort Sea and drilled seven exploration wells. Although we
found oil and gas, developing these wells was not economically
viable at that time.
Now let's fast forward some 25 years. Since 2005, the federal
government has held several OCS lease sales in Alaska. Shell
participated in making these sales a success and paying the
federal treasury nearly $3 billion for ten-year leases in the
Beaufort and Chukchi Seas. We have the most environmentally
sensitive and thoroughly responsible exploration plan in
history, involving hundreds of millions of dollars of
investment in equipment, support vessels, baseline studies and
workforce training. Yet, we have not drilled a single
exploration well, due in large part to permitting delays and
litigation. I will share more on this later in my testimony.
Atlantic and Pacific Coasts.--The oil and gas resource
potential off the Atlantic and Pacific Coasts is also
substantial. The MMS estimates that there are 4 billion barrels
of oil and 37 trillion cubic feet of gas off the Atlantic
Coast, and 10 billion barrels of oil and 18 trillion cubic feet
of gas off the Pacific Coast. However, assessments of resources
have not been updated in decades, and, therefore, it is likely
that even greater volumes of oil and gas exist. Although the
moratorium on offshore leasing in these coastal areas has been
lifted, the government has not yet determined whether and where
to allow oil and gas lease sales.
Benefits of Domestic Oil and Gas Development
We should not be satisfied with having other nations produce their
energy for our use. The cost is enormous. According to the EIA, the
U.S. imports nearly 12 million barrels per day or approximately 60
percent of our consumption. These imports cost the U.S. nearly $600
billion last year.
The choice is clear. We can continue to bear the costs of importing
ever-increasing volumes of oil and gas or we can develop our own
domestic resources. Producing more oil and gas in the U.S. is a ``no
lose'' proposition. It will provide energy security, improve the
balance of trade figures, create jobs and generate federal revenue. In
sum, domestic oil and gas development is an economic engine.
An estimated 9.2 million people are directly or indirectly employed
in the domestic oil and gas industry. This makes the industry one of
the largest employers in the nation. The industry has some of the
highest paying jobs in the U.S., about two times the national average.
A growing oil and gas sector has a positive impact on many other
sectors of the economy, such as iron and steel, aviation, electronics,
agriculture, construction, chemicals, plastics, marine vessels,
telecommunications, manufacturing, trucking and transportation. Most of
these industries have expressed their support for expanded access to
the OCS.
Revenues to federal and state governments also increase as a result
of domestic oil and gas activity. According to the MMS, the OCS leasing
program is the second largest source of federal revenue. In 2008, a
record $23.4 billion was collected from energy production on federal
lands (onshore and offshore). In total, OCS oil and gas development has
generated more than $190 billion in federal revenue from lease bonuses
and royalty payments since 1953, in addition to federal, state and
local income and property taxes. Future OCS activities would produce
more federal revenues. A study by ICF International looked at oil and
natural gas resources (both offshore and onshore) that until recently
were off limits and concluded that development could generate more than
$1.7 trillion in government revenue, create many thousands of new jobs
and enhance our nation's energy security.
The Land & Water Conservation Fund (LWCF) is almost entirely funded
from OCS revenues. Washington, D.C. has received $14 million in 85
grants, Virginia has received $81 million in 377 grants impacting
46,000 acres of parkland and Maryland received $76 million in 327
grants impacting 43,000 acres of parkland. Nationally, this program has
funded more than $7.2 billion (leveraged with a 50-percent match) in
more than 40,000 projects impacting more than 2.6 million acres of
parkland across the U.S. Of importance, the LWCF program is at risk if
additional OCS production is not pursued.
environmental stewardship
Finding environmentally and socially responsible ways to meet the
nation's energy needs is critical to our business success. We are
acutely aware of the passion around the potential adverse impacts of
offshore oil and gas activities. These include:
GHG emissions from the combustion of oil and natural gas,
environmental footprint and visual impact,
risks of a major oil spill on marine wildlife and sensitive
environments and whether spilled oil can be cleaned up
(especially in Arctic conditions),
discharges into the ocean and air emissions from offshore
platforms,
noise impacts on marine mammals, and
operating in sensitive areas.
The industry has an excellent record of exploring for and
developing OCS resources. Advances in technology and science have
enabled this in ways that were unimaginable even a few years ago. We
can drill safely and efficiently with an ever-smaller environmental
footprint in ever-greater water depths farther and farther from shore
with minimal stress on the oceans.
We can operate as good stewards of the environment and, at the same
time, address many of our nation's pressing needs, as the U.S.
Commission on Ocean Policy said:
America can protect the marine environment while creating
jobs, increasing revenues, enhancing security, protecting
cultural heritage, expanding trade, and ensuring ample supplies
of energy, minerals, healthy foods, and life-saving drugs.
Shell is very familiar with the work of the Interagency Ocean
Policy Task Force to develop a national framework for eco-system-based
management of our nation's oceans. We believe this is an excellent
opportunity to recognize the importance of offshore energy to our
country's economy and security, and we acknowledge the vast body of
existing science that guides us, as I will discuss later in these
remarks. Shell is hopeful that the Task Force will provide
recommendations that properly balance the environmental, economic and
social priorities that ought to guide our national ocean policy.
Let me address some of those key concerns here.
Climate Change
There is concern or outright opposition to offshore oil and gas
development from those who oppose the use of fossil fuels. This
reflects a concern about the consequences of CO2 emissions
and global climate change, including concerns about the impacts of the
changing climate on sea levels, polar ice and ocean acidification.
Shell agrees that CO2 emissions must be reduced and that
climate solutions must be embraced. Shell advocates strongly for cap-
and-trade-based legislation to ensure that greenhouse gas reduction
goals are met, but any program must make a fair allocation of credits.
Shell also recognizes the ``hard truth'' that the world must rely
on oil and gas for several decades to come as we transition the U.S.
energy mix to a lower carbon energy mix. It is simply not reasonable to
think that we can turn off oil and gas use. And we cannot afford to. We
need the energy from oil and gas to fuel economic growth and stability.
Only if we are economically healthy can the transition to new
technologies, new energy sources and new energy-efficient ways of
living be achieved. It is important to recognize that this is not an
``either/or'' situation--either fossil fuels or alternatives,
renewables and other energy sources. We will need all sources to meet
demand.
In addition to advocating for government cap-and-trade frameworks,
Shell is working to address the climate challenge by
increasing the efficiency of our own operations;
establishing a substantial capability in Carbon Capture and
Storage;
continuing research and development on technologies that
will increase efficiency and reduce emissions;
helping our millions of retail and business customers use
less energy and emit less CO2; and
aggressively developing low CO2 sources of
energy, including natural gas, biofuels and other low-
CO2 fuel options.
Let me say a word about the potential for natural gas because the
development of our nation's domestic gas resources is a major success
story for our country. By combining new advanced technologies involving
horizontal drilling with proven technologies such as hydraulic
fracturing, we have increased onshore natural gas production by more
than 20 percent over the past three years--an accomplishment that most
energy experts thought impossible a few years ago.
According to some experts, America's known natural gas resources
now exceed 100 years of supply at current U.S. consumption levels--and
we are finding more every day. The fact that we have such enormous
resources gives our country increased energy security and flexibility
to address issues, such as climate change, since natural gas is a
clean-burning fuel that can help to reduce carbon emissions. It serves
as an important bridge as we develop new renewable energy sources.
Therefore, it is important that policymakers recognize the critical
role of natural gas as climate and energy legislation is developed. In
particular, legislation should not inadvertently disadvantage natural
gas.
Footprint on the OCS
The oil and gas industry can develop offshore resources with a
footprint smaller than ever before. This is an important aspect of our
environmental stewardship. It is possible to develop very large sub-
surface areas with a very small surface expression. The technologies
that enable this can be applied both near shore and in deepwater. Let
me describe some of the technologies.
Our Deepwater technology program focuses on equipment and
integrated systems required to produce hydrocarbons with fewer and
smaller surface facilities and reduced environmental impacts. This
involves the optimal use of subsea production systems and new floating
drilling and production systems. New technologies include subsea
separation and boosting, subsea re-injection of produced water and
long-distance pumping with flow assurance. All of our deepwater
projects go through an internal carbon footprint and environment impact
assessment as part of the tollgates to final investment decisions.
Perdido is an ultra-deep water project in the Gulf of Mexico that
illustrates the industry's ingenuity and smaller footprint. Three
different offshore fields covering about 90 square miles in the OCS
will be tied into a single facility at Perdido. Technically, the
project provides the infrastructure that could enable future oil and
gas volumes from a 30-mile radius. That means that about a 3,000-
square-mile area can be developed sharing one facility.
Even more astounding is the fact that Perdido is in 8,000 feet of
water 200 miles south of Houston. When the leases were acquired in
1996, the deepest projects in the Gulf were in 3,000 feet of water. We
did not have the technology at that time, but we were confident that it
could be developed.
There were significant challenges to the project due to water
depth, water pressure and reservoir characteristics. What mooring
systems should be used in ultra-deep water? How should we address harsh
wave loading conditions? How should we overcome the massive hydrostatic
pressure in order to produce 8,000 feet below the surface of the water?
Over a period of more than a decade and at a cost of several
billion dollars, the technology was developed to make the project work.
For the first time, the oil and gas produced will be separated on the
seafloor and ``boosted'' to the surface using machines purposely built
for this project and installed and maintained using robotics. Perdido
is the first application of wet tree direct vertical access (DVA) wells
from a spar--a configuration that allows a larger number of subsea
wells to be accessed from a smaller surface host facility. By utilizing
a single well slot to access the wells beneath the surface facility,
the size and cost of project are reduced. At the same time, the number
of wells that can be accommodated by the surface facility is not
limited.
When Perdido begins producing in the next few months, it will be
the world's deepest offshore oil development, the deepest drilling and
production facility and the deepest subsea well. It will have a
nameplate capacity of 130,000 barrels equivalent per day.
The Ormen Lange project in Norway also demonstrates how technology
enables offshore development with a small footprint. In fact, there is
no surface facility on the offshore at all. Despite being in 3,600 feet
of water with uneven seafloor terrain, strong seafloor currents,
subzero temperatures and extreme wind and wave conditions, our
engineers designed a ``Subsea-to-Beach'' production system in which the
natural gas is produced from subsea wells and transported some 75 miles
through subsea flowlines to the shore. This complex project producing
from one of the largest gas wells in the world in the deepest water
depths in Europe will provide up to 20 percent of the natural gas needs
of the UK for up to 40 years.
Operational Integrity and Incident Prevention
Offshore oil and gas facilities are complex and highly
sophisticated. It is critical that they be designed, installed and
operated with rigorous attention to preventing incidents of any kind.
Safety is a core operating principle essential to protecting people and
the environment. So too is operational excellence. Let me describe some
of the control practices that are in place when we drill a well and
during producing operations.
Well control.--When drilling a well, the pressure in the wellbore
must be monitored and maintained in a way that gas and fluids in the
geologic formation do not escape. There are four layers of prevention
and containment (barriers) that maintain well control. This means that
if one barrier fails due to operational error or equipment failure,
there is no loss of well control.
Layer I includes proper planning and design of the wells to
minimize any technical or environmental risks. This way, before
we start to ``Drill the Well Right,'' we first decide on ``The
Right Well to Drill'' from a technical and environmental
perspective. This layer also includes training of our on-site
staff on crucial well control procedures.
Layer II includes early detection of, and timely response
to, events where gas or fluids begin to enter the wellbore.
When such a ``kick'' is detected, the general response is to
immediately shut down the pumps, perform a flow check, shut in
the well and kill the well. To help carry out this task, Shell
employs its Real Time Operations Centers (RTOCs) in New Orleans
and Houston to monitor the wells 24 hours a day, 7 days a week.
Through advanced information technology and satellite
communications, the experts in the RTOCs monitor in real time
what is happening at the drill site offshore. The RTOCs see the
same drilling data at the same time as the drillers onsite,
such as data from downhole sensors, rig gauges and sub-surface
visualization. With those additional ``sets of eyes'' trained
to monitor and detect any anomalies in the drilling process,
operational concerns of any kind, in particular those
associated with well control, can be stopped and mitigated
immediately.
Layer III involves the use of mechanical barriers. Well
casing, cemented in the hole, allows for safe deepening of the
well and provides long-term protection against formation fluids
coming to surface. Blowout preventers (BOPs) are mechanical
devices that can shut off a well completely and prevent
formation fluids from reaching the surface when the well is
drilled. Weekly testing and inspections are performed to ensure
their competency and integrity.
Layer IV represents relief well drilling. If, despite the
first three layers of protection, there is the unlikely event
of a blowout at an exploration well, site-specific, detailed
contingency plans are in place for drilling a relief well.
Contingency plans include dynamic surface control measures and
the methods of drilling a relief well.
Production Control.--MMS regulations and industry standards require
all offshore producing platforms to have safety shutdown equipment.
Fail-safe sub-surface safety valves must be installed in all wells at
least 100 feet below the sea floor. These safety valves can be manually
closed. They are also designed to shut tight whenever there is a loss
of pressure from the surface facility. For example, if a surface
platform is pushed over by a hurricane or ocean-going vessel, the
safety valves will activate and shut in the well. This prevents the
wells from blowing out.
At the ``Bridge,'' located in New Orleans, we monitor all of our
deepwater production systems in the Gulf of Mexico and Brazil (and
ultimately Alaska). The centralized surveillance center is designed to
optimize deepwater production rates, equipment reliability and system
integrity. Specifically, production and equipment data streams are
continuously scanned to identify any irregularities in performance and,
if detected, are immediately addressed with technical and operational
experts. The Bridge enables us to squeeze the most out of the
reservoirs and maintain our systems and equipment to their best
operating performance. This identifies potential problems before they
occur and minimizes downtime.
During the 2005 hurricanes that devastated the Gulf of Mexico,
about 115 platforms were destroyed and more than 50 others were
damaged. There was no loss of life due to the industry's safety and
evacuation practices. There were no well blowouts because the safety
valves worked. There were some relatively small oil spills from storage
tanks located on the platforms, but none that caused oiling of the
coastline.
Oil Spills: Impacts and Response
Petroleum poses a range of environmental risks when released into
the environment, whether as spills or discharges. U.S. federal agencies
have turned to the National Research Council (NRC) on several instances
to look at the issue. One of the most widely quoted studies of this
type, titled Oil in the Sea: Inputs, Fates, and Effects, was completed
in 1985. This study has been updated twice since then, the most recent
update occurring in 2003.
In North American marine waters, most petroleum comes from natural
seeps (62.5%) rather than from anthropogenic (man-made) discharges
associated with petroleum-extraction (1.2%), transportation (3.6%) and
consumption (32.8%) of crude oil and refined products. (Table 1) (NRC,
2003)
Table 1: Relative contribution of average, annual releases
(1990-1999)
of petroleum hydrocarbons in North American Marine Waters
------------------------------------------------------------------------
Percent
of
bbls Total
(%)
------------------------------------------------------------------------
Natural Seeps 1,264,000 62.5
Petroleum Extraction 23,700 1.2
Petroleum Transportation 71,890 3.6
Petroleum Consumption 663,600 32.8
------------------------------------------------------------------------
(from NRC 2003)
Offshore seeps of hydrocarbons are known to occur around the United
States in the Gulf of Mexico and southern California, and released oil
can be delivered long distances by oceanic currents. Of the
anthropogenic sources of oil in the sea, consumption is by far the
largest contributor (32.8% of total and 87.4% of anthropogenic
sources). As defined in the NRC 2003 report, ``consumption''
contributions are storm-and surface-water runoff, use of 2-stroke
engines, non-tank vessel spills, operational discharges, atmospheric
deposition and aircraft dumping. These releases due to consumption of
petroleum products tend to occur in coastal areas.
Oil and gas extraction activities are often concentrated in regions
where natural seeps form. Historically, slicks of oil from seeps have
been incorrectly attributed to releases from oil and gas platforms and
vice versa. In North America, the largest and best-known natural seeps
appear to be restricted to the Gulf of Mexico and the waters off of
southern California, regions that also have extensive oil and gas
production. In fact, geologists use aerial imagery of oil slicks in the
ocean to identify likely areas to explore for oil and gas.
The toxicity of petroleum hydrocarbons to marine organisms is
dependent on the persistence and bioavailability of specific
hydrocarbons. A quick and effective response to an oil spill is
therefore critical in avoiding or minimizing any shoreline impacts. In
other words, in the unlikely event of a spill we want to respond and
remove the oil before it can impact sensitive environments.
Each offshore oil and gas project must have such a plan in place
before it is permitted to go forward. Given Shell's investment in
exploring in Alaska's OCS, there are concerns that oil spills in arctic
conditions or in ice conditions cannot be cleaned up. I would like to
focus on and hopefully dispel that claim.
Arctic exploration and production is building on a huge experience
base in temperate conditions. The experience in the Gulf of Mexico is
instructive. We know that with proper well design, well controls,
improved technology and effective training, the likelihood of a
significant spill incident has been reduced substantially. In fact, the
MMS calculates that since 1980 less than 0.001% of the oil produced in
the OCS has spilled. In the unlikely event that a spill does occur, we
have a dedicated and proven oil spill response capability, including
equipment, methods and competencies.
During any spill that occurs in water (warm waters, cold waters or
ice-covered waters), it is impossible to clean up 100 percent of the
oil spilled. Depending on air temperature and oil gravity, as much as
40 percent of the oil can evaporate in the first 24 hours. However, in
Arctic conditions, the evaporation rate will be lower and depend on
water temperature and wind conditions. Waves and current can also
impact the recovery rate since mechanical equipment is typically
limited to operating in waves up to 2-3 meters. Daylight, access to the
site, travel time, needed approvals from government agencies and other
factors can also impact a spill operation.
Shell accepts the fact that, in some cases, oil spill response in
ice conditions can be more difficult than in open water. Ice conditions
will demand more flexibility and planning in tactics, special response
equipment and strong coordination and competence of staff and
contractors. It will also require additional planning in areas such as
forecasting ice conditions, monitoring ice and ice deflection to help
trap oil. In some cases, the presence of cold water and ice can enhance
response effectiveness by limiting oil spreading (which in open water
cannot be controlled) and slowing the weathering process.
By working with the natural environment, responders can increase
the response window of opportunity and improve the effectiveness of
mechanical recovery and in-situ burn techniques. For example, if a
spill occurred during the winter season under the ice, the oil would be
trapped, allowing the responders more time to evaluate options for
recovery or in-situ burning because the oil is semi-stationary under
the ice.
Shell believes that it is very important to have the capability to
include multiple response methods in the planning, have approval to use
them and to respond with as many tools as needed. The response strategy
and planning should allow the use of dispersants, in-situ burning and
other methods that may be applicable. The method(s) selected during a
response will depend on items such as the weather conditions, type of
spill and other factors that are decided on a case-by-case basis in
collaboration with the federal and state on-scene coordinators.
Additionally, during a spill event the responders may change from one
tactic to another as the conditions change. Dispersants have been
proven to be effective in cold waters and can be applied with ice
present and be effective for spills that cover a large area. In-situ
burning (which has been used for 30 years around the world) can play an
important role in the unlikely case of a blowout and can burn up to 95
percent of the oil spilled.
Shell has created an unprecedented oil spill response capability to
support its drilling plans in the Beaufort and Chukchi Seas. We have a
dedicated fleet of vessels and specialized oil containment equipment,
which will be on-site 24/7. Spill recovery equipment is state of the
art and widely acknowledged as proven systems under cold-climate
conditions and designed to remove the worst-case discharge. The Nanuq
is an ice-class purpose-built vessel, which can begin recovery within
an hour of any incident large or small.
Arctic Oil Spill Response Research and Development
International scientists and operational personnel, under
management of SINTEF Norwegian Research Institute, spent two weeks in
May of 2009 in the pack ice in the Norwegian Barents Sea to study the
behavior of oil spills in Arctic waters and to test various response
options in realistic oil-in-ice conditions.
The tests proved that ice acts as a natural boom or protective
barrier to confine and reduce the spread of an oil spill and to provide
a longer window of opportunity in which clean-up technologies can be
used effectively. These tests are the most wide-ranging research and
development programs ever undertaken to evaluate Arctic oil spills.
The Joint Industry Project (JIP), under the management of SINTEF,
was sponsored by six international oil companies, including Shell. The
MMS was also a project participant. The project's major objectives are
to further develop knowledge, tools and technologies for oil spill
response in ice-covered waters. The program has consisted of project
areas being carried out over a four-year period, ending in 2009. The
JIP was designed to address key oil spill response issues and scenarios
that program participants might have to deal with:
1. The fate and behavior of oil spilled in Arctic conditions
2. The in-situ burning of oil in Arctic and ice-covered
waters
3. The mechanical recovery of oil in Arctic and ice-covered
waters
4. The use of chemical dispersants in Arctic and ice-covered
waters
5. Monitoring and remote sensing of oil in and under ice
6. The preparation of a generic oil spill contingency plan
7. Field experiments at Svalbard, Norway, in offshore ice-
covered waters
These real-world offshore tests marked the final stage in the
largest and most wide-ranging international research and development
program ever undertaken to enhance understanding, to further improve
and develop spill-response technologies and to increase the ability to
react rapidly in the event of an accidental oil spill in ice-covered
conditions.
Discharges and Emissions
``Dumping'' does not occur offshore. In fact, many materials cannot
be discharged at all, including oily mud and trash and debris.
Allowable discharges from offshore platforms can include produced
waters, drilling discharges and air emissions. We understand public
concern about their potential effect on the environment. Let's be
clear, however, that any discharge or emission must meet Clean Water
Act or Clean Air Act requirements. The Environmental Protection Agency
(EPA) and the MMS permit the allowable discharges and emissions under
tight controls based upon sound science. Sensitive habitats on the
seafloor, like corals or chemosynthetic communities in the Gulf of
Mexico, must be avoided. These permits require drilling mud, for
example, to be tested for composition before their use, to pass a
battery of tests for toxicity to marine animals and biodegradation rate
in the environment before they can be discharged.
An example of how our industry has developed technology to address
the challenges of deepwater and environmental performance at the same
time is new synthetic drilling fluid. This fluid can be recycled and
reused, and, as a result, discharges are minimized. They increase
drilling penetration rates, resulting in less time on location and
reduced air emissions. The EPA has classified this as a ``pollution
prevention technology.''
More than 35,000 wells have been drilled in the Gulf of Mexico. For
more than 20 years, the petroleum industry, the regulatory agencies and
academic researchers have conducted ocean monitoring around well sites
to study effects on water quality, sediment quality, and the local
biological communities. We have found that small areas of the seafloor
can be temporarily disturbed by the deposition of drill cuttings.
However, there are no long-lasting effects and no bioaccumulation of
contaminants that would either jeopardize benthic animals or affect
human consumption of seafood. In fact, our offshore platforms are some
of the most prolific areas for recreational fisherman, and our industry
has successfully coexisted with the commercial fishing industry for
decades.
Marine Animals and Noise
In the Gulf of Mexico and offshore Alaska, our operations have to
coexist with populations of marine mammals that are important to
protect. Seismic exploration is one operation that is carefully
regulated by the federal government and managed by the company so that,
for example, the sounds created don't cause whales to change their
behavior in ways that might be harmful. Regulations require us to:
Have trained marine mammal observers onboard to watch for
mammals
When starting, use a ramp-up procedure to gradually increase
the sound level being produced, which allows animals to leave
the area if the sound is uncomfortable
Stop any operations if a marine mammal is likely to enter a
``safety zone'' around the operation and wait to restart
operations until the zone is all-clear for at least 30 minutes
In Alaska, Shell goes further. We use observers on aircraft to
monitor an even larger area around our operations in the Beaufort Sea.
Since 2006, we have also deployed a network of seafloor acoustic
recorders across the Chukchi Sea and Beaufort Sea that record the
sounds of whales, seals, walrus and other animals, along with natural
sounds like storms and earthquakes and man-made sounds, such as our
seismic programs and vessels. This information helps us understand the
distribution, abundance and migration routes of the animals, as well as
document any subtle behavioral changes that they might make in response
to our presence.
Through these programs, we have seen and heard thousands of whales,
seals, walruses and polar bears, and our monitoring has not detected a
single one that has been injured by our activities. Our seafloor
recorders have documented that migrating bowhead whales will swim
around seismic activities at a distance of a few kilometers. We are now
studying to determine if this response is biologically significant or
less significant--like you or I might cross the street to avoid noise
from a construction site.
Operating in Sensitive Areas
We have found that multiple uses of our oceans can be
accommodated--we can conserve special places and have economic
development. For example, the Flower Garden Banks National Marine
Sanctuary in the Gulf of Mexico is a national treasure of manta rays,
whale sharks, coral heads that are bigger than cars and hundreds of
species of fish and invertebrates. Within a four-mile radius of the
Flower Garden Banks, hundreds of exploratory wells have been drilled,
and there are currently 10 production platforms and approximately 160
km. of pipelines. Twenty-five years of stringent environmental
monitoring by the National Oceanic and Atmospheric Administration
(NOAA), the MMS and industry have found no contamination or degradation
of corals due to oil and gas activity. In fact, our marine biologists
participate in an annual government/industry dive on the Flower Garden
Banks, and we have observed firsthand the pristine coral formations and
wildlife.
Role of Technology
Technology is not static. What we know and how we operate today
will evolve. We must continue to find better ways of working through
technology improvements and breakthroughs that make our operations more
efficient and environmentally safe. Let me give some examples of what
Shell is doing.
Shell has initiated a Future Wells Project involving a range of
technical experts. Their goal is to identify new technologies and
processes that will, for example, reduce the volume of well cuttings
and fluids, increase production rates by reaching the drilling target
with larger casing, unlock reserves that are currently uneconomic or
unreachable and reduce our own fuel consumption.
Shell's interest in the Arctic, in Alaska and Russia, has
accelerated the development of specific projects that will better equip
us to work in this arena. Again, we are looking for alternative
approaches that reduce our environmental footprint in an area that has
unique characteristics very different from the Gulf of Mexico. We do so
in order to advance our understanding of the region, to inform our
design technologies to achieve smaller impact and to respond to
concerns expressed by many, including the indigenous peoples with
strong dependence on and cultural ties to the environment.
Unmanned Aircraft Systems (UAS).--One example of our work
involves integrating unmanned aircraft into our existing manned
aircraft monitoring programs. The monitoring is essential
because it tracks the habits and movements of marine mammals,
the movement of sea ice and the operations of offshore
operations. The goal of the UAS research program is to reduce
the risk and environmental footprint of monitoring. Unlike
manned aircraft, the unmanned aircraft can carry compact
payloads, which allows standard sensors like electro-optical
video, electro-optical stills and infrared to be flown with
very little airborne noise or disruption to natural
surroundings. In Alaska, the industry and government agencies
have collaborated in testing an A-20 ScanEagle system to track
walrus, seals and endangered bowhead whales. We expect to be
able to detect sea-surface contaminants, track sea ice and find
stranded personnel and vessels in broken ice scenarios.
Marine Sound Reduction Program and Marine Mammal Impacts.--
Another example involves developing ways to reduce the sound of
our operations in the Arctic. Shell's program is intended to
better understand sound in Arctic waters and then to develop
ways to mitigate man-made sound. This research is part of our
marine mammal monitoring initiative in the Beaufort and Chukchi
Seas. Together, these two programs seek to understand the
sources and characteristics of man-made marine sound and its
effect on marine animals so that appropriate sound management
plans can be developed. We are analyzing sound data from
drilling activities in Alaska waters done during the 1980s and
1990s. We are taking acoustic measurements on vessels and
drilling rigs to understand the magnitude of sound generated.
We are developing sound mitigation designs for new-build
vessels and underwater acoustic barriers that could be deployed
around existing rigs.
Role of Science
Scientific knowledge will also evolve. This expanded knowledge is
critical because it informs government regulators who must issue
permits, it informs policymakers who must develop sound energy and
environmental policy and it informs our operational decisions.
The government plays a leading role in performing scientific
studies. Since 1973, federal agencies have performed more than 5,000
scientific studies on the environmental effects of offshore oil and gas
activities. For example, the National Academy of Sciences has produced
three reports focused directly on environmental science for offshore
oil and gas, two with particular focus on Alaska. The Minerals
Management Service's OCS Environmental Studies Program has spent more
than $600 million (more than $1 billion in inflation adjusted dollars)
on scientific studies of offshore oil and gas--about half of that
directed specifically to Alaska. Money is not a perfect measure for the
applicability or credibility of the information, but it provides a
metric of effort and breadth that many people will understand.
The industry also has a role to play. Oil and gas companies have
worked on major scientific programs that supplement the research by
government agencies. In the last 10 years, the industry has published
studies on the environmental effects of and best management practices
for pollution prevention technology, emissions from offshore platforms
that include produced waters, drilling discharges, air emissions, the
effects of sound on marine life that includes whales and fish, weather
and oceanographic studies, improved design standards for severe weather
and even the causes of hypoxia in the Gulf of Mexico.
where do we go from here?
I have discussed the need for and benefits of developing the vast
offshore oil and gas resources off the U.S. coast. I have discussed the
industry environmental record and how technology and science are key
enablers for our environmental stewardship. Now I would like to look
forward--where do we go from here and what should policymakers do?
recommendations
The federal government has a critical role to play as a steward of
our oceans. It also has a role to play in supporting the OCS leasing
program and the sustainable development of its natural resources. Let
me provide some policy recommendations for your consideration.
First and foremost, the government must support the OCS leasing program
In areas where OCS leasing has occurred, the government has done
literally years of environmental analysis in advance of the lease sale.
It has invited companies to buy the leases, and it has accepted bonus
bids from companies. In return, the government bears some
responsibility to the leaseholder. Companies bid on leases with the
tacit understanding that the government is prepared to do the work that
allows exploration and development.
Shell's experience in Alaska is a case in point. We participated in
the government's Alaska lease sales and paid the U.S. Treasury billions
of dollars for the leases. We invested hundreds of millions of dollars
more to prepare for exploration drilling. In order to drill, we must
have some 30 state and federal permits. We have not yet drilled a
single exploration well. Permitting delays, coupled with litigation
delays, have blocked the work for several years. We are hopeful that we
will be able to drill in 2010, but this will only happen if the federal
government finally delivers all the permits and if litigation
challenges do not occur.
I fully support the permitting work and the regulatory requirements
that Congress has put in place. Many of those requirements are intended
to protect the environment. I do not believe the process should be
``rubber stamped.'' Quite the opposite. I believe that the government
should have a robust and thorough process that leads to timely
decisions. Endless delays and inefficiencies should not be tolerated
because it is a waste of effort and money for all concerned--Shell, the
government and the taxpayer.
Specifically, I urge Congress to:
Fully fund and resource the various federal agencies that
handle OCS oil and gas permitting. Inadequate funding and
insufficient staff should not be the cause of permitting
delays. If the government is going to hold a lease sale, it
must be prepared to do the environmental studies and other
analyses that underpin OCS permits.
Impose clear timelines on federal agencies, and hold the
agencies to those deadlines so that the private sector has some
assurance of action and can plan its investment decisions
accordingly. If properly staffed and resourced, the deadline
should not be a problem.
Defend its permits when there is a legal challenge and seek
expeditious decisions by the courts. As a result of a court
decision last spring, the Department of Interior (DOI) is
remedying flaws in its current Five-Year OCS Plan. The DOI
needs to move expeditiously to complete this work and in the
process, remove the legal ``cloud'' that hangs over the 2008
Chukchi lease sale.
Consider whether the EPA is the appropriate agency to handle
OCS permits. In the FY 2010 appropriations report for the EPA,
Congress directed the EPA to put adequate staff and resources
to permitting OCS facilities and further directed that the EPA
``set clear, reasonable national guidelines for issuing OCS air
permits.'' Shell has applied to the EPA for our Alaska
exploration work. The 40-month process is still not complete.
This should not be replicated or tolerated.
Increase funding for the MMS Environmental Studies Program.
The government should invest now in key studies, ecological
characterization and additional baseline science, all of which
will be critical to permitting any oil and gas work in OCS
areas outside the Gulf of Mexico.
Establish regional, inter-agency permitting offices to
support OCS leasing and permitting. I commend this Committee
for including an Alaska-based permitting office in the energy
bill that was approved last summer. Such an office will enable
agencies to coordinate their regulatory work, share resources
and hopefully move expeditiously to approve permits.
Second, the government should support opening new OCS areas to oil and
gas development
As I discussed earlier, the U.S. is blessed with resources.
Development has multiple energy and economic benefits.
Third, the government should provide revenue sharing for all coastal
communities
States and communities adjacent to offshore development have
infrastructure needs, such as roads, housing and schools for workers
and their families, enhanced seaport and air terminal facilities,
greater demands for basic public services and other expenses common to
economic growth. Congress recognized this when it provided that the
four Gulf states could share in federal OCS revenue from Gulf leases.
Revenue sharing should not be denied to other states that have OCS
leasing. Today, Alaska is the only other state with OCS leasing by the
federal government. It is unfair and unreasonable to deny revenue
sharing to the State of Alaska. Some argue that revenue sharing takes
money out of the federal treasury. On the contrary, revenue sharing
will enable offshore development and would bring revenues into the
federal treasury.
Fourth, the government should ensure that any National Ocean Policy
recognizes the importance of offshore energy to the nation's
economy and energy security
The President's Interagency Ocean Policy Task Force is developing a
national oceans policy. We will see this report by the end of the year.
I hope the Task Force will provide recommendations that balance the
nation's environmental, economic and social goals without adding new
bureaucracies that undermine the existing OCS oil and gas leasing
program. The Task Force was directed by the President to develop a
framework for marine spatial planning. This framework should inform
government decision makers by providing access to environmental and
ocean user information. It should be used in a way that allows for
continued multiple uses of the oceans and not as a process to ``zone
off'' important economic and recreational uses.
Finally, Congress must have the will to support OCS oil and gas
development, to embrace a domestic energy policy that works
with domestic environmental goals
The energy future of our country will be determined to a great
extent by the legislation enacted by Congress.
In closing, thank you for the opportunity to speak on behalf of
Shell about issues of paramount importance, ones that cannot be
overstated or overemphasized.
The world faces a daunting challenge that demands aggressive,
collaborative and realistic action to meet escalating energy demand in
ways that are good for the environment. Shell challenges our elected
officials to exercise political courage and leadership to make tough--
often unpopular--decisions that are in the best interest of our
citizens, economy and environment.
Driving those decisions must be the reality that it will take all
possible energy sources to meet demand--and that oil and gas will
remain our primary energy sources for decades to come as we transition
to a more sustainable energy future.
Access to vast, untapped natural resources onshore and on the Outer
Continental Shelf is critical--we need it now. Access is good for
America. Developing more of our own resources will create jobs, provide
energy security and help our balance of trade. We must stop sending
hundreds of billions of dollars out of the country and start developing
more of our own energy and bolstering our own economy.
History shows that we can--and do--develop oil and gas resources in
responsible ways. Our record at Shell is impressive.
Shell is a leader in environmentally superior operations. We
advocate globally for carbon dioxide reduction through a phased-in cap-
and-trade program. We see great promise for carbon capture and storage
as a mitigation technology and are collaborating on numerous CCS
research and demonstration projects in the U.S., Canada and other parts
of the world.
Shell supports continued development of alternatives and
renewables, with our focus on wind and biofuels. In addition, we are
increasing production of natural gas, the cleanest-burning fossil fuel.
New technology has opened up abundant gas resources contained in dense
rock formations, which will increase supplies dramatically.
Shell continues to deliver energy to Americans in responsible ways.
That's our job, day in and day out. Our elected officials have the role
to move beyond discussion and enact sound, realistic legislation and to
establish the regulatory framework necessary to bring more energy to
America. Our economy and our nation's security demand and deserve
nothing less. Likewise, we should expect nothing less from our
government.
The Chairman. Thank you very much.
Mr. Amos, go right ahead.
STATEMENT OF JOHN F. AMOS, PRESIDENT, SKYTRUTH, SHEPHERDSTOWN,
WV
Mr. Amos. Mr. Chairman, members of the committee, thank you
for this opportunity to present some of the ongoing risks
posted by offshore oil and gas drilling. I've submitted written
testimony for the record and will summarize my comments here.
After more than a decade analyzing satellite imagery in the
commercial sector for oil and gas exploration, I founded
SkyTruth, a nonprofit corporation dedicated to investigating
environmental issues, using satellite images and other remote
sensing technologies. We work to inform decisionmakers and the
public about the risks posed by resource extraction so we can
make better decisions about developing our resources,
understand the worst-case scenarios implied by those risks, and
ensure that we can effectively respond to those scenarios.
Our work investigating drilling mishaps, severe storm
damage, and leaking pipelines demonstrates that major oil
spills still occur today, including in U.S. waters, despite
significant advances in technology. This testimony addresses
several incidences of oil spills observed by SkyTruth that are
directly related to current offshore oil and gas drilling and
production and the utility and effectiveness of mitigation
efforts, such as creating buffer zones.
Most recently, on August 21, 2009, a production well at the
new Montara oil platform, off the northwest coast of Australia,
experienced a blowout, ejecting its cement plug and spraying
oil and gas into the air and water. The platform and attached
West Atlas drill rig, seen in this photo, were evacuated. For
the next 10 weeks, oil and gas flowed unabated from the well.
To plug the leak, authorities decided to bring in a second rig
from Singapore and drill a relief well. On November 1, the
spill was finally stopped by pumping heavy mud into the well.
Concurrently, the platform and attached rig were engulfed in
flames and burned for 2 days. The $250-million rig is reported
to be a total loss, and engineers are assessing the integrity
of the platform. Difficult work remains to install a permanent
cement plug in the well.
Estimates of the amount of oil spilled range from 1.2
million gallons to more than 9 million gallons. SkyTruth's
analysis of NASA's satellite images, like the one here, showed
that oil slicks and sheen moved as far as 225 miles from the
leaking well and cumulatively impacted more than 24,000 square
miles of ocean, an area the size of my State of West Virginia.
Researchers documented impacts from the spill on seabirds and
marine mammals. Indonesian and Australian fishermen cited fish
kills and significant declines in catch, and news accounts
report that fishermen are going bankrupt.
The Australian government has launched an investigation
into the causes of the blowout, effectiveness of the response,
and environmental impacts. The investigation is expected to
take 6 months.
Severe storms present another risk. In 2005, as Senator
Dorgan noted, Hurricanes Katrina and Rita moved through oil
fields in the Gulf as powerful category-5 storms. SkyTruth's
analysis of satellite images, including this image taken a few
days after Katrina made landfall, revealed extensive slicks
covering more than 700 square miles in the Gulf of Mexico. The
Minerals Management Service reported that Katrina and Rita
destroyed more than 100 platforms and damaged 450 offshore
pipelines.
These storms caused major spills from the onshore
facilities that support offshore production. The Coast Guard
reported that onshore infrastructure spilled 8 million gallons
of oil into coastal wetlands, streams, and communities. A
single spill from a ruptured storage tank inundated 1700 homes
in Louisiana with crude oil.
Infrastructure can fail even in the absence of storms. In
calm weather, in July 2009, a major pipeline operated by Shell
sprang a leak about 30 miles off the Louisiana coast. Divers
located a crack in the pipe, but 63,000 gallons of oil spilled
into the Gulf. The resulting slick covered 80 square miles. The
failed pipeline was installed more than 30 years ago. In 2009,
it began carrying oil from a new platform almost 200 miles
south of New Orleans. In a common industry practice, the new
platform was connected to the old pipeline network.
Offshore production in the Gulf began in the late 1940s.
Today, as you can see on this map, the seafloor is crisscrossed
by 25,000 miles of active pipeline, connecting 3600 platforms
to coastal facilities. As the pipeline network ages, structural
failures and spills become increasingly likely.
In summary, offshore drilling is an inherently risky
venture. Accidents happen despite the most technologically
advanced systems. Nature can create insurmountable situations.
Infrastructure ages and becomes vulnerable. Recent history
shows that when things go wrong, consequences can be severe. As
the Senate debates the merits of opening new offshore areas to
energy development, it is important to understand and carefully
evaluate the risks posed by offshore drilling. The critical
first step is acknowledging these risks to the environment and
to communities that depend on healthy marine and coastal
ecosystems for their economic wellbeing.
I thank you for your attention today, and I would be happy
to answer questions.
