Mr. Chairman, that concludes our comments on S. 1217. We look forward to working with you and the committee on this measure and would be pleased to answer any questions you all may have. [The prepared statement of Mr. Horn follows:] 81-660 0 - 88 - 2 TESTIMONY OF WILLIAM P. HORN, ASSISTANT SECRETARY FOR FISH AND WILDLIFE AND PARKS, DEPARTMENT OF THE INTERIOR, AND JAMES E. CASON, DEPUTY ASSISTANT SECRETARY FOR LAND AND MINERALS MANAGEMENT, DEPARTMENT OF THE INTERIOR, BEFORE THE SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES, REGARDING S. 1217, OIL LEASING AT THE ARCTIC NATIONAL WILDLIFE REFUGE October 13, 1987 Mr. Chairman, I am William P. Horn, Assistant Secretary for Fish and Wildlife and Parks of the Department of the Interior. With me today is James E. Cason, Deputy Assistant Secretary for Land and Minerals Management of the Department of the Interior. On behalf of Secretary Hodel, I would like to express our appreciation to the Committee for your prompt consideration of this issue. We believe timely action by the Congress to permit oil and gas leasing on the Coastal Plain, with appropriate environmental protection measures, is essential. ANWR is our single best opportunity to increase significantly the Nation's oil production in the foreseeable future. As you know, this is a unique area. It has the potential for containing the largest undiscovered oil and gas reserves in the United States. The mean estimate of inplace resources for the Coastal Plain is 13.8 billion barrels of oil and 31.8 trillion cubic feet of gas. As we have previously testified, and as the Secretary's report explained in detail, we believe leasing can be accomplished consistent with the wildlife values of the refuge. We strongly support the intent of S. 1217. While we would recommend several adjustments to the leasing program contemplated by the bill, we strongly endorse the approach contained in S. 1217 of providing authority for both exploration and production. Because of the high costs of conducting oil activities in the Arctic typically in the - tens of millions of dollars - there is no reason to expect that private interests would invest the resources needed for a full exploratory program on the Coastal Plain without assurances that they would be permitted to develop any discoveries that might be made. It has been suggested that Congress should authorize an exploration-only program, or a two-phase program requiring additional decisions before permitting development of any discovered oil resources after the conclusion of an exploratory program. We believe these kinds of approaches would be extraordinarily costly to the taxpayer and ultimately unworkable. Furthermore, the alternative of a. Federally-funded exploratory program would require we estimate a Federal - substantial financial outlays exploratory drilling program could approach $1 billion, depending on the size of the program at a time when the Congress and the Administration are making major efforts to reduce expenditures. History suggests that government agencies do not conduct an efficient and timely exploratory program. Government agencies are simply not oriented towards large, high-risk programs of this nature. We have a relatively small group of petroleum geologists, whose expertise is in resource assessment rather than in searching for oil. The basic structure of the Federal Government provides few, if any, rewards for risk-taking, and penalizes failure. We must remember that even in areas where oil is ultimately discovered, many dry holes are usually drilled before deposits are found. The odds are against any drilling effort making an early "strike" on a major deposit. The oil companies, by comparison, have a relatively large number of personnel experienced at searching for oil. Their entire structure is organized towards risk-taking. And the existence of many companies insures a wide range of prospects and geologic concepts are likely to be pursued. Conversely, the nature of the governmental decision-making process is likely to provide a built-in bias towards early abandonment of a drilling program if there are not immediately positive results. For example, it is not difficult to visualize pressures from both the Administration and Congress for reduction or elimination of appropriations for such an expensive drilling program if early results are negative and the budget deficit continues to be a major problem. Failure or extensive delay in a government exploratory program could not only waste major amounts of taxpayer funds, but deprive the nation of the benefits that would result from a significant oil discovery should major deposits of oil in the coastal plain go undiscovered. I would also point out that such an 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. I believe it is not unreasonable to expect receipts in the range of $2 billion $4 billion from lease sales, even if no oil is discovered. However, if a government drilling program does not find oil in a tract, the lease and bonus value of that and possibly neighboring tracts plummet. We believe the disadvantages that would accompany an exploratory program would not justify transferring the risks accompanying the search for oil from the oil companies to the taxpayers, or forgoing bonus revenues of this magnitude, which accrue to the Federal Government whether or not oil is actually found. Therefore, we strongly urge the Committee to adopt the full leasing approach of S. 1217. We believe that, coupled with provisions assuring appropriate environmental protection, this is the best approach for the area. We do, however, believe that S. 1217 can be improved. First, we believe that the Congress should enact 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. As I mentioned above, this is an area of vast mineral potential and important wildlife values. It has been recognized by the Congress in the Alaska National Interest Conservation Lands Act, as an area deserving special attention. Because of the environmental and energy considerations unique to ANWR, we believe it is important that Congress provide guidance expressly tailored to the area. Any opening legislation should be carefully crafted to achieve the dual goals of expeditious exploration and development of the oil and gas resources of the coastal plain and protection of its fish and wildlife resources. We stand ready to assist the Committee in drafting this kind of opening legislation. Along these lines, we recommend that this new authority include a clear standard for protection of the fish and wildlife of the Coastal Plain, and their habitat. We read S. 1217 as establishing two possibly conflicting standards. Section 4 requires the Secretary to insure that oil and gas activities are conducted so as "to achieve the reasonable protection" of fish and wildlife and other resources, and to mitigate "reasonably foreseeable significant adverse effects" on those resources. |