<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
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                       A NATIONAL ENERGY POLICY

=======================================================================

                           OVERSIGHT HEARINGS

                               before the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

 March 7, 2001, The Role of Public Lands in the Development of a Self-
                       Reliant Energy Policy; and
                June 6, 2001, The National Energy Policy

                               __________

                            Serial No. 107-1

                               __________

           Printed for the use of the Committee on Resources



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                               __________

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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                      Edward J. Markey, Massachusetts
W.J. "Billy" Tauzin, Louisiana       Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
C.L. "Butch" Otter, Idaho            Betty McCollum, Minnesota
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
VACANCY

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 7, 2001....................................     1

Statement of Members:
    Calvert, Hon. Ken, a Representative in Congress from the 
      State of California, Prepared statement of.................    17
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, Prepared statement of....................    18
    Gallegly, Hon. Elton, a Representative in Congress from the 
      State of California, Prepared statement of.................    16
    Hansen, Hon. James V., a Representative in Congress from the 
      State of Utah..............................................     1
        Prepared statement of....................................     3
    McGovern, Hon. James P., a Representative in Congress from 
      the State of Massachusetts, Prepared statement of..........    21
    Pallone, Hon. Frank, Jr., a Representative in Congress from 
      the State of New Jersey, Prepared statement of.............    17
    Radanovich, Hon. George, a Representative in Congress from 
      the State of California, Prepared statement of.............    19
    Rahall, Hon. Nick J., II, a Representative in Congress from 
      the State of West Virginia.................................     3
        Prepared statement of....................................     4
    Rehberg, Hon. Dennis R., a Representative in Congress from 
      the State of Montana, Prepared statement of................    21
    Udall, Hon. Mark, a Representative in Congress from the State 
      of Colorado, Prepared statement of.........................    20

Statement of Witnesses:
    Bowles, Jim L., President, Americas Division, Phillips 
      Petroleum Company, on behalf of the American Petroleum 
      Institute..................................................    89
        Prepared statement of....................................    90
    Geringer, Hon. Jim, Governor, State of Wyoming...............    11
        Prepared statement of....................................    25
    Hocker, Christopher, President, National Hydropower 
      Association................................................   121
        Prepared statement of....................................   122
        Response to questions submitted for the record...........   133
    Hogan, Leland J., Rancher, Stockton, Utah....................   114
        Prepared statement of....................................   116
        Response to questions submitted for the record...........   118
    James, Leslie, Executive Director, Colorado River Energy 
      Distributors Association...................................   143
        Prepared statement of....................................   145
    Judd, Robert L., Jr., Executive Director, USA Biomass Power 
      Producers Alliance.........................................   138
        Prepared statement of....................................   139
    Knowles, Hon. Tony, Governor, State of Alaska................     5
        Prepared statement of....................................     9
    Martz, Hon. Judy, Governor, State of Montana.................    43
        Prepared statement of....................................    45
    O'Connor, Terry Vice President, External Affairs, Arch Coal, 
      Inc., on behalf of the National Mining Association.........    95
        Prepared statement of....................................    97
        Response to questions submitted for the record...........   106
    Stanley, Neal A., President, Independent Petroleum 
      Association of Mountain States.............................    79
        Prepared statement of....................................    80

Additional materials supplied:
    Alberswerth, David, Director, The Wilderness Society, Letter 
      submitted for the record by Hon. Donna Christensen.........    63
    Mason, Tad, Vice President, TSS Consultants, Letter submitted 
      for the record by Hon. Scott McInnis.......................   154


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on June 6, 2001.....................................   159

Statement of Members:
    Flake, Hon. Jeff, a Representative in Congress from the State 
      of Arizona, Prepared statement of..........................   210
    Hansen, Hon. James V., a Representative in Congress from the 
      State of Utah..............................................   159
        Prepared statement of....................................   161
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin, Prepared statement of........................   208
    McInnis, Hon. Scott, a Representative in Congress from the 
      State of Colorado, Prepared statement of...................   207
    Rahall, Hon. Nick J., II, a Representative in Congress from 
      the State of West Virginia, Prepared statement of..........   163
    Solis, Hon. Hilda L., a Representative in Congress from the 
      State of California, Prepared statement of.................   210
    Udall, Hon. Mark, a Representative in Congress from the State 
      of Colorado, Prepared statement of.........................   209
     Udall, Hon. Tom, a Representative in Congress from the State 
      of New Mexico, Prepared statement of.......................   192