[The prepared statement of Mr. Amos follows:]
Prepared Statement of John F. Amos, President, Skytruth,
Shepherdstown, WV
Good morning, Mr. Chairman and members of the committee. Thank you
for this opportunity to present information about some of the ongoing
risks posed by offshor important issue for our nation as we face
increasing political, strategic, environmental and economic
consequences resulting from our dependence on fossil fuels as the
primary energy source driving our economy. As the nation embarks on a
new marine spatial planning process to help us make better informed
management decisions governing our nation's coastal and marine
resources, and as the merits of opening new offshore areas to energy
development carefully evaluate the risks of offshore drilling when
considering the benefits acknowledging the potential risks of offshore
oil and gas development to the environment, and communities that depend
on healthy marine and coastal ecosystems for their economic well
I received degrees in geology from Cornell University (B.S.) and
the University of Wyoming (M.S.), and spent nearly a decade working as
an exploration geol firms, Earth Satellite Corporation (now MDA Federal
Inc.) and Advanced Resources International. During that time I
developed expertise in remote sensing and digital mapping: processing
and analyzing satellite images as a tool to explore for oil and gas,
minerals, and ground water. I conducted dozens of onshore and offshore
exploration studies for clients that included British Petroleum, Shell
Oil Co., Exxon, and the U.S. Department of Energy, among many othe
NASA-funded study to develop remote sensing techniques for detecting
and mapping both natural and human-caused oil slicks at sea. I have
analyzed hundreds of satellite and aerial images of the world's oceans,
collected by a variety of radar, visible and infrared sensors.
In 2001 I founded SkyTruth, a non-profit organization dedicated to
investigating and illustrating environmental issues using satellite
imagery, digital mapping, and other remote sensing technologies. This
testimony addresses several instances of oil spills observed by
SkyTruth that are directly related to current offshore oil and gas
drilling and production. These incidents are notable for their
magnitude and/or the potential risk they expose, and include a broad
range of causes including:
Drilling accidents (Western Australia, August-November 2009)
Severe storm damage (Katrina and Rita, 2005; Ike, 2008)
Aging pipeline infrastructure (Eugene Island Pipeline, July
2009)
i. drilling accidents: the montara / west atlas blowout and spill
On August 21, 2009, Seadrill, a Norwegian offshore drilling
services company\1\, was working from their West Atlas portable jackup
drilling rig at the new Montara oil production platform in the Timor
Sea, about 150 miles off the coast of Western Australia, at a water
depth of 260 feet\2\. The West Atlas rig was drilling a new production
well\3\ when one of the previously completed and temporarily plugged
wells on the platform experienced a ``blowout,'' ejecting its cement
plug and spewing oil, natural gas, and vaporized natural gas
condensate\4\ into the air and water. The rig and platform were
immediately evacuated, with no injury to the 69 workers involved. Due
to the extreme fire and explosion hazard posed by the situation, all
personnel were excluded from the immediate vicinity of the platform and
rig\5\.
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\1\ http://www.seadrill.com/
\2\ http://www.worleyparsons.com/Projects/Pages/
MontaraPlatform.aspx
\3\ http://www.offshore-mag.com/index/article-display/6066428130/
articles/offshore/company-news/australianew-zealand/2009/08/seadrill-
issues_update.html
\4\ http://www.ens-newswire.com/ens/aug2009/2009-08-24-02.asp
\5\ http://www.abc.net.au/news/stories/2009/08/25/2666754.htm
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For the next ten weeks, oil and gas flowed from the damaged well
unabated\6\, despite repeated attempts to plug the well (Figure 1).*
Australian authorities and the platform operator, PTTEP-Australasia\7\,
responded primarily by aerial spraying of chemical dispersants on the
oil slick, with limited boom-and-skimmer operations to mechanically
recover the spilled oil. PTTEP determined that the best way to stop the
flow from the damaged well was to drill a relief well that would
intercept the damaged well at a point approximately 8,600 feet below
the seafloor\8\. Because the West Atlas drill rig was deemed too
hazardous for personnel, a second jackup drill rig, the West Triton,
was transported from Singapore\9\. The West Triton rig did not arrive
on-scene until September 10, nearly three weeks after the spill
began\10\. It was stationed about 6,500 feet from the West Atlas drill
rig\11\, and began to drill the relief well.
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\6\ http://www.watoday.com.au/photogallery/wa-news/the-west-atlas-
oil-spill/20090829-f34l.html
* All figures have been retained in committee files.
\7\ http://www.au.pttep.com/
\8\ http://www.news.com.au/perthnow/story/0,21598,26172761-
5017962,00.html
\9\ http://www.theaustralian.com.au/news/breaking-news/oil-gas-
leak-to-continue-for-seven-weeks/story-fn3dxity-1225765343929
\10\ http://www.watoday.com.au/wa-news/mobile-rig-to-clean-up-oil-
arrives-today-20090910-fj8p.html
\11\ http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aUYFMY8a.T6U
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Nearly one month later, on October 6 the relief well had finally
reached the target depth and the first attempt was made to intercept
the damaged well, a target about ten inches in diameter. This attempt
missed the well\12\, requiring the crew on the West Triton to pull the
drillstring back and drill forward again on a slightly different
trajectory, a process that takes several days to accomplish. This
process was repeated three more times without success. Finally, on
November 1, the fifth attempt to intercept the damaged well
succeeded\13\. The West Triton crew began pumping heavy drilling mud
into the damaged well to squelch the flow of oil and gas. Concurrently,
the damaged well ignited (Figure 2), engulfing the Montara platform and
attached West Atlas drill rig in flames\14\. The fire continued for two
days\15\ before finally burning out all the residual oil and gas in the
well and other combustible materials on the structures (Figure 3).
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\12\ http://www.news.com.au/perthnow/story/0,21598,26172761-
5017962,00.html
\13\ http://www.google.com/hostednews/afp/article/
ALeqM5gwLtvodwRVStfa7BCRLFsX6WbqPg
\14\ http://www.google.com/hostednews/afp/article/
ALeqM5jBnSKYWjVXfddqxWb00p8eb6SqXQ
\15\ http://www.google.com/hostednews/afp/article/
ALeqM5gwLtvodwRVStfa7BCRLFsX6WbqPg
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At this time, leakage from the damaged well has been stopped.
Engineers are assessing the structural integrity of the Montara
platform, heavily damaged by the fire. The $250M West Atlas drill rig
is reported to be a total loss\16\. Difficult and complex work remains
to re-enter the damaged well so a permanent cement plug can be
installed\17\. The ultimate disposition of the other previously drilled
production wells has not been announced.
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\16\ http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=aFa6kCclA1Yg
\17\ http://www.google.com/hostednews/afp/article/
ALeqM5gwLtvodwRVStfa7BCRLFsX6WbqPg
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Oil and gas flowed uncontrollably from the damaged Montara well for
73 days. No estimate has been made of the amount of methane--a potent
greenhouse gas--released during this event. Estimates of the amount of
oil spilled vary widely. Based on visual approximation only, PTTEP
estimated 400 barrels (16,800 gallons) per day\18\. The Australian
government's Department of Resources, Energy and Tourism estimated the
spill rate at ``up to 2,000'' barrels per day\19\. The Australian
Greens party collected data on the measured flow rates from other oil
wells in the vicinity and came up with an estimate of 3,000 barrels per
day\20\. These spill rates translate into total spill volumes of 1.2
million gallons, 6.1 million gallons, and 9.2 million gallons
respectively. For comparison, the Exxon Valdez tanker spill in Alaska
in 1989 released an estimated 10.8 million gallons\21\.
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\18\ http://www.watoday.com.au/wa-news/oil-spill-is-now-one-of-
australias-worst-20091022-hagd.html
\19\ http://www.theaustralian.com.au/news/nation/timor-oil-leak-
larger-than-claimed/story-e6frg6pf-1225790241987
\20\ http://www.news.com.au/perthnow/story/0,21498,25996354-
2761,00.html?from=public_rss
\21\ http://www.sciencentral.com/video/2009/03/24/exxon-valdez-
anniversary/
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Even at the lowest estimate of 400 barrels per day, the Montara
event ranks as the worst productionrelated spill in Australia's 40-year
history of offshore energy development\22\. SkyTruth obtained daily
NASA satellite imagery throughout the course of the spill to track and
measure the locations of oil slicks and sheen in the Timor Sea\23\.
MODIS\24\ satellites capture light reflected from the Earth's surface
in visible and infrared wavelengths. MODIS imagery on August 30\25\
showed slicks and sheen spread across an area of 2,500 square miles\26\
(Figure 4). On September 3 patches of slicks and sheen ranged across
5,800 square miles\27\ (Figure 5). On September 24, MODIS images showed
slicks and sheen spanning nearly 10,000 square miles of the Timor
Sea\28\, an area larger than the state of Maryland\29\.
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\22\ http://www.bloomberg.com/apps/
news?pid=20601130&sid=asC4plvYuEuE
\23\ http://blog.skytruth.org/search?q=timor
\24\ http://modis.gsfc.nasa.gov/
\25\ http://earthobservatory.nasa.gov/NaturalHazards/
view.php?id=40029
\26\ http://blog.skytruth.org/2009/09/timor-sea-drilling-spill-
covers-2500.html
\27\ http://blog.skytruth.org/2009/09/timor-sea-drilling-spill-
covers-5800.html
\28\ http://blog.skytruth.org/2009/09/timor-sea-drilling-spill-
september-24.html
\29\ http://www.ipl.org/div/stateknow/popchart.html#statesbysize
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Before the spill was stopped on November 1, satellite images
obtained and analyzed by SkyTruth showed that oil slicks and sheen had
cumulatively ranged across more than 24,000 square miles of ocean\30\,
an area the size of West Virginia. Slicks had moved far into Indonesian
territorial waters\31\, coming within 40 miles of the Timor coast and
within 20 miles of islands along Western Australia's biologically rich
Kimberley coast. Slicks and sheen were observed at times as far as 225
miles away from the leaking Montara well.
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\30\ http://www.flickr.com/photos/skytruth/sets/72157622226354812/
\31\ http://www.flickr.com/photos/skytruth/3951854968/sizes/l/in/
set-72157622226354812/
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Preliminary investigations of the spill's environmental impacts by
World Wildlife Fund\32\ and by Australian government-funded
researchers\33\ have documented impacts on seabirds and marine mammals.
Timorese and Australian fishermen have cited fish kills and significant
declines in catch in the region affected by the spill and the
application of dispersants\34\. News accounts report that fishermen are
going bankrupt as a result of the steep decline in catch\35\. A multi-
year study of the spill's impacts and lingering toxicity is being
launched\36\; recent studies of the Exxon Valdez spill aftermath
suggest that measurable impacts on ecosystem health and fisheries can
be anticipated for decades\37\.
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\32\ http://www.wwf.org.au/publications/montaraoilspillreport/
\33\ http://www.environment.gov.au/coasts/publications/pubs/
montara-rapid-survey.pdf
\34\ http://www.news.com.au/perthnow/story/0,21598,26286663-
5017007,00.html
\35\ http://www.abc.net.au/news/stories/2009/11/07/2736012.htm
\36\ http://thegovmonitor.com/energy_and_environment/australia-
looks-at-long-term-environmental-plan-formontara-oil-spill-13389.html
\37\ http://www.time.com/time/health/article/0,8599,1902333,00.html
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The Australian government has launched an investigation into the
causes of the Montara blowout, effectiveness of the response, and
environmental impacts\38\. This investigation is expected to take at
least six months to come to completion\39\. Ideally, it will include an
analysis of regulatory gaps or weaknesses that may have contributed to
or allowed the occurrence of this accident. As with most major spills,
it is unlikely that the exact causal chain of events will be repeated
anywhere, including in U.S. waters. Yet the Montara blowout and spill
offers cautionary lessons about modern offshore drilling, regardless of
its cause:
---------------------------------------------------------------------------
\38\ http://www.watoday.com.au/environment/inquiry-announced-into-
timor-sea-oil-spill-20091105-hz7x.html
\39\ http://www.cbsnews.com/stories/2009/11/05/ap/business/
main5530677.shtml
1. The West Atlas drill rig is new, technologically advanced
equipment, built in 2007\40\. It is a jackup rig\41\, a style
commonly used for drilling in relatively shallow water (<400
feet), including much of the Gulf of Mexico continental shelf.
The Montara production platform is also new equipment.
Construction was completed in 2008\42\, and the platform was
installed in 2009 by an Australian engineering firm\43\.
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\40\ http://www.seadrill.com/stream_file.asp?iEntityId=935
\41\ http://oilgasglossary.com/jackup-drilling-rig.html
\42\ http://www.rigzone.com/news/article.asp?a--id=64979
\43\ http://www.upstreamonline.com/live/article172586.ece
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2. The West Atlas rig is owned and operated by Seadrill, a
major international offshore drilling contractor that operates
a global fleet of 41 drilling units, including nine that are
under construction\44\. They have an office in Houston,
identify the Gulf of Mexico as an important business
target\45\, and are currently under contract with Devon Energy
to drill deepwater wells in the U.S. Gulf of Mexico using their
new West Sirius semisubmersible rig\46\. All of the personnel
present when the Montara blowout occurred were working on the
West Atlas rig\47\.
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\44\ http://www.seadrill.com/modules/module_123/
proxy.asp?D=2&C=19&I=1772&mid=18
\45\ http://www.drillingcontractor.org/dcpi/dc-julyaug08/
DC_July08_Seadrill.pdf
\46\ http://www.rigzone.com/news/article.asp?a_id=69946
\47\ http://drillingclub.proboards.com/
index.cgi?board=wellcontrol&action=display&thread=4315&page=1
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3. The U.S. Minerals Management Service has investigated 18
blowouts and 13 losses of well control in the U.S. Gulf of
Mexico since 1983, with three such incidents occurring since
2007\48\.
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\48\ http://www.gomr.mms.gov/homepg/offshore/safety/acc_repo/
accindex.html
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4. The Montara platform is located in relatively shallow
water (260 feet), and the Montara well suffered a failure 8,600
feet below the seafloor. Despite generally calm tropical seas
and favorable weather for offshore operations, more than ten
weeks elapsed before the Montara blowout could effectively be
killed by one of the world's leading well-control contractors
(Alert Well Control)\49\. In contrast, drilling in the U.S.
Gulf of Mexico has moved into ultradeep waters, approaching
10,000 feet for some recently targeted plays on the continental
slope\50\, and wells in the Gulf are now being drilled to
depths exceeding 30,000 feet below the seafloor\51\. The Gulf
of Mexico and Atlantic coasts are regularly hit by tropical
storms\52\. Portions of the Arctic, where offshore energy
development is being considered, feature adverse winter
conditions characterized by sea ice, subzero temperatures,
tropical storm-force winds, and low visibility. Effective
response to a comparable accident in the deepwater Gulf, or
mid-winter Arctic, could be significantly more difficult,
prolonged, and costly.
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\49\ http://www.upstreamonline.com/live/article197622.ece
\50\ http://www.gomr.mms.gov/PDFs/2009/2009-016.pdf
\51\ http://blog.nola.com/tpmoney/2008/05/
mcmoran_says_highprofile_black.html
\52\ http://commons.wikimedia.org/wiki/
File:Atlantic_hurricane_tracks_1980-2005.jpg
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ii. storm damage: hurricanes katrina, rita and ike
In late August of 2005, Hurricane Katrina moved through oil fields
in the central Gulf of Mexico as a Category 5 storm\53\. Just three
weeks later another Category 5 storm, Hurricane Rita\54\, drove through
the offshore infrastructure in the western Gulf. SkyTruth acquired
radar satellite images taken a few days after Katrina made
landfall\55\. Our analysis of these images revealed extensive oil
slicks covering more than 700 square miles in the Gulf of Mexico
(Figure 6). Close examination revealed multiple sources for the slicks,
including known platform locations\56\ (Figure 7). Months later, the
Minerals Management Service reported that Katrina and Rita had
destroyed more than 100 platforms (Figure 8) and severely damaged more
than 50 others; damaged more than 450 pipelines; and caused at least
124 separate spills in the Gulf totaling 750,000 gallons of oil and
other liquid hydrocarbons (primarily based on self-reporting by
industry)\57\. Five drilling rigs were destroyed, and 19 others were
severely damaged\58\. Nineteen mobile drilling units were broken loose
from their moorings and set adrift by the storms, dragging their heavy
anchor chains on the seafloor and causing much of the pipeline
damage\59\. We conclude that many of the oil slicks SkyTruth identified
on satellite images of the Gulf resulted from pipelines damaged in this
manner.
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\53\ http://www.katrina.noaa.gov/
\54\ http://earthobservatory.nasa.gov/NaturalHazards/
view.php?id=15546
\55\ http://blog.skytruth.org/2007/12/hurricane-katrina-gulf-of-
mexico-oil.html
\56\ http://skytruth.mediatools.org/node/12846
\57\ http://www.mms.gov/ooc/press/2006/press0501.htm
\58\ http://meetingorganizer.copernicus.org/EGU2009/EGU2009-
13707.pdf
\59\ http://www.mms.gov/tarprojects/581/
44814183_MMS_Katrina_Rita_PL_Final%20Report%20Rev1.pdf
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Aside from the direct damage to, and spills from, offshore
facilities, these storms exposed a significant and previously
unrecognized risk posed by offshore production: catastrophic spills
resulted from the onshore oil and gas infrastructure that supports
offshore production in the Gulf--the refineries, pipelines, and tanks
required to receive, process, store and distribute oil and gas from
offshore fields. In a May, 2006 report to the U.S. Department of
Homeland Security, the U.S. Coast Guard reported that Katrina and Rita
released over 9 million gallons of oil, not including more than 5,000
minor spills\60\. Storm-damaged onshore infrastructure spilled 7 to 8
million gallons of oil into coastal wetlands, streams, and communities.
A single spill from a ruptured storage tank at the Murphy Oil Refinery
inundated more than 1,700 homes in the towns of Chalmette and Meraux,
Louisiana, with more than one million gallons of crude oil\61\ (Figures
9 and 10).
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\60\ http://www.uscg.mil/ccs/npfc/docs/PDFs/Reports/
osltf_report_hurricanes.pdf
\61\ http://www.epa.gov/katrina/testresults/murphy/
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On September 13, 2008, this coastal vulnerability was exposed again
when Hurricane Ike made landfall near Galveston, Texas, with Category 2
winds but a storm surge more typical of a Category 5 event. Coastal oil
facilities were flooded. SkyTruth obtained NOAA aerial survey
photographs\62\ that showed extensive oil slicks emanating from coastal
wells\63\ and damaged storage facilities\64\ (Figure 11). Onshore
facilities related to offshore production continue to pose risks that
should be acknowledged and effectively managed.
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\62\ http://ngs.woc.noaa.gov/ike/IKE0000.HTM
\63\ http://www.flickr.com/photos/47684393@N00/2861763336/sizes/l/
\64\ http://www.flickr.com/photos/skytruth/2924786274/sizes/l/
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iii. pipeline spills: aging infrastructure
Oil and gas infrastructure can become damaged and cause oil spills
even in the absence of major storms. On July 25, 2009, Shell Oil Co.
reported to the U.S. Coast Guard's National Response Center that they
had detected a loss of pressure in the Eugene Island Pipeline off
Louisiana. Divers found a crack in the 20'' diameter pipe at a point
about 30 miles offshore, in water about 60 feet deep\65\. 63,000
gallons of oil leaked into the Gulf\66\, a ``medium'' spill by Coast
Guard definition. Radar satellite imagery from NOAA showed the
resulting oil slick\67\, which eventually stretched over 15 miles and
reached a size of 80 square miles\68\ before it was effectively
dispersed (Figure 12). Had this break occurred from a point closer to
shore, beaches and coastal resources could have been directly impacted
(Figure 13), as they were with the 1997 Torch spill from a pipeline
just off the California coast\69\.
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\65\ http://www.incidentnews.gov/attachments/8061/524175/
EugeneIslandNewsRelease090729.pdf
\66\ http://www.incidentnews.gov/incident/8061
\67\ http://www.incidentnews.gov/attachments/8061/524191/NESDIS--
Analysis.jpg
\68\ http://www.incidentnews.gov/entry/524230
\69\ http://www.dfg.ca.gov/ospr/spill/nrda/nrda_irene.html
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The Eugene Island Pipeline was installed in 1976\70\. In 2009\71\
it began carrying oil produced from Chevron's new deepwater ``Tahiti''
platform\72\, situated approximately 190 miles south of New
Orleans\73\.
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\70\ http://www.reuters.com/article/environmentNews/
idUSTRE56R46E20090729
\71\ http://www.chevron.com/news/Press/release/?id=2009-05-06
\72\ http://www.gasandoil.com/goc/company/cnn71530.htm
\73\ http://www.offshore-technology.com/projects/tahiti/
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In a common industry practice, Tahiti was ``tied back'' to the
existing infrastructure: new pipeline was only extended 55 miles from
Tahiti to Shell's Boxer platform, where it was connected to the
existing pipeline network\74\. From Boxer, Tahiti oil flowed to shore
through older pipelines including the Eugene Island Pipeline.
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\74\ http://www.subseaiq.com/data/
Project.aspx?project_id=127&AspxAutoDetectCookieSupport=1
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The cause of the Eugene Island Pipeline failure has not yet been
publicly reported, but as the existing nearshore pipeline network ages,
structural failures become increasingly likely due to accumulated
strain and corrosion. Offshore production of oil in the U.S. Gulf of
Mexico began in the late 1940s\75\. In 2006, federal waters in the Gulf
of Mexico produced 5.5 trillion cubic feet of natural gas and 400
million barrels of crude oil\76\. Today, the seafloor in the western
and central Gulf is crisscrossed by a complex network of over 25,000
miles of active pipeline, connecting 3,600 platforms and thousands of
oil and gas wells to coastal processing, storage and distribution
facilities\77\ (Figure 14). A recent SkyTruth analysis of pipeline data
from the Minerals Management Service showed that 60 miles of still-
active pipeline exceed 30 years in age. But most of the active pipeline
segments in the MMS online dataset--totaling over 18,000 miles, or 72%
of the active pipeline network--lack information pertaining to their
installation date\78\, so the real extent of the age problem is
elusive.
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\75\ http://www.gomr.mms.gov/homepg/regulate/environ/
history_louisiana.html 76
\76\ http://tonto.eia.doe.gov/dnav/pet/pet_crd_gom_s1_a.htm
\77\ http://www.gomr.mms.gov/homepg/pubinfo/repcat/arcinfo/
index.html
\78\ http://www.gomr.mms.gov/homepg/pubinfo/repcat/arcinfo/zipped/
8321.zip
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Rigorous inspection and maintenance, routine monitoring, and
aggressive programs to decommission aging pipeline can help manage the
risk. But effective design and implementation of such programs may be
complicated by the existing regulatory regime for offshore pipelines,
with jurisdiction split between two separate agencies, the Department
of Transportation and the Department of the Interior. This is a classic
example of gaps and overlaps in ocean governance of the kind discussed
in a widely quoted 2006 paper\79\ in the journal Science.
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\79\ Crowder, L.B., G. Osherenko, O.R. Young, S. Airame, E.A.
Norse, N. Baron, J.C. Day, F. Douvere, C.N. Ehler, B.S. Halpern, S.J.
Langdon, K.L. McLeod, J.C. Ogden, R.E. Peach, A.A. Rosenberg, and J.A.
Wilson (2006). Resolving mismatches in U.S. ocean governance. Science,
v. 313, pp. 617-618
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iv. key observations
Based on SkyTruth's experience over the past five years
investigating significant oil spill incidents caused by drilling
mishaps, severe storm damage, and leaking pipelines, we offer the
following thoughts:
1. Offshore oil and gas production is a complex, technically
challenging industrial activity. Relatively small spills occur
regularly and, although accidents that lead to major spills are
not common, they do still occur and pose a continuing threat to
other marine and coastal resources, and to the communities and
economic systems that depend on the integrity and
sustainability of those other resources.
2. While continual improvements to comprehensive regulation
and enforcement, coupled with advances in technology and
technique, can significantly reduce the likelihood of accidents
that lead to major spills, offshore production still poses
risks.
3. When things go wrong offshore, the results can be
disastrous, difficult to remediate, and extremely costly\80\ to
both industry and society\81\. The risk becomes much higher in
deeper water, in stormy locations, or where other difficult
conditions (such as ice cover) slow and complicate oil spill
response.
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\80\ http://www.watoday.com.au/environment/cause-of-wa-oil-spill-
revealed-20091109-i59k.html
\81\ http://www.watoday.com.au/wa-news/oil-spill-cleanup-cost-tops-
5-million-20091020-h6qx.html
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4. Prepare for the worst. Determine the worst-case scenario
wherever drilling is allowed, and integrate that scenario into
the processes that will guide the decisionmaking and management
of our nation's marine and coastal resources.
Other impacts, not addressed in this testimony, can also occur.
This testimony does not provide a comprehensive analysis of the
pollution that inevitably accompanies an intensive industrial resource
extraction operation such as oil and gas production. Other important
topics that should be thoroughly investigated and carefully considered
when weighing the merits of offshore drilling include:
The routine, expected pollution from drilling and production
activities (air, water).
The occurrence of minor accidental spills and discharges.
See Table 1,* for example, showing the frequency of spills
>2100 gallons. Data addressing the frequency and cumulative
impact of smaller spills are difficult to come by\82\.
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* Table has been retained in committee files.
\82\ Fraser, G.S., J. Ellis, and L. Hussain, 2007. An international
comparison of governmental disclosure of hydrocarbon spills from
offshore oil and gas installations. Marine Pollution Bulletin, v. 56,
pp. 9-13.
--Fugitive emissions of methane, a potent greenhouse gas, from oil
and gas development activities and facilities.
--The short- and long-term environmental, economic, and
sociological impacts of spills and pollution.
The Chairman. Thank you for being here.
Mr. Rainey, go right ahead.
STATEMENT OF DAVID RAINEY, VICE PRESIDENT, GULF OF MEXICO
EXPLORATION, BP AMERICA, INC., HOUSTON, TX
Mr. Rainey. Thank you, Chairman Bingaman, Ranking Member
Murkowski, and members of the committee. I am honored to appear
before you today to share BP's perspective on environmental
stewardship and offshore energy production.
Throughout the 20th century, an abundant supply of low cost
energy has been the driving force behind America's development,
prosperity, and security. BP supports the view that energy
security is inseparable from economic security and national
security. BP is the largest producer of oil and natural gas in
the U.S. and one of the largest investors in biofuels, wind,
and solar. We recognize the need to transition to a lower-
carbon economy, but that's--that transition will take time. The
U.S. will continue to rely on hydrocarbons for many years to
come. Like any industrial activity, the production and
transportation of oil and gas have environmental implications.
The public is highly concerned about this, and we share their
concerns.
Releases from oil and gas operations are rare, and the
application of technology has enabled a dramatic reduction of
releases from our industry over the last 30 years. To be clear,
any release from our operations is unacceptable, and we will
continue to invest in research and technology to drive us to
our ultimate goal of zero discharge.
Contrary to popular perception, ours is a high-tech
industry. To demonstrate this point, I would like to highlight
three technologies which enable the safe and reliable
production of offshore oil and gas. These are seismic imaging,
drilling, and production systems.
Seismic imaging allows us to predict the possibility of
hydrocarbon reservoirs below the seabed. Drilling allows us to
test for the presence of hydrocarbons in the reservoir, and, if
hydrocarbons are present, the well bore connects the reservoir
to the surface, where production systems enable us to produce
the hydrocarbons and deliver them safely to market.
Our industry has a remarkable track record of moving
forward the limits of each of these technologies. I would like
to highlight a few examples of how we have applied these
technologies in the Gulf of Mexico, in Alaska, and in the
United Kingdom.
In the Gulf of Mexico, much of the seabed is underlain by
shallow salt canopies. These salt canopies obscure the image
below the seabed in the same way that a pane of frosted glass
obscures the image on the other side of a window. Early
exploration focused on areas that had no shallow salt canopy.
As the fields in these areas were discovered, industry began to
explore under the thin edges of the canopies and eventually
under thicker and more complex bodies of salt. Each phase of
exploration was enabled by advances in seismic imaging
technology.
Recently, BP has pioneered a technology known as Wide-
Azimuth Towed Streamer, or WATS. WATS is a 3-dimensional
acquisition technology which has allowed us to get a better
view of what lies on the other side of the frosted glass. As a
result of the application of this technology, we recently
announced a significant extension to our Mad Dog field, which
is now firmly established as the third giant field in our Gulf
of Mexico portfolio.
Also in the Gulf, we have been progressing the limits of
drilling and production systems. As drilling technology has
moved forward enabling discoveries in deeper and deeper water,
so production technology has followed. A variety of production
systems has been developed to account for different metocean,
seabed, and reservoir conditions.
BP currently operates eight production hubs in the
deepwater Gulf of Mexico using these technologies. One of
these, our Marlin hub, has just celebrated its 10th anniversary
of first production. As the original field has declined, five
satellite fields up to 18 miles distant have been tied back to
the Marlin host. This has been enabled by combination of
directional and extended-reach drilling and subsea production
technologies. The useful life of the facility has been extended
and the environmental footprint has been reduced by requiring
only one surface facility, where six would otherwise have been
needed. In addition, Marlin has, this year, achieved a second
peak of production, a very rare occurrence in our industry.
In Alaska, BP is the only company producing oil and gas
from the Beaufort Sea. Production began from our Endicott field
in 1986. Drilling and production take place from an artificial
gravel island located about 1 mile from the shore. The island
is connected to shore via a gravel causeway along which oil and
gas flows through aboveground pipelines. In 2000, production
began at our Northstar project. The Northstar Island, from
which drilling and production takes place, is further offshore
than Endicott. At Northstar, however, there is no causeway and
production is through a pipeline which is buried below the sea
bed.
Our third offshore development in Alaska is the Liberty
Project, which is currently under development. The reservoir at
Liberty is located in Beaufort Sea Federal waters, some 6 to 8
miles from the shoreline. Despite being much further offshore
than either Endicott or Northstar, at Liberty there will be no
new island and no new pipeline. Advances in extended-reach
drilling will allow us to reach the Liberty reservoir from the
existing facilities at Endicott.
Finally, I would like to talk about our Wytch Farm
development in the U.K. Wytch Farm is the largest onshore oil
and gas development in Western Europe. It is located on the
south coast of England in one of the most environmentally
sensitive areas in the U.K. The application of extended-reach
drilling has allowed the offshore parts of the reservoir to be
drilled and produced from onshore facilities behind the
shoreline. By working closely with government, as well as
surrounding communities and other stake holders, we have been
able to design and locate the facilities to have minimal
environmental and visual impacts. This project has been a
resounding success, it is championed by local communities, by
government leaders, and industry. In the 1995, it won the
Queen's Award for Environmental Achievement.
In summary, I would like to return to the Gulf of Mexico,
where technology has been a key driver of our success. In
September, we announced a Tiber discovery, where we set a new
drilling depth record for the industry at 35,055 feet. There
are many challenges to overcome to bring Tiber to production,
but they are exciting challenges and we look forward to
addressing them. As we do so, we will be ever mindful and
respectful of the communities and the environments in which we
operate.
We look forward to continuing to work with you to secure
the energy supplies that our Nation will need. Thank you, and I
will be happy to take your questions.
[The prepared statement of Mr. Rainey follows:]
Prepared Statement of David Rainey, Vice President, Gulf of Mexico
Exploration, BP America, Inc., Houston, TX
Chairman Bingaman, Ranking Member Murkowski, and Members of the
Committee:
My name is David Rainey, and I am BP's Vice President of
Exploration for the Gulf of Mexico. I am pleased to appear before you
today to share BP's perspectives on environmental stewardship and
offshore energy production.
bp in the united states
BP is the largest oil and gas producer in the US, where we directly
employ 29,000 people. We have long been a proponent of comprehensive
energy policies that promote energy security through the development of
both traditional and non-traditional sources of energy, as well as
conservation and efficiency. We have also been an advocate of taking a
precautionary approach to CO2 emissions, and are committed
to reducing the environmental impacts of both energy production and
consumption.
energy trends
Throughout the 20th century, an abundant supply of low-cost energy
was the driving force behind America's development, prosperity, and
security. Globally, the world uses roughly 80 million barrels of oil a
day. The US consumes a quarter of this--about 20 million barrels, of
which we import 60 percent--or 12 million barrels. The Energy
Information Administration (EIA) projects that US energy demand will
grow by 11 percent from 2007 to 2030. Satisfying that demand in a
sustainable way is one of our nation's most significant challenges. If
anticipated US needs are combined with those of the rest of the world,
EIA projects that a 35 percent expansion in global oil production will
be needed. That equates to an additional 30 million barrels of oil
every day.
Finding that oil and natural gas will be neither simple nor cheap.
The era of ``easy oil'' may be over. New supplies are harder to find,
more difficult and more expensive to extract, and are often located in
politically unstable parts of the world. Wherever they come from,
bringing new supplies to fuel our homes, businesses and transportation
needs will require the investment of hundreds of billions of dollars.
BP supports the need to transition to a lower-carbon economy--but
this transition will take time--probably many decades. We believe that
the nation's and the world's short- to medium-term energy mix will
continue to be dominated by hydrocarbons, and finding and developing
oil and gas remains a huge challenge.
bp's energy portfolio
BP is not only the largest oil and gas producer in the United
States, but also the largest investor in energy of all sorts. In the
last five years, we have invested approximately $35 billion in the US
to ensure Americans have the energy and fuels they need to live their
lives. These include:
Oil and natural gas: Offshore and onshore, from the Alaskan
North Slope to the deep waters of the US Gulf of Mexico, we are
a leader in providing America's traditional energy needs.
Wind: We are major investors in wind generation and have
1,000 megawatts (MW) of wind generation on-line. We expect to
have an installed capacity of 2,000 MW by the end of 2010. And
we also have a land position capable of potentially supporting
20,000 MW in the future--one of the largest portfolios in the
country.
Biofuels: We are one of the largest blenders and marketers of
biofuels in the nation. BP has committed more than $1.5 billion
to biofuels research, development, and production in response
to increasing energy demand and the need to reduce overall
greenhouse gas emissions. Our cutting-edge research looks to
use dedicated non-food crops that will contain more energy and
have less impact on the environment and human food supplies
than past generations of biofuels. They will also be more
compatible with existing engines and transport infrastructure,
making them less costly to deploy at scale.
Carbon Capture and Storage (CCS): BP is involved in three
major CCS projects: active operations in Algeria, a planned
project in Abu Dhabi, and a potential hydrogen energy project
in California.
Solar: BP's solar business has been operating for over 30
years and last year had sales of 162 MW globally. This
represents an increase of 29% over 2007 and further growth is
expected.
By investing heavily in a diverse portfolio of energy sources and
the technologies to support them, BP is helping meet America's energy
needs while ensuring a more sustainable economy and energy future.
track record of environmental stewardship
Like any industrial activity, production and transportation of oil
and natural gas carries environmental implications. The public is
rightly concerned about potential impacts and we share these concerns.
Releases from oil and gas operations are rare, and the application
of technology has enabled a dramatic reduction in releases from our
industry over the last 30 years. The National Academy of Sciences
published its ``Oil in the Sea III'' report in 2002. This report states
that oil released to the sea from the global oil and natural gas
declined by 80 percent from 1975 to 2002.
To be clear, any release of hydrocarbons from our operations into
the environment is unacceptable, and we continue to invest in research
and technology to drive us to our ultimate goal of zero discharge.
Examples of the technologies which have helped to reduce accidental
releases include:
Down hole flow control valves that shut down the well
automatically if damage to the surface equipment is detected;
Blowout preventer technology which includes redundant
systems and controls;
New and improved well control techniques which maintain
constant control of the fluids in the wellbore;
Sensors which continually monitor the subsurface and seabed
conditions for sudden changes in well pressures; and
BP's fiber optic network in the US Gulf of Mexico which
allows us to monitor well pressures in real time, both at the
facility and in our offices in Houston.
While our intent is to prevent all accidental discharges, we
conduct regular emergency drills with local, state, and federal
agencies. All of our production facilities have contingency plans that
identify the procedures, response equipment, and key personnel needed
for responding to incidents.
offshore technologies enabling environmental stewardship
Three key technologies which enable the safe and reliable
production of offshore oil and gas resources:
Seismic imaging;
Offshore drilling; and
Offshore production systems.
Seismic imaging allows us to predict the presence of hydrocarbon
reservoirs below the sea bed. Drilling allows us to test for the
presence of hydrocarbons in the reservoirs. When hydrocarbons are
present, the well bore connects the reservoir to the surface, where
production systems enable us to produce the hydrocarbons, and deliver
them safely to the refinery.
Our industry has a remarkable track record of moving forward the
limits of each of these technologies. In BP, we have been at the
forefront of both the development of the technologies, and their
application. I would like to talk about three specific areas where we
have employed these technologies: the US Gulf of Mexico, the Beaufort
Sea offshore Alaska, and our Wytch Farm development in the UK.
us deepwater gulf of mexico
Industry began to explore in the US Gulf of Mexico during the early
1930's. The first discovery out of site of land was made by Kerr McGee
in 1947. The MMS classifies water depths greater than 1,000 feet as
deepwater, and depths beyond 5,000 feet as ultra-deepwater. The first
deepwater exploration well was drilled in 1975. The first ultra-
deepwater exploration well was drilled in 1987. So, while it took more
than 40 years for industry to develop the technology to move from the
shoreline to 1,000 feet water depth, it took just 12 years to move from
1,000 feet to 5,000 feet. Wells in water depths up to 10,000 feet are
now routine.
In the US Gulf of Mexico, shallow salt canopies underlie about 65
percent of the seabed in the deepwater areas. These salt canopies make
seismic imaging of the subsurface very challenging. [See Figures 1A and
1B]* They present the same barrier to our seismic imaging capability
that a pane of frosted glass presents to our eyes and our ability to
see through it. The salt canopies bend the seismic waves and obscure
the image of the underlying geology.
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* Figures have been retained in committee files.
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Early exploration in the US Deepwater Gulf of Mexico was focused on
the 35 percent of the area which has no salt canopy. Without the salt,
conventional seismic imaging worked and fields were discovered as the
advances in drilling technology enabled industry to move rapidly into
the deepwater. Much of the success in this period was enabled by
widely-spaced two dimensional seismic data. The technology challenge
was about developing the systems to safely produce the oil and gas in
these water depths. Our colleagues in Shell were at the forefront of
this phase of Gulf of Mexico development.
By the mid-1990's, the large fields had been found in the areas of
the deepwater free of shallow salt canopies. This led industry to turn
its attention to the challenge of exploring below the salt. To do this,
we matured a technology known as seismic depth imaging. This technology
combines geological modeling and computer algorithms to restore the
seismic wave paths to their correct positions-allowing the image to
emerge.
By the late 1990's, depth imaging allowed the industry to begin to
explore beneath the salt. These early forays were restricted to areas
where the top and base of the salt were geometrically simple and the
imaging problem was, from where we stand today, relatively easy to
solve. BP's Mad Dog, Atlantis, and Thunder Horse discoveries were
delivered on the back of this technology in 1998 and 1999. Since then,
we have continued to refine the technology and have been able to
announce a steady stream of discoveries--most recently Kaskida in 2006,
Isabela in 2007, Kodiak and Freedom in 2008, and this year Mad Dog
South and Tiber.
In 2003, BP began to address the problem of how we would explore
under more complex salt geometries. We predicted that continuing
incremental improvements to what was then considered conventional;
depth imaging methods would soon reach a point of diminishing returns.
So we set out to create a step change by developing a completely new
seismic imaging technology.
Conventional depth imaging is a data processing technology which
involves some of the most sophisticated computer algorithms ever
created. These algorithms require powerful super-computers to run them.
However, the underlying data were acquired using a technology which had
not changed significantly for 25 years. The data were acquired using a
single seismic vessel towing both the seismic source and the receivers.
Effectively, therefore, the data were acquired in two dimensions, but
at sufficiently close spacing to allow processing in three dimensions.
BP's Wide Azimuth Towed Streamer (WATS) and Ocean Bottom Node
technologies involve truly three-dimensional seismic acquisition. They
were conceptualized, modeled, and piloted at scale in the US Deepwater
Gulf of Mexico. The WATS pilot was on our Mad Dog Field, and the Nodes
pilot was on Atlantis. At Mad Dog, the WATS data have contributed
significantly to our ability to continue to develop the field. The
successful Mad Dog South appraisal well which we announced in July of
this year was enabled by these data. At Atlantis, development of the
North Flank of the field has been enabled through the application of
nodes technology and production has begun.
We have worked hard to drive our WATS technology into the market,
and to refine it to make it cost effective in the exploration arena.
