So again, Mr. Chairman, thank you for the commitment of time and energy of the professional staff, as well as my colleagues and their staff as we address this energy issue that's of such importance, not only to my State but the entire United States and our national security.

The CHAIRMAN. Thank you, Senator Murkowski.

Senator Hecht.

STATEMENT OF HON. CHIC HECHT, A U.S. SENATOR FROM THE STATE OF NEVADA

Senator HECHT. Thank you, Mr. Chairman. And I too thank you for having these hearings. Senator Murkowski has done a wonderful job talking for this bill. I think you have convinced a lot of us on the committee. I certainly am convinced we have got to move ahead and, like you said, we have got to move ahead very, very swiftly.

I am glad you are taking the lead, the initiative, and I am sure you will work out the right way to proceed.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Hecht.

Our first witness we would like to welcome, Assistant Secretary for Fish and Wildlife and Parks, William P. Horn, accompanied by

Mr. HORN. Mr. Cason, Deputy Assistant Secretary for Land and Minerals Management.

The CHAIRMAN. Very good. Welcome, Secretary Horn. We are glad to have you back here at the committee along with Mr. Cason. STATEMENT OF WILLIAM P. HORN, ASSISTANT SECRETARY FOR FISH AND WILDLIFE AND PARKS, DEPARTMENT OF THE INTERIOR, ACCOMPANIED BY JAMES E. CASON, DEPUTY ASSISTANT SECRETARY FOR LAND AND MINERALS MANAGEMENT

Mr. HORN. Mr. Chairman, thank you. I appreciate the opportunity to appear here before the committee today on behalf of Secretary Hodel.

I would like to express our sincere and deep appreciation to the committee for your prompt consideration of this issue. Such quick action is important because it is the judgment of our Department's geologists that the 1002 area of ANWR is the single best opportunity in the country to significantly increase our oil production and add to our diminishing reserve base in the future.

Moving on to the specifics rather quickly, the Secretary's recommendation section of the 1002 report outlined the principles which in our judgment ought to be contained in any ANWR opening legislation. We strongly support the intent of S. 1217 because it embodies many of these principles.

We recommend, however, several adjustments to the leasing program contemplated by that bill. Notwithstanding those recommendations, we strongly endorse the approach contained in that measure of providing authority for both exploration and production.

It has been suggested by some that Congress should authorize an exploration only program or a two-phased program requiring additional congressional or other decisions before permitting develop

ment of any discovered oil resources after the conclusion of an exploration program.

We believe these kind of approaches would be extraordinarily costly to the taxpayer and ultimately unworkable. History suggests that government agencies do not conduct an efficient and timely exploration program. Government agencies are simply not oriented towards large, high risk programs of this nature.

We must remember that, even in areas where oil is ultimately discovered, that many dry holes are usually drilled before deposits are found. And one of the best examples we can cite is that it took 10 wells to discover the very large structure that has produced the 9 billion barrels of reserves of Prudhoe Bay.

The odds are against any drilling effort making an early strike on a major deposit, even in a highly promising area like the 1002. As is indicated, the Government just is not organized to engage in these high risk activities.

In contrast, the entire structure of the oil industry is organized towards risk taking, and the existence of many companies participating in a leasing program ensures a wide range of prospects and geologic concepts are likely to be pursued by the private sector.

I would also point out that such an exploration-only approach would deprive us of significant revenues that could reasonably be expected to accrue from bonus bidding on leases allowing exploration and production of any discovered reserves.

We are persuaded that it is not unreasonable to expect receipts in the range of $2 billion to $4 billion from lease sales, and that is in terms of immediate up front bonus moneys, dollars generated, even if no oil is subsequently discovered.

However, if a Government drilling program does not find oil in a tract, the lease and bonus values of that tract and potentially neighboring tracts could plummet. We believe the disadvantages that would accompany an exploratory program would not justify transferring the risk accompanying the search for oil and gas from the oil companies to the American taxpayers or foregoing bonus royalties or revenues of this magnitude which would accrue to the Federal treasury whether or not oil is actually found.