Statement of Witnesses:
     Norton, Hon. Gale A., Secretary, U.S. Department of the 
      Interior...................................................   164
        Prepared statement of....................................   168
        Response to questions submitted for the record...........   210

 
 OVERSIGHT HEARING ON THE ROLE OF PUBLIC LANDS IN THE DEVELOPMENT OF A 
                       SELF-RELIANT ENERGY POLICY

                              ----------                              


                        Wednesday, March 7, 2001

                       House of Representatives,

                        Committee on Resources,

                             Washington, DC

    The Committee met, pursuant to notice, at 10:02 a.m., in 
Room 1324, Longworth House Office Building, Hon. James V. 
Hansen (Chairman of the Committee) presiding.

  STATEMENT OF THE HON. JAMES V. HANSEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF UTAH

    The Chairman. The Committee will come to order. We 
appreciate your presence. This very important meeting we are 
having today will be regarding energy policy. Between this 
Committee and the Commerce Committee, we hope to be coming up 
with a policy that will determine the energy policy of America 
for the next few years.
    Around the country this winter, Americans have opened their 
utility bills with dismay to see their costs double and 
sometimes triple from last year. Many Americans have written to 
ask, ``Who fell asleep at the switch? How can there be an 
energy shortage in one of the most prosperous and 
technologically-advanced countries in the world?''
    Our current situation is the direct result of the lack of a 
coherent national energy policy and policies that have 
restricted the development of our domestic energy resources on 
public lands, thereby increasing reliance on foreign energy. To 
keep our economy prosperous and reinforce our national 
security, we must have reliable energy supplies at a reasonable 
cost. We have called this congressional hearing to explore how 
we may structure natural resource policy to help achieve a 
sustainable and self-reliant energy policy.
    Over the last 150 years, the Federal Government retained 
land to hold in trust for the people. The principle guiding 
public land policy was multiple use and sustainable yield. 
Public land was a resource to be used in maintaining our 
national health, environment, and wealth.
    Some time ago, we lost that vision and today we are paying 
the price. Currently, while national energy costs skyrocket, 
billions of barrels of oil and natural gas are locked beneath 
public lands, including the Arctic National Wildlife Refuge. 
Using public lands responsibly includes environmentally 
sensitive resource extraction. These two goals are not mutually 
exclusive. We have produced more than 13 billion barrels of oil 
since 1977 from Alaska's North Slope in a manner that has 
allowed wildlife to thrive and the caribou herds to increase 
five-fold.
    Clean oil remains untouchable in many parts of the United 
States and hydroelectric generation has been reduced. In one 
case, generating capacity at a Federal hydropower facility was 
reduced by one-third to comply with environmental regulations. 
That is enough energy to power 400,000 homes.
    I recall the debate in Utah several decades ago when we 
first set out to develop resources on the upper Colorado River. 
After extensive study, the Bureau of Reclamation ultimately 
identified two sites that were most feasible-- Echo Park 
Canyon, in Dinosaur National Monument, and Glen Canyon.
    Once that was done, we went through months and months of 
additional study and debate. Strong feelings were expressed on 
all sides. Both sites proposed were beautiful, rugged, and 
largely unexplored, and yet both sites were unique in that they 
shared the geological characteristic that made it possible to 
build one of the largest man-made structures at the time, to 
harness one of the wildest and untamed rivers in the 
hemisphere. After a long period of debate and negotiation, 
Congress ultimately decided that Glen Canyon was the best place 
to dam the upper Colorado River.
    We used to hear former President Clinton say from time to 
time, ``you can't have mines everywhere,'' and I agree with 
that. You can only have mines where the minerals and resources 
are. Likewise with a dam, you can't have dams everywhere. You 
build dams on sites which are capable of accomplishing the 
purpose for which they are built.
    In this instance, Glen Canyon was designed for three 
purposes: water storage, flood control, and to generate 
electricity for the growing population in the Southwest. You 
know, it has got another one now; it is called recreation. In 
fact, more people go there for more than one day than probably 
any other place in our whole park system.
    Once the site was proposed, opponents of the project cried 
out and said, ``This dam is too big. We will never be able to 
use all that power. You will upset the laws of supply and 
demand,'' et cetera, et cetera. Besides, why do we need 
hydropower when we already have all of that great coal in the 
Kaparowits plateau?
    Thirty years later, when former President Clinton 
designated the Grand Staircase-Escalante National Monument, we 
were told that the Kaparowits coal would never be used, that 
markets would never be able to use all that coal, and that 
there was a glut of cheap power that would make the development 
of the coal resource uneconomical.
    My, how times have changed. Let's not repeat the short-
sightedness of the past. We have been given a sacred trust by 
the people to develop our natural resources wisely and maintain 
a healthy environment. It is time to return to the original 
concept of multiple use of access to our public grounds.
    I will look forward to hearing from our witnesses.
    [The prepared statement of Chairman Hansen follows:]