Today, much of the US Deepwater Gulf of Mexico is covered by what we
call XWATS--for Exploration WATS--seismic surveys. [See Figure 2] The
data from these surveys will allow us to continue to move forward the
limits of where we explore. As a result, we will be more efficient,
drill fewer wells, and have less impact on the environment as we become
better at predicting the presence of oil and gas in the subsurface.
I have mentioned above how drilling technology advanced to allow us
to drill in deep and ultra-deep waters. As discoveries were made,
production technology followed. A variety of production systems have
been developed to account for the different metocean, seabed, and
reservoir conditions. [See Figure 3]
BP has been at the forefront of this recent phase of deepwater
development. Today, we operate eight major producing facilities in the
US Deepwater Gulf of Mexico. [See Figure 4] They range from the Pompano
fixed platform, installed in 1994 in 1,300 feet of water, to the
Atlantis semi-submersible platform, which started production in 2007
and sits in 7,100 feet of water. In between lie:
The Marlin tension leg platform in 3,234 feet of water;
The Holstein, Mad Dog, and Horn Mountain spar facilities in
4,344, 4500 and 5,422 feet of water, respectively; and
The Thunder Horse and Nakika semi-submersible platforms in
6,050 feet and 6,340 feet of water, respectively;
Today Atlantis is the world's deepest oil production facility, an
honor previously held by both Horn Mountain and Nakika, when they began
production.
In addition to enabling the industry to move into ever deeper
waters, the drilling envelope has been extended by advances in
directional and extended reach drilling. The Nakika development is an
example of where these technologies have been combined with subsea
production technology to bring six otherwise uneconomic discoveries to
production. These independent, medium-sized fields are tied back to the
centrally-located semi-submersible production host facility. Distance
from the central host varies from five to 26 miles. By combining
directional and extended reach drilling with subsea production systems,
the environmental footprint has been reduced by requiring only one
surface facility, where previously six would have been needed. [See
Figure 5]
This month marks the tenth anniversary of our Marlin oil and gas
hub. As the Marlin Field has declined, a series of satellite fields
have been tied back using subsea production technology. In total, five
satellite fields have been tied back, with distance from the host
ranging from two miles to 18 miles. This year, the Dorado and King
South satellite fields have been brought on line. These tiebacks have
returned the facility to a second peak of production--a very rare
occurrence in our industry. Again, the combination of directional and
extended reach drilling and subsea production technology has enabled
multiple fields to be developed from a single host platform. The
environmental footprint has been reduced and the useful life of the
facility has been extended.
In addition to directional and extended reach drilling, today's
drilling technology allows us to drill to total depths which were
unimaginable just 15 years ago. In the mid-1990s, drilling was
restricted to roughly 20,000 feet total depth. Today we routinely drill
to 30,000 feet and below. [See Figure 6] This means that we encounter
ever greater temperatures and pressures. Our Thunder Horse development
currently defines the limits for what we call high-pressure/high-
temperature production technology. That said, we are already moving
beyond these limits. Our Kaskida discovery, with reservoir depths
ranging from 30,000 feet to 32,500 feet, has reservoir pressures above
20,000 pounds per square inch. We are currently designing the systems
which will be required to bring Kaskida to production.
Finally, we have recently announced our Tiber discovery--which was
at the time of rig release the deepest well in the history of the oil
and gas industry at 35,055 feet. Tiber is an exciting discovery, and we
are working hard to understand the technologies which will be required
to bring it to production.
liberty project, beaufort sea, alaska
In Alaska, as elsewhere, much of the easy-to-reach oil and natural
gas has been found and has been, or is being, produced. The new
opportunities which have emerged are harder to reach and more
technically challenging. They have become accessible, in large part,
due to the technological advances we are discussing here today.
Presently, BP is the only company producing oil and natural gas from
the Outer Continental Shelf in the Beaufort Sea.
In 1986, the Endicott field became the first offshore producing
field in the Beaufort Sea. The Endicott facility lies about a mile
offshore and produces from an artificial gravel island which is
connected to the coast by a gravel causeway. Oil and gas produced at
Endicott come to shore via above-ground pipe lines.
The next step of Arctic offshore developments in the Beaufort Sea
was Northstar--also operated by BP. The artificial Northstar Island
sits in state of Alaska waters, significantly further offshore than the
Endicott Island. It is accessible by water and air only. There is no
causeway, and production is through a pipeline which is buried below
the seabed. The Northstar Island was designed to withstand Beaufort Sea
ice conditions, and the pipeline was constructed to protect against
leakage and is buried deep enough to protect against ice scouring on
the sea bed.
The latest evolution of the application of offshore Arctic
technology is BP's Liberty Project which is currently under
development. The Liberty reservoir is located in Beaufort Sea Federal
waters, roughly six to eight miles from the North Slope shoreline. The
project will use existing, expanded facilities associated with Endicott
and require no additional, roads, causeways or subsea pipelines. The
key technology which will enable success is directional and ultra-
extended reach drilling.
During the last three decades, the limits of extended reach
drilling have moved forward continuously. During the 1980's, three to
four miles was the maximum horizontal distance which a well could be
drilled from its surface location. During the 1990's, five to six miles
became the norm. At Liberty, the wells will reach out six to eight
miles from the Endicott Island to access the reservoir under the
Beaufort Sea. [See Figure 7] One of the world's most powerful and most
sophisticated onshore drilling rigs was constructed (in Washington
state) to make this possible. For perspective, if the Washington
Monument were the Liberty drill rig, it could extend out to the Capital
Beltway and reach a target nearly two miles deep. These will be among
the most challenging wells ever drilled in the industry.
Drilling from the expanded Endicott surface facilities is expected
to start in 2010, and first production is expected in 2011. Through the
advance of drilling technology we will access a new, 100-million barrel
field that will produce directly into existing facilities without the
need for a drilling island, offshore production facility, or subsea
pipeline.
Another key to success in the Beaufort Sea has been our
relationships with our neighbors on the North Slope. These
relationships have spanned decades and are based on long-term trust and
commitments to the community. We have staffed an office in Barrow,
Alaska since 1979 and regularly interact with stakeholders, including
the North Slope Borough, the Alaska Eskimo Whaling Commission,
residents of Native Alaskan villages, and others. Things that concern
our neighbors the most are those that pose a risk to their subsistence
way of life. Understanding this has allowed a trusting relationship to
prosper.
the wytch farm field
Located on the south coast of England, Wytch Farm is Western
Europe's largest onshore oil field. It is located in one of the most
environmentally sensitive areas of the UK and it is operated by BP.
[See Figure 8] In 1995, it won The Queen's Award for Environmental
Achievement. The area has also been designated as an Area of
Outstanding Natural Beauty, a Site of Special Scientific Interest
(SSSI), and a World Heritage Coastline. Wytch Farm achieved first oil
in 1979. Since then, the project has been developed in three phases and
over 100 wells have been drilled to date. [See Figure 9]
The Wytch Farm reservoir extends underneath Poole Harbor, which is
an area similar to Cape Cod here in the US. The reservoir is accessed
by extended reach drilling from behind the shoreline. Development here
has been achieved through close co-operation and engagement with
governments, as well as the surrounding communities. Considerable input
on the design of facilities was sought from local community and
environmental stakeholders, including the siting of the operating
equipment, with various above-ground permanent facilities designed to
blend into the existing landscape.
As a result of the area's ecological importance, BP and other
stakeholders applied strict environmental protection policies and
established monitoring programs and surveys related to air quality,
archaeology, seabed ecology, bird and reptile populations. All of these
surveys were vital in determining how to develop the oilfield and in
providing baseline data against which BP could monitor its performance.
In recent years, BP applied extended reach drilling techniques,
which brought environmental and commercial benefits to the development
by enabling the furthest parts of the offshore reservoir to be drilled
from an onshore site. Well M16 set a new world record when it broke the
six mile barrier in June 1999, reaching a total length of seven miles
and a depth in excess one mile. In addition, the drilling rig and
equipment also had noise-abatement controls installed to meet the
requirements set by local officials.
Wytch Farm continues to be a resounding success, championed by the
local community, government leaders, and industry. The application of
technology has enabled the development of this oil field in the midst
of one of the most environmentally sensitive coastal environments in
Europe.
summary
In my testimony today, I have described the evolution of three key
technologies which have enabled BP and our industry to explore for and
produce oil and natural gas in some of the most challenging
environments in the world.
Seismic imaging is the key technology which enables us to see below
the seabed and better predict the presence of oil and gas reservoirs.
Finding oil and gas for the future requires exploring in areas that are
ever deeper and more complex. To do this, we must continue to apply and
enhance our seismic imaging technologies.
Advances in drilling technologies and production systems have been
significant. They include extended reach drilling, drilling in deeper
waters, and to greater depths. These advances enable more production
while reducing environmental impacts and allowing for efficient use of
existing facilities and infrastructure.
Floating production systems allow oil and gas to be produced from
locations that are far removed from onshore oil refineries or
pipelines. Sub-sea tiebacks allow multiple wells and fields to connect
to one surface platform from many miles away. This means that fewer
platforms are required which increases efficiency, and reduces the
environmental footprint, and the visual profile. Many of the technology
examples discussed herein have enabled a robust track record of
environmental stewardship and can reduce or even eliminate the visual
``footprint'' of offshore energy operations.
As we continue to move forward the limits of drilling and
production technology, we are constantly mindful of our aspiration of
``zero discharge''. The technology to contain oil and gas is constantly
moving forward as well.
Technology has been, and will continue to be, the key to our energy
future. We must continue to invest in exploration and production
capability and in technology to meet demand. We must also continue to
develop technologies to increase recovery of oil and gas from
established hydrocarbon positions here in the US and around the world.
Finally, to encourage and ensure continued success, we must have stable
fiscal, regulatory, and leasing policies so that the oil and gas
industry can continue to maintain investments which create jobs,
generate revenues and enhance US energy security.
Thank you for the opportunity to share BP's perspectives on
environmental stewardship and offshore energy production.
The Chairman. Thank you very much.
Mr. Short, go right ahead.
STATEMENT OF JEFFREY SHORT, PACIFIC SCIENCE DIRECTOR, OCEANA,
JUNEAU, AK
Mr. Short. Thank you, Mr. Chairman, Senator Murkowski,
other members of the committee. Good morning.
I'm the Pacific science director for Oceana, an
international marine conservation organization dedicated to
using science, law, and policy to protecting the world's
oceans. While I understand we're here today to talk about
environmental stewardship as it relates to offshore oil and gas
production, I must state for the record that Oceana opposes
expanded oil development in the OCS because we and many other
conservation organizations believe the environmental risks are
poorly understood and are not justified by the economic
benefits.
Simply put, the current state of the science is just not
capable of identifying all of the risks involved, let alone
assess them with much confidence. We typically approach these
projects by assuming that we know all we need to know about how
exploration and production affect the environment, which we use
to justify doing an inadequate job of characterizing the
environment before development starts, and then, when impacts
occur, find we can't really tell what caused them, because we
didn't document what was there to begin with carefully enough.
Environmental scientists have made stunning discoveries on
how oil affects marine life over the last 20 years, making it
clear that there is a lot more that we need to know. The
prudent management response is not to pretend that these
impacts don't exist, but to set the stage for their discovery,
and to embrace truly precautionary science-based regulation of
development.
Along these lines, I commend to you the following
principles:
No. 1, decisions about development should be guided by a
plan that prioritizes marine ecosystems and the services they
provide and to ensure the integrity of the most important
ecological areas is adequately protected.
No. 2, we need to know what is in the ocean and how a
marine ecosystem functions to have a reasonable chance of
detecting impacts that really did occur. For example, claims
that oil and gas development have had little effect on marine
life in the Gulf of Mexico ring rather hollow, because,
although we know these ecosystems have changed considerably, we
do not know exactly how, because we did not establish,
quantitatively, what was there beforehand.
No. 3, the status of key ecosystem components should be
monitored over the course of development and production so that
natural trends and variability can be accounted for when
assessing impacts.
No. 4, the best available technology should be used and
proposed incident response and recovery methods should be fully
developed, proven effective, and readily available.
No. 5, we should insist on adequate predevelopment social
and economic research to evaluate subsistence and local use of
the ocean in respective ecosystems.
No. 6, we recommend increased dedicated funding to the
National Oceanic and Atmospheric Administration to provide them
with expanded agency capacity to evaluate the effects of--and
impacts--of oil on marine ecosystems.
This needn't be prohibitively expensive. Per barrel
produced, Norway currently spends over three times as much just
on response and mitigation technologies as we do on our entire
oil research program, and just 1 percent of the value of new
oil produced would represent a tremendous expansion of our
program.
Finally, we believe that oil and gas development should
only occur as part of a plan to move toward an alternative
renewable energy.
In closing, I cannot overemphasize the fact that marine
ecology is still a developing science and that the science of
oil pollution effects, in particular, is still in its infancy.
The record of new toxicity mechanisms that continue to be
discovered virtually guarantees that impacts occur in the
environment that we still don't even know how to detect.
Responsible stewardship, therefore, compels us to embrace a
much higher standard of precaution as we consider the risks
associated with oil and gas development.
Thank you for this opportunity to comment, and I look
forward to answering the committee's questions.
[The prepared statement of Mr. Short follows:]
Prepared Statement of Jeffrey Short, Pacific Science Director, Oceana,
Juneau, AK
Good morning. I am the Pacific Science Director for Oceana, an
international marine conservation organization dedicated to using
science, law, and policy to protect the world's oceans. Oceana's
headquarters are in Washington, DC, and we have offices in five states
as well as Belgium, Belize, Spain, and Chile. Oceana has 300,000
members and supporters from all 50 states and from 150 countries around
the globe.
Prior to joining Oceana, I spent more than 30 years as an
environmental chemist studying oil pollution fate and effects as an
employee of the National Oceanic and Atmospheric Administration (NOAA).
In that role, I led numerous studies on the Exxon Valdez oil spill
beginning a week after the incident through my retirement from NOAA in
November 2008. I have a Master of Science degree in chemistry, and I
wrote the doctoral dissertation for my PhD in fisheries on data
generated by the spill. With more than 50 professional papers on the
Exxon Valdez oil spill and related topics, I have advised governments
in Canada, China, Korea, Norway and Russia on oil pollution issues.
Our oceans are places of wonder and beauty, and they provide
important services that we want and need. Oceans are our largest public
domain and house biological riches that surpass those of our national
forests and wilderness areas. Oceans provide oxygen we breathe, food we
eat, medicines we need, and aesthetic and spiritual nourishment.
Healthy oceans and coastal ecosystems are also economic engines that
provide valuable jobs, energy resources, and recreation and tourism
opportunities. Simply put, oceans are essential to our lives and
livelihoods.
While I understand that the purpose of this hearing is to discuss
environmental stewardship as it relates to offshore oil and gas
production, I must state for the record that Oceana opposes expanded
offshore oil and gas development. We and so many other environmental
organizations take this position because we believe the environmental
risks poorly are understood and are not justified by the potential
economic benefits. The current lack of baseline information combined
with the broad suite of toxicological risks, both known and emerging,
requires responsible stewards to embrace a much higher standard of
precaution in considering the risks associated with oil and gas
development. We, therefore, believe that the potentially irreversible
effects of oil pollution on marine ecosystems and their dependent
economies do not warrant the questionable, and in any case short-term,
economic benefits that might be gained from offshore oil and gas
development.
That said, Oceana and other conservation groups do support better
stewardship for our oceans, and we appreciate the fact that the
Committee has framed this hearing in those terms. As we consider any
industrial activities in the ocean--oil and gas, shipping, fishing,
alternative energy development--our first step should be to understand
and protect the marine environment and those dependent on it. Once we
understand the functioning of the ecosystem, we can better predict how
activities might affect it and, therefore, undertake a true stewardship
and planning effort.
Too often, this is not the case. Large oil development proposals in
the marine environment are presented and discussed as engineering
challenges, without sufficient regard for the complexity of the
environment in which they would occur, or the often dubious assumptions
implicit in assessments of environmental risks and mitigation
technologies. Oil spill contingency plans are presented as exercises in
damage control, taking for granted that not all damage can be
controlled, and based on the faulty assumption that the important
variables and their interactions are adequately understood,
predictable, and manageable. Similarly, the methods used to evaluate
mitigation technologies in the field usually do not meet basic
scientific principles, so that the results, and hence risk assessments
based on them, are inherently questionable. In truth, our understanding
of how oil behaves in the environment, the ways it affects organisms,
and how well response and mitigation measures actually work in the
field is still in its infancy. That fact alone argues for an especially
precautionary approach to offshore oil and gas development.
For example, following the 1989 Exxon Valdez oil spill, scientists
and spill response managers assumed that oil would be most persistent
in the uppermost parts of the intertidal zone because oil from the
spill would be more likely to adhere to the sediments there.\1\ Four
years after the incident, beach cleanup and monitoring were terminated,
because hardly any oil was still evident in the upper portion of the
intertidal zones, either on beach surfaces or beneath.\2\ Subsequently,
however, residents of the area repeatedly reported finding oil lower
down in the intertidal zone and just below the beach surface. Sometimes
enough oil was found to support combustion. Finally in 2001, I led a
rigorous, quantitative study that involved no assumptions about where
on a beach oil might be found. That study showed that most of the
remaining oil was in the more biologically productive mid-tide portion
of the beach.\3\
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\1\ Owens, E. H., In Proceedings, 14th Arctic and Marine Oil Spill
Program (AMOP) Technical Seminar, Environment Canada, Ottawa, ON, 1991,
pp. 579-606.
\2\ Neff, J. M.; Owens, E. H.; Stoker, S. W. In Exxon Valdez Oil
Spill: Fate and Effects in Alaskan Waters; Wells, P.G., Butler, J. N.,
Hughes, J. S., Eds.; American Society for Testing and Materials Pub.
1219: Philadelphia, Pennsylvania, 1995; pp 312-346.
\3\ Short, J. W., Lindeberg, M. R., Harris, P. M., Maselko, J. M.,
Pella, J. J., and Rice, S. D. 2004. An estimate of oil persisting on
beaches of Prince William Sound, 12 years after the Exxon Valdez oil
spill. Environmental Science and Technology, 38:19-26.
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As it turned out, the policy decision to end cleanup and beach
monitoring was largely based on unverified assumptions that went
unquestioned for 9 years. Over the last 20 years, scientists have
definitively proved false similarly naive assumptions regarding the
ways in which oil components exert their toxic effects,\4\ the
identities of many of the compounds that are known to be toxic,\5\ the
processes that affect the persistence of oil in the environment once
released,\6\ the efficacy of response and mitigation technologies,\7\
and the ecological impacts from disturbances associated with offshore
oil and gas development.\8\ Each time one of these assumptions is
proven incorrect, it reinforces the fact that there is a great deal
that we do not know about these issues.
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\4\ Carls, M.C., Rice, S.D., and Hose, J.E. 1999. Sensitivity of
fish embryos to weathered crude oil: Part I. Low-level exposure during
incubation causes malformations, genetic damage and mortality in larval
Pacific herring (Clupea pallasi). Environ. Toxicol Chem 18: 481-493.
Heintz, R.A., J.W. Short, and Rice, S.D. 1999. Sensitivity of
fish embryos to weathered crude oil: Part II. Incubating downstream
from weathered Exxon Valdez crude oil caused increased mortality of
pink salmon (Oncorhynchus gorbuscha) embryos. Environ. Toxicol Chem 18:
494-503.
Incardona, J.P., Collier, T.K., and Scholtz, N.L. 2004. Defects
in cardiac function precede morphological abnormalities in fish embryos
exposed to polycyclic aromatic hydrocarbons. Toxicol. Appl. Pharmacol.
204:191-205.
Barron, M.G., and Ka'aihue, L. 2001. Potential for photoenhanced
toxicity of spilled oil in Prince William Sound and Gulf of Alaska
waters. Mar. Pollut. Bull. 43:86-92.
Cleveland, L., Little, E.E., Calfee, R.D., and Barron, M.G. 2000.
Photoenhanced toxicity of weathered oil to Mysidopsis bahia. Aquat.
Toxicol. 49:63-76.
\5\ Barron, M.G., Carls, M.C., Heintz, R., and Rice, S.D. 2004.
Evaluation of fish early life stage toxicity models of chronic
embryonic exposures to polycyclic aromatic hydrocarbon mixtures.
Toxicol. Sci. 78:60-67.
Barron, M.G., Podrabsky, T., Ogle, S., and Ricker, R.W. 1999. Are
aromatic hydrocarbons the primary determinant of petroleum toxicity to
aquatic organisms? Aquat. Toxicol. 46:253-268.
Rowland, S., Donkin, P., Smith, E., and Wriage, E. 2001. Aromatic
hydrocarbon ``humps'' in the marine environment: unrecognized toxins?
Environ. Sci. Technol. 35:2640-2644.
\6\ Burns, K. A., Garrity, S. D., Jorissen, D., MacPherson, J.,
Stoelting, M.; Tierney, J., and Yelle-Simmons, L. 1994. The Galeta oil
spill. II. Unexpected persistence of oil trapped in mangrove sediments.
Estuarine Coast. Shelf Sci. 38:349-364.
Reddy, C. M., Eglinton, T. I., Hounshell, A., White, H. K., Xu,
L., Gaines, R. B., and Frysinger, G. S. 2002. The West Falmouth oil
spill after thirty years: the persistence of petroleum hydrocarbons in
marsh sediments. Environ. Sci. Technol. 36:4754-4760.
Short, J.W., Irvine, G.V., Mann, D.H., Maselko, J.M., Pella,
J.J., Lindeberg, M.R., Payne, J.R., Driskell, W.B., and Rice, S.D.
2007. Slightly weathered Exxon Valdez oil persists in Gulf of Alaska
beach sediments after 16 years. Environ. Sci. Technol. 41:1245-1250.
\7\ Fingas, M. 2004. Dispersants, salinity and Prince William
Sound. Prince William Sound Regional Citizens' Advisory Council Report
No. 955.431.041201. Prince William Sound Regional Citizens' Advisory
Council, Anchorage, Alaska.
\8\ Petersen, C. H., Rice, S. D., Short, J. W., Esler, D., Bodkin,
J. L., Ballachey, B. E., and Irons, D. B. 2003. Emergence of ecosystem
based toxicology: Long term consequences of the Exxon Valdez oil spill.
Science, 302:2082-2086.
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This information is important because the risk assessments we
undertake for oil and gas activities are, by definition, based on what
we do know and what we assume. Given the fact that we have been wrong
so many times before, we can rest assured that such assessments
understate the actual likelihood of serious environmental impacts.
Given the fundamental nature of the scientific uncertainties that
remain, we should expect more unwelcome surprises regarding the
environmental impacts of offshore oil and gas development in the
future. While we have a better idea of what questions to ask
scientifically, we have also learned that there are likely to be
impacts that we do not know how to detect, let alone mitigate, because
we do not even know what they might be. The prudent management response
is not to pretend that such impacts do not exist, but to conduct the
necessary research, account for uncertainty, and embrace truly
precautionary, science-based regulation. Along these lines, I recommend
to you the following principles:
First, decisions about development, such as oil and gas
activities should be made in the context of a plan that
prioritizes protecting marine ecosystems and the services they
provide. Decisions about industrial activities must be based on
sound science, planning, and precaution. Critical habitats and
processes, including important ecological areas should be
identified and appropriate protective measures adopted for them
as a predicate to development.
Second, to make effective decisions about whether industrial
activities should occur and, if so, when, where, and how, we
need to know what is in the ocean as well as how the marine
ecosystem is structured and functions. In the aftermath of the
Exxon Valdez spill, consequences for populations of impacted
species were often obscured because we did not have a
sufficient picture of the pre-impact population sizes.
Similarly, the massive development in the Gulf of Mexico
occurred with scant attention to the status of the ecosystem
beforehand. As a result, claims that oil and gas development
has had little effect on marine life in the Gulf of Mexico ring
hollow. Although we know that these marine ecosystems have
changed considerably, we cannot demonstrate exactly how because
we did not establish quantitatively what was there before the
development occurred. Without such baseline knowledge about
what is in the ocean and how it interrelates, we cannot
legitimately evaluate risks prior to industrial activities, and
we risk being in the position of wondering what was lost
following development or an industrial accident because we did
not evaluate what was there to begin with. Yet, that is the
current situation in most of the areas where expanded oil and
gas drilling has been proposed--there simply is not sufficient
ecological baseline information to adequately evaluate or
mitigate risks. In the Arctic Ocean, for example, a massive
expansion of oil and gas leasing has been authorized despite a
paucity of scientific data about the marine ecosystem.
To better understand the risks and to provide a baseline for
decision makers, quantitative assessments of the major
ecosystem components as well as ecological studies to provide a
basic understanding of the food-web interactions that support
them or are affected by them should be conducted prior to
authorizing oil and gas activities. These studies should
include baseline surveys of pollutants, pre-development
population assessments of species at greatest risk, such as
seabirds and marine mammals, and studies on their seasonal and
spatial variability.
For large-scale projects, the adequacy of these pre-
development surveys should be evaluated by an independent panel
of experts. Although the Minerals Management Service has
expended considerable sums on studies, they were not guided by
an integrated ecosystem research plan. As a result, population
and distribution data for several vulnerable species that play
important roles in the marine ecosystem are either outdated or
missing. In contrast, careful formulation of integrated
ecosystem research and monitoring plans, such as the Gulf
Ecosystem Monitoring plan in Alaska formulated in the aftermath
of the Exxon Valdez oil spill,\9\ may furnish more useful
information at a fraction of the cost.
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\9\ See: http://wwww.evostc.state.ak.us/gem/gemdocs.cfm
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Third, the status of key and vulnerable ecosystem components
should be monitored over the course of development and
subsequent production, so that natural trends and variability
can be given due consideration when evaluating oil and gas
impacts. Any important but poorly-understood ecological
processes identified during the pre-development surveys and
subsequent review should be studied in sufficient detail to
elucidate and remedy the defects in our understanding. These
on-going research and monitoring programs should be tailored to
the respective regions where new development is proposed and
overseen by an independent body comprising concerned local
interests, such as the Regional Citizens' Advisory Councils
envisioned in the Oil Pollution Act of 1990. The results of
these efforts should be made publicly available not only
through websites and publications, but also periodic science
symposia in respective ecosystem regions. Funding for these
endeavors should be provided largely by those seeking to
develop oil and gas leases. An oil spill risk assessment as
outlined in S. 1564 introduced by Senator Begich should be a
first step to determining if spill clean up is possible and
under what conditions.
Fourth, best available technology must be used, and proposed
incident response and recovery methods be fully developed and
readily available. These mechanisms must be demonstrated to be
effective in the region where new oil and gas development is
proceeding, not in some warehouse thousands of miles away, and
under realistic environmental conditions in field tests. Oil
spill response and recovery plans often rely on dispersants,
for example. At this time, however, we have not developed a
reliable and scientifically rigorous method for measuring the
proportion of oil actually dispersed that did not, and would
not, have temporarily disappeared because of wave action only
to re-aggregate unmeasured elsewhere.\7\ Once a reliable method
for performance evaluation is in hand, it should be applied in
field tests to determine dispersant efficacy under a realistic
range of temperatures, sea surface salinities and agitation,
and oil types, viscosities and slick thicknesses. Similar
concerns apply for in situ burning. For mechanical recovery, we
need to know how well the proposed techniques can be expected
to work in various states of the seas and winds, and for what
fraction of the time they can even be deployed successfully. In
the Arctic, it has been widely recognized that mechanical
recovery is impossible in icy conditions, and it would be
useful to know whether such response measures could even be
deployed during the long Arctic night.
A necessary component of these response and recovery methods
is adequate infrastructure. We must ensure that all vessels are
subject to tracking and that response and recovery equipment is
stationed in accessible locations.
We also must insist that impacts from the exploration
process, production wastes, and other pollution are minimized.
Exploration for oil, which involves seismic testing, can be
harmful to many species of endangered and threatened species
including marine mammals, sea turtles and fish.\10\ While we
believe these impacts are unjustified in any areas that were
previously set aside or protected, as well as in highly
sensitive areas such as the Arctic, responsible environmental
stewardship requires that these impacts at least be minimized
by careful timing and choosing locations where these species
are not present. Production wastes, such as drilling muds and
produced waters also harm marine ecosystems.\11\ Methods should
be developed to treat these wastes prior to releasing them into
the environment, or they should not be released at all.
Similarly, emissions of air and water pollutants must be
minimized by requiring new and better technology, and the
introduction of invasive species must be strictly prohibited.
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\10\ Engos, A., S. Lokkeborg, E. Ona, and Soldal, A.V. 1996.
Effects of seismic shooting on local abundance and catch rates of cod
(Gadus morhua) and haddock (Melanogrammus aeglefinus). Canadian J.
Fish. Aquatic Sci. 53: pp. 2238-49.
Mate, B.R., K.M. Stafford, and Ljungblad, D.K. 1994. A change in
sperm whale (Physeter macrocephalus) distribution correlated to seismic
surveys in the Gulf of Mexico. J. Acoustical Soc. Am. 96:3268-69.
Richardson, W.J. ed., ``Marine Mammal and Acoustical Monitoring
of Western Geophysical's Open-Water Seismic Program in the Alaskan
Beaufort Sea, 1998'' (1999) (LGL Rep. TA2230-3).
\11\ Cranford, P.J., Gordon, D.C. Jr., Lee, K., Armsworthy, S.L.,
and Tremblay, G.--H. 1999. Chronic toxicity and physical disturbance
effects of water-and oil-based drilling fluids and some major
constituents on adult sea scallops (Placopecten magellanicus). Mar.
Environ. Res. 48:225-256.
Ray, J.P., and Engelhardt, F.R. (eds). 1992. Produced water:
technological/environmental issues and solutions. Proceedings of the
1992 International Produced Water Symposium, February 4-7, San Diego,
California. Plenum Press, New York.
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Fifth, we should insist on adequate pre-development social
and economic research to evaluate subsistence and local use of
the ocean in respective ecosystems. As we have seen with beach
communities and fishery economies following oil spills and
other ocean pollution events, just the perception that seafood
could be tainted can lead to devastating market losses for
commercial fishers and tourism providers and even more profound
disruptions of communities that rely on subsistence for the
main supply of food, as is often the case with Alaska Natives.
Research before development is the only way to accurately
account for these risks in the decision making process.
Sixth, increased dedicated funding should be provided to the
National Oceanic and Atmospheric Administration and through the
National Science Foundation to support research on the
toxicology of petroleum and petroleum products and their
interactions with other contaminants. NOAA in particular has
done pioneering work discovering heretofore unanticipated
biochemical mechanisms through which petroleum can poison
marine biota, such as the embryotoxic effects of certain
polycyclic aromatic hydrocarbons (PAH) on fish eggs and the
interaction of PAH with sunlight to dramatically increase
toxicity.\4\ Funding for this work should be broadened to
include research aimed at identifying toxic compounds in
petroleum that now remain obscure, as well as the biochemical
mechanisms causing their toxic effects. The research methods
developed at NOAA in these fields over the last decade hold
great promise for producing more discoveries of fundamental
value regarding responsible environmental stewardship.
The funds needed to address all of the concerns listed above
amount to a small fraction of likely revenues generated by new
oil production. In fact, allocating just 1% of the revenues
resulting from expanded offshore oil and gas production would
amount to an enormous increase over current funding levels.
Currently, the national oil-spill research plan is more than 10
years old, and of the $28 million annually authorized to fund
it, only about a fourth is actually spent.\12\ In contrast,
Norway has spent the equivalent of $10 million on new oil-spill
technologies alone since 2006,\12\ and it produces less than a
third of the petroleum that the United States does.\13\ Truly
responsible environmental stewardship would include substantial
funding increases to better support research in all aspects of
the environmental impacts of offshore oil and gas development.
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\12\ Torrice, M. 2009. Science lags on saving the Arctic from oil
spills. Science 325:1335.
\13\ Central Intelligence Agency. 2008. The world factbook. Central
Intelligence Agency, Washington, DC.
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Moreover, the provision of adequate funding would address a
chronic asymmetry in the scientific standards used to evaluate
the environmental impacts of offshore oil and gas development.
Paying inadequate attention to pre-development surveys,
ecosystem process and monitoring studies, and ecotoxicological
research, has crippled our ability to detect impacts. This
failure exacerbates the likelihood of ill-advised policy
recommendations. By contrast, there are rigorous standards
typically applied to demonstrations of impacts from
development. By acquiescing to defective standards prior to
impacts but insisting on rigorous standards to demonstrate them
afterward, we create a substantial bias that works to promote
environmental harm. This bias could be considerably reduced
simply by insisting on rigorous and adequately comprehensive
pre-development surveys, as well as monitoring over the
economic life of approved projects. There should be enough
science to have a reasonable chance of detecting population-
level effects that might result from plausible impacts
associated with development within the associated region.
Finally, new oil and gas activities should occur only as part
of a plan to move toward alternative, renewable energy. We can
all recognize that the country must undergo a shift to
renewable energy. New oil and gas activities must only be
undertaken as a bridge to that future. We must ensure that
decisions are made and revenues allocated in such a way to move
us closer to renewable energy and sustainable living.
In closing, I cannot overemphasize the fact that marine ecology is
still a developing science, with new, fundamental discoveries coming on
a regular basis, and that the science of oil pollution effects is still
in its infancy. We are never quite sure how oil will behave once
released, where it will eventually find its way, how it may interact
with other pollutants, or even all the ways it can harm marine life.
When we make the effort to look closely, such as happened after the
Exxon Valdez spill, fundamental surprises typically come to light.
These discoveries overturn predictions of impacts often stated with
unfounded confidence beforehand that in retrospect turn out to have
been based on little more than conjecture. The record of new toxicity
mechanisms that continue to be discovered, along with longstanding
evidence of toxic effects that are clearly related to oil exposure but
that cannot be explained on the basis of what we currently know about
the toxicity of oil components, virtually guarantees that toxic impacts
occur in the environment that we do not even know how to detect.
Recognition of this requires us to embrace a much higher standard of
precaution as we consider the risks associated with oil and gas
development. It is largely on the basis of this recognition that we at
Oceana, along with most of the marine conservation community, believe
that the potentially irreversible effects of oil pollution on marine
ecosystems and their dependent economies do not justify the potential
short-term economic gains that might accrue from offshore oil and gas
development.
The Chairman. Thank you all very much for your testimony.
Let me start with a few questions.
Dr. Cruickshank, let me ask you, first of all--one of the
suggestions we've heard and discussed is the idea of
establishing ``no development buffer zones'' for a certain
number of miles offshore or in particular sensitive areas. I
notice, in your testimony, about the--which is it?--the Flower
Garden Banks--you talk about how MMS established--as I
understand your testimony--MMS established buffer zones to
prevent possible impacts on the coral habitats in that area.
That raises the obvious question, Is this something we should
have MMS doing instead of having the Congress do it? I mean,
we--once Congress legislates a buffer zone or a ``no
development'' zone, whatever you want to call it, we're then
sort of locked into that until we get the votes to change that
or until it becomes a big enough priority to change. I'm just
wondering if it--is this really something that needs to be left
to the agency with responsibility so that new information can
be taken into account? What's you're--does the administration
have a position on that question?
Mr. Cruickshank. We don't have a position on that
particular question. We certainly have authority, under current
law, to establish buffer zones, and we have done so, not only
in the Flower Garden Banks, but in certain sail areas where
we've created buffer zones from the coast. We try and do that
based on what we know about the specifics in an area--the
specific environmental resources, the other uses of the sea and
seabed, the particular social values of an area--and, as
appropriate, we create zones to protect those resources and
values that are appropriate to protect in a given area. That's
not to say that everybody would always agree with the decisions
we make as to where we put buffer zones, and their size, but we
certainly have the authority to do so.
The Chairman. Do you also consider establishing buffer
zones in order to protect the view? I mean, if there's a
community located there and they're concerned about the
possibility of rigs in the line-of-sight offshore, do you take
that into account and perhaps establish buffer zones to deal
with that, or is that not part of your authority, as you see
it?
Mr. Cruickshank. We can, and we have done so in one place.
We negotiated a lease stipulation with the State of Alabama for
areas offshore Baldwin County, Alabama. There were some visual
concerns for the tourism industry in Baldwin County, Alabama,
and we've negotiated a requirement, on all leases, that they
take steps to minimize the visual impact in that area. That
stipulation applies to any lease within 15 miles of the coast
of that county.
The Chairman. OK. Why--if you did it there, have you
considered doing it more broadly as part of a leasing plan, to
just provide assurance to folks on--who--living on the coast,
that--so they're--they need not worry about any development
occurring in a larger area?
Mr. Cruickshank. It's certainly an option. To date, we have
not applied that as a general rule across the OCS. We have--did
so, in that case, because of particular concerns of the State
and the ability to negotiate with them on an acceptable
solution. Other buffer zones we have used have been to protect
subsistence-hunting resources, marine mammal migration paths,
and the like. So, it really depends on the particular
circumstances.
The Chairman. OK. Why don't I stop and defer to Senator
Murkowski.
Senator Murkowski. Thank you, Mr. Chairman, and thank you
all for your testimony this morning.
Mr. Rainey, I appreciate you stating for the record that
the oil and gas industry is high-tech. For people who don't
know about Perdido and about what is occurring at Liberty, it
is nothing short of phenomenal to think that we can be
exploring and producing in the depths that you're talking
about, 35,000 feet is the record, but what's going on at
Perdido at 8,000 feet, 200 miles offshore, tapping into things
in a 30-mile radius. I had an opportunity to see what Shell is
doing with the 4-D seismic technology, and it's better than
Disneyland, in terms of how you can take technologies and go
after a resource that is thousands of years old, and do so in
an environmentally sound way. So, I commend you for the efforts
that have been made to really play out the technologies so that
you're able to gain the resource while at the same time working
to care for the environment.
Mr. Odum, I thought that you were more than just a little
bit of a gentleman in your criticism. I wouldn't even call it
criticism, you just said that when, ``We here at the Federal
level commit to OCS, the government needs to be prepared to do
the necessary permitting.'' I think we recognize that up north
that is not the case, and you have been very gentle in saying
that the Federal system in Alaska needs attention. It needs
more than attention, and I think we're failing on that
commitment when we can't get these permits to you after years
of waiting. You need to know that we're working to that issue.
I wanted to ask you, Mr. Odum and, Mr. Rainey, you were
also involved, and Dr. Cruickshank there was a test that went
on up in the Barents Sea, off of the coast of Norway, to
determine how capable we are in responding to a spill in Arctic
icy conditions. For us in Alaska, as we look to expanded
offshore, this is something that is of keen interest. This was
just reported in yesterday's Anchorage Daily News, and the
conclusion, as I understand it was pretty encouraging, the ice
can actually act as more of a natural blockade that can trap
the oil and give responders a greater time period to clean it
up. Can you speak to this test that was conducted, and I
understand that it was paid for by the industry, so of course
that makes it suspect from the get-go. But, MMS was also
involved, and I would like to explore what we've learned from
this.
Mr. Odum. Thank you, Senator. I think the--so, SINTEF is
the group that organized this. It's a Norwegian research
institute. As you say, there were a number of industry
participants, plus also a number of other government-related
participants, as well.
The idea behind this study--this was a 3-year study to
answer these questions about what happens--what's the behavior
of oil in water that is either partially or all the way up to
fully ice-covered? So, this was a--an opportunity to do this in
a real-world situation in the Barents Sea.
I think it actually--if I could just link it very quickly
to a statement made earlier--we do a certain amount of
research--you know, the MMS does, here in this country, but we
benefit from research that's done all around the world. I think
this is a great, great example of that.
It tested the behavior of oil in the water, various
recovery methods, which would include mechanical-type recovery
methods, boom and scooping oil out of the water, as well as
dispersants in ice, as well as in situ burning. What it found
was that--I think, two major conclusions. One is that each of
those methods is successful to a degree--and I think ``better
than expectations'' would be the way to say it--but ten, in a
mitigating sense, in a preparatory sense as we work in a area,
we should be prepared to apply all three of those methods. So,
it was good news, from that perspective, and we're happy to see
the report out on that.
Senator Murkowski. Dr. Cruickshank, would you care to
comment on that?
Mr. Cruickshank. Yes. So, I'm aware of this report. We're--
SINTEF is coming in to brief us next week on the results, so I
won't comment on that. But, I would like to note that that's
only one of a lot of research that's gone on in the ability to
clean up spills in Arctic waters. Earlier this year, we
published a report highlighting the research results of about
10 years of research on this topic, and we can certainly make
that available to the committee, if it's interested.