Therefore, we strongly urge the committee to adopt the full leasing and development approach contained in S. 1217. We believe that that, coupled with the provisions assuring appropriate environmental protection, provide the best approach for this area.

Moving on to some of the suggested alterations in S. 1217 first we would recommend that Congress enact the stand-alone authority for oil and gas activities on the coastal plain, rather than add provisions to the Mineral Leasing Act of 1920 or the OCS Lands Act.

Such a measure should authorize the Secretary to pursue an orderly program for leasing the entire 1002 area. Because of the environmental and energy considerations unique to this area, we believe it is also important that Congress provide guidance expressly tailored to the area. Any legislation should carefully be crafted to achieve the dual goals of expeditious exploration and development of the oil and gas resources of the area and protection of its important fish and wildlife resources.

We stand ready to assist the committee in drafting legislation of this type. Along these lines, we recommend that this new statutory authority include a clear standard for protection of the fish and wildlife of the coastal plain and associated habitat.

After much internal review, we put forth a standard in the 1002 report, which was of "no unnecessary adverse effects." In developing that standard, we have defined unnecessary adverse effects to mean "those impacts likely to cause harm to fish and wildlife, their habitats or the environment, that can be reasonably avoided by theapplication of appropriate technology and engineering procedures, timing, and siting."

With this standard and the type of mitigation stipulations outlined in the 1002 report, oil leasing and production can be accomplished consistent with the natural resources of the area.

I think it is also important that we note the interplay of this prospective legislation with the Refuge Administration Act that presently governs administration of the area. And here we have a simple recommendation: One, that if Congress chooses to open the 1002 area, that it designate and make oil and gas exploration and development one of the primary purposes for which the area will be managed.

Secondly, we would recommend that the Congress consider deeming activities related to oil and gas that are consistent with a no unnecessary adverse effects standard to be compatible with the purposes of the refuge.

I think that this would work to make the stand-alone leasing program mesh very nicely with the Refuge Administration Act and permit management of the refuge to proceed in an orderly fashion, and also permit us to proceed in an orderly fashion to lease and explore this area for its hydrocarbon potential.

Moving from the general to the specific, the 29 mitigation measures contained in the 1002 report are attached to my testimony, and they represent the types of specific actions we would apply to a leasing development program. I should note that they are basically a starting point, and we will develop and propose site specific, more detailed stipulations for various activities in accordance with the general principles that would be developed during the NEPA process for any leasing activity that we would pursue.

Now, the operational stipulations for the well drilled on the KIC Arctic Slope lands, which have been previously submitted to the committee, are more extensive and detailed and give the committee an idea of how we would work with the industry on an on the ground basis to apply stipulations to protect the environment.

To give you some examples attendant to the well drilled there on the KIC property, we made them put together an oil derrick that could be laid down during foggy periods, to not only provide for human safety but to ensure minimal collisions with flying waterfowl in the foggy conditions that often affect the area.

There is a caribou proximity stipulation added that during the drilling that went on, particularly as we got more towards the end of the winter, into the spring, whenever animals, particularly pregnant cows, came within an appropriate or relative proximity to the well, drilling activities had to cease.

Of course, it goes without saying that one of the stipulations we would pursue would be winter operations only in terms of exploration, and all of the drilling and all of the seismic work that has been conducted generally gets done between November 1st and May 1st, when the area is frozen solid. People operate on temporary ice fields and ice roads, with no damage to the tundra.

Now, some of the particular stipulations that we have outlined and I think are important to note give some idea of the commitment the Department would have to ensuring that the environment in this area is protected, and would include:

Stipulation number 11, no surface occupancy at the important Sadler-Rochet Spring;

Stipulation number 16, which is general use of time and space surface restrictions to keep people and human activity out of particular areas during caribou calving or snow geese staging, when we know the animals use a particular locale;

Stipulation number 18, to ensure the re-injection of drilling muds and drilling wastes, to avoid some of the problems attendant to the late steventies technology used in Prudhoe Bay;

Stipulation number 20, noise limits within two miles of rapter nests so we do not adversely affect nesting golden eagles or peregrine falcons;

Stipulation number 29, to ensure that rehabilitation and restoration plans are part of our permanent approval process. This is to make sure that the footprint of human activities on the tundra will be temporal, even if we are fortunate enough to discover oil in the

area.