  Statement of The Honorable James V. Hansen, Chairman, Committee on 
                               Resources

    Around the country this winter, Americans have opened their utility 
bills with dismay to see their costs double and sometimes triple from 
last year. Many Americans have Written to ask, ``Who fell asleep at the 
switch? How can there be an energy shortage in one of the most 
prosperous and technologically advanced countries in the world?''
    Our current situation is the direct result of (1) lack of a 
coherent national energy policy over the past eight years, and (2) 
policies that have restricted development of our domestic energy 
resources on public lands, thereby increasing reliance on foreign 
energy. To keep our economy prosperous and reinforce our national 
security, we must have reliable energy supplies at a reasonable cost. 
We have called this Congressional hearing to explore how we may 
structure natural resource policy to help achieve a sustainable and 
self-reliant energy policy.
    Over the last 150 years, the Federal government retained land to 
hold in trust for the public. The principle guiding public land policy 
was multiple use and sustainable yield. Public land was a resource to 
be used in maintaining our national health, environment and wealth.
    Some time ago, we lost that vision and today we are paying the 
price. Currently, while national energy costs skyrocket, billions of 
barrels of oil and natural gas are locked beneath public lands 
including the Arctic National Wildlife Refuge. Using public lands 
responsibly includes environmentally sensitive resource extraction. 
These two goals are not mutually exclusive. We have produced more than 
13 billion barrels of oil since 1977 from Alaska's North Slope in a 
manner that has allowed wildlife to thrive and the caribou herds to 
increase 5-fold.
    Clean coal remains untouchable in many parts of the United States 
and hydroelectric generation has been reduced. In one case, generating 
capacity at a Federal hydropower facility has been reduced by \1/3\ to 
comply with environmental regulations. This is enough energy to power 
400,000 homes.
    We have been given a sacred trust by the people to develop our 
natural resources wisely and maintain a healthy environment. It's time 
to return to the original concept of multiple use on our public lands.
    I look forward to hearing from our witnesses.
                                 ______
                                 
    I now recognize the distinguished gentleman from West 
Virginia, the ranking Democrat on the Committee.