Senator Murkowski. Great, I appreciate it.
Thank you, Mr. Chairman.
The Chairman. Senator Dorgan.
Senator Dorgan. Mr. Chairman, thank you.
Because there's no longer a restriction on drilling on the
Outer Continental Shelf, and, I think, because there's a
generally different view about the eastern Gulf--I mean,
reflected by the vote in this committee--it seems to me that it
probably is useful now for your agency, Dr. Cruickshank, to be
thinking about what kind of buffer zones would be advisable. I
know you've said you described it in one State because of
concerns about the State, but do you think it's probably
advisable for the agency to be thinking about that more
generally?
Mr. Cruickshank. It's certainly an option that we have on
table. We are currently going through over a half million
comments that we received on a draft proposed program for the
OCS, and one of the specific questions asked in that program
was about the applicability of buffer zones and how they might
be used. So, we're going through and analyzing those comments,
and it will be among the information that's available to the
Secretary as he considers his decisions for the OCS.
Senator Dorgan. I mean, the issue of environmental
stewardship is about a lot of things. It's about visual line-
of-sight issues with respect to drilling. It's about ecosystems
and other things. So, I mean, I think all of us are interested
in trying to determine, What does this mean as we prepare to
produce more energy here in our country and drill where we
perhaps have not drilled before? What is our responsibilities
and requirements for environmental stewardship?
One of the witnesses raised the question--I think Mr.
Amos--of the blowout of the new rig in Australia. My
understanding is that an official from MMS indicated that that
agency would never have approved the engineering design of the
well that is leaking off of Australia. Are you familiar with
that at all?
Mr. Cruickshank. A bit. Until the Australian government
completes its investigation, we won't know for sure what caused
the incident. But, there are some differences between here and
there that I think are significant.
The well design is not one that we would have approved.
They had a single barrier to control the well, we require
redundant barriers. We also require that the barriers be tested
at pressures at least as great as those expected to be found in
the reservoir. It's our understanding there was no such
requirement to test the barrier offshore Australia.
We also have what we believe is the most aggressive oil
spill contingency planning and oil spill drill program in the
world, where we are constantly making sure people are able to
respond quickly and muster the equipment quickly to respond to
spills. Whether any of these would have had any bearing on the
spill in the Timor Sea, we won't know until Australia completes
its investigation. But, I do believe that these factors would
help reduce the likelihood of such a spill, and mitigate
impacts of any such spill.
Senator Dorgan. Mr. Amos, you talked about the 9 million
gallons of oil, Katrina/Rita--and it's--I'm just--I think--I'm
trying to read this--the storm damage onshore infrastructure
spill, 7 to 8 million gallons. So, the bulk of that was not
spilled from offshore drilling, the bulk of that was onshore
storage. Is that correct?
Mr. Amos. That's correct.
Senator Dorgan. OK. The reason I mention that is, my
colleague from New Jersey used the 9-million-gallon gross
number, without a description of it. I didn't have the same
number. But--so, the bulk of that was onshore.
Mr. Amos. Correct.
Senator Dorgan. All right. Let me ask, if I can--the
sources of hydrocarbons in the marine ecosystem from oil
drilling verses natural seeps and discharges from shipping--
does anybody on the panel have some notion about what kind of
percentages we're talking about there?
Mr. Short.
Mr. Short. Yes, there are much greater inputs of
hydrocarbons to the marine environment from natural oil seeps
than there are from exploration activities and development
activities. The key difference is that when hydrocarbons are
released into the environment from seeps, the ecosystem has
adapted to that over centuries, if not millennia. So, birds,
marine mammals, other biota in the region are--know to avoid
the area if they're impacted toxicologically.
Senator Dorgan. So----
Mr. Short. But, a marine spill or catastrophic release, the
animals aren't adapted to, so they get clobbered.
Senator Dorgan. So, there's a difference between seeps and
discharges and spills and so on--
Mr. Short. Yes.
Senator Dorgan [continuing]. Just based on the ecosystem's
response to it. My understanding is that about 2 percent of the
volume of oil released into U.S. waters comes from spills.
About 98 percent comes from seeps and discharges from shipping
and so on, so forth. I'm not--by that, I'm not suggesting that
there is not a concern or an interest here. You--Mr. Short,
you've talked about the need to understand the ecosystem
better, and the fact that drilling occurred without a baseline
study. Of course, a baseline study at this point would simply
describe today's baseline.
Mr. Short. Exactly.
Senator Dorgan. I'd--but--and there's a great deal of
drilling going on in the Gulf, and many of us feel there will
be more drilling. One of the things that we will rely on very
substantially is Dr. Cruickshank's agency to make sure that the
rules, the regulations, the conditions, the restrictions,
including environmental stewardship, reflect the kind of safety
that our country will expect and demand with respect to
offshore drilling. I personally believe that, from the
standpoint of energy security for this country, which is a very
important issue for America right now and going forward, we are
going to produce more American energy. A portion of that is
going to be offshore oil and gas. The question isn't
``whether,'' the question is, ``How do we do that in a way that
accomplishes two goals, greater energy security for our country
and, at the same time, protecting our environment and our
ecosystem?''
So, I really appreciate, Mr. Chairman, your holding this
hearing, because it relates to the amendment that I withdrew,
and I think that this will attend, I think, a much longer
discussion over a longer period of time. But, I thought the
witnesses gave us a good blend of virtually all of the
interests and discussion that need to be a part of this.
The Chairman. Thank you very much.
Senator Risch.
Senator Risch. I'll pass.
The Chairman. All right.
I think Senator Shaheen was--no. Is that--oh, that's right.
Senator Shaheen came before Senator Landrieu.
Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman. You know, we
women all look alike----
[Laughter.]
Senator Shaheen. I'm sorry, but--I didn't mean that. That
was a shot.
[Laughter.]
The Chairman. I didn't suggest you looked the same.
[Laughter.]
Senator Shaheen. Thank you all very much for being here.
I want to follow up on your comment, Dr. Cruickshank, about
the decision to ask, in Alabama, that the company minimize
their sight impacts. What exactly does that mean?
Mr. Cruickshank. What the stipulation calls for is to look
at opportunities to--instead of building a new platform in
those waters, to perhaps have subsea completion and tie it back
to an existing platform, to drill from existing facilities. If
you're not able to do that, to try and place and design a
facility so that it will have a minimal visual impact on the
shoreline.
Senator Shaheen. Dr. Short, in his testimony, talks about
the national oil spill research plan being more than 10 years
old and that only about a fourth of the 28 million authorized
to fund it has been actually spent. Is that--would you agree
with that assessment? Should we--what more should we be doing
in that area?
Mr. Cruickshank. I can't speak specifically to those
numbers, though we can get them for you.
At MMS, we have a budget of about $6 million a year that we
put into oil spill response research and training programs.
We've funded that regularly every year to look into improved
technologies and to operate the National Oil Spill Response
Test Tank in New Jersey. I know that there are a lot of other
agencies involved in oil spill research, as well, but I can't
speak to their levels of funding.
Senator Shaheen. Dr. Short, would you like to comment on
your--put that in a context for us. You talked about how much
Norway has spent on new oil spill technologies. Do you have
recommendations for what we ought to be doing to address
cleanup?
Mr. Short. Addressing much greater emphasis on how well
these technologies actually work in the field would be the--my
single greatest recommendation, so that we do field tests that
are--employ methods of known recovery so we can make
quantitative comparisons between different approaches, and do
them in a realistic field setting rather than in the artificial
settings that are so often employed.
I don't know what the conditions were in the Barents test.
I'm very encouraged, and I congratulate Shell and SINTEF for
pursuing that research. But, typically, these sorts of
experiments are limited, don't have much replication, and
they're very expensive to conduct. So, doing them in a rigorous
way that will give us robust results, I would encourage that
that further continue.
Senator Shaheen. Dr. Cruickshank, is it MMS that has the
responsibility to do that kind of comparative analysis of
technologies that are available?
Mr. Cruickshank. I think that the responsibility is shared
among agencies, and we are certainly one of them.
I do want to say a little bit more about the test tank we
have in New Jersey. It's one of a kind in the world, and it's
about 660 yards long, 75 yards wide, and can create oceanlike
conditions and test response technologies in real-world
conditions, a variety of temperatures and sea conditions. It is
used to try and compare the results of different cleanup
technologies under different conditions. These--responsible for
probably about 95 percent of the data that's out there on
mechanical response information. So, we think this is a very
valuable resource that we make available to anybody who wants
to use it to try and improve understanding.
Senator Shaheen. Is there a lead agency that is charged
with being the decisionmaker on those kinds of analyses?
Mr. Cruickshank. I've----
Senator Shaheen. If there's a discrepancy between what
agencies come up with?
Mr. Cruickshank. I'm not sure there's a discrepancy between
agencies that--we all sit down together. We're involved, NOAA's
involved, and the Coast Guard is involved, and others, as well.
We do compare notes on the sorts of research we're conducting,
and the results that we get.
Senator Shaheen. Thank you. Just very quickly, for both
Shell and BP, what--you pointed out the technological
advancements that have been made by both of those companies in
the industry in drilling processes. Are you also working on
those same kinds of research and development efforts when it
comes to cleanup and how to deal with spills and challenges
like the ones Mr. Amos showed us?
Mr. Rainey. I'm not familiar with the details of the
studies, but I do know that BP participates in research studies
all over the world on these issues. So, I can get you the
details if you would like me to.
Mr. Odum. Senator, my answer----
Senator Shaheen. Thank you, I'd appreciate that.
Mr. Odum [continuing]. My answer is really the same. The
answer is clearly, yes, we do. The studies that we did in
Norway, which were multimillion-dollar, multiyear studies, were
to answer exactly this type of question. We recognize that is
not only important to being able to mitigate a spill if it
happens, but it's an important enabler to helping convince
stakeholders that we can actually do this the right way.
I'll make the point again, too, I think the idea that
research needs to be one place or the other, we--I think we
should look at it and say, ``This is research that's shared
openly all over the world. It's not protected and kept to any
particular area.'' So, the fact that it is done globally is
important, I believe.
Senator Shaheen. Thank you.
The Chairman. Senator Landrieu.
Senator Landrieu. Thank you.
Let me begin, quickly, Mr. Chairman, by just thanking you
for holding this very important hearing, because, like several
of my colleagues have said, I think it's important for us to
really examine the facts and to try to seek the truth, relative
to the benefits and the risk associated with energy production.
I particularly like the term ``stewardship,'' and I believe
that stewardship actually begins with presenting facts in a way
that tell the truth about what's really happening in offshore
and onshore oil and gas.
So, knowing, Mr. Amos, that you would bring your charts, I
brought some of my own. I'd like to start with a picture first.
I think my colleagues need to see a satellite image from
NASA in the Gulf of Mexico, because most of the offshore oil
and gas drilling in the Nation, of course, has gone on, as Mr.
Amos said, for 40 years off of the State that I represent. So,
we would know a lot about this. So, I brought a picture of what
the Gulf looks like.
These are oil spills in the Gulf. This was taken, Tom,
when? 2007. But, Mr. Amos, as you know, none of these spills
are spills, they're leakages, natural seepage in the Gulf of
Mexico. On any day, you could take a shot from NASA, in any
ocean, in any place in the world, and you will see the oil like
this, because of this chart. I'm going to ask Mr. Amos to read
this chart. Go ahead, please.
Mr. Amos. I'm sorry, I can't see it very well from where I
sit.
Senator Landrieu. OK. Let me try to read it for you. It
says petroleum transportation tankering, it's petroleum in
American waters, 4 percent, which is the blue, from tankering.
Those are spills caused by tankers that run aground because
organizations like yours don't encourage safe domestic
drilling, but we have to bring in oil from other countries,
which is a lot more hazardous. I'll get to that in a minute.
So, these tankers run aground and spill oil in lots of
places, including New Jersey and California and all places.
Then cars and boats and other sources that Americans drive put
32 percent of the oil into the oceans. Then natural seepage
puts 63 percent. Then, you see that little green? It's very
small, so it's hard for a lot of people to see it, even though
you don't--some people even have glasses--it's hard to see, so
I'm going to point it out. It's 1 percent of the oil in the
oceans--1 percent is from drilling. We could, if we work
together and be truthful about what's happening, perhaps even
eliminate that 1 percent, which is a very small portion. That's
hopefully what this hearing will be about.
In addition, the other point I would like to make is that
this 1 percent, which is a risk, and there are impacts, but, to
put this into perspective, the spill that you cited in
Australia which causes some people to back up--I want to give
you these details here. You said it was the largest spill in
Australia's history. It's true. It leaked 823,000 gallons of
oil. As Mr. Cruickshank testified, it wouldn't even be allowed
in this country, because it doesn't stand up to our strict
environmental rules. But, let's say we had messed up and
allowed it to produce oil off of our shores. The spill equals
one-third of the amount necessary to fill the Reflecting Pool
outside of this Capitol. It's largest spill in the history of
Australia. It's a pretty long history. The rig that blew didn't
meet our standards, but if we--it had slipped through and we
had allowed it to drill, the oil it spilled would fill up a
third of the Capitol Reflecting Pool.
So, Mr. Chairman, I think one of the ways forward is for
people to start telling the truth about what actually happens,
onshore and off. The risk associated with offshore oil and gas
drilling domestically are far outweighed by the benefits. I'm
going to go about 30 seconds over my time. Those benefits would
be victory in World War II, would be the Industrial Revolution,
would be the automobile or the airline industry. You do a great
disservice, you and your organizations, in not telling the
American people the truth about what happens in domestic
drilling, onshore and off, and putting it in the perspective
that it deserves.
So, my second point--and I'll be very, very brief here--is
that stewardship also, I think, starts with understanding that
the more we push this industry off of our own shores and off
domestically, it goes to countries that we have absolutely no
control over, that don't even have democracies, that don't have
lawyers, that don't have courts, that, when things go wrong, it
can't be fixed easily, countries like Cuba or Venezuela, or
places like Saudi Arabia or other places.
So, I would strongly suggest that we have more hearings
like this. The people that I represent--and I'm going to show
one more chart, which talks about this, and I'll give back my
time, Mr. Chairman--we brought this chart. We use it a lot,
because this is what the Gulf looks like. That doesn't look
like a bad picture to us, that looks like a jobs picture to us,
because thousands of people are employed, laying those
pipelines, working on those rigs, producing tremendous wealth
for this Nation. We intend to pursue this in other places in
the country, as well.
Thank you.
The Chairman. Dr. Cruickshank, let me ask you, just to be
clear--Mr. Amos has made the point, which I don't think anyone
has contradicted, that most of the spill that occurred as a
result of Katrina and Rita was onshore--I mean, that wound up
in the Gulf, was onshore, spillage from storage facilities and
pipelines that were onshore. That's--is that a correct
description of what you testified to, Mr. Amos?
Mr. Amos. Senator, that's correct, although I do want to
point out that you can't have offshore production without
building those onshore facilities.
The Chairman. No, I agree with that, and I'm just trying to
get clear in my mind, Dr. Cruickshank. What is MMS's
responsibility for preventing spills and leakage from onshore
facilities such as these?
Mr. Cruickshank. We have no authority over onshore
facilities. Those are typically permitted by the States.
The Chairman. So, that's strictly a State problem, the way
the law now stands, as you see it.
Mr. Cruickshank. Yes.
The Chairman. EPA does not get involved, and the Department
of Energy does not get involved--
Mr. Cruickshank. I'm sure there are a number of Federal
agencies that have rules in permitting, such as EPA, for clean
air, clean water; Army Corps of Engineers, if wetlands are
affected. But, in terms of the decisions to build a facility
and a lot of the specifics about where it's going and how it's
operating----
The Chairman. So, the Department of Interior's position
under the law is that your responsibility for this kind of
issue commences at the water's edge, essentially. Is that
accurate, or not?
Mr. Cruickshank. That's what we have authority to permit.
What we do require, as part of the environmental review, is
that a company needs to explain how they're going to get the
product to shore, where it's going to go, the facilities they
may use, so that can all be considered and the environmental
impact statement and any information used in the Coastal Zone
Management Act reviews.
The Chairman. But, in these--in the pipelines and the
storage that is constructed, once that is constructed, the
question of how hardened that is to resist damage from
hurricanes, for example, that's not a subject that you address
through MMS.
Mr. Cruickshank. That's correct.
The Chairman. OK.
Senator Murkowski, do you have any other questions?
Senator Murkowski. I do, just a couple, Mr. Chairman.
Senator Landrieu, the last poster that you showed, you
said, ``This is jobs.'' I think we can go further, it's not
only jobs, it's energy security for this Nation.
Senator Landrieu. For America.
Senator Murkowski [continuing]. It's environmental
protection.
I would like to ask you both, Mr. Rainey and Mr. Odum--both
of your companies work all over the world, not just here in the
United States. I believe that the environmental standards that
we put in place, the requirements that we put on you as an
industry, are pretty tough. I know, certainly in Alaska,
they're extra tough. It's because we have an environment up
there that is different, it is unique, and it is harsh, but
it's also very fragile.
Can you rank for me, if you will, where the United States
is in terms of environmental protections and regulations as
compared to the other places in the world that you operate?
Where are we?
Mr. Odum. Certainly, I think the--it's taking a very broad
perspective. I would say that the U.S. programs are the most
comprehensive and--``strict'' would probably be appropriate
word to use, as well--in the world. That's taking into account
the specific regulations around areas like Alaska, but also the
comprehensive nature of that entire program across the U.S.
OCS. I would put it at the top.
Senator Murkowski. Mr. Rainey.
Mr. Rainey. Yes, Senator, I would agree with Mr. Odum,
that, in my view, environmental regulations in the U.S. are
amongst the most stringent that we see anywhere in the world,
and they provide the highest level of environmental protection
that we see anywhere in the world.
Senator Murkowski. I know there were announcements made
this past week, in terms of some changes with the U.S. program
where we are shortening the lease terms, there are additional,
I would call them ``regulatory burdens,'' but perhaps others
would describe them otherwise. When we put in place in policies
that say, ``OK, we're going to shorten your lease terms,'' what
does that do for you, from a business perspective, and where
you choose to operate in the globe?
Mr. Rainey. Thank you, Senator. I can speak to that from an
explorer's perspective. In BP, we rank our exploration
opportunities on a global basis. The nature of the leasing and
the regulatory and the fiscal regime is an important aspect of
that ranking.
At the present time, the U.S. receives a very large
proportion of our global exploration spend. You all know that,
without successful exploration, there is no development and
there is no production. So, if we choose to send our
exploration dollars elsewhere, then the follow-on benefits of
development and production will go elsewhere, as well.
Senator Murkowski. ``Go elsewhere'' to nations to where the
environmental regulations are not near as stringent.
Mr. Rainey. Exactly.
Senator Murkowski. We need to think globally about this.
Mr. Amos, let me ask you--because you made the statement
that SkyTruth essentially focuses on the risks that are posed
by resource extraction. Does your organization also focus on
other energy resources that might have impact to the
environment? A lot of discussion has taken place in this
committee about offshore wind. There are some environmental
challenges with that, and also environmental challenges with
the onshore wind. Do you do environmental assessments in other
energy areas as well, or is it just resource extraction?
Mr. Amos. I would like to correct a misperception, that
Senator Landrieu suggested that our agency actually takes a
position on whether more offshore oil or gas drilling should or
should not be done. We do not take such a position. Our work is
focused on ensuring, in fact, that drilling for resources can
and will be done in a more sustainable and environmentally
friendly manner, wherever it's done, including here in U.S.
waters. So, I just wanted to correct that.
I will say that our organization does look at other forms
of energy production and extraction. As you suggest, no form of
energy production is without its impacts and risks.
I would also suggest that the very same technology that
we've shown you today that can be used to demonstrate what
happens when things go wrong, even with the best technology--
and they do still go wrong--can also be used to show where
things are not going wrong. So, we would welcome the
opportunity to work with you, and to work with representatives
of industry and government, to use this monitoring technology
in a publically transparent way so that, hopefully, we can show
where it's being done right instead of just where it's being
done wrong.
Senator Murkowski. I think industry would welcome the
opportunity to demonstrate where it's being done right.
Senator Landrieu. I do have a followup.
The Chairman. I think maybe the others do, too. Let me----
Senator Landrieu. I'm sorry.
Senator Shaheen.
The Chairman. Senator Menendez, I think, would be next, and
then Senator Shaheen, and then Senator Landrieu.
Senator Menendez. Thank you, Mr. Chairman. Mr. Chairman, I
appreciate the hearing.
Mr. Odum, in your testimony, you painted what I think is a
pretty absurdly rosy picture of the oil reserves contained in
the Outer Continental Shelf. Listening to your testimony, one
might think that we had several Saudi Arabias beyond our shores
ready to be, you know, drilled and wash over us in low gas
prices and rainbows. Of course, I have a different picture of
that, because the Energy Information Administration's 2007
report on what effects opening the entire OCS to drilling would
have on energy production and prices states that such a policy,
quote, ``would not have a significant impact on domestic crude
oil and natural gas production or prices.'' Then, the EIA
testified before this committee last month, and they
reaffirmed, basically, that statement again.
But, I'm concerned, when, you know, witnesses like yourself
come before the committee and make these, you know, incredibly
rosy pictures, because it affects our policy--you know, I'm
concerned when, in 2004, your parent company was caught
falsifying its oil reserves, was fined $150 million, faced
criminal charges, and only recently settled shareholder
lawsuits. Why would, based upon that experience, the committee
necessarily believe what you are saying about oil reserves
versus, you know, predictions?
Mr. Odum. Thank you, Senator. I think we--the good news is,
we have the ability to go back to the facts. I think the
easiest place for me to point to is the Gulf of Mexico. Gulf of
Mexico right now makes probably on the order of 1.4 million
barrels a day. We have a project out there,--we call it the
Mars development--that itself makes a few hundred thousand
barrels a day. We have the Perdido project, which will come on
in the next couple of months, which itself will make--has the
capacity to make 130,000 barrels a day. There are other
examples from other industry players out there.
My point is, you know, 1.4 million barrels, in its
entirety, right now from the Gulf of Mexico, in these discrete
projects, which are the development opportunities we have out
there, are adding significant pieces. So, I would disagree,
fundamentally, that this area, where--you know, the other
characteristic we've seen in the Gulf of Mexico is, the
resource estimates have continued to grow as we've been there,
done additional research, improved technology--throughout the
history of us being there, those resource estimates have grown.
I would anticipate the exact same thing would happen at other
areas of the OCS in the U.S. So, we can make a significant
difference in----
Senator Menendez. But, there is a difference between a
guess and what actually is a reserve, is it not?
Mr. Odum. There are very clear parameters on which the U.S.
uses to define what a ``reserve'' is verses what ``resources''
are.
Senator Menendez. Let me ask you this. You, in your
testimony, state that you believe that those who believe that
there are serious environmental risks to offshore drilling have
a, quote, ``outdated view of how the oil and gas industry
operates today.'' Is it really so outdated, in view of what
just happened off the coast of Australia, that it spewed oil
into the ocean--do you have a picture of that?--for over 10
weeks, and then caught fire before finally being plugged, just
2 week ago? Is it really just an outdated view to believe that
environmental effects of drilling, when it's estimated that 9
million gallons of oil spilled during that spill? Am I just
being old-fashioned, when that same drilling entity is working
in U.S. waters today? I find it difficult to--you know, maybe
you can say that things are safer, but to suggest that there
are no risks. I want to end there, with that question.
Then, Mr. Amos, I want to ask you a question. I know that--
earlier, I talked about what happened in Katrina and Rita. I
was talking about both offshore and onshore spills. When the
Coast Guard reported to Congress--not me, but the Coast Guard--
that 8 million gallons of oil spilled onshore, and MMS reported
that over 700,000 gallons spilled offshore, aren't the
labyrinth of onshore pipelines and refineries directly linked
to offshore production? If we didn't have the offshore
production, would we necessarily have all of that additional
risk? Shouldn't we count that as part of the overall risk
factor?
So, if you would both answer those questions, I'd
appreciate it.
Mr. Odum. If I go back to the question of, ``Do we have an
outdated view?'' my point is this, that the technology has
dramatically changed over the decades, and many people do have
a view of how they saw the industry 20, 30 years ago. I'm
telling you, yes, it's very different today.
As we think about opening new areas of the OCS to
exploration production, I believe the way to look at it is to
look at latest developments by the industry in the current
areas that are open, translate that to the new areas, because
that's where you see the new technology, and, in addition, all
the mitigation techniques and other things that we've learned
over these decades. So, that's where my view, an outdated view,
comes from.
Mr. Amos. Thank you, Senator. You're absolutely correct in
your statement that the onshore and offshore infrastructure is
essentially one interconnected facility. It should be
considered as such. The 1700 homes in Louisiana that were
inundated by crude oil from the spilled storage tank, those
homeowners probably would not differentiate between where the
oil came from and who owned it. So, as we consider offshore
drilling in new areas, it's not just the risk from what happens
on multibillion-dollar high-tech platforms that are operated by
the biggest energy companies in the world; it's also the risk
posed by the network of pipelines and onshore processing and
storage facilities that are a requirement of supporting that
offshore development.
I'd also like to point out that--I think you mentioned that
the Norwegian company that was drilling off Australia when this
blowout occurred is a well-respected global operator. They have
a fleet of 41 drilling platforms around the world. They've
targeted the Gulf of Mexico as an important area of business
operations, and have an office in Houston. I think you
mentioned, they're currently under contract to drill in the
Gulf of Mexico through 2012. So, it's imperative that we
understand exactly what caused that blowout and spill in
Australia. But, as we've seen in our investigations in recent
years, every individual accident is a unique--a culmination of
a unique chain of circumstances.
Senator Menendez. I appreciate it. I've asked Secretary
Salazar to look into exactly that.
Thank you very much, Mr. Chairman.
The Chairman. Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman.
The Interagency Ocean Policy Task Force that was
established by President Obama in June released their interim
report in September. The priorities that the task force laid
out included ecosystem-based management, comprehensive coastal
and marine spatial planning, increased scientific knowledge of
the oceans that we can apply to policy decisions, and improved
coordination between Federal, State, local, and regional ocean
management entities.
Now, we haven't yet seen the final report. But, if we were
going to incorporate that framework into current policies
around our oceans and coasts, how would that affect what we're
currently doing with respect to development, drilling? How
would existing environmental standards change, or not, based on
that kind of a framework?
Dr. Short, I'm going to ask you to, if you would, go first,
because I think what's being talked about in those
recommendations is consistent with the kinds of things you were
talking about in your testimony.
Mr. Short. Thank you, Senator.
We would like to see the--those recommendations integrated
into policies for offshore oil and gas leasing--in particular,
marine spatial planning and ecosystem-based management aspects
of them--because too often these--as I mentioned earlier, too
often these things focus on a zoning approach rather than
identifying which parts of the marine ecosystem are
disproportionately productive and vulnerable and need
protection. We feel that those should be first identified and
then appropriate protections conferred on them--not necessarily
to exclude industrial development, but to make sure that we
preserve the integrity of the function of what they do--and
that that should be number-one priority of any marine spatial
planning exercise.
Along with that, ecosystem-based management could usefully
be applied to the way that we go about assessing the background
and then monitoring of ecosystems as these industrial projects
are--unfold, because we see that, although there is a great
deal of money often spent on environmental studies, it's not
spent as intelligently as it could be if you were to take an
ecosystem approach at the outset to figure out, in a
fundamental way, what's there and how it works together, what
it depends on. This doesn't have to cost a fortune. There are
several examples in Alaska of highly respected ecosystem-based
management plans--study plans, in effect, primarily now
directed toward fishery issues--that could be usefully adopted
toward oil and gas issues, as well.
Senator Shaheen. Thank you.
Mr. Rainey and Mr. Odum, how would you see, if those
priorities were adopted, that changing or affecting the way you
currently do business?
Mr. Odum. The--Senator, I think the--the first thing that I
think is important here is that we recognize what currently
happens within the purview of the agencies that exist. So, for
example, the idea of looking out at long-term impacts, at
multiple uses, that is actually already within the purview of
the MMS that's done. I may get the terminology wrong, but I
think it's the OCS Lands Act that, you know, provides for that
type of analysis. So, first of all, I think it's important to
recognize what's already done.
Second of all, if I could be very frank, I mean, one of the
things that--if I went to the worry side, one of the things
that worries me is, it creates a very big bureaucracy,
potentially. It could be done right. If it wasn't done right,
it could create a large bureaucracy that could potentially put
us into a mode of slowing things down and just studying forever
rather than truly moving forward on things. So, I do worry
about that, to be perfectly open.
I think the--you know, my personal take on it is that I
think we need to understand what we mean when we say an
``adaptive approach.'' I'll use Alaska as an example. There's--
across the Arctic, there, through the Canadian Beaufort, as
well as the coast off Alaska in the Beaufort and the Chukchi,
there's been about 112 exploration wells drilled. There's been
an enormous amount of data collected associated with that
activity, which has taken great steps forward, in terms of the
understanding of everything from migration of mammals all the
way to the impact of noise and so forth. So, that activity
actually, to a degree, enables the collection of that
information. We adapt as we learn from that and how we move
forward.
So, I think we'd have to be cautious about a program that
says, ``Are we going to learn and adapt and move forward, or
are we just going to study until we've answered every possible
question?'' That's my concern.
Senator Shaheen. I don't--other than the increased
scientific knowledge, I don't think it said anything about
studying. Do you not think increased scientific knowledge is
appropriate?
Mr. Odum. No, I certainly do. I mean, I absolutely, fully
support having the right information.
Senator Shaheen. Thank you.
I'm actually out of time, Mr. Rainey.
The Chairman. Go ahead, if you want to respond.
Mr. Rainey. I was just going to add, Senator, that I think
we should remember that scientific knowledge is always moving
forward. Actually, using the best available and most up-to-date
scientific information is part of the current regulatory
system, and it supports the OCS leasing and exploration and
development programs.
I think we also need to remember that OCS development has
been going on for the last 50 years, and it has been going on
in a way that is both safe and protective of the environment.
The Chairman. Senator Landrieu.
Senator Landrieu. Thank you very much.
Following up, I'd like to use Senator Menendez's picture,
which is a very disturbing picture, but it's part of the truth
that I'm going to continue to try to tell. The fact is, these
things happen.
On this day, when this picture was taken, however, on this
rig off the coast of Australia--I'm going rough it; maybe, Mr.
Rainey, you, or Mr. Odum know better. But, since we have 4,000
structures like this in the Gulf, I'm going to rough that there
are 20,000 in the world. So, 19,999 were not on fire. I want to
repeat, 9,999 were not on fire. This one was. The oil spilled
from this would fill up, as I said, one-third of the Reflecting
Pool outside of the Capitol.
So, let us agree that there are risks associated, but it
has already been determined, and testified to at this hearing
by Mr. Cruickshank, who is the expert for the government, does
not work for oil companies and does not work for SkyTruth, has
said that this rig would not be allowed to operate in the
United States of America.
No. 2. The spill that occurred in my State, in St. Bernard
Parish, that went--the oil went into 1700 homes--I'm very
familiar with, because I walked through many of them myself--
was leaked from a holding tank, Mr. Chairman. Murphy Oil, this
is public record, had 5 or 6 of these large holding tanks that
are very familiar to places in Louisiana, Texas, New Jersey,
Alaska--all over the country, actually. They're refined
products, and sometimes unrefined products, that are held until
they can be refined in the Nation. There is a regulation that
says that, when a storm comes--because we have them all the
time, and have for hundreds of years in the United States--the
companies have to fill them up so that they're heavy and the
winds that blow against them won't overtop them. That was not
done. They are liable, and they paid a significant amount of
money to people. Now, four or five of the tanks were filled,
and one was not. Now, that is public record. You all can go
look at it.
Mistakes are made every day, even though there are
regulations and there are enforcements. We've learned from
that. Mr. Amos, you would be happy to know that I think we've
adopted new regulations so that maybe inspectors now go out and
check, before storms come, to see how much these tanks are
filled up. We did some good things.
But, those things happen. But, the fact is, people were
compensated, it was terrible, there was a lot of cleanup. But,
the same people that had the oil in their homes also worked for
the company, so they didn't want them to go out of business
because they would lose their jobs. So, we all rolled up our
sleeves, we cleaned up, learned, passed new regulations, and
moved on.
The third and final point I want to make are the reserves.
My colleagues continue to say that this whole effort is for
naught, because there's no oil anywhere anyway, so why drill?
I'm going to ask you, Mr. Amos, where you support drilling,
because you said you did, and I want to know specifically in
what area.
These are the estimates--not from the oil companies, not
from the environmental groups; this is from the Minerals
Management Service--that is proving what Mr. Odum has said is
true, that the estimates are going up, and they're going up
because technology's getting better, we're learning how to find
oil in places we didn't know it was before, and gas. We used to
have to drill lots of wells before we'd find the oil and gas;
now, with the new imaging technology, we're finding it more
quickly. As we continue to produce more, we're finding more.
So, based on our own data--this is the U.S. Government, this
isn't Louisiana, this isn't Texas, this isn't Alaska trying to
tell everybody there's oil out there when there's not--this is
the U.S. Government saying, ``If you look for it, you'll find
it.'' There are lots of resources. These resources belong to
the people of the United States, and they have a right to earn
a living and to create wealth for them. They actually own these
resources.
My final point is this. Mr. Amos, we have found something
we agree on. You said that we need more environmental support,
and I agree. If the States of Louisiana, Texas, and Mississippi
and Alabama, who have--are bearing the burden of this
production--proudly--we know their risk, their advantages--had
gotten a portion of the funding that all the other States in
this country have gotten, based on a 37-and-a-half-percent
share, which Harry Truman offered to us in 1920, which we did
not get, it would have generated $23 billion for us just in the
last 7 years. That would have supported a lot of environmental
support, rules, and regulations, coastal restoration, flood
protection, navigation control. But, we have this great
industry that we're proud of and virtually no help from the
Federal Government to regulate it in the way that we would wish
and would want to--although there are great regulations out
there--for the protection of our coast.
So, I'm going to conclude with: good stewardship, again,
starts with telling the truth, painting a clearer picture of
the hazards and benefits, and sharing the revenues in a way
that promotes good stewardship of the environment and good
economic opportunity for the people of our Nation.
Thank you.
The Chairman. Let me just ask one additional question, then
I think we're ready to terminate the hearing.
Mr. Amos, your satellite imagery and digital mapping and
remote sensing technologies that you made reference to and have
in your exhibits here, those are available to our agencies at
this time? I mean, the information that you collect through
those. Is that right, or not?
Mr. Amos. The satellites we collect information from are
operated by a variety of sources, including the U.S.
Government. In the case of Australia, the images we showed were
produced by NASA from NASA taxpayer-funded satellites. But, in
some cases, we have to buy satellite imagery from commercial
providers. For oil pollution, in particular, the best tool is
radar satellite imagery, and the U.S. Government does not
operate any civilian radar satellites. But, NOAA Satellite
Services Division does have agreements with other countries to
purchase those kinds of images, when necessary.
The Chairman. OK. All right.
I think there's been useful testimony. I appreciate all of
you coming. We will try to learn from your written reports and
see if any action can be taken here in Congress.
Thank you very much.
[Whereupon, at 12:15 p.m., the hearing was adjourned.]
[The following statement was received for the record.]
Statement of Jon Hrobsky, Director, Policy & Government Affairs,
National Ocean Industries Association
Thank you for the opportunity to submit written testimony for the
record regarding the Committee's November 19, 2009 hearing to receive
testimony on environmental stewardship policies related to offshore
energy production.
NOIA is the only national trade association that represents all
companies engaged in the exploration for, and production of,
traditional and alternative energy on the nation's Outer Continental
Shelf. The NOIA membership comprises more than 300 companies engaged in
activities ranging from producing to drilling, engineering to marine
and air transport, offshore construction to equipment manufacture and
supply, shipyards to communications, and geophysical surveying to
diving operations. As such, this hearing is of particular importance to
our members.
While some of your witnesses may be testifying on particular
environmental stewardship proposals related to offshore energy
production, we would like to concentrate our testimony on general
technological advancements and improved safety practices in the
offshore oil and gas industry which may help guide the committee in
your decision making.
a source of constant technological innovation
Today's offshore technology allows us to produce more energy by
reaching places that would never before have been possible. New world
records are always being set.
Industry recently set one of these records by drilling a well in
water depths exceeding 10,000 feet. That's the equivalent of
successfully navigating nearly two miles down from the surface of the
ocean before even beginning to drill, sometimes another 30.000 feet
into the earth below the sea floor. The technology required to drill,
complete and produce this type of well must overcome an environment of
high pressure (in excess of 20,000 pounds per square inch) and high
temperature (exceeding 350F). Deep wells such as this are expensive,
costing as much as $100 million apiece.
After coming from the ground, the oil or natural gas then travels
through a pipeline where the temperature is just above freezing and the
formation of ice crystals threatens to block the flow unless constantly
supervised and adjusted. At depths far beyond where humans can travel,
sometimes as much as 5,000 feet or more below the ocean surface,
Remotely-Operated Vehicles (ROVs) are used to perform maintenance and
repairs.
All this is possible with fewer facilities and less impact--even
visual--than ever before. For example, multiple subsea wells can be
connected by tiebacks to a single platform over great distances. Such
an installation is capable of reaching wells on the ocean floor dozens
of miles away in all directions while connecting to an ocean surface
platform one mile above.
Directional drilling also allows for extraction of resources which
are miles away from the point where the actual well is drilled.
This cutting edge technology doesn't come cheap, however. The total
cost of this type of project, including wells drilled and the subsea
connection system, can exceed $5 billion.
an exemplary record of environmental protection and stewardship
The outstanding environmental record of U.S. companies operating
offshore around the world is well recognized as . . .technologies are
allowing the offshore industry to venture into deeper waters than ever
before, while protecting marine life and subsea habitats. . .\1\--even
in the most challenging areas such as the Arctic and North Sea and in
otherwise catastrophic weather.
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\1\ Clinton Administration DOE report: Environmental Benefits of
Advanced Oil and Gas Exploration and Production Technology, 1999.
---------------------------------------------------------------------------
Off the part of our coast in which exploration and production has
historically been allowed, the safety of our operations was
demonstrated in the most severe hurricane situations in 2005 and 2008.
Though many of the exploration and production facilities in the Gulf of
Mexico were severely damaged or destroyed, the high-tech safety and
environmental protection equipment and processes worked.
Careful scientific environmental study and operational planning
always precede OCS activity. For example, our offshore geophysical
companies, which conduct seismic work that allows us to ``see''
geologic structures beneath the seabed--have worked with the National
Marine Fisheries Service and MMS to implement many procedures and
practices designed to avoid harm to marine mammals, including:
Monitoring for the presence of animals of concern
Shutdown or no start-up when they are too close
Slow, gradual ramp-up of operations just in case
During exploration, jack-up or semi-submersible rigs and drill
ships have multiple systems and physical barriers to ensure that no
spill occurs. Most important, along with multiple, redundant remote
control systems. are ``blowout preventers'' which in deepwater are
installed on the well at the seabed and are capable of immediate
closure in event of any emergency.
Also, a ``downhole safety valve'' in the well itself below the
seabed provides an added protection barrier in the event of some
catastrophic event.
As a result of these safeguards, the offshore oil and gas industry
has a laudable environmental record, as noted in the ``Oil in the Seas
III'' National Academy of Sciences study, which finds that although the
amount of oil produced and transported on the sea continues to rise,
improved production technology and safety training of personnel have
significantly reduced both blowouts and daily operational spills.
The industry remains under intense scrutiny by its two primary
regulators--the MMS and the U.S. Coast Guard--as well as a host of
other governmental agencies with oversight responsibilities such as the
Environmental Protection Agency and the National Oceanic and
Atmospheric Administration.
However, it is the MMS that regulates all exploration, development,
and production activities on about 8,000 active leases to ensure that
these activities are conducted safely and in an environmentally sound
manner. The MMS reviews and approves industry exploration and
development plans before allowing any operations to commence, monitors
all lease operations to ensure that industry is in compliance with
relevant requirements, and conducts scheduled and unscheduled
inspections. In 2008, MMS conducted over 25,000 inspections of OCS
facilities.
To summarize, the latest technology and sound management practices
not only allow for the continued production of domestic energy
resources, but they have also made the U.S. offshore industry the envy
of the world. Its environmental record is superb:
Since 1985, more than 8 billion barrels of oil were produced
in federal offshore waters with less than 0.001 percent
spilled--a 99.999 percent record for clean operations.
