House energy reform process will be open, Rahall pledges

US House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) said on May 23 that he is committed to an open and deliberate process in considering federal energy reforms contained in a bill that he introduced a week earlier.

Nick Snow
Washington Correspondent

WASHINGTON, DC, May 24 -- US House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) said on May 23 that he is committed to an open and deliberate process in considering federal energy reforms contained in a bill that he introduced a week earlier.

Oil and gas producers and consumers have strongly criticized the bill, HR 2337, which, among other things, would repeal parts of the 2005 Energy Policy Act, restrict uses of produced water, and limit federal oil royalty in-kind (RIK) payments to Strategic Petroleum Reserve purchases.

Republican members of the committee protested that oil and gas industry groups were largely excluded from the bill's development. Rahall responded that they could submit comments before the committee returns to mark up the bill following the Memorial Day recess.

Presidents of three gas industry groups expressed deep concerns about the bill in a May 22 letter to Rahall. Barry Russell of the Independent Petroleum Association of America, Skip Horvath of the Natural Gas Supply Association, and Donald F. Santa of the Interstate Natural Gas Association of America said HR 2337 "would move significant and much-needed natural gas supplies out of reach while making it more difficult to build new pipeline infrastructure."

In a statement distributed to reporters before the hearing, the American Exploration & Production Council called the bill "a prescription for slowing natural gas exploration, reducing production, and increasing prices."

'Weren't invited'
Oil and gas industry groups also said they were being excluded. "We're here, but we weren't invited to testify," Marc W. Smith, executive director of the Independent Petroleum Association of Mountain States, told OGJ before the hearing began.

Representatives of federal agencies involved in resource management and development made up the first panel of witnesses. Rahall said he acceded to requests from the committee's Republican minority to let a second panel of presidents of two organizations representing energy consumers testify.

John Engler of the National Association of Manufacturers and James L. Martin of the 60-Plus Association, a senior citizens advocacy group, separately questioned the wisdom of imposing more restrictions on domestic energy production as prices are rising.

As he welcomed the first panel (US Bureau of Land Management Deputy Director Henri Bisson; Minerals Management Service Deputy Director Walter Cruickshank; Melissa Simpson, deputy undersecretary for natural resources and environment at the US Forest Service; Vickie VanZandt, senior vice-president for transmission services at the Bonneville Power Administration, and Timothy R.E. Kenney, deputy assistant secretary for oceans and atmosphere at the National Oceanic and Atmospheric Administration), Rahall quipped, "I am probably the first committee chairman to hold a hearing consisting only of witnesses who are hostile to his position."

But he also said the Natural Resources Committee was taking a different approach to developing legislation than it used in recent years. "During the 6 years that I served as the ranking member, the practice was for the majority to toss out energy bills a day or two before a markup, with no hearings, affording the members of this committee little time to completely understand what they were voting on," he said.

In contrast, he continued, HR 2337 was introduced a full week before the hearing. "The record will be open for submitted testimony and, with the House not being in session next week, interested parties are afforded even more time to dissect provisions of the legislation before it is marked up," Rahall said.

He said the primary witnesses were limited to representatives of the current presidential administration to give it "the opportunity to testify in person in the event that it wanted to defend its position with respect to specific provisions or to offer constructive advice in its capacity as the entity that would have to implement provisions of the bill should it become law."

As they testified, however, the federal witnesses generally said their agencies needed more time to consider the bill's potential impacts and would have to submit written comments later.

Defends provisions
In his opening statement, Rahall also defended the bill's provisions, which he said grew out of 13 committee and subcommittee hearings. They showed that the federal government is not receiving a fair return on energy produced from public resources and that recreational and agricultural activities are being harmed, he said.

"I have heard the allegation that this bill repeals the Energy Policy Act of 2005," Rahall said. "There are 530 sections in that act, 84 of which fall under this committee's jurisdiction. Of those 84, HR 2337 amends only seven of those provisions."

The EPACT provisions that would be repealed include a requirement for BLM to process onshore drilling permit applications in 30 days, suspension of permit processing fees, and initiation of a process that could lead to oil shale and tar sands development. Rahall said the hearings also revealed that surface landholders need more rights in federal split-estate situations and that produced water uses should be restricted.

But his strongest attack was on MMS's RIK program, which the agency says has reduced operating expenses and increased revenues but which Rahall said is plagued with scandal. "According to media reports, the Justice Department has launched a criminal investigation into the activities of top officials involved with the royalty-in-kind program. The inquiry appears to focus on the cozy relationship between these officials and those in industry who seek contracts from them," he said.

An MMS spokesman confirmed to OGJ that the Department of Justice is investigating two possible ethics violations in the RIK program following a probe by Department of Interior's inspector general and that the program's director, Gregory Smith, is retiring effective May 26.

Questions retirements
Rahall noted that Smith's departure follows MMS Director Johnnie Burton's retirement. He suggested that the Bush administration "uses retirement like some perverse witness protection program [to get officials] out of the spotlight and off the list of in-the-know folks who could provide damaging evidence."

Committee member Stevan Pearce (R-NM) strongly disagreed. "I was especially unnerved by your characterization of Johnnie Burton. She has not been indicted and, in fact, has sat in this hearing room in the past 60 days patiently taking questions. I'm embarrassed by what you said and apologize to her," he told Rahall.

Rahall said he was not implying criminal behavior by Burton but reiterated that she "is a person who apparently never saw an oil and gas royalty payment audit she liked." When she was the interior secretary, he said, "the average number of annual audits conducted plummeted from 540 to 144. And left on the wayside were billions of dollars in royalty payments owed to the American people."

HR 2337 would require MMS to conduct a minimum of 550 oil and gas lease audits each fiscal year. In his testimony, Cruickshank said compliance reviews, which MMS uses as a less expensive alternative to full audits on high-volume properties, collected $3.27/$ spent from fiscal 2003 through 2005, compared with $2.07 collected through audits.

Committee Democrats generally applauded the bill. "It's a good place to start to assure we get a fair return from production on public lands. Compared to other parts of the world, where assets can be seized, our government extracts relatively little from those who produce oil and gas on its holdings in a much more secure political environment," said George Miller of California.

Others called for a more cautious approach. "Repealing the 30-day drilling permit decision deadline could have consequences. Maybe 30 days isn't the right time period, but leaving it open-ended could be problematic," said another Californian, Jim Costa.

Dan Boren of Oklahoma said he backed Rahall's commitment to an open process but added that domestic drilling has grown and production will follow soon since EPACT's enactment. "I'm glad this committee is taking its oversight responsibilities seriously, but this bill would increase energy costs and place a greater burden on the poor, something that Democrats traditionally oppose," he said.

Some Republicans said the bill is a mistake. Chief minority member Don Young of Alaska said it would make domestic energy more expensive and less available. Doug Lamborn of Colorado said, "Section 306 raises disturbing implications of federal interference in groundwater, which traditionally has been handled by states."

Rahall reiterated that the bill could change. "Very few introduced measures are perfect. I do not view HR 2337 as being written in stone," he said.

Contact Nick Snow at nsnow@cox.net.

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