 STATEMENT OF THE HON. NICK J. RAHALL, II, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF WEST VIRGINIA

    Mr. Rahall. Thank you very much, Mr. Chairman. I join with 
you in welcoming our distinguished Governors of Alaska, 
Montana, and Wyoming to the Resources Committee this morning 
for this very important hearing on the role of public lands in 
the development of a national energy policy.
    I approach this issue perhaps slightly differently, perhaps 
a lot differently than Chairman Hansen and our distinguished 
panel that is going to be testifying this morning. That is 
certainly no surprise to the Chairman. We have worked together 
on this Committee for a number of years, or decades perhaps.
    Certainly, Federal lands have a role to play in producing 
energy for our Nation. For instance, almost 23 million acres of 
these lands are currently subject to Federal onshore oil and 
gas leases. Now, this happens to be greater than the size of my 
home State of West Virginia. It is the size of Indiana and just 
slightly less than the size of States like Ohio, Kentucky, 
Tennessee, and Virginia. Now, when you toss in the geothermal 
and coal leases, well, you start to get to the size of these 
States.
    Acreage aside, energy production from Federal lands, both 
onshore and offshore, is making a sizable contribution to our 
energy needs. Oil production from Federal areas account for 27 
percent of the U.S. total, natural gas 38 percent of the total, 
and coal 23 percent of the total, to the pleasure, I am sure, 
of the governors from the Powder River Basin.
    And here is something I am sure that certain people do not 
want you to know, but it is worth stating today, and I am going 
to repeat it. Natural gas and coal production from Federal 
leases was at an all-time high during the Clinton 
administration, surpassing the amount produced during the 
Reagan years, let alone Bush the First. And let me repeat that. 
Natural gas and coal production from Federal leases was at an 
all-time high during the Clinton administration, surpassing the 
amount produced during the Reagan years, let alone Bush the 
First.
    With this noted, I become somewhat puzzled when I hear talk 
about opening more Federal lands to energy development. Now, 
which areas are we talking about here? The big production comes 
from offshore oil. Yet, exploration for new fields is 
constrained by drilling moratorium bans supported by the 
President during the campaign, as well as the governors of 
those coastal States. And when it comes to onshore, certainly a 
viable energy policy should not include opening Federal park 
and wilderness areas to new oil and gas drilling.
    So does it all boil down to little old Alaska, opening up a 
national wildlife refuge so that 10 to 15 years in the future 
oil may begin flowing to the lower 49 States, if it is not 
first exported to Japan, an undetermined amount of oil at that? 
Does that represent the hope and the salvation of our Nation's 
energy security? That, in my view, is quite a roll of the dice 
approach to addressing our energy needs.
    Certainly, Alaska has a role to play. An issue I intend to 
examine is whether we have fully explored the potential for the 
23-million-acre National Petroleum Reserve in Alaska to not 
only contribute to our energy needs, but to Alaska's thirst for 
shelling out a $2,000-per-year check out of its $27 billion 
North Slope oil kitty to every man, woman, child, and infant 
residing in the State, a State, I might add, with no income tax 
and no statewide sales tax. I notice there is a little rumbling 
in the audience. Everybody is trying to find out where to sign 
up for this check.
    But rather than becoming bogged down in controversy over 
the Arctic Refuge, I also think it would be constructive if we 
have more dialogue over the potential of constructing the North 
Slope gas pipeline already authorized by Federal law. We ought 
to examine more fully the contribution that that can make in 
providing a more immediate return in meeting America's energy 
needs.
    With that, I again welcome our Governors this morning and 
look forward to your testimony.
    [The prepared statement of Mr. Rahall follows:]

 Statement of The Honorable Nick Rahall, a Representative in Congress 
                    from the State of West Virginia

    Thank you, Mr. Chairman. I would like to welcome the distinguished 
governors of Alaska, Montana and Wyoming to the Resources Committee for 
today's hearing on the role of public lands in the development of a 
national energy policy.
    I approach this topic from perhaps a different perspective than 
does Chairman Hansen and the governors who are with us this morning.
    Certainly, Federal lands have a role to play in producing energy 
for our Nation. For instance, almost 23 million acres of these lands 
are currently subject to Federal onshore oil and gas leases.
    That is greater than the size of my home State of West Virginia. It 
is the size of Indiana, and just slightly less than the size of States 
like Ohio, Kentucky, Tennessee and Virginia. Toss in Federal geothermal 
and coal leases, and you start to get to the size of those States.
    Acreage aside, energy production from Federal lands, both onshore 
and offshore, is making a sizable contribution to our energy needs. Oil 
production from Federal areas account for 27 percent of the U.S. total. 
Natural gas, 38 percent of the total. And coal, 33 percent of the 
total...to the pleasure, I am sure, of the Governors from the Power 
River Basin.
    And here is something I am sure certain people do not want you to 
know: Natural gas and coal production from Federal leases was at an all 
time high during the Clinton Administration, surpassing the amount 
produced during the Reagan years, let alone Bush the First.
    With this noted, I become somewhat puzzled when I hear talk about 
opening more Federal lands to energy development.
    Which areas are we talking about? The big production comes from 
offshore. Yet, exploration for new fields is constrained by drilling 
moratoriums; bans which President Bush supported during his campaign, 
as well as by the governors of the coastal States. And when it comes to 
onshore, certainly a viable energy policy should not include opening 
Federal park and wilderness areas to new oil and gas drilling.
    So does it all boil down to little `ole Alaska, to opening up a 
national wildlife refuge so that 10 to 15 years in the future oil may 
begin flowing to the lower 48 unless it is first exported to Japan? An 
undetermined amount of oil at that. Does that represent the hope and 
salvation of the Nation's energy security?
    That, in my view, is a roll of the dice approach to addressing our 
energy needs. Certainly, Alaska has a role to play. An issue I intend 
to examine is whether we have fully explored the potential of the 23 
million acre National Petroleum Reserve-Alaska...to not only contribute 
to our energy needs...but to Alaska's thirst for shelling out a $2,000 
per-year check out of its $27 billion North Slope oil kitty to every 
man, woman, child and infant residing in the State. A State, I might 
add, with no income tax and no statewide sales tax.
    I notice the audience is getting restless, governor, they want to 
know where to sign up.
    Rather than becoming bogged down in controversy over the Arctic 
Refuge, I also think it would be constructive if we have more dialogue 
over the potential constructing the North Slope gas pipeline--already 
authorized by Federal law can make in providing for a more immediate 
return in meeting America's energy needs.
    With that, I welcome our witnesses and look forward to hearing the 
testimony. Thank you.
                                 ______
                                 