There has not been an incident involving a significant oil
spill from a U.S. exploration and production platform in nearly
30 years (since 1980).
Government statistics show that the injury and illness rate
for offshore workers is about 70 percent lower than for all of
private industry.
Today's modern technology includes such environmental
protections as automatic subsea well shut-in devices, including
sub-seabed safety valves.
The industry's performance during the 2005 hurricane season
(Hurricanes Katrina and Rita), which moved through a core area of
offshore operations, is instructive. While it is true that 115
platforms were destroyed, the storm threatened over 3,000 facilities,
the vast majority of which survived. Despite sustained winds reaching
170 miles per hour and towering waves and the resulting destruction of
numerous platforms and rigs, there was no significant spill from
production wells and no injury or loss of life among the 25,000--30,000
workers who are offshore at any given time.
We thank you again for this opportunity to submit written
testimony, and remain available for any further questions.
APPENDIX
Responses to Additional Questions
----------
Response of John F. Amos to Question From Senator Bingaman
Question 1. Your testimony expressed concern about the impact of
the offshore and onshore infrastructure necessary to support offshore
production. The Minerals Management Service (MMS) testified that their
jurisdiction generally ends at the state-federal offshore boundary.
Please discuss your understanding of the governmental entities with
jurisdiction over this infrastructure, and any view you may have about
the adequacy of the regulatory oversight for this infrastructure.
Answer. MMS decisions about outer continental shelf (OCS) leasing
will generate demand for onshore facilities to support new, or
additional, offshore exploration and production. Current regulatory
roles are now provided to impacted coastal states under the federal
consistency provision of the Coastal Zone Management Act (CZMA), for
those impacted coastal states that have a federally-approved Coastal
Zone Management Plan. If OCS leasing expands into previously protected
federal waters, onshore industrialization in shoreline areas--where
coastal states have set aside important habitats, parklands, and
coastal-dependent tourism infrastructure--will likely require continued
reliance on a strong state role under the CZMA consistency process.
An additional complicating factor in regulatory oversight is the
division of offshore pipeline oversight between MMS and the Department
of Transportation (DOT). It is our understanding that, in general, MMS
is responsible for ``gathering'' lines that typically collect oil and
gas from offshore wells and deliver it to platforms, while DOT is
responsible for ``market'' lines that then bring the product to shore.
We are not sure how, specifically, a given segment of pipeline is
assigned to MMS or DOT jurisdiction.
I would like to take this opportunity to expand on my response to a
question you asked during the hearing: whether the data and information
that SkyTruth uses are available to government agencies as well. I
interpreted your question to refer to the satellite images that we use
in our work, and answered that government agencies certainly have
access to those same satellite systems and the images and data they
produce. I also want to make clear that we routinely make SkyTruth-
processed images and analyses available to the public, including
government agencies, for non-commercial purposes. For example, we have
provided images to the Surface Water Quality Bureau of the State of New
Mexico Environment Department, and to scientists in Wyoming conducting
studies funded by industry and the Bureau of Land Management. In the
immediate aftermath of Hurricane Katrina, we worked around the clock to
produce and publish precision image-maps showing platform and pipeline
locations and sources of oil leaks in the Gulf of Mexico, and
informally provided those maps to staff at MMS and NOAA as fast as we
could generate them. It was our hope that these image-maps would be
helpful for the response and repair effort so we produced and published
them as a public service. For an example of one of these image maps,
see http://skytruth.mediatools.org/sites/default/files/photo_import/
1904/935/11980.jpg.
Responses of John F. Amos to Questions From Senator Murkowski
Question 1. You stated in your testimony that ``effective design
and implementation of safe pipeline systems may be complicated by the
existing regulatory regime for offshore pipelines, with jurisdiction
split between two separate agencies, the Department of Transportation
and the Department of the Interior. This is a classic example of gaps
and overlaps in ocean governance of the kind discussed in a widely
quoted 2006 paper in the journal Science.'' Would you agree that it
makes sense to consolidate as much management as possible of the OCS
oil and gas resources within one department, with other agencies
serving in advisory roles?
Answer. Our observation is that gaps raise the possibility that
existing or potential problems are not being recognized or effectively
addressed. However, SkyTruth has no expertise in developing government
policy and regulation, so we can make no specific recommendations in
those areas.
Question 2. From your testimony, it appears that SkyTruth focuses
much of its efforts on oil and natural gas operations.
a. Does your organization track or project the impacts that
offshore wind installations could have on the marine
environment?
Answer. We're not aware of any large offshore wind projects in U.S.
waters. We have, however, produced images illustrating the landscape
footprint of utility-scale onshore wind and solar projects (see our
renewable energy gallery at http://www.flickr.com/photos/skytruth/sets/
72157616622223819/).
b. Does your organization track or project the impacts that
solar energy, biofuels, and any other onshore alternative
energy projects could have?
Answer. See above.
c. Would you agree that the development of offshore wind
energy, solar energy, biofuels, and other alternative energy
resources will impact the environment?
Answer. We're not experts in understanding the impacts posed by all
potential sources of energy, particularly offshore in the complex and
relatively poorly understood marine environment. We know what we see,
and that's generally limited by the primary technologies we use--
satellite and aerial imagery--to impacts that are directly observable
on land, or on the ocean's surface. But in general it seems likely that
any industrial-scale activity to produce and transport energy will have
impacts on the environment.
Question 3. As I understand your organization, you obtain, create,
and supply pictures of resource extraction impacts and potential
resource extraction impacts to environmental groups and other entities
interested in documenting and communicating such impacts. Is this
accurate?
Answer. SkyTruth produces images that illustrate a range of
environmental issues, including resource extraction activities such as
drilling, mining, and logging. We routinely make these images available
to the public, including interested individuals, conservation
organizations and government agencies, for noncommercial, educational
and scientific purposes.
a. Would you provide a comprehensive list of all of the
organizations to whom you have supplied SkyTruth's materials?
Answer. SkyTruth generally distributes images publicly through our
website and online image galleries, so it's not possible for us to
compile a comprehensive list. However, we do know that users of our
images have included the Bureau of Land Management, the New Mexico
state government, Trout Unlimited, Rocky Mountain Elk Foundation, World
Wildlife Fund-Australia, The Wilderness Society, Sierra Club,
Earthworks, Appalachian Voices, PBS, NBC Nightly News, and CBS Evening
News, among others.
b. Of these groups, how many have taken positions generally
or specifically opposing the projects of which you've provided
photographs?
Answer. I have no way of knowing this (see above). Certainly many
of the conservation groups that have used our images advocate for
changes in the way public lands and resources are managed.
c. If all or an overwhelming percentage of the groups to whom
you supply your pictures oppose offshore and onshore drilling
projects, how is it true to state, as you did in testimony
before this committee, that your group takes no position on the
issue?
Answer. We don't know what percentage of citizens groups,
organizations, or other public entities using our work are opposing
drilling projects (see above). SkyTruth believes that the relative
risks, benefits, and impacts of all industrial uses of public lands and
waters should be acknowledged, fully presented to the public, and
carefully weighed as part of the decisionmaking process about how to
best manage those public resources. Our role is to help provide
information about these risks, benefits and impacts, using remote
sensing technologies, to those engaged in policy debates.
Question 4. Several of the images on your website and in your
testimony aren't actual photos of development but they're photos of an
area with your own drawings of what your organization believes some
possible future development might look like. Do you ever run these
images by the proposed developer of the area to verify whether they
happen to agree or disagree with your sketches?
Answer. SkyTruth simulations are based on satellite and aerial
imagery of actual pollution incidents, and on existing, comparable,
developments. To the extent possible we use published plans or
applications from the proposed developers, and government rules and
management practices that would likely apply.
Question 5. Your testimony cites what you label catastrophic oil
spills resulting from hurricanes Katrina and Rita, but these larger
spills seem to have occurred onshore from the refineries, the
pipelines, and other infrastructure associated with delivering the
products to customers. I'm not sure how this is specifically relevant
to the debate about offshore development. Wouldn't similar risks apply
to the same types of facilities much further inland, supporting on-
shore development, if they were hit by other disasters like tornadoes
or earthquakes?
Answer. Hurricane Katrina caused damage to OCS facilities that
spilled more than 700,000 gallons of oil and condensate offshore,
cumulatively a ``major'' spill by Coast Guard definition. Among other
spills, Hurricane Rita caused 1.9 million gallons of heavy fuel oil to
spill into the Gulf from a damaged barge; most of this product sank
into the water and could not be recovered (http://www.darrp.noaa.gov/
southeast/dbl152/).
SkyTruth's work with severe storms highlights the
interconnectedness between offshore development and onshore
infrastructure. In the case of Hurricanes Katrina, Rita, and Ike, these
facilities caused significant spills. Communities that are being asked
to consider drilling off their shores should be aware that coastal
infrastructure is also implied by that development, and can be a source
of damaging spills. For this reason, the information I presented on
coastal spills is directly relevant to offshore development.
Although I have no knowledge of major spills caused by earthquakes
or tornadoes, large earthquakes certainly have the potential to damage
pipelines and storage facilities. Seismic and volcanic activity present
hazards somewhat unique to Alaska: Cook Inlet risked a major spill
early this year from an oil storage tank facility located in the well-
documented path of dangerous mudflows from the latest eruption of
Redoubt Volcano, and the facility has since been closed (http://
www.rigzone.com/news/article.asp?a_id=82587). All such risks should be
acknowledged and incorporated into the decisionmaking processes that
inform resource management and emergency preparedness.
Question 6. I'm trying to get a better sense of your organization
SkyTruth's philosophy. What I'm getting from your testimony is that the
risks of offshore development outweigh the benefits. My question is
where and how you may suggest Americans obtain our 20 million barrels
of oil each day in the immediate to short term. Do you think tankers
from abroad, presumably increasing traffic in the Houston ship channel
to make up for a slowdown in domestic production, would be a safer
measure until our Nation ceases to consume oil?
Answer. The risks and benefits of offshore development should be
honestly and publicly debated as part of an ongoing national
decisionmaking process. Industry spends millions of dollars each year
reiterating the benefits of drilling to the public and to influential
decisionmakers. However, the impacts of development and the continued
risk of accidental spills often are not apparent to the public and
decisionmakers. These impacts would need to be considered in
comprehensive cost-benefit analyses to address the question of benefit
vs. risk. SkyTruth doesn't engage in comprehensive cost-benefit
analysis; that is well beyond the scope of our mission and current
resources. Rather, we provide information on impacts and risks to be
included in such public policy debates.
a. Where, specifically, have your pictures revealed that oil
development can be or is being conducted in a safe manner?
Answer. With a publicly transparent, systematic program of regular
monitoring, we could demonstrate over time that development is avoiding
some observable impacts (such as moderate to large oil spills, or
excessive landscape fragmentation). Such a program would require
substantial resources to buy and process the stream of imagery required
to do this kind of systematic monitoring. To date, these resources have
not been dedicated to implement such a monitoring effort here in the
US.
To help evaluate the safety of offshore energy development, we
recommend forming a partnership among government agencies, industry,
researchers, citizens groups and other stakeholders to design and
conduct routine OCS monitoring. SkyTruth has worked with two satellite
data receiving, processing and analysis facilities that could house
such a monitoring program: the Center for Southeastern Tropical
Advanced Remote Sensing (CSTARS) at the University of Miami (http://
cstars.rsmas.miami.edu/), and the Alaska Satellite Facility (ASF) at
the University of Alaska-Fairbanks (http://www.asf.alaska.edu/).
Question 7. Concentrated oil spills always have some environmental
impact--that's why we agree that oil and gas should always be produced
as safely as possible, under stringent conditions. However, according
to a report issued in 2003 by the National Academy of Sciences (Oil in
the Sea III), extraction activities release far less oil each year than
consumption activities, which in turn release far less than natural
seepages. In fact, the NAS report found that extraction activities--
which your organization so closely tracks--accounts for just 1 percent
of the oil entering North American waters each year. Taking this a step
further, multiple peer-reviewed studies [see http://www.ia.ucsb.edu/pa/
display.aspx?pkey=412] have found that the offshore production of oil
could actually help reduce the amount that naturally seeps from the
ocean floor.
Answer. I understand from SkyTruth's scientific advisors that there
is a substantial difference in toxicological impact between slow,
steady-state, widely distributed seepage of weathered and biodegraded
oil, vs. the sudden concentrated release of raw crude oil into an
environment that has not evolved mechanisms to accommodate it. The
deaths of marine mammals, birds, fishes and shellfish that result from
major oil spills attests to that difference.
In fact, entirely unique and potentially valuable ecosystems of
hydrocarbon-metabolizing organisms have developed on the seafloor
around many of the natural seeps in the Gulf of Mexico. I personally
observed these organisms on two deep research dives in the Gulf, at
water depths over 1,000 feet (http://tinyurl.com/y9edj5l). These
organisms survive by ``eating'' the oil and gas that emerges from the
seeps. In this case, if oil production actually reduced the flow of oil
from these natural seeps, it could extinguish rare communities of
organisms that are not yet well-studied. This would not necessarily be
a net positive outcome, since these seeps and communities are an
integral part of the marine environment in this area.
In addition, natural seeps are not ubiquitous. Background research
for a NASA-funded study I participated in determined that in US waters,
most natural oil seeps occur on the continental slope in the deepwater
Gulf of Mexico, and in the Santa Barbara Channel off southern
California (http://www.nasa.gov/home/hqnews/1999/99-001.txt).
Question 8. Although accidental spills or blowouts involve a much
more concentrated release of oil than natural seeps, much of the
testimony discusses toxicity of oil in the sea and the idea that its
continued buildup and dispersal may have toxic effects. Is this any
less true of a constant seepage of oil from the seabed than from the 1
percent of the ocean's oil from production related releases?
Answer. See above. The acute toxicity of a major oil spill can have
effects on the environment and on economically valuable fisheries that
can last for decades (http://tinyurl.com/cfekru). Natural seepage, as a
long-term natural phenomenon, is part of the evolved landscape where it
occurs; therefore the local ecosystem is adapted to that local flux of
hydrocarbons.
Question 9. Have you ever considered that oil production could
actually have a positive environmental impact, insofar that it could be
reducing the rate of natural seepages?
Answer. See above. The arbitrary destruction of unique and
potentially important seep ecosystems, that have evolved over a long
period of time, would not necessarily be a positive environmental or
economic outcome.
Question 10. Would policies not be more efficient in terms of
reducing oil in the sea to focus on reducing the amount of oil that is
spilled during consumption activities, rather than narrowly focusing on
a part of the process that is believed to account for nearly 30 times
less spillage each year?
Answer. As the personal opinion of a seafood lover and a body-
surfing fanatic, I think our nation should diligently work to reduce
all human-caused sources of oil pollution in the sea.
Question 11. I understand your organization also tracks and
projects the effects of domestic mining operations. While you certainly
have every right to do that, have you considered mining's importance to
the development of clean energy technologies? Some of the largest wind
turbines can contain 335 tons of steel (forged with iron ore), nearly 5
tons of copper, 3 tons of aluminum, and up to 2 tons of rare earths. If
we refuse to produce our own mineral resources, we will simply cede the
front end of the clean energy supply chain, fall further behind in the
development of these technologies, and trade our dependence on foreign
oil for an equally devastating dependence on foreign minerals. So, do
you believe the environmental impacts that can be associated with
hardrock mining outweigh the beneficial effects of the raw minerals and
metals that it yields?
Answer. Again, SkyTruth's mission is to help the public and
decisionmakers become aware of the impacts of mining so that these
impacts can be honestly acknowledged, debated, and incorporated into
the planning process for mine approval, bonding, permitting and
closure. SkyTruth does not have the expertise or resources to engage in
comprehensive cost-benefit analyses.
Question 12. Since your career as a geologist began, have you
observed any meaningful improvements in the development of offshore or
onshore oil and gas development in the U.S.?
Answer. Most of the technical advances I'm aware of come in the
area of seismic data processing and analysis, and drilling and
completion technology. These advances improve industry's ability to
profitably locate and produce resources from unconventional reservoirs,
complex geologic settings, and logistically challenging environments.
Question 13. Since SkyTruth's inception, can you illustrate any
success stories in terms of influencing policy and regulation, or
providing pictures to groups that do so influence, that has resulted in
meaningfully safer offshore oil and gas development?
Answer. I'm not aware of any such examples with certainty but I
consider it possible that our post-Katrina oil spill imagery helped
spur MMS and industry to rapidly develop new, stricter requirements for
the mooring systems of mobile drilling units; and spurred NOAA to
acquire satellite imagery after severe storms, enhancing our nation's
ability to evaluate and respond to storm-damaged infrastructure.
Question 14. On November 5th of this year, you headlined a briefing
in the Capitol, presented by the Sierra Club, on the ``risks associated
with including offshore drilling in the upcoming climate legislation.''
Was a member of Congress a sponsor of this briefing, and was a member
of Congress present at this briefing?
Answer. My understanding is that Senator Bill Nelson sponsored this
briefing, which was attended by one of his staff. No members of
Congress attended. SkyTruth was invited to provide information on
recent offshore oil spills, similar to our testimony on November 19. We
clearly stated that we do not promote any particular legislative or
policy prescriptions related to offshore drilling.
Response of John F. Amos to Question From Senator Menendez
Question 1. The Australian oil spill in the Timor Sea is the latest
and best known mishap, but isn't it true that in the just the last six
months there have been other oil spills, in the U.S. and around the
world? Please describe what you know of these incidents and comment on
how they illustrate our current risk for spills despite the existence
of advanced technology and regulatory laws.
Answer. There have been other oil spills since June 2009, including
the following:
Prudhoe Bay pipeline spill, December 2009--an above-ground,
onshore pipeline operated by British Petroleum in the Lisburne
field ruptured and spilled 46,000 gallons of mixed oil and
water onto the tundra (http://dec.alaska.gov/spar/perp/
response/sum_fy10/091129301/091129301_index.ht m), one of the
biggest spills to occur on the North Slope (http://www.adn.com/
money/industries/oil/prudhoe/story/1046914.html). A 200,000
gallon spill from a poorly maintained BP pipeline in March 2006
still ranks as the largest North Slope spill (http://
www.adn.com/money/industries/oil/story/876063.html). Lack of
inspections and regular maintenance resulted in corrosion that
caused the 2006 spill; the cause of the 2009 spill is under
investigation.
Dubai Star tanker spill, December 2009--a 2007-built tanker
carrying jet fuel was at anchor in San Francisco Bay and
loading bunker fuel from a barge when a mechanical failure
occurred, spilling fuel onto the deck and into the Bay.
Responders were immediately activated but the resulting oil
slick reached 2 miles in length and 200 yards in width, and was
not contained for four hours (http://www.mercurynews.com/
topstories/ ci_13677172).
Eugene Island Pipeline, July 2009--a large-diameter pipeline
operated by Shell Oil Co. sprang a leak about 30 miles off the
Louisiana coast and spilled 63,000 gallons into the Gulf of
Mexico (http://www.incidentnews.gov/incident/8061), creating an
80-square-mile oil slick before the spill could be contained.
The pipeline was installed in 1976 and recently began carrying
oil produced from a new platform located in deep water 190
miles south of New Orleans. It is common for new producing
fields to be tied back in to the existing pipeline network
closer to shore. To the best of our knowledge, no cause has yet
been determined for this failure.
Mystery spill, July 2009--tar balls began washing ashore on
the beaches of South Padre Island, Texas. The source of the oil
is unknown (http://www.mysanantonio.com/news/51521182.html).
Norway tanker spill, July 2009--One of Norway's worst oil
spills ever occurred when a tanker ran aground and spilled part
of its cargo of diesel fuel (http://www.independent.co.uk/news/
world/europe/norway-cleans-up-after-oil-spill-1769714.html).
The captain of the vessel failed to call for assistance when
his engine failed in stormy conditions.
These spills result from a mix of old and new technology, but what
they share (for those where a cause has been established) is the
element of human error: neglected maintenance, and failing to follow
the law and best practices. Technology advances can provide a measure
of protection from spills, but we observe that accidents due to
equipment failure, bad practices, and bad decisions continue to have
serious consequences.
______
Responses of Marvin E. Odum to Questions From Senator Bingaman
Question 1. The Committee heard testimony about the infrastructure
necessary to support offshore oil and gas production and to bring the
product onshore. Please state the extent to which your company
typically is involved in the development, construction or maintenance
of this infrastructure. If you do not typically handle this directly,
please indicate the extent to which you are involved with the entities
who are responsible for this infrastructure.
Answer. Shell is an integrated energy company with exploration,
development, and producing capability. We also own and operate pipeline
transportation infrastructure, which transports crude oil and natural
gas from offshore platforms to shore for refining and marketing. While
we do have design engineering capability in-house, we typically manage
development projects in-house and contract with engineering firms to
design the facilities. Construction and installation of offshore
infrastructure is performed by contactors and managed by our project
engineers and construction staff. Shell operates its own platforms and
pipelines with the help of contactors that Shell requires be trained to
Shell and Industry standards.
In some cases, we determine that facilities (including pipelines
and platforms) owned and operated by other companies can be used in
lieu of constructing new infrastructure. Doing so generates efficiency
and reduces the infrastructure footprint. For example, our Perdido
facility in the Gulf of Mexico utilized new technology to make a world
record water depth subsea tie-in to an existing pipeline.
Question 2. The Committee also heard testimony to the effect that
the Minerals Management Service's authority ends ``at the water's
edge.'' Please state your understanding of the various government
entities--federal, state, or local--responsible for permitting,
oversight, or spill response related to the infrastructure necessary to
support offshore production or to bring the product onshore.
Answer. The Mineral Management Service's (MMS) authority for
leasing and regulatory enforcement for oil and gas facilities begins at
the dividing line between the state territorial seas and the Outer
Continental Shelf (OCS). The territorial seas typically extend from the
shoreline out to three nautical miles but can extend further out in the
case of Texas and Florida. The MMS is also required to consult with any
Federal agency that has regulatory jurisdiction. There are, however,
some exceptions to the MMS's jurisdiction and a myriad of other federal
statutes and agencies that impact offshore development and peripheral
activities. These include:
For oil spill prevention and response preparedness under the
Oil Pollution Act requirements, the President delegated
authority over oil and gas facilities--including pipelines--to
MMS from the shoreline out to and including the offshore
platforms. This includes the state territorial seas.
The U.S. Coast Guard (USCG) has jurisdiction for actual
response to an oil spill from oil and gas facilities and for
workplace safety on offshore platforms.
The Department of Transportation has jurisdiction for the
design, construction, and maintenance of offshore pipelines
downstream of the oil and gas sales point.
The Environmental Protection Agency (EPA) has authority to
regulate water discharges in the OCS and air emissions in the
OCS, except for the central and western Gulf of Mexico.
The Fish and Wildlife Service and the National Marine
Fisheries Service have authority to regulate activities for the
protection of marine mammals that could be impacted by offshore
projects.
Offshore facilities are subject to the Federal consistency
requirements of the Coastal Zone Management Act (CZMA), whereby a
coastal state can determine whether any project receiving a Federal
permit is consistent with its coastal management program. If an
offshore project requires on onshore pipeline or onshore processing
facilities, that portion of the project is subject to the permitting
requirements of the coastal state and the local jurisdictions, such as
zoning requirements of a county.
Question 3. The Committee heard testimony regarding oil spills that
occurred during severe storms in the Gulf of Mexico from onshore oil
and gas infrastructure that supports offshore production--refineries,
pipelines, and tanks required to receive, process, store and distribute
oil and gas from offshore fields. Please describe your company's
involvement in developing and maintaining this onshore infrastructure,
and your understanding of the governmental entities responsible for
permitting, oversight and spill response for this infrastructure.
Answer. Coastal states and local jurisdictions (county, parish, or
town) will have jurisdiction for onshore pipelines and other
infrastructure. Shell has constructed and does maintain onshore oil and
gas infrastructure that support offshore production. This is primarily
pipelines and pumping and storage facilities along the coast where
offshore pipelines come ashore. In addition, Shell owns and operates
refineries, pipelines, and tanks required to receive, process, store
and distribute oil and gas from offshore fields. These facilities are
designed to withstand operational and environmental loading, such as
internal pressures and wind and wave loads as prescribed by Industry
standards and required by both Federal and state regulations. We
perform regular inspections of and maintenance on these facilities as
required by Shell policies and state and Federal regulations.
A spill or discharge from a facility onshore or offshore that
causes the release of a pollutant or results in a sheen on the water is
reported to the National Response Center (NRC), which is the national
point of contact and operations center for the release of any hazardous
substances that occurs in the U.S. The NRC will relay information to
the appropriate federal on-scene coordinators (USCG or EPA, depending
on the spill's location), which in turn will contact and mobilize other
federal and state incident teams. The first and most immediate
response; however, is that of the facility, and the facility's response
plan is immediately activated in the event of a spill. For this reason,
the facility's response equipment and the quantity, operation, and
location of this equipment and supplies are all critical to effective
spill recovery and clean-up.
Responses of Marvin E. Odum to Questions From Senator Murkowski
Question 1. Can you amplify for me your concerns about domestic
energy production and, if regulatory uncertainty and overly burdensome
litigation continues to stall development, what we can expect to see in
terms of driving energy jobs and production overseas? Feel free to
answer in numbers of actual jobs and numbers of barrels of oil, or
percentages, whichever is available.
Answer. When considering an investment in a multi-year, multi-
million or billion dollar exploration and development project, a
company looks at many factors including the applicable fiscal terms,
regulatory requirements and legal or political risks. The project's
attractiveness is impacted if there is a high potential for legal
challenge or political interference; or if the fiscal terms or the
regulations are uncertain or unstable.
It is difficult for me to say how many US oil and gas projects and
associated jobs have been left ``on the table'' due to a company's
analysis of these criteria. I can say, first, that oil and gas
development in the central and western Gulf of Mexico over the last 50
years has been successful in large part due to clear and equitable
``rules of the road;'' and second, we are seeing that the ``rules of
the road'' are not as clear in other areas of the OCS that are opening
up. This should be a concern to policymakers. Let me provide two
examples.
In the OCS off the coast of Alaska, we have experienced a delay of
three years in acquiring permits necessary to drill exploratory wells
in the Beaufort Sea and incurred hundreds of million dollars in costs
for preparation and equipment and personnel mobilization. Limited term
leases were acquired from MMS in 2005, and we have not been able to
drill a well. A recent study by the Institute of Social and Economic
Research of the University of Alaska\1\ quantifies OCS development
could generate an annual average of 35,000 jobs over the next 50 years
for the state of Alaska alone. These jobs represent a total payroll of
$72 billion (2007$) over the 50-year period. OCS-related employment
growth could more than offset losses from the decline of petroleum
production on state lands and could help sustain the Alaska economy for
several decades.
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\1\ Economic Analysis of Future Offshore Oil & Gas Development:
Beaufort Sea, Chukchi Sea, and North Aleutian Basin, Northern Economics
and the Institute of Social and Economic Research of the University of
Alaska, March 2009.
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In the Eastern Gulf of Mexico, we have received approval from MMS
for an exploration plan in ultra-deep water, but issuance of an air
permit from EPA will take an additional 18-24 months. The Gulf of
Mexico Energy Security Act of 2006 opened several million acres of the
Eastern Gulf to leasing but failed to adequately provide for
streamlined air permitting, such as that applied in the central and
western Gulf of Mexico. To help illustrate the significance of the oil
and gas industry relative to job creation, a recent study entitled,
``The Energy Sector: Still a Giant Economic Engine for the Louisiana
Economy'' by Dr. Loren C. Scott, Ph.D found that in 2005 alone the oil
and gas industry supported $70.2 billion in sales in Louisiana firms,
generated over $12.7 billon in household earnings for Louisianans, and
supported 320,280 jobs in the state.
Question 2. When evaluating offshore oil and gas development
opportunities in nations outside the U.S., what are some of the main
factors a company might take into account when assessing the
attractiveness of the investment climate?
Answer. Oil and gas exploration and development opportunities both
in the U.S. and around the world are evaluated on a number of criteria.
The internal screening process is designed to ensure that investments
are made in projects that will successfully grow the business and
return value to our shareholders. Among the criteria applied to a
proposed exploration or development project are:
The recoverable oil and gas volume and price forecast
The cost to bring the resource to market, including
applicable fiscal terms, and any uncertainty about the
applicable legal and regulatory regime that might increase
project costs
The ability to meet a schedule, which is affected by
litigation and regulatory delays
The predictability and certainty of gaining a license to
operate and the security of that license
The technology required to develop the resource--does it
exist?
The potential environmental and social factors associated
with the project The political stability of the resource
holding country
Access to skilled workers
Question 3. When we talk about environmental stewardship on a
global level, knowing what we know about the U.S. program, is it better
or worse for the world's environment when the U.S. adds to its
environmental restrictions things like shorter lease terms and
heightened regulatory burdens?
Answer. Like any policy that impacts the factors listed above (in
Murkowski Response No. 2), shorter lease terms and heightened
regulatory burdens reduce the attractiveness and global competitiveness
of U.S. energy prospects. Failure to provide for adequate timeframes to
explore and properly evaluate offshore leaseholds before having to make
a multi-million dollar decision would impact the viability and
prospective value of domestic lease rights and could influence the
energy industry to pursue more attractive foreign alternatives.
Unnecessary regulatory burdens have a similar economic impact. Because
U.S. demand will need to be met, the effect of overly burdensome
regulation is to force the importation of foreign energy sources that
may have greater environmental impacts or risks.
The U.S. has very high safety standards and environmental controls.
The environmental record over the past 40 years, as documented by the
Department of Interior and the National Academy of Sciences, attests
that such a regulatory framework is effective and is continuously
improving. We know this because other countries copy what we have here
in the U.S. On the other side of the equation, for every barrel of oil
or TCF of natural gas that the U.S. imports rather than produces
domestically, the U.S. effectively increases environmental risks while
exporting the environmental effects of production and transport.
Any policies that unnecessarily favor less stringent environmental
alternatives are obviously contrary to U.S. goals regarding global
environmental stewardship.
When you add the tremendous economic and national security benefits
from domestic production compared to imports, the net benefits weigh
greatly in favor of domestic development of our energy resources.
Question 4. While EIA has said that increased domestic offshore oil
and gas production would not result in meaningful energy price
differences for Americans, do you think that a major ramp up of
development in the Atlantic, Pacific, Eastern Gulf, and Alaska OCS
would send a market signal that could, in fact, affect world price of
oil?
Answer. It is very difficult to predict oil prices with any degree
of certainty--given the multitude of factors, anticipated and
unanticipated--which can come into play over time. Any price impact
would also depend on whether more investment in productive capacity for
oil in the U.S. OCS adds to, or substitutes for, investment in capacity
in other regions of the world. In the first case, this could result in
a more moderate price environment. It the second case, it may not,
depending on the relative cost and volume profiles of competing
developments. Increased access to development options in the lower 48
OCS and Alaska OCS would clearly improve the set of investment choices
available to the oil and gas industry and allow growth of additional
producing capacity and supply where economic parameters and market
needs are most favorable.
a. Is the analysis the same for natural gas prices as oil,
even though natural gas is not based on a world price?
Answer. Although gas prices in the U.S. tend to be more closely
related to supply and demand developments in North America, rather than
global trends, similar considerations to oil apply.
Question 5. Senator Menendez indicated that not only would price be
unaffected by increased domestic offshore drilling, but that
``production'' would be unaffected by increased domestic offshore
drilling. Is it accurate to imply that increasing production would have
no effect on energy security?
Answer. As indicated in my response to question #4, we do not agree
with the Senator's basic assumption. If we assume, however, that
``energy security'' means a stable energy supply that promotes and
fuels a healthy economy, then there can be no doubt that increasing
domestic production will contribute to domestic energy security.
Each barrel of oil produced in the U.S. will displace a
barrel of oil imported from abroad and is a more secure supply
source.
Nearly $1 billion is exported from the U.S. to other nations
in order to import oil. This export of U.S. dollars has an
adverse effect on our balance of trade and therefore, an
adverse impact on the overall economic health of the U.S.
economy.
Exploration and production in the U.S. will create jobs.
Over 9 million people are employed directly and indirectly by
the domestic oil and gas industry. A study by the University of
Alaska concluded that developing the vast resources off the
coast of Alaska will create 35,000 annual jobs in Alaska and
the lower 48 states.
Exploration and production on U.S. land creates revenue for
the federal government in the form of bonus bids, rentals and
royalties. The industry is the largest revenue source for the
federal government after the Internal Revenue Service.
Increasing oil and gas production in the U.S. will generate
tax revenues for federal, state and local governments in the
form of income taxes, sales taxes, property taxes and the like.
In sum, by creating more jobs, more government revenue, and more
energy, increasing domestic production will substantially enhance the
health of the economy and make us less dependent on foreign sources. A
healthy economy will be essential as we move to invest in a lower
carbon future.
Question 6. Environmental stewardship has improved through
directional drilling and subsea tiebacks, among other improvements, as
I understand it. Can you describe your environmental record in terms of
exploration, development, and production for both Alaska and the Gulf
of Mexico?
Answer. I refer you to my written testimony submitted to the
Committee where I covered our environmental record, which I was not
able to go into detail during my oral testimony. Let me provide a
condensed response for you here. The oil and gas industry can develop
offshore (and onshore) resources with a footprint smaller than ever
before. This is an important aspect of our environmental stewardship.
It is possible to develop very large sub-surface areas with a very
small surface expression. The technologies that enable this can be
applied both near shore and in deepwater. Let me describe some of the
technologies.
Our deepwater technology program focuses on equipment and
integrated systems required to produce hydrocarbons with fewer and
smaller surface facilities and reduced environmental impacts. This
involves the optimal use of subsea production systems and new floating
drilling and production systems. New technologies include subsea
separation and boosting, subsea re-injection of produced water and
long-distance pumping with flow assurance. All of our deepwater
projects go through an internal carbon footprint and environment impact
assessment as part of the tollgates to final investment decisions.
Gulf of Mexico. Perdido is an ultra-deep water project in the Gulf
of Mexico that illustrates the industry's ingenuity and smaller
footprint. Three different offshore fields covering about 90 square
miles in the OCS will be tied into a single floating surface facility
at Perdido. Technically, the project provides the infrastructure that
could enable future oil and gas volumes from a 30-mile radius. That
means that about a 3,000-square-mile area can be developed sharing one
floating facility.
Alaska. Shell hopes to drill two exploratory wells in the Alaska
OCS in 2010. Shell has created an unprecedented oil spill response
capability to support its drilling plans in the Beaufort and Chukchi
Seas. We have a dedicated fleet of vessels and specialized oil
containment equipment, which will be on-site 24/7. Spill recovery
equipment is state of the art and widely acknowledged as proven systems
under cold-climate conditions and designed to remove the worst-case
discharge. The Nanuq is an ice-class purpose-built vessel, which can
begin recovery within an hour of any incident large or small.
Question 7. Seismic data acquisition has also improved over the
years. Please describe any environmental benefit that may be conferred
as a result, and feel free to discuss any additional benefits to the
OCS program through this technology.
Answer. Environmental performance of all aspects of our business
continues to improve as we understand and incorporate the latest
information into the way we work. These improvements, such as passive
acoustic monitoring and air gun technology, go a long way in mitigating
the environmental effects of seismic exploration. Operational
commitment is also a factor. In the Alaska OCS, for instance, Shell
seismic vessels followed a gradual sound ramp up profile at
commencement of any seismic survey, to give marine mammals time to
clear the area. We also maintained constant vigilance for marine
mammals with trained native observers on board the seismic ships and
with airborne monitors flying ahead on its planned course. Seismic
operations ceased with any sighting and did not restart until the area
was clear.
Still, the oil and gas industry, geophysical contractors, and
governmental regulatory agencies continue to further scientific
understanding of the effects of sound on marine life, to investigate if
additional improvements can be made. For example, a joint industry
program (JIP) organized by the International Association of Oil and Gas
Producers has provided approximately $24 million USD to advance
scientific understanding of the effects of sound generated by offshore
oil and gas exploration and production operations on marine mammals,
fish, and reptiles through independent research by some of the leading
scientists and institutions in the field. This work is available to
all--the public, the scientific community, and international regulators
at: http://www.soundandmarinelife.org/
In addition to mitigating the environmental impacts of seismic
exploration, improvements in seismic data acquisition include 3-D
seismic, wide azimuth seismic, and enhanced processing and
visualization. These improvements allow us to see below salt
formations, which typically ``whiteout'' or blur seismic data and
better pinpoint oil and gas reservoirs. This results in a smaller
environmental footprint (i.e., fewer exploratory and appraisal wells,
fewer platforms, and more productive wells). It also better enables us
to locate potential hazards to drilling, such as shallow gas
formations.
Question 8. How are competing uses in the offshore areas dealt with
currently under existing laws and regulations--does this work and are
changes needed?
Answer. We don't believe that significant changes are needed to
balance multiple-uses of offshore areas. There is a robust, effective
system already in place to balance environmental stewardship and
responsible energy development of the OCS that takes into consideration
multiple-uses of the ocean. The leasing process established by the
Outer Continental Shelf Lands Act requires the Secretary of Interior to
consult with other agencies to obtain information pertinent to
responsible OCS oil and gas leasing, exploration, and development
decisions as well as to monitor the human, marine, and coastal
environments. The MMS puts stipulations on operations in place during
the planning process to minimize and mitigate potential conflicts
between different user groups. The MMS is also obligated to incorporate
public concern and potential conflicts between different user groups
through the public participation process and response.
The system works in the Gulf of Mexico. For example, the oil and
gas industry has co-existed with the sport and commercial fishing
industry in the Gulf for decades and also co-exists within the
protected boundaries of the Flower Garden Banks National Marine
Sanctuary (FGBNMS). In the Gulf, it's common for fishermen to target
areas around platforms because they serve as artificial habitat for so
many important species. A 2002 study from the MMS reported that the
total economic output to Gulf coastal counties associated with sport
fishing and diving activities near oil and gas structures is more than
$300 million per year\2\. At the Flower Garden Banks National Marine
Sanctuary, 25 years of stringent environmental monitoring by NOAA, MMS,
and industry has found no contamination or degradation of corals due to
oil and gas activity, even though hundreds of exploratory wells have
been drilled, and there are currently 10 production platforms and
approx. 160 km of pipelines within 4 miles of the sanctuary boundary.
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\2\ Hiett, R.L. and J.W. Milon. 2001. Economic Impact of
Recreational Fishing and Diving Associated with Offshore Oil and Gas
Structures in the Gulf of Mexico: Final Report. OCS Study MMS 2002-010.
U.S. Dept. of the Interior, Minerals Management Service, Gulf of Mexico
OCS Region, New Orleans, LA. 98 pp.
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Response of Marvin E. Odum to Question From Senator Dorgan
Question 1. Earlier this year in this committee, I proposed an
amendment which is one of the primary reasons for the oversight
hearing. Through my approach, the MMS would be authorized to go through
a rulemaking process to issue regulations and would consider a range of
local and other conditions during that process. In federal waters, the
Secretary would establish zones which would determine what kind of
restrictions would be placed on surface activities. The onus is then
placed on individual companies to develop innovative technology
solutions in those zones. Renewable development (i.e. wind turbines
offshore) and previously existing oil and gas projects would be exempt.
I believe that if we could pursue this approach, it is possible to
deploy innovative technology applications to limit the environmental
footprint and significantly reduce the visual impact while increasing
access to resources.
Given your company's experience with projects in other regions and
the testimony that you have presented, do you believe that this is a
concept that you could support?
Answer. The footprint and visual impact of offshore oil and gas
activities could be addressed through the process you describe. As new
areas of the Outer Continental Shelf (OCS) are opened to oil and gas
leasing, perhaps such a proposal merits consideration. I will note that
the federal agencies currently have tools to protect sensitive areas
offshore. For example, MMS requires buffer zones around corals and
chemosynthetic communities on the seafloor and around marine protected
areas. Currently, States control activities in their Territorial Seas
(generally three miles from the coast) and require that offshore
projects do not conflict with coastal management plans, which can
include view shed criteria.
Responses of Marvin E. Odum to Questions From Senator Menendez
Question 1. Much of your testimony has focused on the spill
prevention capacity of your company. But realistically, an accident is
an accident, and by its very nature cannot be fully anticipated or
prevented. Yet, some preliminary reports have shown that the recent
Australian oil spill in the Timor Sea happened as a result of
negligence on the part of its operator. On this issue, how can your
company ensure that human error is not a factor in drilling operations?
If we cannot prevent human error, are we not then to assume that
further accidents could happen?