Now, one particular issue that has been of high concern has been related to gravel and water availability. As indicated by Senator Murkowski in his opening comments, the area can be classified as an Arctic desert, and so there has been some concern about will there be sufficient water available to permit activities to proceed in a safe fashion.

Related to that, of course, is where do we extract the gravel? There is ample gravel reserves on the 1002 area, but some of them are attendant to riparian zones and riverbeds, and there is concern about adverse impacts on fishery resources.

I direct your attention to recommended mitigation step number 5 in the 1002 report, which I quote:

Point 5. Prohibit gravel removal from active stream channels and major fish-bearing rivers, winter water removal from fish-bearing waters or springs and tributaries feeding into fish-bearing waters, spring, summer, or fall water removal from fishbearing waters to levels that will not easily pass fish or maintain quality rearing habitat.

We have been sensitive to this issue from the outset and would hope that any authority that is provided to lease the area would permit the Secretary to impose these types of restraints to ensure that the environment is duly protected.

In addition to the inclusion of our "no unnecessary adverse effects standard," we also recommend that the Secretary be given the authority to require no unnecessary duplication of surface facilities in the coastal plain and the Department be provided new stand-alone authority to subject requests for rights of way and fa

cilities siting to the same "no unnecessary adverse effects standard."

This will ensure that the development scenario designed for the 1002 area is the most coordinated and efficient possible consistent with environmental protection. It will also ensure that the footprint on the tundra from these activities is minimized.

We also believe that new leasing authority must contain certain unique provisions relating to the mechanics of an ANWR program. First, we would expect to conduct lease sales on a sealed, cash bonus bid, fixed royalty basis. We note that S. 1217 provides the Secretary the authority to use any of the bidding systems listed in the OCS Lands Act, and we have no objection to the provision of this discretionary authority.

We would also ask for authority to lease tracts larger than the 640 acre limitation on competitive leases that we have in the lower 48. We agree with the provision in S. 1217 that sets this size at 2560 and would like additional authority to exceed that size up to a total of 3,840 acres in order to accommodate odd-shaped tracts along boundaries.

Also, the development and marketing of oil and gas from the 1002 area is dependent upon the development of a transportation system and infrastructure to link up with Prudhoe Bay and the Trans-Alaska Pipeline. Any leasing authority should contain provisions permitting the Secretary to suspend the term of a produceable lease in general, and particularly pending construction of the necessary means for transporting the oil to market.

S. 1217 also adopts the final legislative EIS that was incorporated in the 1002 report as the necessary NEPA compliance for the development and conduct of lease sales, and requires such sales to take place within 12 months of enactment.

We have recommended and believe that the final legislative EIS should be adopted as the programmatic environmental impact statement for the leasing program. But we have committed and propose to comply with NEPA for each subsequent step of the process, be it leasing, exploration, or approval of production plans.

However, such NEPA compliance will require approximately 18 to 24 months after passage of authorizing legislation before the first lease sale could occur if there are no legal challenges further delaying matters. Accordingly, we would not be able to comply with the twelve month deadline contained in this legislation.

In order to prevent delays beyond the 18 to 24 months, we recommend that expedited judicial review provisions similar to those included in the Trans-Alaska Pipeline Authorization Act of 1973 be included or considered by the committee.

Lastly, we read the provisions of section 4 of the bill, S. 1217, as potentially limiting the applicability of Federal and state environmental laws. The Secretary has consistently stated that all applicable Federal laws should apply to leasing activities on the coastal plain.

Moreover, suspension of state laws would be contrary to the basic approach of this administration regarding Federal-State relations. We do not anticipate any problems working with the State of Alaska in this particular area.