    The Chairman. I thank the gentleman from West Virginia.
    As you know, the policy of the Committee is if you are 
present when the gavel falls, you will be recognized by 
seniority and after that in the order in which you arrived. But 
in the interests of time, we are going to go straight to our 
three distinguished Governors. We are very honored to have you 
with us at this particular time.
    We understand that Governor Knowles, of Alaska, has an 
airplane to catch, and so we will go to you first, Governor, if 
that is all right.
    Governor Knowles, we will turn to you, sir.

   STATEMENT OF HON. TONY KNOWLES, GOVERNOR, STATE OF ALASKA

    Governor Knowles. For the record, I am Tony Knowles, the 
Governor of Alaska, and I welcome this opportunity to testify 
on the vital issue of developing a self-reliant national energy 
policy and the central role that America's public lands play in 
that effort. I applaud you and the national administration for 
focusing on this issue which is so important to America's jobs 
and families.
    I address you today in two capacities, first as Governor of 
a State which serves as America's energy storehouse. Since 
completion of the trans-Alaska oil pipeline nearly 25 years 
ago, Alaska has been supplying a significant portion of this 
nation's domestic oil production. And now, with development of 
our natural gas, North America's largest proven reserve, we 
will continue to help meet America's energy needs.
    Second, I represent my fellow governors of oil- and gas-
producing States as Chairman of the Interstate Oil and Gas 
Compact Commission (IOGCC). These 37 States produce more than 
99 percent of the oil and natural gas produced onshore in the 
United States, and are committed to the conservation and 
maximum utilization of America's oil and gas reserves.
    My message today is simple. To continue America's 
prosperity which I believe is threatened by a looming energy 
crisis, we must meet our nation's energy needs through a 
combination of conservation and increased supply. The key to 
increased energy supply is the environmentally-responsible 
development of this nation's enormous energy resources, most of 
which lie beneath our public lands. Our access to those lands 
obligates us to accept the profound responsibility for 
enlightened stewardship. No longer can access to public lands 
be an excuse for environmental destruction.
    As this Committee knows well, this country is suffering 
from a combination of high energy prices and energy shortages. 
We need to look no further than the news video of senior 
citizens being pried from stopped elevators during California's 
rolling blackouts or subsequent plant closures and layoffs to 
know that.
    New energy supplies will come from many sources, but our 
obligation for jobs and families of Americans is to look at 
home first. America's public lands hold the vast majority of 
those new energy resources. In my own State of 375 million 
acres, one-fifth of the land mass of the rest of America, we 
have no choice but to look to public lands, as they constitute 
88 percent of our land mass.
    Mr. Chairman, I submit that we need to look no further than 
the 49th State for a national model on how to find and produce 
energy resources on public lands, while protecting the wildlife 
and the environment. We in Alaska apply a simple standard to 
development issues, whether producing oil from a newly 
discovered reserve or harvesting America's best tasting wild 
organic salmon, and that standard is we do development right.
    By that, I mean development must be based on three 
principles: sound science and technology, enlightened 
stewardship, and a thorough, open public process. Using that 
standard, we have in Alaska supplied up to a quarter of 
America's domestic oil production from the nation's two largest 
oil fields. We have done so while protecting the nation's most 
pristine environment inhabited by more caribou, grizzlies, bald 
eagles, and mosquitoes than the rest of the country combined.
    Nationally, the vast majority of our energy resources are 
on public lands. The U.S. Geological Survey estimated that 67 
percent of the nation's undiscovered oil and 40 percent of its 
undiscovered natural gas resources lie beneath onshore public 
lands. And along our coastlines, only 2 percent of total 
Federal offshore acreage, including that in Alaska, has been 
leased for energy development. At the same time, the amount of 
public lands available for oil drilling has shrunk from 73 to 
17 percent in the past 25 years.
    The best promise for new natural gas development, which we 
know is the clean-burning fuel of the 21st century, is on the 
public lands in the Gulf of Mexico, the Rocky Mountains, and 
Alaska's Arctic Slope. As we seek to develop these energy 
resources on public lands, I believe those of us from Western 
public lands States have a special obligation to adhere to the 
``doing it right'' standard, and we are doing exactly that in 
Alaska.
    During my roughnecking days on the North Slope in the 
1960's, a drill pad could be as big as 65 acres. Today, they 
are a tenth that size. In using new technology, up to 50 wells 
can be drilled from the same smaller pad and tap into oil 
identified by 3-D seismic technology into oil 20,000 feet deep 
and 5 miles away, under sensitive areas such as ice-choked 
ocean or sensitive wildlife habitat. That is like running a 
well through this Committee room floor to Ronald Reagan 
National Airport and we could determine which gate the drill 