Answer. I invite you and your staff to tour Shell's facilities to
meet the men and women involved with our operations and the technology
they employ to ensure the safety and integrity of our operations. In my
testimony, I described some of the technology, such as the multiple
redundant barriers in place when drilling exploration wells. I
described the exploration and production control rooms that are manned
24/7 and see in real time the operations that occur offshore. Should
there be any anomaly in those operations, experts both on-site and
onshore work to understand the anomaly and resolve it before it becomes
an incident. Shell takes extreme measures to avoid incidents that will
pose a danger to our employees, to the residents of the communities in
which we operate, or to the environment.
Question 2. One of the troubling aspects of the Australian spill is
that it took three weeks before any efforts to plug the leak were even
attempted. This was the case despite the fact that the rig is in
relatively shallow water and mild weather conditions were present. How
would Shell be able to respond to a well blow-out if it happened in the
wake of a disaster similar to Hurricane Katrina? Or, if it happened in
the frigid conditions of the Beaufort Sea, or far offshore in the
Chukchi Sea, in the winter? How long do you think it would take to stop
a spill and clean it up under those conditions?
Answer. Further to my response to the question above, Shell has a
robust contingency plan in place to deal with a loss of well control.
In the Gulf of Mexico, all drilling operations are shutdown prior to a
hurricane entering the Gulf. If a well blow-out occurred as a result of
a hurricane, the same relief well drilling plan is put in place--there
is no difference. Access to a suitable drilling rig would not be a
problem.
In Alaska, the drillship is equipped with special devices that
allow it to disconnect from the well quickly (within minutes) and move
away from the site to avoid damage by the blowout. This allows the same
drillship to drill the relief well for the blowout. In the Timor Sea
incident the original rig was a jackup rig could not escape quickly, so
it was evacuated at the beginning of the leak. A second jackup rig had
to be activated, equipped for service, manned, mobilized to the well
site, jacked to the proper height, a relief well planned and drilling
operations initiated all while the leak was still in progress.
The MMS requires all offshore operators to have a relief well
drilling plan with a blowout kill plan before initiating well drilling
operations. Adequate casing, wellheads, the guide base, cement,
drilling fluids, a second Blow Out Preventor (BOP) and all other
components of the relief well must be aboard the drillship or its
supporting fleet or within ``easy reach''. Unlike the Timor Sea
incident, in its offshore U.S. operations, Shell will be ready to
initiate the relief well drilling process almost immediately.
It is difficult to say how long it would take to stop a spill and
clean it up since there are a variety of factors and conditions that
will affect this. We have designed our systems to minimize this time as
much as reasonably possible.
Responses of Marvin E. Odum to Questions From Senator Sessions
Question 1. In your opinion, do shorter lease terms, an increase in
royalties, and an increase in taxes play a part in determining which
country your company with produce?
Answer. Yes. Although there are other intangible factors that play
a role in our investment decisions, economic reality dictates that such
costs and lease terms are a critical determinant. We have a serious
responsibility to our shareholders to thoughtfully and analytically
select the most favorable economic alternative.
Question 2. The oil and gas industry directly and indirectly employ
9.2 million people, so could someone explain to me why with double
digit unemployment numbers are we not moving forward with increasing
domestic production and employing individuals here at home?
Answer. Shell supports government policies that will enable the
growth of domestic production and believes that increasing domestic oil
and gas production is a ``win-win-win.'' Such policies will generate
jobs, contribute to government revenues and improve the overall US
economy. As noted, over 9 million people are employed directly and
indirectly by the domestic oil and gas industry. A study by the
University of Alaska concluded that developing the vast resources off
the coast of Alaska would create 35,000 annual jobs in Alaska and the
lower 48 states.
Question 3. In total, the OCS development has generated $190
billion in federal revenue from bonus bids and royalty payments. Its
puzzles me with record breaking deficit numbers, why the 5 year plan
for OCS is getting delayed when it could produce federal revenues. Does
anyone have an opinion on this?
Answer. With all due respect, the US Department of the Interior is
in the best position to explain the reason for delay in issuing the 5-
year OCS leasing plan. It is true that the oil and gas industry makes a
substantial contribution to federal revenues each year in the form of
bonus bids, rentals and royalties, as well as in tax revenues generated
by associated jobs.
Question 4. What is the role of the National Oceanic and
Atmospheric Administration (NOAA) in OCS development? NOAA
Administrator Lubchenco sent a letter to MMS dated September 21, 2009,
which also appeared the LA Times commenting on the OCS proposed 5-year
plan--2010-2015. However, NOAA later claimed it was an unofficial
letter. How is MMS bound or inclined to react to this letter's
contents?
Answer. With all due respect, the MMS is better positioned to
comment on whether or not it will react to or be bound by the Sept. 21,
2009 letter that NOAA submitted and withdrew. I read the letter and
believe that it contained serious factual inaccuracies, unfounded
allegations and important omissions. Therefore, I sent a response to
the NOAA Administrator in an attempt to set the record straight. I
attach that letter here for your review.
Question 5. How many agencies does an oil and natural gas company
have to deal with to produce from a federal offshore lease? Does this
number of different and competing bureaucracies make operations in the
OCS more efficient or less efficient?
Answer. I have attempted to answer the question of regulatory
jurisdiction in my response to Senator Bingaman's question #2. The
number of agencies varies by the nature of the specific activity,
location of the offshore lease and whether the state and local
jurisdictions are involved. Suffice it to say, there are many agencies.
However, the number of agencies and regulations is not as problematic
as agencies not working together effectively and agencies whose policy
and objectives are at odds with the responsible development of federal
OCS resources.
For example, if an agency's mission is primarily conservation
related, it may not diligently and objectively review and process
regulatory approvals unless a national federal policy provides such
guidance.
I call your attention, though, to the effectiveness of the
regulatory framework (and the corresponding environmental record) of
the central and western Gulf of Mexico. The regulatory agencies work
cooperatively to review and process regulatory approvals and maintain
the highest standard of environmental and safety standards of anywhere
in the world. I question why this model can't be replicated in other
areas of the OCS. We strongly support the provision in the Senate
Energy bill for an Alaska OCS permitting office with direction to major
federal agencies to work cooperatively to process permits.
Question 6. We've heard the U.S. ranks very high in environmental
stewardship. How high does the U.S. rank in terms of applying its
stewardship policies in such a way as to provide certainty to the
process of leasing and developing the OCS?
Answer. The environmental statutes and regulatory regimes that
implement those statutes are among the most protective in the world.
That is why many say that the US ranks very high in environmental
stewardship. In the same vein, the US offshore leasing program in the
Gulf of Mexico has been among the most transparent and certain in the
world. As federal leasing of other offshore areas occurs, there appears
to be valid reason to be concerned that the ``rules of the road'' are
less clear and less certain.
The example is the OCS off Alaska. The federal government has held
lease sales there, awarded leases and collected billions of dollars in
bonus bids and rentals. Shell paid about $2.2 billion for leases; we
invested about another $1 billion; and have been ``shovel ready'' to
explore since 2007. Due to legal and regulatory roadblocks, we have not
yet been able to drill a single exploration well. We have urged
policymakers to address this dilemma.
______
Response of Jeffrey Short to Question From Senator Bingaman
Question 1. You testified that current scientific knowledge related
to the impacts of offshore oil and gas production on the marine
environment is inadequate. You recommended that additional research be
conducted. Please be more specific about the highest priority areas of
research that you believe are necessary. Also state which research
entities or agencies you believe to be best suited to conduct this
priority research.
Answer. My written statement details, at a broad level, the
scientific research that must be undertaken before we can make informed
decisions about whether oil and gas production should occur offshore
and, if so, when, where, and how. We cannot fully evaluate the
potential impacts of production without understanding the marine
ecosystem, and the necessary steps to beginning that understanding are
outlined in my written statement.
The three priority areas for research are in the toxicology of oil
pollution, in oil spill cleanup and mitigation technology, and in
gathering basic scientific information in Arctic coastal and marine
environments. In toxicology, research on the biochemical mechanisms of
toxic impacts of polycyclic aromatic hydrocarbons (PAH) on developing
embryos is likely to be immediately rewarding, and the toxicity of
other oil components such as the alkylbenzenes (Rowland et al. 2001)
that have been identified as toxic as a class but have not been
examined in detail are also likely to be fruitful. In cleanup and
mitigation, quantitative methods for assessing the efficacy of existing
and new methods are urgently needed. Cleanup and mitigation methods are
typically ``evaluated'' with little or no regard for routine scientific
practices elsewhere such as use of positive and negative controls,
comparison with reference standards, determination of precision through
replication, etc. In general, much higher standards of scientific
evaluation should be mandated for qualifying performance claims for
these technologies.
As I highlighted in my testimony and below, we should have
sufficient understanding of ecosystems to conduct a quantitative risk
assessment of impacts. Our understanding of Arctic marine ecosystems is
especially deficient. With few exceptions we do not know even basic
information such as the abundance and distribution of marine species. A
large expansion of oil and gas activities is occurring in the U.S.
portion of the Arctic Ocean. An investment in research to at least
attain a basic understanding of Arctic ecosystems is necessary to
inform the public and decision makers of the risks and trade-offs to
developing this region.
The agency most qualified to perform research in these areas is the
National Oceanic and Atmospheric Administration (NOAA). Scientists at
NOAA discovered the embryotoxic effects of PAH and have done subsequent
pioneering studies on the biochemical mechanisms responsible. Modest
but sustained support for continuing these studies is almost certain to
lead to practically useful insights regarding the ways that oil affects
wildlife, and possibly humans as well. NOAA's Office of Response and
Restoration has the most direct experience with using practical methods
for mitigating oil spills when they occur, and hence is best equipped
to evaluate technological improvements. NOAA is also well suited to
conduct much of the research necessary to gain a better understanding
of Arctic marine ecosystems.
Responses of Jeffrey Short to Questions From Senator Murkowski
Question 1. I agree with your testimony that there should be a plan
that balances ecosystems with resource management. I also certainly
agree with best available technology and continuing research on how to
better prevent and mitigate risks for offshore development. My question
is, since there is always room for improvement, does that mean that the
science may never quite be good enough for some to accept offshore
development?
Answer. Thank you, Senator Murkowski, for your support of balanced
and comprehensive planning. Please do not hesitate to ask if there is
anything I or my colleagues can do to further your efforts in that
regard.
With regard to your specific question, while it may be true that
some people are never satisfied with anything, the more relevant issue
here is how much science is adequate. Just because scientific enquiry
is boundless should not be used as an excuse to forego investment in
enough science to achieve a basic understanding of ecosystem
functioning. In my view, adequate science here means sufficient
understanding of the ecosystem to conduct a quantitative risk
assessment of impacts that may occur because of offshore development.
Ability to couch impacts in terms of a known distribution of likely
outcomes is key here, as distinct from unsupported opinions of agency
staff, contractors and others, all having varying degrees of
credentials, which has typically been the case to the present.
By definition, ``risk'' is uncertainty that is quantifiable. This
implies that the most important sources of risk are known, as well as
the uncertainties associated with each source. Applied to a risk
assessment of ecosystem impacts from defined events such as an oil
spill or well blowout, a quantitative assessment of ecosystem risks
would require a basic understanding of how the ecosystem works. This
means knowledge of the major ecosystem components (i.e. species) and
their food web dependencies, including their seasonal variability. Once
a basic food-web is constructed, comprising the dominant species, the
energy flows connecting them and the natural variability of these
species or functional equivalents, it is possible to run Monte Carlo
simulations of effects from impact scenarios. These simulations allow
estimation of the probability of specified responses, and hence a
quantitative specification of risk.
Question 2. Your testimony indicates that 4 years after the Valdez
spill, ``monitoring was terminated.'' I want to give you a chance to
clarify this; has there really been no monitoring of the coastal areas
around the Valdez spill since 1993?
Answer. Thank you for the opportunity to clarify this statement. I
was referring to the monitoring done by Shoreline Cleanup Assessment
Teams (SCAT) to evaluate the persistence of oil remaining on beaches
oiled by the 1989 Exxon Valdez oil spill. This monitoring was
terminated after the summer of 1993, when it was determined that
natural dispersion and degradation processes would remove any remaining
oil. Subsequently, research that I led in 2001 demonstrated that the
assumptions underlying this determination were substantially incorrect
(see Short et al. 2004, 2006).
In particular, the 1993 decision assumed that (1) observation and
persistence of oil on the surface of beaches was closely correlated
with the location of oil beneath the surface (2) that the subsurface
oil was located in the upper intertidal; (3) that clay-oil flocculation
processes, recently discovered to be an apparently effective natural
dispersion process (Bragg and Yang 1993) would rapidly disperse
remaining subsurface oil, and (4) microbial degradation would
effectively degrade any remaining oil within beaches. All four of these
assumptions turned out to be incorrect. Subsequent studies carried out
after 2000 showed that the location of visually-evident surface oil and
obscured subsurface oil were poorly correlated, so that monitoring oil
persistence at locations where surface oil was present (and where most
monitoring effort was directed) gave little information on the
persistence of subsurface oil. Surface oil was located mainly in the
upper intertidal, whereas subsurface oil was concentrated near the mid-
tide level on beaches. These two factors led to mis-allocations of
monitoring effort for subsurface oil from 1990 to 1993, so that efforts
were put toward the wrong beaches and the wrong places on beaches.
The unanticipated persistence of oil in some locations shows that
natural dispersion processes including clay-oil flocculation and
microbial degradation were less effective than expected. Indeed, in
some places the composition of the oil remaining today is similar to
that of oil present near the end of 1989 (Short et al. 2007a). The
reasons for this persistence are currently under investigation.
The surprising persistence of oil on beaches of Prince William
Sound following the Exxon Valdez oil spill serves as an excellent
example of my primary point: that management decisions regarding the
environmental impacts of oil are far too often based on unwarranted
assumptions that usually go unchallenged. Tragic though it was, the
Exxon Valdez oil spill provided a rare opportunity to evaluate some of
these assumptions, because the remote setting was conducive to
evaluating impacts with scant interference from other sources of
pollution, and because the settlement funds provided a relatively ample
source of funding for the scientific studies. These studies led to
realization that oil was not only much more persistent than expected,
it was also much more toxic to fish embryos (Carls et al. 1999, Heintz
et al. 1999), and the toxic components were not those thought to be
primarily responsible for toxicity prior to 1989 (Incardona et al.
2004). These discoveries clearly indicate that much more needs to be
learned about how oil affects marine ecosystems to support sound
management decisions, and the agency best positioned to investigate
these issues is the National Oceanic and Atmospheric Administration.
Question 3. Are you or your organization familiar with the
population of sperm whales in the Gulf of Mexico?
Answer. Oceana is not familiar with the population of sperm whales
in the Gulf of Mexico.
a. Has the population increased or decreased as the Gulf
continues to be developed?
Answer. Oceana is not familiar with the status of the sperm whale
population in the Gulf of Mexico.
b. Would you agree that we continue to learn new information
about marine mammals through monitoring programs associated
directly with, and dependent upon, deepwater oil and natural
gas programs?
Answer. The collection of new information about marine life in
general helps us better understand how marine ecosystems are structured
and function. We should, however, strive to understand ecosystems
before industrial activities proceed in order to better assess the risk
of activities to the health of the ecosystem and provide critical
baseline information. Monitoring that is conducted during operations
can then be compared to baseline conditions to help determine if
impacts have occurred. Such monitoring should be independently
verified.
c. Is there any conclusive or empirical evidence that these
marine mammals have been harmed by seismic activity in the Gulf
of Mexico?
Answer. I am not familiar with research that has been done on the
impacts of seismic activity in the Gulf of Mexico, but it is my
understanding that MMS did commission a study that showed some effects
of seismic on sperm whales. Without adequate baseline information, it
is extremely difficult to demonstrate harm to a population of marine
mammals. Furthermore, marine mammals can be especially difficult to
study. If there is a lack of sufficient science to determine effects,
that is not necessarily an indicator of a lack of effects.
Question 4. Concentrated oil spills always have some environmental
impact--that's why we agree that oil and gas should always be produced
as safely as possible, under stringent conditions. However, according
to a report issued in 2003 by the National Academy of Sciences (Oil in
the Sea III), extraction activities release far less oil each year than
consumption activities, which in turn release far less than natural
seepages. In fact, the NAS report found that extraction activities--
which your organization so closely tracks--accounts for just 1 percent
of the oil entering North American waters each year. Taking this a step
further, multiple peerreviewed studies [see http://www.ia.ucsb.edu/pa/
display.aspx?pkey=412] have found that the offshore production of oil
could actually help reduce the amount that naturally seeps from the
ocean floor.
a. Although accidental spills or blowouts involve a much more
concentrated release of oil than natural seeps, much of your
testimony discusses toxicity of oil in the sea and the idea
that its continued buildup and dispersal may have toxic or
poisoning effects. Is this risk any less for a constant seepage
of oil from the seabed than from the 1 percent of the ocean's
oil from production related releases?
Answer. Thank you for the opportunity to elaborate on this issue.
Comparing the total amount of oil released by seeps and development is
diverting Congress and the public from the real issue here. The fact
that natural seeps release oil into the environment has little bearing
on the risks posed by catastrophic spills and blowouts, or even on
chronic, intermittent releases of oil related to development
activities.
Natural seeps provide a reliable source of reduced carbon for
microbial communities that detoxify the oil by assimilating and
decomposing the toxic components. More complex and mobile organisms are
able to avoid areas impacted by the toxic components of oil seeps, thus
avoiding the toxic effects of oil. Many sessile organisms have adapted
over long time periods to such seeps, which is not possible in an
accidental spill. Furthermore, pollution from oil seeps is largely
unavoidable. In contrast, pollution from oil spills, blowouts and even
urban runoff are more variable in both time and space, and hence enter
environments where populations of microbes capable of decomposing the
toxic components of oil are low, more complex organisms are not
habituated to inputs.
b. Have you ever considered that oil production could
actually have a positive environmental impact, insofar that it
could be reducing the rate of natural seepages?
Answer. I am not aware of any scientific data supporting this
contention. In my studies of natural oil seeps in Alaska (Short et al.
2007b), my petroleum geologist colleagues have remarked that while oil
seeps reliably indicate the regional presence of oil, they are
typically poor indicators of specific, economically attractive deposits
because the seepage usually means that most of the oil associated with
the deposit from which it arises has already seeped away. To the extent
that this is true, tapping unconnected oil deposits nearby would have
little or no effect on oil seepage rates.
c. Would policies not be more efficient in terms of reducing
oil in the sea to focus on reducing the amount of oil that is
spilled during consumption activities, rather than narrowly
focusing on a part of the process that is believed to account
for nearly 30 times less spillage each year? In other words,
should more taxpayer dollars be directed towards dealing with
production or consumption spills?
Answer. Careful assessment of the impacts of oil released into the
environment from consumption activities deserves far more scientific
scrutiny than has so far been devoted to it. At present, too little is
known about these impacts to provide a reasonably sound basis for
resolving this question.
Question 5. Your testimony states ``When we make the effort to look
closely. . .fundamental surprises typically come to light. These
discoveries overturn predictions of impacts often stated with unfounded
confidence beforehand that in retrospect turnout to have been based on
little more than conjecture.'' Does this principle ever apply to
predictions of both environmental organizations as well as offshore
drilling proponents in terms of what an impact might or might not turn
out to be?
Answer. Again, thank you for the opportunity to clarify this
important point. I want to be clear that my answer is emphatically in
the affirmative. If, on the basis of rigorously conducted science, a
practice or activity can be shown to have negligible or otherwise
environmentally acceptable impacts, then we should not waste time or
resources to oppose them, and I am personally committed to this
principle.
For example, in 2001 I participated in a study of toxic
hydrocarbons in the discharge from the ballast water treatment facility
at the Alyeska marine oil terminal into Port Valdez, Alaska (Salazar et
al. 2002). Our study clearly showed that the most contaminated site
located just above the discharge diffuser was cleaner than the
supposedly clean, un-impacted reference site in similar studies of the
Sullom Voe marine oil terminal in the United Kingdom. I was
subsequently quite vocal in my defense of the outstanding job done by
Alyeska to treat their discharges, and our study effectively laid to
rest concerns regarding suspected effects of these discharges on the
biological resources of Port Valdez. So as a matter of principle as
well as practice, I strongly believe that when industry can be clearly
shown to be doing an environmentally responsible job, they deserve the
support and applause of the environmental community.
Question 6. Presume a major increase in efficiencies, biofuels,
electric cars, and other efforts to reduce American consumption of oil,
but that millions of barrels a day will still be consumed for many
decades to come. What is Oceana's position on where, specifically, such
oil should come from, and if there is no such position, why not?
Answer. Careful review of America's oil production and consumption
figures show that a major national initiative to reduce dependence on
oil could eliminate our dependence on foreign oil, especially oil from
countries other than Canada and Mexico, our closest trading partners.
Based on data for 2008 from the Energy Information Agency, the United
States consumed 19.5 million barrels per day (MBD), of which 11.1 MBD
was imported (EIA 2009). Of this, 9.0 MBD was used for gasoline for
transportation, 4.6 MBD for diesel fuel and home heating oil (not
including jet fuel), and 1.9 MBD for liquid petroleum gas. Reducing our
consumption through conservation, alternative energy sources and
increased efficiencies of these three components of consumption by 72%,
an achievable goal, would eliminate our need for imported oil entirely.
Assuming the 2.5 MBD we import from Canada remains a reliable
additional source reduces our conservation requirement to 55% and our
imports from Mexico reduce it even further.\1\
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\1\ Note that these scenarios assume no reductions in jet fuel
consumption through conservation or increased energy efficiency.
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Such a conservation program would have multiple benefits for the
United States. It would dramatically reduce our balance of payments,
increase our latitude in foreign policy with respect to countries from
whom we import oil and who are less friendly toward the United States
than are Canada and Mexico, dramatically lower our emissions of carbon
dioxide thus helping to mitigate global warming, and substantially
lower the cost of all petroleum products that are still used, thus
enhancing the efficiency of our economy. For as is well known the price
of petroleum is very sensitive to supply, and were the United States to
effectively increase supply by 10 MBD through conservation, increased
energy efficiency and alternative energy, the price of petroleum would
plummet.
Question 7. Since Oceana's inception, can you illustrate any
success stories in terms of influencing policy and regulation that has
resulted in meaningfully safer offshore oil and gas development?
Answer. In the nearly ten years of Oceana's existence, decisions
about offshore oil and gas activities have focused on opening new areas
to leasing and increasing seismic and other activities. Those decisions
have been made without a comparable increase in available science or
clean-up technology.
______
Responses of Walter Cruickshank to Questions From Senator Bingaman
Question 1. Offshore oil and gas production involves not only
production wells, but also considerable infrastructure to support those
wells, to bring the product onshore, and to process or transport the
product once it is onshore. This includes onshore refineries, pipelines
and tanks required to receive, process, store and distribute oil and
gas from offshore fields. Please describe MMS' authority and
responsibility regarding permitting, oversight, and spill response for
the offshore and onshore infrastructure necessary to support offshore
oil and gas production. Include in your response a discussion of the
extent to which MMS' analysis of offshore activity under the National
Environmental Policy Act (NEPA) includes impacts caused by this
infrastructure.
Answer. MMS has no authority under OCSLA or any other law to
regulate OCS-related activities in State waters and onshore. While
MMS's permitting authority ends at the Federal/State boundary, impacts
of any new OCS-related infrastructure in State waters and onshore which
will be installed in order to serve the OCS production activities are
considered indirect impacts and must be analyzed in MMS's NEPA
documents. At the lease sale stage, NEPA documents analyze
programmatically the impacts of coastal infrastructure including
existing oil refineries and pipelines, and this analysis typically
extends to the first onshore processing point. While the States, Army
Corps of Engineers, Federal Energy Regulatory Commission and/or
Department of Transportation have permitting authority for OCS-related
activities in State waters and onshore, the MMS prepares NEPA documents
to address the general impacts from hypothetical new OCS-related
facilities that could extend into State water or onshore areas. Actual
permitting for construction or expansion of any OCS-related coastal
facility, such as a pipeline or gas processing plant, would not be
within MMS purview. Detailed impact analyses and any mitigation
requirements for OCS-related infrastructure in State waters and onshore
fall under the purview of permitting agencies such as those listed
above.
The MMS's responsibilities under the Oil Pollution Act of 1990 (OPA
90) include spill prevention, review, and approval of oil-spill
response plans (OSRP); inspection of oil-spill containment and cleanup
equipment; and ensuring oil-spill financial responsibility for all
offshore facilities seaward of the coast line.
Question 2. Please describe your understanding of the authority and
responsibility of other government entities or agencies, including
federal, state, or local authorities, regarding the permitting,
oversight or spill response for this infrastructure both offshore and
onshore. Also describe any ways in which MMS coordinates with any of
these entities in carrying out its responsibilities.
Answer. The OCSLA directs the Secretary to conserve the Nation's
natural resources; develop natural gas and oil reserves in an orderly
and timely manner; meet the energy needs of the country; protect the
human, marine, and coastal environments; and receive a fair and
equitable return on the resources of the OCS. The Department uses
marine spatial planning (MSP) as a collaborative process of working
with other Federal agencies, along with its diverse stakeholders, to
meet its stewardship and ocean resource management responsibilities
using an adaptive and ecosystem-based approach to management. To that
end, MMS presently leads the development of a Web-based Multipurpose
Marine Cadastre, in a partnership with NOAA. The Cadastre is intended
to evolve toward meeting the needs of the entire U.S. ocean community
for the purpose of planning ocean uses, avoiding conflicts, and
determining the necessary participants for individual project
assessments.
The following agencies are those with whom the MMS shares
jurisdiction of the OCS and works collaboratively either as lead or in
a participating capacity:
Coast Guard
Maritime safety and security
Cranes on mobile facilities
Facilitate spill clean-up in Federal and state
waters
Aids to navigation, fairways and anchorage areas
Offshore workplace health and safety
Hazardous materials storage
Army Corps of Engineers
Offshore structures locations
Evaluates permit applications for essentially all
construction activities that occur in the Nation's waters
Air Force and Navy
Designated military warning and water test areas
Decommissioning and site clearance
States
Permitting and oversight of oil and gas operations
in state waters
Coastal Zone Management--Coastal area protection,
preservation.
Environmental Protection Agency
Water quality in state and federal waters,
Air quality in all OCS areas except the Gulf of
Mexico west of 8730'W longitude\1\
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\1\ Under provisions of the Clean Air Act Amendments (CAAA) of
1990, the Environmental Protection Agency's (EPA) Administrator, in
consultation with the Department of the Interior's Secretary and the
U.S. Coast Guard's Commandant, established requirements to control air
pollution in Outer Continental Shelf (OCS) areas of the Arctic,
Atlantic, Pacific, and eastward of 8730'W longitude in the Gulf of
Mexico
National Oceanic and Atmospheric Administration
Coastal Zone Management--Coastal area protection,
preservation
Marine sanctuaries
Marine mammal protection
Endangered species
Essential fish habitat
Commercial fisheries
Consultation for Decommissioning
Fishermen's Contingency Fund
Provide oil spill response scientific support
Fish and Wildlife Service
Marine mammal protection
Endangered species
Department of Transportation
Oversight of transportation pipelines offshore and
onshore (Pipeline and Hazardous Materials Safety Administration
(PHMSA))
Federal Aviation Administration
Oceanic air traffic (helicopters), towers
Occupational Safety and Health Administration
Safe and healthful working conditions
As described above, onshore regulation rests with the States, Army
Corps of Engineers, Federal Energy Regulatory Commission and/or
Department of Transportation
Question 3. The Committee heard testimony that existing research
efforts related to the marine ecosystem and the impact of industrial
activities in particular areas is inadequate. Specifically, concern was
expressed about the lack of baseline data, an integrated ecosystem
research plan, monitoring of vulnerable ecosystem components, and
information on best available technology. What is MMS' view of the
adequacy of its research capacity in this area? Are there other federal
entities that currently complement MMS' research? What if any
additional resources for research does MMS need to ensure that these
issues are adequately addressed?
Answer. The MMS is committed to maintaining the capability to
conduct the research needed to ensure safe and environmentally sound
offshore energy development. The MMS does not operate research
facilities and therefore seeks the most highly qualified scientists
through a selective and competitive process to meet mission
requirements.
This approach has been successfully followed since the 1970s when
the OCS Environmental Studies Program (ESP) began. The ESP research
strategy has evolved over the years. Initially the focus was on the
development of statistically significant baseline information.
Following recommendations from a National Academy of Sciences review,
the program strategy evolved to gathering focused, scientific
information that could inform management decisions, such as the
development of protective measures and identifying vulnerable ecosystem
components. This approach has served the program and the scientific
community well. Over the decades, the offshore energy program created
the stimulus for pioneering research that otherwise would not have
occurred. This research has led to discovery of new habitats and new
species, description and modeling of physical processes, and an
improved body of scientific knowledge regarding the ecosystem
components that could possibly be impacted by offshore energy
development.
MMS has a strong record of gathering baseline data and monitoring
information in areas that actively experience offshore energy
development. Notably, our early studies of the Flower Gardens Banks
(now part of the Flower Garden Banks National Marine Sanctuary) in the
1970's evolved to a continuous monitoring program that, decades later,
attests to the successful management of, and coexistence of, oil and
gas activities in proximity to one of the healthiest coral reefs in the
world. Another example of MMS development of baseline data with
subsequent long-term monitoring is the establishment of the Multi-
agency Rocky Intertidal Network (MARINe) which started along the
Pacific coast in the area of offshore oil development. That program has
gathered several decades of observations and has grown over the years
to include more than a dozen partners. Through the addition of numerous
new partners, the MARINe program has expanded to include the entire
west coast from Alaska to Mexico and is currently adding new sites on
the east coast. The use of MARINe monitoring results and processes have
been instrumental for a number of notable events including the M/V
Cosco Bussan oil spill in San Francisco Bay in 2007 and the closure of
the black abalone fishery in Southern California.
MMS has the responsibility for environmental assessment and
environmental research to support offshore energy activities. To carry
out these responsibilities, MMS works with other science agencies
including the National Oceanic and Atmospheric Administration (NOAA),
U.S. Fish and Wildlife Service, U.S. Geological Survey (USGS),
Environmental Protection Agency, and many other agencies that have
complementary interests. Frequently, MMS will use the research
capabilities within another federal agency to meet mission
requirements. For example, NOAA performs much of the marine mammal
research in offshore Alaska to meet MMS scientific information needs.
Similarly, the MMS utilizes the scientific capabilities of the USGS to
carry out mission research in Louisiana and California. Our federal
partners in turn utilize the body of scientific knowledge that includes
MMS funded research to accomplish their mission. For example, much of
the MMS marine mammal research will be used by MMS and the NOAA
National Marine Fisheries Service for biological consultations under
the Endangered Species Act. On several occasions, MMS-managed research
has received awards for excellence in partnering from the National
Oceanographic Partnership Program (NOPP) and the Department of the
Interior.
Responses of Walter Cruickshank to Questions From Senator Murkowski
Question 1. Are you able to speak to Mr. Amos' account of the
Eugene Island pipeline spill this past summer insofar as whether it
resulted in any environmental degradation such as oiled birds or
mammals or fisheries impacts? Did it reach shore?
Answer. The Eugene Island Pipeline oil spill, which occurred on
July 25, 2009, was from a Shell pipeline that is regulated by the
Department of Transportation (DOT). DOT is conducting the investigation
of the incident. The Unified Command for the Eugene Island Pipeline oil
spill announced that clean-up operations were completed on August 3,
2009.
The July 25, 2009 spill from the 20'' Eugene Island Pipeline
released approximately 1,500 barrels (63,000 gallons) of crude oil
before it was secured on July 27, 2009. The actual break was
approximately 33 miles offshore and 60 miles southwest of Houma, LA.
There were no reports of contacts to mammals, birds, fish, other
wildlife species, or coastal habitats. There were no reported contacts
to shore. The Marine Spill Response Corporation (MSRC) responded to the
spill by applying dispersants and skimming surface oil.
Question 2. Can you talk about the Rigs to Reef program and how it
figures into the agency's environmental stewardship priorities? On this
point, would you characterize your experience with the impact of oil
rigs on fishing to be a positive or negative one?
Answer. MMS is proud of the Rigs to Reefs program and its place in
our environmental stewardship priorities. Natural hard substrate is
limited in the Gulf of Mexico OCS region. Oil and gas platforms
contribute substantially to local and regional abundance of reef
habitat and the abundance of reef associated fishes. In many areas,
platforms also allow the development of numerous species of coral. All
offshore platforms, including those in the Rigs to Reefs program,
provide protected areas from trawling and associated impacts such as
bycatch (living creatures captured unintentionally). Coastal states
with approved, State specific, artificial reef plans can identify
offshore areas and sites suitable for artificial reef developments. The
total number of platforms that have been used in all states' Rigs to
Reefs programs over its entire history is 323 as of 2009 (Alabama 4;
Florida 3; Louisiana 215; Mississippi 8 and Texas 93). These
substantial additional areas of hard bottom habitat result in an
overall positive impact to the Gulf of Mexico. MMS works very closely
with the states' artificial reef coordinators to ensure the program is
run efficiently and provides a benefit to fishermen and the environment
without unreasonable impediments to other users or to oil and gas
infrastructure and future exploration and development.
Question 3. Can you describe the process at Interior for ranking
the environmental sensitivity of coastal areas under the Outer
Continental Shelf Lands Act? Do you have all the information you need
to have completed this exercise in environmental stewardship? Can you
provide a status update on this as relates to the 5-year plan.
Answer. It would be premature to describe the process for ranking
the environmental sensitivity of coastal areas for the 5-year OCS
program, as the Department has not yet finalized the analysis required
by the D.C. Circuit in last year's Center for Biological Diversity
case. As required by the Court, the Department's consideration goes
beyond NOAA's Environmental Sensitivity Index (ESI) data to analyze the
sensitivity of (shoreline) coastal habitats as well as the sensitivity
of offshore (marine) resources.
Question 4. You mentioned your engagement with the President's
Ocean Policy Task Force. To what extent has MMS ceded any of its
authority over managing the OCS energy resources to this interagency
commission? Do you think that energy priorities will be lower or higher
upon completion of the recommendations?
Answer. The OCS Lands Act and the Energy Policy Act of 2005 vest
the Department with authority and responsibility for mineral and energy
development on the OCS, in conjunction with other relevant statutes
such as the National Environmental Policy Act (NEPA), Marine Mammal
Protection Act (MMPA), Coastal Zone Management Act (CZMA), etc. The
Ocean Policy Task Force intends to provide policy guidance, encourage
efficiencies among governmental entities, and provide a better
framework for application of existing laws and agency authorities, but
it does not supersede these laws and authorities.
Question 5. In soliciting comments for the Chukchi POE application
from Shell, did any DOI office issue a direct or specific solicitation,
apart from the Federal Register, to the North Slope Borough or any
other specific entity?
Answer. The MMS Alaska OCS Region formally solicited comments on
the Chukchi Exploration Plan (EP) from multiple stakeholders. The MMS
made direct distribution of the EP to the North Slope Borough, Alaska
Eskimo Whaling Commission, Alaska Beluga Whale Committee, Alaska Eskimo
Walrus Commission, Ice Seal Commission, Nanuk Commission, Federally
recognized tribes, local community leaders and Federal and State
agencies. The MMS also posted the EP on the MMS Alaska OCS Region
webpage and provided copies of the EP to local libraries in Anchorage
and Fairbanks for direct access to the public. MMS also formally
notified several environmental organizations that the EP was available
for review. The MMS offered to conduct government-to-government
consultations with Federally recognized tribes and to meet with any
interested party. The Native Village of Point Hope, the North West
Arctic Borough and the Village of Wainwright each requested a meeting,
which MMS staff attended in person or by teleconference.
Question 6. Are you aware of any coordination between any DOI
office and outside environmental organizations in the formulation of
official comments or rulemakings?
Answer. MMS does collaborate with other federal, state, tribal and
non-governmental organizations (e.g., environmental groups) on many
topics, such as developing studies, soliciting input on environmental
analyses during public comment periods, and formulating mitigation and
monitoring measures. While we would review any input from various
parties, we independently develop and transmit official MMS comments
for various governmental actions and do not assist outside
environmental organizations in the formulation of their official
comments. For an action where MMS is the main Federal agency, we review
any comments from environmental organizations received during the
public comment process and consider them during the rulemaking process,
as we do with any other entity.
Question 7. What is the average length of time, from application
receipt to approval, for MMS to issue an air permit for the Western and
Central Gulf of Mexico?
Answer. MMS does not ``issue a permit,'' but does require
operations to limit air pollutant emissions. Air emissions are
evaluated and approved as part of an Exploration Plan (EP) or
Development Operations Coordination Document (DOCD) submitted to MMS by
an offshore operator.
The legal foundation for the air reporting required in EPs and
DOCDs is set forth in the Outer Continental Shelf Lands Act (43 U.S.C.
1334(a)(8)).\2\ ``The regulations prescribed by the Secretary under
this subsection shall include, but not be limited to, provisions--for
compliance with the national ambient air quality standards pursuant to
the Clean Air Act (42 U.S.C. 7401 et seq.) to the extent that
activities authorized under this subchapter significantly affect the
air quality of any State.''
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\2\ Air emissions information requirements for EPs and DOCDs are
specified at 30 CFR 250.218 and 250.249.
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The Clean Air Act Amendments of 1990 provide that the Secretary of
the Interior will work with the U.S. Environmental Protection Agency's
(USEPA) Administrator to establish requirements to control air
pollution in OCS areas of the Gulf of Mexico westward of 87o30'
longitude. For sources located in areas under MMS jurisdiction,
regulations are promulgated by 30 CFR 250 Subpart C.
The purpose of the EP and DOCD is to determine if proposed
activities will comply with applicable United States federal laws and
regulations including the Clean Air Act; unreasonably interfere with
other uses of the area; interfere with or endanger operations on other
leases; result in pollution; create hazardous or unsafe conditions; and
to determine if proposed activities will cause serious or undue harm or
damage to life, property, any other mineral deposits (in leased or
unleased areas), the national security or defense, the marine, coastal,
or human environment.
The contents of an EP and DOCD include, but are not limited to, a
description of the proposed activities; a description of the drilling
unit, if applicable, with brief discussion of safety and pollution
prevention features; and, for DOCDs, proposed or existing structure
locations and a description of each proposed piece of infrastructure
(including any production equipment to be installed), and a brief
discussion of safety and pollution prevention features of each item.
EP and DOCD reporting requirements are promulgated at 30 CFR 250
Subpart B and further clarified in Minerals Management Service Notice
to Lessees No. 2008-G04, Information Requirements for Exploration Plans
and Development Operations Coordination Documents.
If an EP or DOCD is accurate and complete when submitted, including
air emissions information, the document must be approved or
conditionally approved (approved with modifications) within 30 days for
an EP (30CFR 250.233) or within 120 days for a DOCD (30CFR 250.270).
The clock does not start until the plan is deemed complete by MMS. EPs
or DOCDs that are deemed incomplete are sent back for corrections,
which usually take 2 to 4 additional weeks. Submission of inadequate or
inaccurate information in any of the multiple plan reviews within the
EP or DOCD can require modification of a plan, which slows down the
review and approval process.
For the period 1991 through 2009, the average time from application
receipt to approval (including the time to deem plans complete) was 43
days for an EP and 60 days for a DOCD. The DOCD typically has more
information submitted related to oil and gas production and
transportation facilities and equipment.
Question 8. Are shorter lease terms, such as the proposed reduction
from 10-to-7 years and 8-to-5 years, projected to confer any benefit in
terms of environmental stewardship?
Answer. The policy proposal for Lease Sale 213 is to shorten
primary lease terms from 10 to 7 years in 800-1600 meters of water
depth in the Gulf of Mexico, with extension from 7 to 10 years in the
primary term granted in return for commencing an exploration well
within the new initial 7-year primary term. A similar policy is being
proposed for leases in 400-800 meters, where 8-year term leases will be
shortened to 5 years with extension to 8 years for commencing an
exploration well within the first 5 years of the lease. However, that
second proposed policy change reflects a similar existing policy in
which 8-year primary term leases are cancelled at the end of 5 years if
an exploratory well is not commenced within the first 5 years of the
lease.