bit would emerge from.
    With this ``doing it right'' approach to development, we 
successfully convinced the Clinton administration to permit 
exploration and development in a portion of the 23-million-acre 
National Petroleum Reserve (NPRA), a promising Indiana-sized 
area to the west of Prudhoe Bay. We did so by imposing the 
strictest environmental constraints of any oil and gas lease in 
America or the world.
    These 79 conditions are specifically designed to protect 
caribou, polar bears, and birds particularly during sensitive 
periods of calving, migration, molting, denning, and 
hibernation. They were the result of a collaboration of world-
class experts in science and engineering from all levels of 
government and industry. This is the only acceptable way to 
combine the needs for jobs and energy development with the 
protection of the land and wildlife we love.
    To continue meeting this nation's energy needs, we urge the 
Congress to permit exploration in America's best prospect for a 
major oil and gas discovery in the Arctic National Wildlife 
Refuge (ANWR). Just a small portion of this South Carolina-
sized refuge is believed to contain up to 16 billion barrels of 
oil, enough to produce 2 million barrels a day for at least 25 
years, about a third of the current domestic production. In 
addition, it is believed to hold substantial new discoveries of 
natural gas.
    Environmentally-responsible development in the Arctic 
Refuge would be good for America, producing thousands of jobs, 
lessening our dependence on imported oil, reducing prices at 
the pump, providing environmentally-friendly natural gas to 
produce our nation's electric supply, improving our nation's 
trade deficit, and a host of other reasons.
    As enlightened stewards, we must and can take special 
precautions to protect caribou, musk ox, geese, polar bear, and 
other wildlife that inhabit the Arctic Refuge. As we did in the 
NPRA, we will work with the industry to mitigate impacts such 
as limited activity during the 6 to 8 weeks when the Porcupine 
caribou herd often uses the coastal plain for calving. We must 
be sensitive to the subsistence needs of Native people on both 
sides of the border whose culture, nutrition and economy are 
dependent on the area's healthy wildlife.
    To bring oil from ANWR and other North Slope development to 
American consumers, we are working with the Bush administration 
to reauthorize the right-of-way lease for the 800-mile trans-
Alaska oil pipeline. The Federal right-of-way administered by 
the Bureau of Land Management expires in 2004, but the 
environmental review and renewal process is projected to take 
at least 2 years. I welcome this Committee's oversight and 
encouragement of that process.
    Alaskans are working to continue as the nation's energy 
storehouse by delivering our enormous natural gas reserve to 
thirsty American markets. Alaska's North Slope has 35 trillion 
cubic feet of discovered natural gas, most of which is being 
reinjected to increase Prudhoe Bay oil production. Yet, 
geologists estimate we are sitting on perhaps triple what we 
have already discovered, more than 100 trillion cubic feet.
    The most viable way to get that gas to market is through a 
1,800-mile pipeline from Alaska's North Slope through Fairbanks 
and along the Alaska Highway into the North American gas 
distribution system. This route has already been approved by 
Congress in 1977 and international agreement. This development 
would be one of America's largest privately-funded construction 
projects, creating jobs and delivering environmentally-friendly 
energy for a generation or more. I am pleased that the nation's 
governors unanimously endorsed the Alaska Highway natural gas 
pipeline project at last month's National Governors' 
Association conference.
    In closing, Mr. Chairman, let me note that conservation 
must be a cornerstone of America's energy policy. It is not 
purpose here today to describe this critical component in 
detail, but I note that conservation alone cannot address the 
challenge before us. We must increase our supply to stabilize 
prices and prevent shortages. America's energy security depends 
on access to public lands.
    With new technology and strengthening our resolve to 
protect the environment, we can go beyond the old approach of 
either development or the environment to the 21st century 
paradigm of recognizing the necessity and interdependence of 
both.
    On behalf of the IOGCC, I recommend several steps to 
improve responsible access to our public lands: complete the 
inventory of oil and gas resources on public lands, as required 
in last year's Energy Policy Conservation Act; expedite 
processing of applications to drill and offers to lease; 
conduct extensive research on the technologies of extraction 
and alternative energy; repeal roadless plans and new roadless 
initiatives that should already be a part of comprehensive land 
use management plans; and streamline the National Environmental 
Protection Act process.
    Mr. Chairman and Committee members, Alaska, my 
administration, and the IOGCC stand ready to assist you and our 
national administration in crafting a sensible national energy 
policy that provides greater access to public land for domestic 
oil production and natural gas, that encourages conservation 
and recognizes the important partnership with our private oil 
and gas industry to get the job done.
    Thank you.
    [The prepared statement of Governor Knowles follows:]

   Statement of The Honorable Tony Knowles, Governor, State of Alaska

    Good morning, Chairman Hansen and distinguished members of the 
Committee. For the record, I am Tony Knowles, Governor of Alaska.
    I welcome this opportunity to testify on the vital issue of 
developing a self-reliant national energy policy and the central role 
America's public lands play in that effort. I applaud you and the 
national administration for focusing on this issue so important to 
American jobs and families.
    I address you today in two capacities: First, as governor of a 
state which serves as America's energy storehouse. Since completion of 
the trans-Alaska oil pipeline nearly 25 years ago, Alaska has been 
supplying a significant portion of this nation's domestic oil 
production. And now with development of our natural gas--North 
America's largest proven reserves--we'll continue to help meet 
America's energy needs.
    Second, I represent my fellow governors of oil and gas producing 
states as chairman of the Interstate Oil and Gas Compact Commission. 
These 37 states produce more than 99 percent of the oil and natural gas 
produced on-shore in the United States and are committed to the 
conservation and maximum utilization of American oil and gas resources.
    This time of year as the snow continues to fall across most of my 
state, I have a personal policy to try to stay within about a 10-degree 
temperature variation from the bulk of my constituents. I was looking 
forward to a real Alaska-style snowstorm, but am honored nonetheless to 
join you here in our nation's temperate capital.
    My message today is simple: to continue America's prosperity which 
I believe is threatened by a looming energy crisis, we must meet our 
nation's energy needs through a combination of conservation and 
increased supply.
    The key to increased energy supply is the environmentally 
responsible development of this nation's enormous energy resources, 
most of which lie beneath our public lands. Our access to those lands 
carries with it the responsibility for sound stewardship. That access 
can never be considered a green light for the irresponsible destruction 
of those lands.
    As this Committee knows well, this country is suffering from a 
combination of high energy prices and energy shortages. We need look no 
further than news video of senior citizens being pried from stopped 
elevators during California's rolling black-outs to know that.
    New energy supplies will come from many sources, but our obligation 
for the jobs and families of Americans is to look at home first. 
America's public lands hold the vast majority of those new energy 
resources.
    In my own state of 375 million acres, public lands constitute 88 
percent of our land mass, with 40 percent of our state in Federal 
forests, wildlife refuges and national parks. Development of the 
resources on public lands in Alaska is a critical part of our economic 
future.
    Mr. Chairman, I submit we need look no further than the 49th state 
for a national model on how to find and produce energy resources on 
public lands, while protecting the wildlife and environment.
    We in Alaska apply a simple standard to development issues, whether 
producing oil from a newly discovered reserve or harvesting America's 
best-tasting, organic wild salmon. That standard is--we do development 
right.
    By that, I mean development must be based on three principles: 
sound science, good stewardship and a thorough, open public process.
    Using that standard, we in Alaska have supplied up to a quarter of 
America's domestic oil production from the nation's largest oil fields. 
We've done so while protecting the nation's most pristine environment 
inhabited by more caribou, grizzly bears, bald eagles and mosquitoes 
than the rest of the country combined.
    Nationally, the vast majority of our energy resources are on public 
lands. The U.S. Geological Survey estimates that 67 percent of the 
nation's undiscovered oil and 40 percent of its undiscovered natural 
gas resources lie beneath on-shore public lands. And along our 
coastlines, only 2 percent of total Federal offshore acreage, including 
that in Alaska, has been leased for energy development.