MMS's internal analysis indicates that industry is already capable
of operating on these timeframes (see response to next question). One
effect of the proposal as it relates to 7-year term leases will be to
accelerate drilling on some leases that would otherwise have been
drilled closer to the end of the 10-year primary term. Another effect
will be to speed up the relinquishment and reoffering of leases that
otherwise would be held to the end of the 10-year primary term. Because
this would only affect a narrow band of leases, a reduction or increase
of overall production is not anticipated. Therefore, MMS does not
anticipate negative or positive environmental impacts from this policy
proposal.
Question 9. What evidence is there to prove or strongly indicate
that the length of existing lease terms is resulting in the U.S.
taxpayer failing to derive the maximum benefit from OCS oil and gas
development?
Answer. As proposed in the Proposed Notice of Sale for Central Gulf
of Mexico OCS Sale 213, the existing lease term of 10 years would be
shortened to 7 years for leases in water depths from 800 to 1600 meters
deep in the Gulf of Mexico, but they would receive an automatic 3-year
extension provided drilling has started by the end of the seventh year
after lease issuance. Evidence derived from detailed data MMS routinely
collects on OCS activity strongly indicates that the evolution of
capabilities in these water depths have decreased time necessary for
exploration. In contrast to earlier periods, deepwater leases that have
completed their primary term in the last 5 years show that nearly all
producing leases in 800 to 1600 meters of water commenced drilling by
year 7. In 800 to 1200 meters of water, 92% of leases issued from 1995
to 1999 that have achieved production were found to have started
drilling by the 7th year of their lease term, up from 33% of those
issued from 1985 to 1989. The data are similar in 1200 to 1600 meters,
where 85% of producing leases issued from 1995 to 1999 were drilled by
year 7, up from 25% for those issued from 1985 to 1989. Almost all
prospective leases that were not drilled by year 7 either were extended
through unitization or encountered unusual circumstances that led to
authorized extensions beyond the 10-year primary term through
suspensions. Because the unitization and suspension programs handle
such unusual cases, the primary term does not need to be set to
accommodate the exceptional cases.
The shortened drilling periods will improve taxpayer benefit
largely by expediting re-leasing and exploration on non-producing
leases. In some cases lessees that otherwise would have postponed
drilling until near year 10 will find ways to drill earlier. Those who
do not accelerate drilling will relinquish their blocks sooner so those
tracts can be reoffered to others who may have different ideas about
their oil and gas potential. Earlier reoffering will accelerate the
receipt of new bids for the relinquished acreage and its evaluation by
new lessees.
Question 10. How are competing uses in the offshore areas dealt
with currently under existing laws and regulations--does this work and
are changes needed?
Answer. Under existing laws and regulations, MMS is the lead for
all energy and mineral resources activities on the OCS. Several other
federal agencies also have jurisdiction over certain aspects of OCS
activities. At the lease sale stage, MMS coordinates with those federal
agencies along with a number of affected State agencies. This
coordination includes, but is not limited to, consultations required
under the Endangered Species Act with the National Marine Fisheries
Service and Fish and Wildlife Service; Essential Fish Habitat
consultation with the National Marine Fisheries Service; and Coastal
Zone Management Act consistency determination with affected States. In
addition, MMS and the United States Coast Guard have several Memoranda
of Understanding and Memoranda of Agreement regarding our respective
responsibilities in such areas as oil discharge planning, preparedness,
and response; incident investigations, floating offshore facilities,
civil penalties and general jurisdictional concerns.
For post-lease activity, the number of federal agencies an oil and
gas company must deal with directly depends on the lease location and
type of activity proposed. A list of those pertinent federal agencies
was previously provided above in reply to Chairman Bingaman's second
question. Not every federal agency listed above is involved in the
review and approval of every OCS oil and gas proposal, but every
proposal does involve consultations with at least a few of these
agencies. The MMS strives to ensure that its NEPA and other analyses
contain all the information needed for decision-making, including
information related to compliance with laws and regulations outside
MMS' direct purview. Our collaborative processes continue to work
successfully as they are currently structured under existing laws and
regulations.
Responses of Walter Cruickshank to Questions From Senator Dorgan
Question 1. Earlier this year in this committee, I proposed an
amendment which is one of the primary reasons for the oversight
hearing. Through my approach, the MMS would be authorized to go through
a rulemaking process to issue regulations and would consider a range of
local and other conditions during that process. In federal waters, the
Secretary would establish zones which would determine what kind of
restrictions would be placed on surface activities. The onus is then
placed on individual companies to develop innovative technology
solutions in those zones. Renewable projects (i.e. wind turbines
offshore) and previously existing oil and gas projects would be exempt.
I believe that if we could pursue this approach, it is possible to
deploy innovative technology applications to limit the environmental
footprint and significantly reduce the visual impact while increasing
access to resources.
Is this the type of approach that could have environmental merits
and also allow for increased access to hydrocarbon resources near shore
in the federal waters?
Answer. A similar approach is already in use off of Baldwin County,
Alabama to limit visual impacts per the State's request. Since 1999,
MMS has adopted in each annual Central Gulf of Mexico lease sale a
lease stipulation that requires consultation when developing plans for
fixed structures within 15 miles of the coast of Baldwin County. MMS's
NEPA documents also analyze deferring this area, but have found that
the stipulation adequately addresses adverse visual impacts.
The stipulation states that in order to minimize visual impacts
from development operations on this area, lessees must contact other
lessees and operators of leases in the vicinity to determine if
existing or planned surface production structures can be shared. If the
lessee cannot formulate a feasible development scenario that does not
call for new surface structure(s), the operator should ensure that new
structures are the minimum necessary for the proper development of the
block and that they will be constructed and placed, using orientation,
camouflage, or other design measures in such a manner as to limit their
visibility from shore.
Likewise, the use of newer technological innovations in the Gulf of
Mexico now allows the use of subsea development projects to 'tie-back'
to existing structures. It is possible to forego surface structures in
near-shore environments by connecting subsea production to structures
as far away as 45 miles away for oil and 77 miles away for natural gas.
The use of this technology also allows for the minimization of the
number of offshore facilities, reducing multiple use conflicts, and
aesthetics. This technique also provides policymakers with an option to
allow coastal buffer zones with no permanent surface structures without
putting the oil and gas resources out of reach.
In the Pacific Region, some leases, particularly those close to
shore, contain a stipulation ``all platforms will be an acceptable
design, properly camouflaged and subject to other conditions to protect
aesthetic values.'' In other cases, mitigation attached to the
development plan and environmental documents addressed aesthetic
concerns. In both cases, these measures result in the use of a paint
color anticipated to reduce visual impacts. In the latter case, these
mitigation measures were coordinated with the U.S. Coast Guard, State
of California Coastal Commission, California State Lands Commission,
adjacent counties, industry and MMS.
Question 2. If buffer zones on structures within certain distances
from shore are implemented, do you have a view on the environmental
issues intended to be addressed, and what are the appropriate distances
to be identified for such limitations? How would the MMS take this into
consideration?
Answer. Alternatives, including buffer zones, are identified during
the public scoping process for the 5-Year Program and individual lease
sales. All reasonable alternatives would then be analyzed in MMS's NEPA
documents. Buffer zones are usually proposed with the intention of
limiting visual impacts or risk of an oil spill contacting shore. In
addition, buffer zones are used to protect sensitive areas such as
critical habitat for endangered and threatened species. The appropriate
buffer distance to address visual impacts would depend on such things
as the type of structures, coastal elevation, and presence of historic
properties, while risk of oil spill contact with sensitive
archaeological and biological resources would depend on prevailing
winds and currents, and the presence of any such resources.
Question 3. Another witness, Dr. Jeffrey Short, Pacific Science
Director of Oceana, made strong assertions that much more needed to be
done in terms of better understanding of the marine ecosystem in order
to protect it from serious environmental damage. He stated that the
U.S. does not have a good baseline record of the original state of the
environment in the Gulf of Mexico before we started oil and gas
operations, so we cannot assess the impact of these activities on the
environment in the Gulf of Mexico. He indicated that we need to study
and monitor ecosystems and technologies before projects were able to
proceed and that funding needed to be provided for that.
Answer. The MMS places a high priority on conducting an integrated
scientific program that develops information on living marine resources
and their interaction with, and influence by physical and other
environmental processes. MMS's environmental research strategy is
developed around an understanding of the energy technologies and the
potential nature of impacts they might produce. This focus provides the
greatest opportunity to successfully develop the scientific information
needed to mitigate environmental impacts. It is true that many areas of
the marine environment have been exposed to impacts from fishing,
shipping, naval operations, and in some cases, offshore oil and gas
development. Baseline environmental conditions are constantly changing,
but that does not preclude the conduct of scientifically valid studies
to assess impacts. In the Gulf of Mexico, highly regarded studies
published in peer-reviewed scientific journals describe the localized
impacts that can be measured around drill sites and/or production
platforms. MMS sponsored pioneering research of biologic communities on
the continental slope in the 1980's, long before the oil industry had
moved into these water depths. MMS research led to important
discoveries of chemosynthetic communities of biological organisms that
were subsequently protected through operational regulations. MMS
environmental research moved into still deeper Gulf of Mexico waters,
and many of these studies, in collaboration with federal partners in
NOAA and USGS, identified new chemosynthetic and deepwater coral
communities. This research has informed resource managers and has led
to additional protections for these deepwater biological communities.
Follow-on research and monitoring then assesses the effectiveness
of the mitigation. As a research strategy, MMS will continue to conduct
studies of marine ecosystems in areas that are being considered for
development, and it will continue to conduct studies throughout the
life of the offshore energy development activity.
Question 4. Is this the type of work that the MMS has authority to
do? If so, what kinds of research and analysis are underway at the MMS
that would respond to the concerns of Dr. Short? Do you know of any
areas in the world where we do have adequate baseline data and where we
have been able to measure the impact of oil and gas activities? What do
these studies show as the impact of oil and gas activities and how
concerned should we be about their environmental impact when compared
to other activities in the marine environment in other regions of the
world?
Answer. The OCS Lands Act provides MMS with the authority to
conduct the research needed to manage offshore energy development in a
safe and environmentally sound manner. MMS conducts a broad array of
environmental research designed to meet the needs in a particular OCS
area. While a general research strategy can be described, the
scientific knowledge base and state of OCS activity varies from the
Gulf of Mexico to the Pacific and from the Atlantic to offshore Alaska.
The research programs in each of these areas will vary depending on
these and other factors. The MMS conducts public workshops to give the
scientific community and stakeholders the opportunity to work with MMS
scientists as we develop our research plans. In addition, the MMS has
established an independent Scientific Advisory Committee (chartered
under the Federal Advisory Committee Act) that provides advice on the
Environmental Studies Program research direction and focus. This input,
numerous reviews by the National Academy of Sciences over the years,
and publication of scientific findings in peer-reviewed scientific
journals, all combine to validate the kinds of research and analyses
that are undertaken.
Considerable resources have been allocated towards gathering
baseline data in each of the OCS areas over the decades. However, MMS
data gathering does not continue when the prospect of offshore energy
development no longer exists. The Gulf of Mexico is probably the most
studied and well described area in the world. In the 1970's, baseline
studies evolved into focused ecosystem studies and monitoring studies.
These studies provide a solid basis for the management of potential
impacts from offshore oil and gas activities. Notably, our early
studies of the Flower Gardens Banks (now part of the Flower Gardens
National Marine Sanctuary) in the 1970's evolved to a continuous
monitoring program that, decades later, attests to the successful
management of, and coexistence of, oil and gas activities in proximity
to one of the healthiest coral reefs in the world.
While other regions around the world undergo oil and gas
development, few have been developed under the broad safety and
environmental safeguards afforded through U.S. regulations. MMS has
invested more than $800 million in environmental research since the
beginning of the program studying marine life and ecosystem processes.
No other program in the world can match the investment and regulatory
protections of the United States. Notwithstanding that fact, we do
engage with colleagues from around the world to learn from their
experiences and to share our knowledge. For example, we have
collaborated on many scientific projects related to offshore oil and
gas activities offshore Canada, Norway, Mexico, and Australia.
Responses of Walter Cruickshank to Questions From Senator Menendez
Question 1. Dr. Cruickshank, I am concerned about the offshore
activities of Seadrill--the operator of the failed rig in the Australia
disaster. They operate here in the United States and have at least one
rig in the Gulf of Mexico. In a recent letter to Secretary Salazar, I
requested that the Department of the Interior conduct a full
investigation of Seadrill and its activities in American waters to
ensure that a similar accident is not repeated here at home. Has MMS
independently done anything to examine Seadrill, its activities in US
waters or its compliance with US law? How is Seadrill's safety record,
and what exactly about the Australian spill makes you convinced it
couldn't happen here?
Answer. The MMS is conducting the requested analysis of Seadrill's
compliance and safety record. As mentioned in a response to your
letter, we anticipate completing this analysis by the end of February
2010.
Regulations governing U.S. OCS drilling operations provide that on
the U.S OCS--
The drilling program would have to be submitted to MMS as
required in the regulations. The program would have to satisfy
MMS engineers before it was approved by the MMS District
Supervisor.
The casing would have to be cemented in accordance with the
requirements in the drilling regulations.
The casing would have to be pressure tested to 70% of the
minimum internal yield for 30 minutes with less than a 10%
pressure drop. This test would have likely identified the
problem with the primary cement job on the Timor Sea well.
For suspended wells, the operator would have to set a
secondary plug in the casing as described in the
decommissioning regulations .
The operation would be inspected by MMS personnel at least
once during the course of the drilling operations, and all
casing, cementing, and testing information would be closely
reviewed.
Each of these requirements separately, and certainly all of them
together, should have prevented the drilling operations that occurred
in the West Timor Sea, as we understand them. The Australian
Government's final review of the causes of the West Timor spill,
however, has yet to be completed.
Question 2. Dr. Cruickshank, according to statistics compiled by
the MMS, there have been over 40 spills greater than 42,000 gallons
(1,000 barrels) since 1964. During Hurricanes Katrina and Rita alone,
some 9 million gallons of oil were spilled from offshore and onshore
operations.5 Oil is extremely toxic to a wide variety of marine
species, and as noted by a recent National Academy of Sciences study,
current cleanup methods are, ``incapable of removing more than a small
fraction of the oil spilled in marine waters.'' Why is it so difficult
to clean up oil once it is spilled into coastal ecosystems?
Answer. A primary focus of the MMS regulatory program is spill
prevention. MMS is also a leader in spill preparedness, response
research, and studies to address the potential effects of spills on
marine and coastal resources. The ability to clean up oil varies with
each circumstance depending on the product released, location, weather
conditions and more. MMS requires offshore operators to have the
necessary equipment on standby, usually through contracts with oil
spill response companies, to respond to a worst case scenario spill.
Booms, skimmers, and other response equipment frequently recover
substantial volumes of oil given the right circumstances. In the open
ocean, any remaining oil will weather and become entrained in the water
column and will be diluted by the far greater volume of ocean water so
as not to raise the oil concentration above natural conditions.
An oil spill that comes in contact with shore can become entrained
in sensitive habitats where attempts to remove the oil may cause more
damage than the oil. Since 1964, only 10 OCS spills have contacted
shore; all originated 19 miles or less from shore, and only one caused
substantial harm to wildlife and habitats (1969). Deepwater tracts
generate much of the current offshore oil production and are expected
to generate more each year. Deepwater tracts are generally 50 or more
miles offshore, from where it is highly unlikely a spill would contact
shore.
There have been 36 petroleum spills of 42,000 gallons (1,000
barrels) or greater from Federal OCS oil and gas activities since 1964.
Most of these spills had no recorded contacts to marine species or
coastal habitats. Only six of these spills contacted shore, the last of
which was in 1998. Most of the contacts were minor, with no wildlife
contacts recorded and minimal beach cleanup required. The exception was
the 80,000 barrel Santa Barbara spill in 1969, which had substantial
contacts to birds and to coastal habitats. Current OCS regulations have
far more stringent requirements for well casing, which would have
prevented the Santa Barbara well failure.
The OCS petroleum spill record has improved greatly over time from
the first 15-year record of approximately 10,300 barrels produced per
barrel spilled (1964-1978), to more than 88,400 barrels produced per
barrel spilled (1979-1993), to more than 140,000 barrels produced per
barrel spilled (1994-2008)
The article referenced in the question supporting the Hurricane
Katrina and Rita spill statistics was published by the Houston
Chronicle in November 2005 and was written prior to any comprehensive
spill statistics being available for Hurricanes Katrina and Rita and
should be considered preliminary.
Over 250,000 barrels of oil spilled onshore and in Louisiana State
waters during Hurricane Katrina. This included nine crude oil spills of
1,000 barrels and greater from onshore oil refinery tank farms totaling
more than 193,000 barrels. Most of the remaining spillage was reported
as dispersed during Hurricane Katrina. Over 22,000 barrels of oil
spilled onshore and in Louisiana State waters during Hurricane Rita.
This included three crude oil spills of 1,000 barrels and greater
totaling 10,783 barrels of which 7,500 barrels were reported recovered.
Most of the remaining spillage was reported as dispersed during
Hurricane Rita. (Source: Louisiana Department of Environmental Quality,
December 2007).
By far the greatest amount of oil spilled as a result of the
hurricanes came from facilities not regulated by MMS. An estimated 8
million gallons of oil were spilled from coastal oil storage facilities
and approximately 50 percent of this was recovered. An additional 1.46
million gallons were spilled onshore or in State waters as a result of
Hurricane Katrina and none of the oil was recovered. An estimated 0.49
million gallons of crude oil from eleven onshore or coastal facilities
in State waters released during Hurricane Rita and approximately 70
percent of this was recovered. An additional 45 spills resulting in
0.43 million gallons occurred onshore or in coastal waters as a result
of Hurricane Katrina with none of the oil recovered. Finally,
approximately 3.3 million gallons were spilled from a tank barge, when
it struck a submerged oil platform that had been damaged during the
storms and only 4.8 percent was recovered.
MMS reported the following petroleum losses from offshore
structures during: Hurricane Ivan, 4,645 barrels; Hurricane Katrina,
4,729 barrels; Hurricane Rita, 8,734 barrels; and Hurricanes Gustav/
Ike, 5,858 barrels for a total of 23,966 barrels (811,482 gallons).
Over 1 million gallons were spilled from federal offshore oil platforms
and associated pipelines during these storms. The loss of hydrocarbons
from wells and pipelines was minimized by the successful operation of
the safety valves that MMS requires to be installed. All OCS facilities
in areas threatened by the storms' approach were shut in before the
hurricanes so that oil losses were mostly limited to the oil stored on
the damaged platforms and rigs or contained in damaged pipeline
sections between the check valves. The hydrocarbons lost during the
hurricanes were thoroughly dispersed offshore by the hostile sea
conditions, which eliminated the potential for oiling the shores.
However, some of the platforms and pipelines damaged during the 2004,
2005, and 2008 hurricane seasons continue to release small volumes of
oil, some with short duration releases, and repairs have not been fully
completed for all facilities and pipelines. These small volumes
amounted to an additional 1,767 barrels (about 74,000 gallons) through
the end of 2009.
There were no accounts of environmental consequences resulting from
spills from OCS facilities that occurred during major hurricanes from
2002 through 2008:
no spill contacts to the shoreline
no oiling of marine mammals, birds, or other wildlife
no large volumes of oil on the ocean surface to be collected
or cleaned up
no identified environmental impacts from any OCS spills from
these hurricanes
Responses of Walter Cruickshank to Questions From Senator Sessions
Question 1. Has the Minerals Management Service (MMS) taken a
stance on revenue sharing?
Answer. The Administration has not taken a position on establishing
additional revenue sharing programs.
Question 2. MMS announced yesterday that it disbursed $10.68
billion in Fiscal Year 2009 for mineral development (oil, gas and
coal), but in FY 08 the Department of Interior's MMS distributed $23.4
billion. Could you please explain why there has been a significant
decline?
Answer. In the last five years, the Department has disbursed an
average of more than $13 billion annually. It is important to note that
the FY 2008 disbursement of over $23 billion was an anomaly due in part
to the high prices of oil and gas boosting royalties and causing record
bonus bids for Outer Continental Shelf leases. In FY 2008, MMS
disbursed approximately $23.4 billion in total revenues with $10.1
billion in bonus bids, $.3 billion in rents and $13 billion in
royalties and other revenues. In FY 2009, MMS disbursed approximately
$10.7 billion in total revenues with $1.3 billion in bonus bids, $.3
billion in rents, and $9.1 billion in royalties and other revenue.
Question 3. My state of Alabama received revenues through Fiscal
Year 2009 in amount of $ 17.2 million, but I noticed that several
onshore states specifically New Mexico received $388.5 million. In your
opinion, wouldn't allowing revenue sharing and additional production
off coastal states help with state budget issues?
Answer. The Gulf of Mexico Energy Security Act established a
revenue sharing program with four Gulf of Mexico coastal producing
states. The MMS allocates and distributes the funds annually, based on
a formula established under the Act. Congress authorized the States'
use of the funds for mitigation of damage to fish, wildlife, or natural
resources; implementation of a federally-approved marine, coastal, or
comprehensive conservation management plan; mitigation of the impact of
OCS activities through the funding of onshore infrastructure projects;
and the planning and administrative costs of such projects.
Question 4. How can MMS justify its recent announcement to shorten
lease terms in deepwater Gulf of Mexico, when the Department of
Interior Inspector General has testified that this could be
counterproductive by reducing interest in leases? Was there any
analysis completed beforehand by MMS to study the impacts this decision
could have?
Answer. As set forth in the Proposed Notice of Sale for Central
Gulf of Mexico OCS Sale 213, the existing lease term of 10 years would
be shortened to 7 years for leases in water depths from 800 to 1600
meters deep in the Gulf of Mexico, but those leases would receive an
automatic 3-year extension provided drilling has started by the end of
the seventh year after lease issuance. The shortened period to start
drilling recognizes the evolution of capabilities in the deeper water
depths and the decreased time necessary for exploration and
infrastructure development. Over the last 25 years, industry has become
more experienced with deepwater drilling, offshore development
technology has improved and infrastructure has spread into the deeper
waters of the Gulf of Mexico. The number of possible host facilities
emerging from existing prospects has increased, so more fields will
likely be produced by less costly tie-back arrangements. Consequently,
parts of the deepwater Gulf basin can reasonably be explored and
developed in less than a decade.
Analysis of data accumulated by MMS as part of its duties to manage
the OCS confirm that industry has become able to identify and drill the
prospective leases in up to 1600 meters of water depth in the Gulf in
less than 10 years. In contrast to earlier periods, deepwater leases
that have completed their primary term in the last 5 years show that
nearly all producing leases in 800 to 1600 meters of water commenced
drilling by year 7. In 800 to 1200 meters of water, 92% of leases
issued from 1995 to 1999 that have achieved production were found to
have started drilling by the 7th year of their lease term, up from 33%
of those issued from 1985 to 1989. The data are similar in 1200 to 1600
meters, where 85% of producing leases issued from 1995 to 1999 were
drilled by year 7, up from 25% for those issued from 1985 to 1989.
These data show that most leases not drilled by year 7 were
eventually relinquished undrilled, while the relatively few leases
drilled after the 7th year were almost invariably relinquished,
presumably because those wells did not result in the discovery
resources worth developing. Almost all prospective leases that were not
drilled by year 7 either were extended through unitization or
confronted unusual circumstances that led to authorized extensions
beyond the 10-year primary term suspensions. Because the unitization
and suspension programs handle such unusual cases, the primary term
need not deal with those kinds of productive leases.
Question 5. Secretary Salazar has made several decisions that has
made it increasingly difficult for producers to supply domestic oil and
natural gas and increase energy security. Secretary Salazar has
repeatedly stated that the Obama Administration is not ``anti-oil and
gas,'' yet when it comes to Interior's onshore and offshore natural gas
and oil program, the record suggests otherwise. The 2010-2015 5-year
plan, as of today, is still stuck at Interior and Secretary Salazar is
indicating that whatever revised plan comes out will have to go through
additional public comment time as well as resubmission to DC Circuit.
You have been with the agency for at least 4 other 5 year plans. Why is
this particular plan taking so long to become final?
Answer. The 2007-12 program is being revised to meet the mandate of
the U.S. Court of Appeals for the D.C. Circuit, which found fault with
the program developed by the prior Secretary June 2007. The Court found
that in using the NOAA Environmental Sensitivity Index that addresses
shoreline/coastal habitats only, the Department had failed to consider
the relative environmental sensitivity of the entirety of `` the outer
Continental Shelf'' of the different areas, as required by section 18
of the OCS Lands Act. The Department formed a team of well-qualified
scientists and other subject matter experts that conducted a more
complete environmental sensitivity analysis. The Secretary is
considering the new information along with the existing information and
analysis that was either upheld by the court or not challenged,
including the Final EIS, to make the necessary decisions under the Act
to balance the potentials for environmental damage, discovery of oil
and gas, and adverse impact on the coastal zone. In accordance with the
Government's petition to the Court, the Preliminary Final Program will
be announced for public comment and submitted to the President and
Congress, before being finally approved. It should be noted that, in
response to a petition for reconsideration filed by Secretary Salazar,
the Court limited its order to three areas of the Alaska OCS, so that
other sales included in the 2007-2012 program are proceeding without
awaiting the curative work.. The last sale was Western Gulf of Mexico
Sale 210 held in August of 2009. The next proposed sale is Central Gulf
of Mexico Sale 213 scheduled for March 2010.
In mid-2008, the previous Administration began preparation of a 5-
Year Program and issued a Draft Proposed Program for 2010-2015 on
January 16, 2009 with a 60-day comment period. The Secretary extended
the comment period an additional 180 days and held four regional
meetings to allow for greater public input. Over 530,000 comments were
received and are being summarized and considered for the next
decisions, beginning with the announcement of public meetings for
scoping issues for preparation of a draft EIS. The current program does
not expire until June 30, 2012. Accordingly, the preparation process of
a new program does not affect sales in the current program for 2007-
2012.
Question 6. Has Carol Browner, Energy Czar, been briefed in regards
to the 5 year plan and has she had any input in deciding to move
forward?
Answer. MMS has not briefed Ms. Browner.
Question 7. The oil and gas industry directly and indirectly employ
9.2 million people, so could someone explain to me why with double
digit unemployment numbers are we not moving forward with increasing
domestic production and employ individuals here at home?
Answer. President Obama expects the Department of the Interior to
make significant progress toward a new energy future, with attention to
responsible domestic production of conventional energy resources as
well as a strong new emphasis on renewable energy production and
transmission. We are delivering on this task. Since January 20, 2009,
we have offered tens of millions of acres of onshore and offshore lands
for oil and gas leasing, adopted a new framework for renewable energy
development in the OCS, and expedited the review of solar, wind, and
geothermal energy projects on public lands. These actions will create
more supplies of conventional and renewable domestic energy, leading to
more jobs.
Question 8. In total, the OCS development has generated $190
billion in federal revenue from bonus bids and royalty payments. Its
puzzles me with record breaking deficit numbers, why the 5 year plan
for OCS is getting delayed when it could produce federal revenues. Does
anyone have an opinion on this?
Answer. The Department is currently operating under the existing
OCS Leasing Program, 2007-2012. While Secretary Salazar did extend the
comment period last February for an out-of-cycle Draft Proposed
Program, which the previous Administration released on January 16,
2009, the Department expects to issue an approved Final Program and
Final EIS, with a schedule of offshore lease sales to allow for
activities to be conducted in an environmentally safe and operationally
sound manner, prior to the scheduled expiration of the current program.
Question 9. What is the role of the National Oceanic and
Atmospheric Administration (NOAA) in OCS development? NOAA
Administrator Lubchenco sent a letter to MMS dated September 21, 2009,
which also appeared the LA Times commenting on the OCS proposed 5 year
plan-2010-2015. However, NOAA later claimed it was an unofficial
letter. How is MMS bound or inclined to react to this letter's
contents?
Answer. During the 5-Year Program preparation process, comments are
solicited three separate times, the initial Request for Information,
the Draft Proposed Program and the Proposed Program. In addition to
public comment, pursuant to statutory requirements, MMS specifically
solicits review and comment from Governors and other Federal agencies,
including NOAA. On September 30, 2009, NOAA sent a follow-up letter
clarifying that their earlier letter was intended to provide informal
comments to start a dialogue between the agencies on a variety of
issues. The Department has had a long-standing relationship with NOAA
and their highly-respected scientists and other experts. The Department
looks forward to continuing this relationship and pursuing this
dialogue with NOAA throughout the entire OCS process. MMS is not bound
by NOAA's comments, except to the extent that NOAA is providing an
official position on a mandate under NOAA's authority that requires
certain actions or responses from MMS, but will give careful
consideration to its recommendations as well as those of other
commenters.
Question 10. How many agencies does an oil and natural gas company
have to deal with to produce from a federal offshore lease? Does this
number of different and competing bureaucracies make operations in the
OCS more efficient or less efficient?
Answer. While MMS is the lead for all energy and mineral resources
activities on the OCS, several other Federal agencies also have
jurisdiction over certain aspects of OCS activities. At the lease sale
stage, MMS coordinates with several federal and state agencies. This
coordination includes, but is not limited to, consultations required
under the Endangered Species Act with the National Marine Fisheries
Service and Fish and Wildlife Service; Essential Fish Habitat
consultation with the National Marine Fisheries Service; and Coastal
Zone Management Act consistency determination with affected States.
For post-lease activity, the number of Federal agencies an oil and
gas company must deal with directly depends on the lease location and
type of activity proposed. In addition to MMS, the following Federal
agencies may also have jurisdiction over an individual proposal:
Department of Defense (including the U.S. Army Corps of
Engineers)
Department of Transportation (including U.S. Maritime
Administration)
Environmental Protection Agency
Federal Aviation Administration
Federal Energy Regulatory Commission
National Aeronautics and Space Administration
National Marine Fisheries Service
National Park Service
Fish and Wildlife Service
U.S. Coast Guard
While not every Federal agency listed above is involved in the
review and approval of every OCS oil and gas proposal, every proposal
does involve at least a few of these agencies. The magnitude of this
involvement ranges from receipt of notifications to issuing permits.
Because MMS is the lead for OCS oil and gas activities, MMS
considers the overall proposal, while other Federal agencies may look
at one aspect of the proposal. These agencies have various specialties
that in many cases can bring forth pertinent information more
efficiently than one or two agencies could. It is not the number of
agencies, but rather, how they coordinate and cooperate that makes the
difference in efficiency. MMS strives to ensure that its NEPA and other
analyses contain the information needed for decision-making, including
information related to compliance with laws and regulation outside MMS'
direct purview. MMS and other Federal agencies have worked together and
will continue to work together to promote the efficiency of the
permitting process for OCS oil and gas activities.
______
Responses of David Rainey to Questions From Senator Bingaman
Question 1. The Committee heard testimony about the offshore
infrastructure necessary to support offshore oil and gas production and
to bring the product onshore. Please state the extent to which your
company typically is involved in the development, construction or
maintenance of this infrastructure. If you do not typically handle this
directly, please indicate the extent to which you are involved with the
entities who are responsible for this infrastructure.
Answer. BP currently operates eight deepwater projects in the Gulf
of Mexico. In some cases, BP owns pipeline capacity to bring oil and
gas production to shore and in others, we utilize existing capacity
owned by other producers or pipeline operators. The development,
construction and maintenance of the infrastructure required to support
offshore oil and gas production is an integral part of BP's business.
BP recently completed the delivery of a series of five new developments
in the deepwater Gulf of Mexico, they included: Mad Dog, Holstein,
Nakika, Atlantis and Thunderhorse. As we proceeded with the development
of these projects, we were also engaged in the installation of the
critical pipeline infrastructure to bring the oil and gas produced from
these facilities to shore. BP undertook these investments because there
was no existing capacity to bring these volumes to shore. These
collective investments are called the Mardi Gras Pipeline
Transportation System. The project transports production from the five
major deepwater Gulf of Mexico projects previously mentioned and also
transports 50 percent of all current deepwater Gulf production at
depths of more than 7,000 feet. This transportation system consists of
five main lines which total 490 miles--Okeanos (100 miles), Proteus (70
miles), Endymion (90 miles), Caesar (115 miles) and Cleopatra (115
miles)--and is the highest capacity deepwater pipeline system ever
built. The Mardi Gras system is able to move more than one million
barrels of crude and 1.5 billion cubic feet of natural gas per day.
This project is but one example of the investment BP has made and
continues to make in the safe and environmentally responsible
exploration, development, production and transportation of offshore oil
and gas resources to consumers and businesses in the United States.
Question 2. The Committee also heard testimony to the effect that
the Minerals Management Service's authority ends ``at the water's
edge.'' Please state your understanding of the various government
entities--federal, state, or local--responsible for permitting,
oversight, or spill response related to the offshore infrastructure
necessary to support offshore production or to bring the product
onshore.
Answer. The Department of Interior, through the Minerals Management
Service, is charged with implementation of the OCS Lands Act. Many
other agencies regulate activity on the OCS, including a number of
federal and state agencies responsible for implementing laws and
regulations relating to the protection of the environment and marine
life. These laws, and the agencies charged with their oversight, are
able to assure adequate oversight and rigor with respect to safety and
the environment on the OCS.
Among the laws designed to address those concerns are: Coastal Zone
Management Act, National Environmental Policy Act, Rivers and Harbors
Act, Clean Water Act, Oil Pollution Act, Clean Air Act, Noise Pollution
Control Act, Comprehensive Environmental Response, Compensation, and
Liability Act, Resource Conservation and Recovery Act, Endangered
Species Act, Marine Mammal Protection Act, Migratory Bird Treaty Act,
Magnuson-Stevens Fishery Conservation and Management Act, National
Fishing Enhancement Act, as well as acts designed to protect historical
and ecologically important resources, including the National Marine
Sanctuaries Act, Antiquities Act, Abandoned Shipwrecks Act,
Archeological Resources Protection Act, and National Historic
Preservation Act.
In addition to the MMS, other federal agencies and departments
having influence on operations on the OCS are: Department of
Transportation, Department of Homeland Security (Customs and Border
Patrol, U.S. Coast Guard), Department of Commerce (National Oceanic and
Atmospheric Administration, National Marine Fisheries Service),
Department of Interior (Fish & Wildlife Service), Army Corps of
Engineers, Federal Energy Regulatory Commission, Environmental
Protection Agency, Department of Labor, Occupational Safety and Health
Administration.
State agencies involved in OCS operations include: Departments of
Natural Resources, Offices of Conservation, Departments of
Environmental Quality, State Mineral Boards, State Land Offices,
Railroad Commissions, and various local government entities.
Question 3. The Committee heard testimony regarding oil spills that
occurred during severe storms in the Gulf of Mexico from onshore oil
and gas infrastructure that supports offshore production--refineries,
pipelines, and tanks required to receive process, store and distribute
oil and gas from offshore fields. Please describe your company's
involvement in developing and maintaining this onshore infrastructure,
and your understanding of the governmental entities responsible for
permitting, oversight and spill response for this infrastructure.
Answer. BP is involved in the production and transportation of oil
and gas from onshore facilities to onshore refineries and natural gas
processing facilities. Where we have owner and operator positions, we
are accountable for the maintenance of these facilities. All onshore
facilities are regulated by state and federal pipeline transportation
authorities, as well as environmental agencies.
All pipelines operated by BP which deliver oil and natural gas from
offshore facilities to onshore locations are equipped with high and
low-pressure sensors. In the event of a change in pipeline pressure
beyond a specified set point, the pressure sensors will trigger an
alarm to the facility operator and/or shut down the pipeline. When
alerted of a potential pipeline emergency BP will first shut down the
operation and investigate the cause including ensuring that the
pressure sensing equipment is not malfunctioning, and then will
visually observe the pipeline, if possible, to determine the source. If
the source is not within observable range, BP will contact the sending
and receiving facilities to determine the abnormality. In the event a
release is discovered, the BP Pipeline Response Plan with its
predetermined response capabilities will be activated.
Question 4. BP has recently reported a spill from a pipeline that
serves Prudhoe Bay in Alaska. Please describe the cause of this spill
and state which governmental entities are involved in regulating that
pipeline and in assisting in the spill response. Please indicate
whether there is any difference between the pipeline infrastructure
involved in that spill and the onshore infrastructure that is utilized
to transport oil produced offshore.
Answer. On November 29 while performing routine rounds, a BP
operator discovered an oil leak on an 18 inch oil production line to
its Lisburne Production Center (LPC). Workers have identified the
specific point of the leak. It is a rupture, roughly 24-inches long,
running lengthwise on the bottom of the 18-inch diameter pipe. The
rupture, by visual inspection, appears to have been caused by
overpressure in the pipeline, linked to ice forming inside the pipe.
Large ice plugs have been identified on both sides of the leak. The
investigation into the incident continues, and is expected to
conclusively determine the cause.
The pipeline in question is regulated by the State of Alaska
through the Department of Natural Resources, the Department of
Environmental Conservation and the Alaska Oil and Gas Conservation
Commission. The response to the incident is being managed through a
Unified Command structure. The Unified Command is comprised of BP, the
Alaska Department of Environmental Conservation, the North Slope
Borough and the US Environmental Protection Agency. The US Coast Guard
has also participated.
The design of every pipeline system is unique to its specific
circumstances and needs. Each design takes into consideration items
such as the type of service (full or partially processed oil, multi-
phase production, water, gas, etc), the properties of the oil produced
(e.g. SPE specific gravity, paraffin content, etc.), operating
pressures, fluid temperatures, and external temperatures. In addition,
pipeline construction, control and monitoring technology continues to
evolve and is applied as applicable to each project.
Responses of David Rainey to Questions From Senator Murkowski
Question 1. Can you amplify for me your concerns about domestic
energy production and, if regulatory uncertainty and overly burdensome
litigation continues to stall development, what we can expect to see in
terms of driving energy jobs and production overseas? Feel free to
answer in numbers of actual jobs and numbers of barrels of oil, or
percentages, whichever is available.
Answer. As a company involved in many aspects of energy
development--wind, solar, biofuels, oil, natural gas, and shale gas--we
remain very concerned about the impact that litigation is having on US
energy development. No form of energy is immune; wind is now seeing
significant development challenges just like oil and natural gas.
Recently, the industry has seen challenges to seismic acquisition
programs, the MMS Five-year leasing program and other project specific
matters. BP is intimately familiar with ``public challenges'' (i.e.
protests, challenges or litigation) involving BP America Production
Company. These challenges have the potential to affect oil and gas
leasing and development decisions made by the United Stats Department
of the Interior, Bureau of Land Management: San Juan Citizens Alliance
v. Norton (United States Court of Appeals for the Tenth Judicial
Circuit); San Juan Citizens Alliance v. Stiles (United States District
Court for the District of Colorado); and Biodiversity Conservation
Alliance v. Bureau of Land Management (United States District Court for
the District of Wyoming).
In additional to litigation, BP is also concerned about the
cumulative effects of others policy proposals, including higher
taxation, legislative initiatives, and proposed regulatory changes on
the oil and gas industry. It is true that increased level of
uncertainty brought about by these multiple policy initiatives does not
enhance the attractiveness of the US. We believe the result of
increased uncertainty could lead to reduced investment, which will mean
less energy production, fewer jobs, lower revenues to state and federal
treasuries, etc.
Question 2. When evaluating offshore oil and gas development
opportunities in nations outside the U.S., what are some of the main
factors a company might take into account when assessing the
attractiveness of the investment climate?
Answer. Key factors that companies look for when assessing the
attractiveness of an area for long term investment include: economic
attractiveness and the ability to make a return on the investment for
shareholders, historical fiscal stability, and stable regulatory
regimes. Other factors that also are assessed include:
Level of technical risk--the ability to find and develop the
resource
Technical challenges such as water and reservoir deeper,
pressures, temperatures.
The attractiveness of the opportunity (size of the
opportunity, ease of developing, will new technologies be
required, etc.)
Fiscal arrangements--for example in some Production Sharing
Agreements, which are popular outside the US, countries allow
companies to recover capital investment before applying
royalties, taxes, etc.
Upfront capital investment required by BP before starting to
receive money back.
Amount of capital required
Type of fiscal regime and the level of complexity (federal
vs. state, a 3 x 3 mile block, or a 30 x 30 miles block
Progressive or regressive tax structures
Question 3. When we talk about environmental stewardship on a
global level, knowing what we know about the U.S. program, is it better
or worse for the world's environment when the U.S. adds to its
environmental restrictions things like shorter lease terms and
heightened regulatory burdens?
Answer. The OCS has been safely and reliably producing oil and
natural gas for the nation for over 50 years. The current regulatory
structures and lease terms have served the US Government and industry
well. Stable fiscal, regulatory and leasing policies are important to
sustainable oil and natural gas development which help the nation meet
its goals for energy and economic security.
We would be concerned about the creation of additional regulation
that duplicates current practices of Federal and State governments and
would not add value or enhance the consultation that already takes
place between the various government agencies, oil and gas companies
and other stakeholders. Onerous regulation and bureaucracy would
discourage companies from investing in the United States versus
elsewhere, reduce government revenues and opportunities for jobs
related to our industry's activities, and also have potential overall
negative impacts on the environment because we would likely import more
oil from other countries that may have less stringent environmental
standards.
Stringent regulatory oversight in the US helps maintain
environmental performance. Offshore operators operate under 17 major
permits and must follow 90 sets of federal regulations.
In accordance with National Environmental Policy Act (NEPA), the
Minerals Management Service prepares environmental documents on lease
sales and other major exploration and production related activities to
be informed on environmental consequences of their decisions. For
example, environmental impacts of seismic acquisition in the OCS are
addressed in Environmental Impact Statements. Mitigation and monitoring
requirements are determined during consultation processes with US Fish
and Wildlife, National Marine Fisheries Service and state Coastal Zone
Management agencies.
The MMS strictly governs well drilling programs. The policies
followed by the industry and MMS regulations ensure that wells on the
US OCS are cased, cemented, protected with internal plugs and monitored
to prevent problems during drilling of wells. The United States has the
most effective oil spill prevention and response regime in the world.
The OCS leases produce about 1.4 million barrels of oil per day. MMS
calculates that since 1980 less than 0.001% of the oil produced in the
OCS has spilled. Natural seepage of oil from the ocean floor is much
greater.
Industry's performance during Hurricanes Katrina and Rita
demonstrated the success of the environmental protection built into
offshore operations. MMS estimates 3,050 of 4,000 Gulf platforms and
22,000 of 33,000 miles of pipelines were in direct paths of the storms.
About 115 platforms were destroyed and over 50 others damaged. There
was no loss of life and there were no significant oil spills from OCS
facilities.
In addition, Federal lease sales include a 5 Year plan with both
draft and final environmental impact statements and solicitation of
public comment no fewer than three times. The Federal Lease Sale
planning process is public lengthy and elaborate.
We are very concerned about reducing lease terms and in a letter to
Mr. Marshal Rose, Chief, Economics Division, Minerals Management
Service, on November 24, 2009, BP urged the Minerals Management Service
to reconsider its proposal to reduce lease terms in oil and gas Lease
Sale 213 for the Central Gulf of Mexico Planning Area to be held March
17, 2010 (letter is attached herein). Stable and predictable leasing
structures have encouraged significant investments which have led to a
dramatic increase in production in the past decade. Today the GoM
accounts for almost one quarter of the oil produced in the United
States. Key to the success has been a stable leasing program, including
lease terms that do not change from one sale to another.
We believe that the proposed reduction of lease terms could produce
serious unintended consequences. The proposal will likely impact the
overall attractiveness of the GoM in comparison with other areas around
the world. If the region becomes less attractive for investment, this
will result in reduced revenues to the US. Furthermore, limiting the
terms of leases in water depths of up to 1600 meters likely will result
in the drilling of fewer exploration wells. We also believe that the
proposed changes could result in production of less oil from fewer
deepwater projects, not more. This will cause the US to import more oil
from other locations where environmental laws are less stringent. The
US balance of trade would also be negatively impacted with fewer jobs
created and US energy and national security could be undermined.
Policies that drive companies to drill additional wells merely to
retain leases or extend shortened lease terms will result in a waste of
resources simply for the purpose of extending the term of the lease.
This is inconsistent with the Congressional declaration of policy found
in the Outer Continental Shelf Lands Act, particularly Congress' stated
policy of ``. . .expeditious and orderly development, subject to
environmental safeguards, in a manner which is consistent with the
maintenance of competition and other national needs. . .'' This could
lead to inefficiencies in the GoM drilling sector and unnecessary
environmental risks.
Due in large part to advances in seismic imaging, deepwater
drilling technology and production systems technology, the industry is
able to explore previously inaccessible areas of the Outer Continental
Shelf. New supplies are harder to find, more difficult and more
expensive to extract and take much more time and resources of all kinds
to bring online, not less. As a result, we need a more flexible leasing
program to support safe and reliable oil and gas development in the US
OCS, not one which is more restrictive.
Question 4. While EIA has said that increased domestic offshore oil
and gas production would not result in meaningful energy price
differences for Americans, do you think that a major ramp up of
development in the Atlantic, Pacific, Eastern Gulf, and Alaska OCS
would send a market signal that could, in fact, affect world price of
oil?
a. Is the analysis the same for natural gas prices as oil,
even though natural gas is not based on a world price?
Answer. The market impact of developing areas of the OCS currently
closed to development would ultimately depend on the volumes of oil
(and natural gas) discovered and produced. Based on official data, the
National Petroleum Council estimated in 2007 that undiscovered,
technically recoverable resources in Federal OCS moratoria areas
amounted to 17.8 billion barrels of oil and 76.5 Tcf of natural gas,
which the NPC estimated could support production by 2025 of 1 Mb/d and
3.8 bcf/d, respectively. (NPC Hard Truths, tables 2-12 and 2-13)
New discoveries could begin to impact prices even before production
started if they contributed to changing market expectations of short-
and long-term future supply availability. Moreover, the market impact
could be amplified if opening OCS acreage to development were part of a
larger energy policy package aiming to increase domestic production,
slow demand growth, and increase the flexibility of the US and global
economic systems to deal with changing market circumstances. The market
impact would also be affected by the reactions of consumers and
producers alike to the changing supply prospects signaled by such an
opening.
While there is not an integrated global natural gas market,
regional markets have become increasingly linked in recent years. And
US natural gas prices would be likely to efficiently reflect the market
impact of any new supplies that resulted from a lifting of OCS
moratoria.
Question 5. Senator Menendez indicated that not only would price be
unaffected by increased domestic offshore drilling, but that
``production'' would be unaffected by increased domestic offshore
drilling. Is it accurate to say that increasing production would have
no effect on energy security?
Answer. The market impact of increased domestic offshore drilling
would ultimately depend on the volumes of oil (and natural gas)
discovered and produced. It is true that oil is a global market--and
the US natural gas market has become more linked to other regional gas
markets--so developments here must be assessed in a global context.
That said, an increase in domestic oil and natural gas production that
resulted from an increase in offshore drilling would be likely to have
an impact. The extent of that impact would depend on the additional
volume of oil and natural gas produced; the impact on market
perceptions about short-and long-term supply availability; and the
reactions of other market participants to these changes.
Given the global nature of the oil market--and the increasingly
linked nature of natural gas markets--import independence would not
totally isolate the US from energy supply disruptions abroad. However,
increased domestic production would benefit the economy by creating
domestic jobs and by reducing the trade deficit. The National Petroleum
Council estimated in 2007 that opening Federal OCS moratoria areas to
development could attract a cumulative total of $98 billion in new
investment by 2025; create more than 130,000 (direct) jobs; raise $41
billion in federal royalties and $28 billion in federal income taxes;
and reduce the trade deficit by $145 billion. (NPC Hard Truths, table
2-13)
Question 6. Environmental stewardship has improved through
directional drilling and subsea tiebacks, among other improvements, as
I understand it. Can you describe your environmental record in terms of
exploration, development, and production for both Alaska and the Gulf
of Mexico?
Answer. The record of BP and the industry when viewed through a
historical perspective is one of extraordinary success both in the Gulf
of Mexico and Alaska. While we have had incidents, our objective and
aspiration is to have none. Any release of oil from our facilities is
unacceptable. Operations today include regulatory requirements for
blow-out preventers and also include multiple technological and
mechanical redundancies to ensure that releases do not occur and the
environment is protected. In addition, inspection and maintenance
programs ensure that facilities are regularly monitored to prevent
incidents and releases from occurring.
Question 7. Seismic data acquisition has also improved over the
years. Please describe any environmental benefit that may be conferred
as a result, and feel free to discuss any additional benefits to the
OCS program through this technology.
Answer. Seismic imaging allows us to predict the presence of
hydrocarbon reservoirs below the sea bed. BP's Wide Azimuth Towed
Streamer (WATS) and Ocean Bottom Node technologies involve truly three-
dimensional seismic acquisition and help in improvement of imaging
below salt and other complicated geology. These acquisition
technologies have been adopted industry-wide in the Gulf of Mexico.
Additionally, improvement in seismic imaging in a producing field over
time helps in monitoring fluid movement. As a result, we as an industry
will be more efficient, drill fewer wells, and have less impact on the
environment as we become better at predicting the presence of oil and
gas in the subsurface.
This ability to more clearly see the reservoir increases drilling
success. Fewer wells drilled to find and develop a reservoir lead to
incrementally less emissions per barrel of oil produced from drilling
and its logistical support operations. That means less discharges to
air and water and fewer solid wastes. And energy efficiency per barrel
of oil produced is improved.
Increased seismic success in the OCS results in more barrels of oil
and gas produced domestically which can have environmental benefits.
This provides energy closer to the end user reducing air emissions and
fuel consumption from transporting imported oil. This lessens the
carbon footprint for the same barrel of oil and risks from transporting
oil via tankers.
Furthermore, BP has developed the attached OCS resources assessment
document which we feel will assist policy makers in trying to
understand the issues government and industry should consider as it
contemplates opening new areas.
Question 8. How are competing uses in the offshore areas dealt with
currently under existing laws and regulations--does this work and are
changes needed?
Answer. The Minerals Management Service process has proven to be an
effective, deliberate public process that provides area residents and
other users of the OCS with extensive opportunities for comment and
consultation.
Draft and final environmental impact statements are
prepared, soliciting public comment.
MMS holds scoping sessions and public hearings in local
communities during the stages in the lease sale planning
process.
These are supplemented with numerous formal and informal
contacts and consultations with various stakeholders.
Effective multiple-use planning continues when leases are
awarded as companies seek approval for exploration plans,
consulting with potential affected communities.
Policy needs to allow for true multiple uses, encourage cooperative
efforts that engage all stakeholders, including industry and commercial
users, and consider all benefits that the United States and its
communities derive from oceans, lakes and coasts.
National policy should be built on extensive region and local
stakeholder investment already in place. For example, BP already
participates in a number of voluntary efforts with stakeholders in
areas it operates including (but not limited to):
Numerous consultation and coordinated research efforts with
communities and sustenance resource users in Alaska;
Participation in the Gulf of Mexico Foundation, founded to
help protect the health and productivity of the Gulf;
And the SERPENT Project which facilitates scientific
research with academia using industry resources.
All oil and gas development projects in the OCS go through a
permitting process that involves multiple agencies at the local, state,
and federal levels. Nearly every state and federal permit process
requires, at a minimum, public notice. Direct consultation with
communities and stakeholders is an agency requirement for more complex
projects, including those requiring an environmental impact statement.
For example, in Alaska, BP's development projects require approvals
from the Borough's Planning Department, Planning Commission and
Assembly and this also includes consultation with key communities and
subsistence hunters. BP Alaska's Liberty project provides a recent
example of the extensive nature of these consultation requirements. In
order to develop the Liberty field, the company was required to obtain
over 25 major permits. These include: federal permits (e.g., U.S. Army
Corps of Engineers wetlands fill, U.S. Fish and Wildlife Service marine
mammal authorization, and U.S Environmental Protection Agency camp
wastewater permit), state permits (e.g. Alaska Department of Natural
Resources land use and water use permits, Alaska Department of
Environmental Conservation air quality permit) and Borough permits
(rezoning and master plan approval). For each of these there was a
formal public consultation requirement as part of the permit approval
process. This included public notice, public meetings, and federal and
state government consultations.
BP takes a proactive role in this consultation. In the case of the
Northstar EIS process, we recognized the critical role the Borough
would have in overall project review, and we insisted the Borough be
involved in the planning and preparation of the EIS for Northstar by
making them a cooperating agency. In designing our environmental marine
mammal monitoring, BP works closely with the Borough with an extensive
peer-review process lasting several days. Along with federal agencies
such as the Minerals Management Service and the National Marine
Fisheries Service, the Alaska Eskimo Whaling Commission, individual
hunters and Borough staff are very involved in these meetings and offer
very detailed comments.
Borough officials have ongoing access to our facilities and
periodically meet with BP on matters relating to Borough jurisdiction
and concern. Planning Commission members are invited to visit the field
and are regularly updated on activities and issues. BP also goes beyond
the required legal or regulatory requirements for consultation and
pursues a healthy, ongoing working relationship with the North Slope
community. Some examples are:
Since the mid 1980s when BP has had a need to conduct any
activities in offshore waters during later summer and fall, BP
has negotiated annual Conflict Avoidance Agreements with the
Alaska Eskimo Whaling Commission and key whaling captains
associations of villages closest to our activities. The CAA is
an agreement to minimize the potential for conflicts and
negative impacts between subsistence hunters and industry
operators and includes mutually agreed upon mitigation
measures.
BP shares scientific data with the Borough and participates
in scientific working groups.
A company policy (``The Good Neighbor Policy'') designed to
mitigate the potential effects in the event of a large offshore
oil spill related to the Northstar facility
Responses of David Rainey to Questions From Senator Dorgan
Question 1. Earlier this year in this committee, I proposed an
amendment which is one of the primary reasons for the oversight
hearing. Through my approach, the MMS would be authorized to go through
a rulemaking process to issue regulations and would consider a range of
local and other conditions during that process. In federal waters, the
Secretary would establish zones which would determine what kind of
restrictions would be placed on surface activities. The onus is then
placed on individual companies to develop innovative technology
solutions in those zones. Renewable development (i.e. wind turbines
offshore) and previously existing oil and gas projects would be exempt.
I believe that if we could pursue this approach, it is possible to
deploy innovative technology applications to limit the environmental
footprint and significantly reduce the visual impact while increasing
access to resources.
Given your company's experience with projects in other regions and
the testimony that you have presented, do you believe that this is a
concept that you could support?
Answer. BP fundamentally believes that it is possible to deploy
innovative technology applications to limit environmental footprints
and reduce visual impacts while increasing access to resources. BP
supports a pragmatic approach to offshore energy development. Our
experience--at Wytch Farm, in the environmentally sensitive Poole
Harbor area of southern England and the Liberty Project in Alaska--
clearly demonstrates that these objectives can be achieved through
innovative technology solutions.
Question 2. The extended reach drilling from onshore as a part of
the Poole Harbor/Wytch Farm Field in the U.K. seems particularly
interesting to me. You have effectively been able to use technology to
drill 11 kilometers offshore in a very ecological sensitive location.
As you explain, over 100 wells have been drilled so far.
Answer. Wytch Farm has been developed by BP to be Western Europe's
largest known onshore oil field in one of the most environmentally
sensitive areas of the UK. It is an Area of Outstanding Natural Beauty,
featuring: Sites of Special Scientific Interest (SSSI), Special
Protection Areas, World Heritage Coastline, Ramsar Sites (designated
wetlands of international importance), National Trust land, National
Nature Reserves.
Development has been achieved through close co-operation and
openness with the surrounding communities. Local liaison committees
were formed to consult fully with all statutory and non-regulatory
bodies and local residents are kept informed of relevant activities.
Careful consideration was given to the levels, shape and general
arrangement of the developed area and the siting of the operating
equipment, with the various above-ground permanent facilities designed
to blend into the existing landscape.
As a result of the area's ecological importance, BP vigorously
applied its environmental protection policy, establishing a monitoring
program covering 23 studies, from archaeology and seabed ecology, to
surveys of the wintering bird population, reptile communities and the
red squirrel colony on Furzey Island, to the health of heathland, reed
beds and saltmarshes. The results of these surveys were vital in
determining both how to develop the oilfield and in providing baseline
data against which BP could monitor its performance.
Regular atmospheric monitoring around the oilfield facilities,
together with observation of lichens on nearby trees, indicate that the
air quality around existing well sites and the gathering station
generally suffers no adverse impacts from BP's activities in the area.
In recent years, BP has pioneered significant advances in extended
reach drilling techniques, which has brought considerable environmental
benefits to the development by enabling the furthest parts of the
offshore Sherwood reservoir to be drilled from an onshore site. Well
M16 set a new world record when it broke the 10km barrier in June 1999,
reaching a displacement distance of 10,728m, a total length of 11,278m
and a depth of 1638m. The drilling rig and ancillary equipment had a
comprehensive noise-control package installed to meet the strict noise
criteria imposed by Dorset County Council.
In 1995, the Wytch Farm Development won The Queen's Award for
Environmental Achievement in acknowledgement of the innovative,
technologically challenging and environmentally beneficial manner in
which the offshore section of the Sherwood reservoir was being
developed.
BP continues to manage an area of land around the site in order to
integrate Wytch Farm into the Purbeck countryside and to ensure that
due consideration is given to the ecology of the area for the life of
the oilfield.
development/facilities
There have been three phases of development at Wytch Farm, which
has a total of 98 wells, 63 producers and 35 injectors, operating from
10 sites.
export
The heart of the project is at Wytch Heath, the site of the
gathering station, where the crude oil and liquid petroleum gases
(LPGs) from the reservoirs are separated.
LPG is stored in 12 large steel vessels and is loaded into road
tankers and transported to the local market. A 16-inch diameter
pipeline exports up to 110,000 barrels of crude oil a day, 91km via the
Fawley Refinery across Southampton Water to Hamble Oil Terminal. Here
it is stored in five tanks before being exported by tanker.
At the gathering station there is a parallel 48km, 8-inch diameter
pipeline that was laid by BP on behalf of British Gas. It exports two
million cubic feet a day of methane/ethane to Sopley, north of
Christchurch, for feeding into the main domestic gas network.
fast facts
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Field description Wytch Farm oil field comprises three separate reservoirs that lie
under Poole Harbour and Poole Bay, in Dorset, South-west England.
----------------------------------------------------------------------------------------------------------------
Location 17 miles from Poole, Dorset
----------------------------------------------------------------------------------------------------------------
Block number PL089 (main onshore fields); PI259 (small onshore area under
sandbanks); 98/6 and 98/7 (Sherwood offshore)
----------------------------------------------------------------------------------------------------------------
Participants BP (Operator--67.5%), Premier (12.5%), Maersk (7.5%), ONEPM (7.5%),
Talisman (5%)
----------------------------------------------------------------------------------------------------------------
Discovered 1959-1978
----------------------------------------------------------------------------------------------------------------
Start-up 1979 (Stage I); 1990 (Stage II), 1994 (Stage III)
----------------------------------------------------------------------------------------------------------------
Average daily production (2007) 23,000 bpd oil; 6 mmscfd gas; 50 tonnes LPGs
----------------------------------------------------------------------------------------------------------------
Peak production 1997--110,000 bpd
----------------------------------------------------------------------------------------------------------------
Question 3. Can you tell me more about how this project came about?
How were local communities and governments engaged? What kind of
consultative process was undertaken before the project began? What
kinds of policies were put in place to meet the strict environmental
conditions? Do you think that this approach is something that could be
employed in the U.S. federal OCS?
Answer. See response to previous question. Yes, the approaches that
were taken at Wytch Farm and which are being take at our Liberty
project in Alaska could certainly be employed in the US federal OCS.
Response of David Rainey to Question From Senator Menendez
Question 1. I think that the environmental integrity of offshore
oil operations should not be limited to what happens on platforms.
Pipelines, tankers/barges and onshore facilities--all necessary for oil
production--are also at risk for spills. In March 2006 the largest
crude oil spill in the history of North Slope operations brought
national attention to the chronic problem of spills. BP was fined $20
million including criminal penalties and probation for knowingly
neglecting corroded pipelines. As a result, the federal government and
the State of Alaska have filed separate lawsuits against BP. In 2007 BP
shut down Northstar oil field, which lies six miles offshore of the
Prudhoe Bay field in the Beaufort Sea, after a worker noticed a leak in
some pipe. What has BP learned from these experiences and how can you
assure us this problem will not happen again?
Answer. In 2006 BPXA set up the Technical Directorate to provide in
addition to other roles integrity management capability and oversight
of North Slope operations with respect to engineering standards,
operating systems development and corrosion management. Over the past 3
years, this team has successfully introduced a new corrosion control
strategy, doubled the size of the corrosion, inspection and chemicals
group, and implemented a new BP Operating Management System. These
actions have made a significant improvement to the integrity of our
facilities and operating systems.
Responses of David Rainey to Questions From Senator Sessions
Question 1. In your opinion, do shorter lease terms, an increase in
royalties, and an increase in taxes play a part in determining which
country your company with produce?
Answer. Lease terms, royalty rates and taxes all play a critical
role in determining how BP approaches investment decisions around the
world.
BP is especially concerned about what we see as a trend toward
higher levels of government take. This includes recent increases in
royalty rates on leases across the GoM, new taxes on GoM production
being contemplated by Congress and the administration, and escalating
rental rates. These actions, when combined with a reduction in lease
terms, have the undesired effect of decreasing the competitiveness of
the GoM.
We believe that a reduction of lease terms as recently proposed by
MMS could produce serious unintended detrimental consequences. The
proposal will likely impact the overall attractiveness of the GoM in
comparison with other areas around the world. If the region becomes
less attractive for investment, this will result in a reduction in
revenues to the US Treasury from lower bonus bids on leases, reduced
rental payments and lower royalties. Furthermore, limiting the terms of
leases in water depths up to 1600 meters will likely result in the
drilling of fewer exploration wells. We also believe that the proposed
changes could result in production of less oil from fewer deepwater
projects, not more. This will cause the US to import more oil from
other locations where environmental laws are less stringent. The US
balance of trade would also be negatively impacted, fewer jobs will be
created, and US energy and national security could be undermined.
To encourage continued success with domestic energy development, we
must have stable leasing, fiscal, and regulatory policies. They are
critical to continuing investments which create jobs, generate revenues
and enhance US energy and national security.
Also please see attached comments submitted by BP on the Notice of
Lease Sale 213 proposal to reduce lease terms for leases in the Gulf of
Mexico:
Question 2. The oil and gas industry directly and indirectly employ
9.2 million people, so could someone explain to me why with double
digit unemployment numbers are we not moving forward with increasing
domestic production and employing individuals here at home?
Answer. The oil and gas industry does directly and indirectly
employ over nine million people in the US. We believe that increasing
access to new areas would have a significant stimulative impact on the
domestic employment situation. In the energy industry, the best way to
increase investment and create new jobs is to promote policies which
open new areas to exploration and development. The US government can
play an important role in this respect. The impact of such policy
proposals would be to create jobs in a multitude of areas, including
oil and gas exploration, development and production, pipeline
manufacturing and construction, equipment manufacturing, offshore
service sector expansion, natural gas plant construction and
installation, as well as the service sectors which support these
activities. While many of the jobs would be construction related, a
significant number would sustained by an expanding industry.
Question 3. In total, the OCS development has generated $190
billion in federal revenue from bonus bids and royalty payments. Its
puzzles me with record breaking deficit numbers, why the 5 year plan
for OCS is getting delayed when it could produce federal revenues. Does
anyone have an opinion on this?
Answer. BP believes that the current MMS Five-year leasing program
is robust and should continue as originally outlined. Furthermore, we
support the proposed 2010-2015 Five-year plan and would like to see it
move forward expeditiously so that the US can begin to enjoy the
economic and energy benefits that come from opening new areas.
Question 4. What is the role of the National Oceanic and
Atmospheric Administration (NOAA) in OCS development? NOAA
Administrator Lubchenco sent a letter to MMS dated September 21, 2009,
which also appeared the LA Times commenting on the OCS proposed 5 year
plan--2010-2015. However, NOAA later claimed it was an unofficial
letter. How is MMS bound or inclined to react to this letter's
contents?
Question 5. How many agencies does an oil and natural gas company
have to deal with to produce from a federal offshore lease? Does this
number of different and competing bureaucracies make operations in the
OCS more efficient or less efficient?
Answer. The Department of Interior, through the MMS, is charged
with implementation of the OCS Lands Act. Many other agencies regulate
activity on the OCS, including a number of federal and state agencies
responsible for implementing laws and regulations relating to the
protection of the environment and marine life. These laws, and the
agencies charged with their oversight, are able to assure adequate
oversight and rigor with respect to safety and the environment on the
OCS.
Among the laws designed to address those concerns are Coastal Zone
Management Act, National Environmental Policy Act, Rivers and Harbors
Act, Clean Water Act, Oil Pollution Act, Clean Air Act, Noise Pollution
Control Act, Comprehensive Environmental Response, Compensation, and
Liability Act, Resource Conservation and Recovery Act, Endangered
Species Act, Marine Mammal Protection Act, Migratory Bird Treaty Act,
Magnuson-Stevens Fishery Conservation and Management Act, National
Fishing Enhancement Act, as well as acts designed to protect historical
and ecologically important resources, including the National Marine
Sanctuaries Act, Antiquities Act, Abandoned Shipwrecks Act,
Archeological Resources Protection Act, and National Historic
Preservation Act.
In addition to the MMS, other federal agencies and departments
having influence on operations on the OCS are: Department of
Transportation, Department of Homeland Security (Customs and Border
Patrol, U.S. Coast Guard), Department of Commerce (National Oceanic and
Atmospheric Administration, National Marine Fisheries Service),
Department of Interior (Fish & Wildlife Service), Department of the
Army (Corps of Engineers), Federal Energy Regulatory Commission (FERC),
Environmental Protection Agency (EPA), Department of Labor,
Occupational Safety and Health Administration.
State agencies involved in OCS operations include: Departments of
Natural Resources, Offices of Conservation, Departments of
Environmental Quality, State Mineral Boards, State Land Offices,
Railroad Commission, and various local government entities.
Question 6. We've heard the U.S. ranks very high in environmental
stewardship. How high does the U.S. rank in terms of applying its
stewardship policies in such a way as to provide certainty to the
process of leasing and developing the OCS?
Answer. The United States has well developed and understood
environmental laws and regulations which have directed leasing and
development in the OCS for many decades. US OCS environmental
regulatory programs are looked at as models by some countries new to
offshore energy development.
The National Environmental Policy Act (NEPA) has provided the
framework for environmental policymaking since 1969. Minerals
Management Service (MMS) produces NEPA documents for each of the major
stages of energy development planning--from the overarching 5 Year
Leasing Program EIS, through each of the NEPA documents for the energy
lease sales, exploration, development and production plans. The MMS
Environmental Studies Program has conducted environmental research in
support of the NEPA process for over 35 years. Federal and state
agencies participate in the NEPA process as cooperating or consulting
agencies. And public comment is an important part of the process.
Stewardship is recognized as high in part because of the
comprehensive nature of the NEPA analysis. Environmental, biological,
archaeological, socioeconomic, and geological conditions or potential
conflicts, or other information that might bear upon the potential
leasing, exploration, and development of the program area and vicinity
are considered and addressed. The NEPA process used for leasing and
development aides in delivering certainty by providing a balanced forum
for early identification, avoidance, and resolution of potential
conflicts.
Attachment I.--Outer Continental Shelf (OCS) Resource Assessment
Proposal
may 1st, 2009
Congressional and Administration officials have called for an
updated resource assessment of the US Outer Continental Shelf (OCS). By
far, the most powerful tool in assessing oil and gas potential on the
OCS is marine seismic data. Current resource assessments are based on
data which were acquired 20 to 30 years ago. Seismic technology has
improved dramatically in the intervening period, as has the
understanding of deepwater exploration potential. New data will provide
valuable insights into the crustal structure and geology of the OCS,
and help to "refresh" existing geophysical and well log databases.
New seismic data is the enabling technology to help both
government and industry deliver timely and more accurate
resource assessments on which to base a new MMS Five-year
Leasing Plan.
Seismic acquisition programs should be scaled appropriately
for the different phases of evaluation in order to minimize
costs and environmental impacts. For example:
--A logical first step is to acquire low-density, two-dimensional
(2D) regional seismic data via an Environmental Assessment
(Note: An EA determines if significant impact may occur
requiring an Environmental Impact Statement)
--Areas with greatest exploration potential would be high-graded,
and subsequently, high density 2D or three dimensional (3D)
seismic would be acquired in focused areas where
prospectivity is demonstrated. Such activities would be
part of a Programmatic Environmental Impact Statement
(PEIS), which could take up to two years to complete and
cover multiple Geophysical & Geological (G&G) activities.
PEIS should be undertaken in a timely manner along the East
and West Coasts in support of future exploration activity.
If required, a Steering Board of government and industry
experts could be formed to guide the design and development of
the seismic acquisition. This would ensure government access
to, and input from subject matter experts.
Regional framework and 2D seismic
To the best of our knowledge, no significant industry seismic data
has been acquired off the US East Coast in 30 years, West Coast and
south Alaska in over 20 years. A regional 2D, long record length (to
enable deep imaging) sparsely spaced seismic grid will provide much-
needed and timely data to enable an improved and updated resource
assessment. This data will serve to ``refresh'' and tie existing
vintage seismic data, provide insights into deep crustal structure and
will enable us to better tie existing seismic datasets into a common
framework.
Figure 1* is an example of a ``vintage'' 2D seismic section
compared with a modern (2006) 2D section. These sections are a cross
section, or vertical slice, through an offshore basin. Please note the
detailed geology revealed in the modern 2006 section, where the deeper
geology reveals both insights into the crustal structure as well as a
new play type.
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* All figures have been retained in committee files.
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Timing: This type of survey can be obtained under an Environmental
Assessment. This would enable the acquisition of new data within 6-12
months, beginning as early as 3Q 2009.
Funding model: Industry could fund the low-density 2D program as a
speculative seismic shoot and data would be provided at no cost to MMS
by the seismic contractor.
Survey Design: Wide spacing (a seismic line every 50-100 miles).
Potential Environmental Impacts: Wide seismic line spacing
minimizes environmental impacts. Impacts will be addressed in the
Environmental Assessment and Incidental Harassment Authorization (IHA).
Mitigation and monitoring requirements will be identified during
consultation processes with US Fish and Wildlife, National Marine
Fisheries Service and state Coastal Zone Management agencies. Typical
mitigation during seismic acquisition includes marine mammal observers,
ramp up procedures and exclusion zones.
Resource assessment
Regional evaluation enables geoscientists and engineers to generate
an updated resource assessment of the oil and gas potential of the OCS.
This will help focus further exploration activity in the most
prospective areas and down-grade/eliminate other areas, thus reducing
overall cost and environmental impacts of an offshore leasing program.
New seismic data, combined with global exploration insights gained over
the past 3 decades, will certainly reveal new exploration concepts. A
Steering Board of subject matter experts, as mentioned previously,
could be utilized to ensure robust seismic acquisition.
Forward timeline, data requirements and links to a 5 year plan
In the MMS draft 2010-2015 5 year plan, East and West Coast area-
wide sales will begin in 2012. Area-wide Programmatic Environmental
Impact assessments for the East and West OCS (including S. Alaska)
could be initiated as early as mid-2009, and would require at 18-24
months for completion. While a PEIS could not be in place for a timely
regional assessment of offshore oil and gas resources, this would
provide a robust environmental assessment in support of future focused
2D or 3D seismic.
New regional seismic, coupled with existing seismic, will not be
sufficient to define prospects in all areas of the OCS. However,
process of high-grading on sparse, widely spaced data, then focusing
dense 2D or 3D seismic over the most prospective areas is a typical
practice of the petroleum industry. This process is efficient in terms
of time, cost and environmental impact, because it focuses activity
into only those areas that are deemed as prospective. This could be
funded as a "speculative" seismic project, where a number of companies
share the costs. The data is owned by the acquiring geophysical
company, shared with the MMS and can be purchased by any interested
party.
Attachment II.--BP Comments
BP America Inc.,
Gulf of Mexico Exploration,
Houston, TX, November 24, 2009.
Mr. Marshal Rose,
Chief, Economics Division, Minerals Management Service (MS-4050), 381
Elden Street, Herndon, VA.
Subject: Comments on the Proposed Changes in Lease Terms, Proposed
Notice of Sale 213, Central Planning Area, Gulf of Mexico
Dear Mr. Rose: The Minerals Management Service (MMS) has proposed
that oil and gas Lease Sale 213 for the Central Gulf of Mexico (GoM)
Planning Area be held March 17, 2010. The Proposed Notice of Sale 213
published in the Federal Register on November 16, 2009 includes a
revision of lease terms for the blocks in water depths of 400 meters to
less than 1600 meters. Under the proposal, blocks in 400 to 800 meters
are proposed to change from an 8-year lease term to a five-year initial
lease term, where commencement of an exploratory well would extend the
lease term to eight years. Furthermore, blocks in 800 to less than 1600
meters are proposed to change from a ten-year initial lease term to a
seven-year initial lease term, where commencement of an exploratory
well would extend the lease term to ten years.
Retain current lease terms
BP America strongly supports a continuation of the regular leasing
program in the central and western GoM--the region has been safely and
reliably producing oil and natural gas for the nation for over 50
years. However, we are very concerned about reducing lease terms. We
urge MMS to reconsider this proposal. We believe the appropriate
approach is to retain the current lease term structures for these
waters because they have served the US Government and industry well.
Stable and predictable leasing structures have encouraged significant
investments which have led to a dramatic increase in production in the
GoM over the past decade. Today, the GoM accounts for almost one
quarter of the oil produced in the US. Key to the success has been a
stable leasing program, including lease terms that do not change from
one sale to another.
Potential for significant unintended consequences
We believe that the proposed reduction of lease terms could produce
serious unintended detrimental consequences. The proposal will likely
impactthe overall attractiveness ofthe GoM in comparison with other
areas around the world. If the region becomes less attractive for
investment, this will result in a reduction in revenues to the US
Treasury from lower bonus bids on leases, reduced lease rental
payments, and lower royalty payments. Furthermore, limiting the terms
of leases in water depths up to 1600 meters will likely result in the
drilling of fewer exploration wells. Fewer exploration wells will
result in fewer discoveries, fewer development projects, and less
production. This will cause the US to import more oil from other
locations where environmental laws are less stringent. The US balance
of trade would also be negatively impacted, fewer jobs will be created,
and US energy and national security could be undermined.
Policies that drive companies to drill additional wells merely to
retain or extend shortened lease terms will result in a waste of
resources simply for the purpose of extending the term ofthe lease.
This is inconsistent with the Congressional declaration of policy found
in Sec. 1332 of the Outer Continental Shelf Lands Act, particularly
Congress' stated policy of ``. . .expeditious and orderly development,
subject to environmental safeguards, in a manner which is consistent
with the maintenance of competition and other national needs. . .''
This could also lead to inefficiencies in the GoM drilling sector and
unnecessary environmental risks.
GoM complexity demands regulatory flexibility
The GoM is one of the most complex oil and gas basins in the world.
This complexity is demonstrated by very deep, subsalt, high pressure
and high temperature reservoirs that are currently being explored and
appraised. It was not until earlier in this decade that the industry
was able to position exploration wells and appraise discoveries in
complex subsalt and high pressure strata. The complexity of the
subsurface requires long periods of time to acquire and process
seismicim ages before being able to safely design and execute wells
which today take at least a year to plan. Therefore, past experiences
regarding the timeframes from lease acquisition to the first
exploration well are not appropriate analogues for the present and the
future.
Water depth should not be the only driver
We believe that water depth should not be the primary driver of
lease terms. More often than not, it is the subsurface difficulties
associated with imaging and drilling designs that require industry to
need more time to image, plan, and execute the drilling of deep water
wells. We believe this fact is recognized by MMS, and especially so in
the deep water and ultra deep gas plays on the shelf. MMS has issued
Notices to Lessees and Suspensions of Operations regarding the
evaluation, planning and drilling of ultra deep gas wells on the shelf.
In doing so, MMS has acknowledged that these operations are as
challenging as those in the deep water even though the leases are in
less than 200 meters of water.
Technology challenges require time to overcome
Industry has always operated on the cutting edge of technology.
This is more the case today than ever before. Due in large part to
advances in seismicim aging, deep water drilling technology and
production systems technology, the industry is able to explore
previously inaccessible areas of the GoM. The chalenges of operating in
deeper water, subsalt, and at higher temperatures and pressures are
extraordinary. The fact remains, new supplies are harder to find, more
difficult and more expensive to extract and take much more time and
resources of all kinds to bring online, not less. These facts call for
a more flexible leasing program , not one which is more restrictive.
Drilling costs are increasing
Today, exploration wells cost between $100 and $250 million each
and take several years to plan and execute. On average, only one in
three exploration wells will find sufficient commercial quantities of
oil and gas to develop. When discoveries are made, the projects that
bring them to production often require the development of new
technology. These projects are hugely expensive and require many years
to deliver. This said, the projects are being delivered with a safety
and environmental record that would be the envy of any industry.
Next generation of discoveries will require more time
The next generation of discoveries in the GoM will require more
time and more investment to move from discovery to production. Today,
exploration wells in the GoM target reservoirs lying as much as 6 to 7
miles below sea level. Water depth is just one element of increased
complexity. Subsurface challenges associated with seismic imaging and
drilling designs have an even more significant impact on the time and
investment required. As the remaining resources become increasingly
difficult to discover, and more challenging and expensive to develop,
stable and predictable leasing, regulatory, and fiscal regimes will
continue to be important to successful oil and gas resource
development.
Ten year lease terms are critical
Today, the significant amount of uncertainty involved, and the
technology and investment required justify the full 10-year lease term.
As we move to deeper and more chalenging environments, whether they be
on the shelf or in deepwaters, there is no reasonable logic for shorter
lease terms.
Kaskida example
With more difficult to image and deeper prospects our recent
successes like Kaskida clearly demonstrate that it may take a full ten
years from the initial lead identification and lease acquisition to
drill the exploration well . It took ten years for us to produce a
seismic image of sufficient quality to safely plan and execute the
exploration well at Kaskida (see timeline below).* We believe this will
be a typical timeline for many future GoM prospects.
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* Graphic has been retained in committee files.
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New play concepts will be discouraged
The current ten-year lease term for deepwater areas of the GoM
enables industry to adequately evaluate new play concepts. Examples
include recent success in assessing the Paleogene/Lower Tertiary plays
where industry has discovered billions of barrels of oil and gas in-
place. New play concepts require sufficient time, investment and
technology to be properly assessed and tested. Often, one well is
selected to test a play concept; however, there is a group of related
prospects on other leases which are dependent upon the outcome of the
play test. If lease terms are reduced, the incentive to pursue new play
concepts will be severely diminished as industry will be less likely to
test a single prospect in a new play if they do not hold a portfolio of
leases with ``follow-on'' prospectivity.
Hub developments
While conventional plays in the GoM mature, field sizes are
decreasing. As a result, in order to make a discovery economically
viable it is often required that multiple discoveries are tied together
into a single hub, or production facility. Such circumstances require
that industry has the time and flexibility to mature each of these
opportunities individually. This concept is demonstrated by BP's Nakika
development, which includes six separate fields tied together into a
common host/hub facility. None of these fields was economic on its own.
However, the hub concept enabled collective development. Under the
proposal, industry will be discouraged from pursuing such opportunities
because ofthe lack of time available to fully explore and appraise
multiple fields.
Escalating rental rates
The Notice also includes new, escalating rental rates for leases in
the GoM. BP is concerned about what we see as a trend toward higher
levels of government take. This includes recent increases in royalty
rates on leases across the GoM, new taxes on GoM production being
contemplated by Congress and the administration, and escalating rental
rates. These actions, when combined with a reduction in lease terms,
have the undesired effect of decreasing the competitiveness of the GoM.
We urge MMS to retain the existing rental rate structure.
Conclusion
Technology has been, and will continue to be, the key to our energy
future. We must continue to invest in exploration and production
capability, and in technology to meet demand. We must also continue to
develop technologies to increase recovery of oil and gas from
established hydrocarbon positions in the US. To encourage and ensure
continued success, we must have stable leasing, fiscal, and regulatory
policies so that the oil and gas industry can continue to maintain
investments which create jobs, generate revenues and enhance US energy
and national security.
BP appreciates the opportunity to comment on the Proposed Notice of
Sale 213. In order to enhance the nation's economic, energy, and
national security, the U.S. clearly needs to aggressively expand
offshore access and open all available areas to oil and gas leasing,
exploration and development, rather than limiting the opportunities by
reducing lease terms. A dramatic change in policy with regard to lease
terms, as proposed in the Notice, sends the wrong signal to industry
and undermines the confidence built in the leasing program overdecades.
Again, BP urges the MMS to reconsider this proposal and retain the
current lease term structure. We would welcome the opportunity to
further discuss our comments.
Sincerely,
David I. Rainey,
Vice President.