    At the same time, the amount of public lands available for oil 
drilling has shrunk from 73 to 17 percent in the past 25 years. It's 
worse for natural gas development, which we know is the clean-burning 
fuel of the 21st century.
    A recent report by the National Petroleum Council showed that the 
most promising regions for future gas production in the Rocky Mountains 
and Gulf of Mexico are either closed to exploration or have significant 
access restrictions. And even if we can obtain access to these 
resources, public lands must be crossed by pipelines or other methods 
to deliver the energy to homes, power plants and factories.
    As we seek to develop these energy resources on public lands, I 
believe those of us from western public lands states have a special 
obligation to adhere to the ``doing it right'' standard.
    We're doing exactly that in Alaska. During my rough-necking days on 
the North Slope in the 1960s, a drill pad could be as big as 65 acres. 
Today, they're a tenth that size.
    And using new technology, up to 50 wells can be drilled from the 
same, smaller pad and tap into oil identified by 3-D seismic technology 
into oil 20,000 feet deep and five miles away, under sensitive areas, 
such as an ice-choked ocean or sensitive wildlife habitat. That's like 
running a well through this Committee room floor to Ronald Reagan 
National Airport and we could determine which gate the drill bit would 
emerge from.
    With this ``doing it right'' approach to development, we 
successfully convinced the Clinton administration to permit exploration 
and development in a portion of the 4-million-acre National Petroleum 
Reserve, a promising Indiana-sized area to the west of Prudhoe Bay.
    We did so by imposing the strictest environmental constraints of 
any oil and gas lease in America. These 79 conditions are specifically 
designed to protect caribou, polar bears and birds, particularly during 
sensitive periods of calving, migration, molting, denning and 
hibernation.
    They were the result of collaboration of world-class experts in 
science and engineering from all levels of government and industry. 
This is the only acceptable way to combine the need for jobs and energy 
development with protection of the land and wildlife we love.
    To continue meeting this nation's energy needs, we urge the 
Congress to permit exploration in America's best prospect for a major 
oil and gas discovery--in the Arctic National Wildlife Refuge. Just a 
small portion of this South Carolina-sized refuge is believed to 
contain up to 16 billion barrels of oil, enough to produce 2 million 
barrels a day for at least 25 years, about a third of the current daily 
domestic production. In addition it is believed to hold substantial new 
discoveries of natural gas.
    Environmentally responsible development in the Arctic Refuge would 
be good for America--producing thousands of jobs, lessening our 
dependence on imported oil, reducing prices at the pump, providing 
environmental friendly natural gas to produce our nation's electrical 
supply, improving our nation's trade deficit, and a host of other 
reasons.
    I believe we must, and can, take special precautions to protect the 
caribou, musk ox, geese, polar bear and other wildlife that inhabit the 
Arctic Refuge. As we did in the NPRA, we will work with the industry to 
mitigate impacts, such as limiting activity during the six to eight 
weeks when the Porcupine caribou herd often uses the coastal plain for 
calving.
    We must be sensitive to the subsistence needs of Native people on 
both sides of the border whose culture, nutrition, and economy are 
dependent on the area's healthy wildlife.
    To bring oil from ANWR and other North Slope development to 
American consumers, we are working with the Bush administration to 
reauthorize the right of way lease for the 800-mile trans-Alaska oil 
pipeline.
    The Federal right of way administered by the Bureau of Land 
Management expires in 2004, but the environmental review and renewal 
process is projected to take two years. I welcome this Committee's 
oversight and encouragement of that process.
    Alaskans are working to continue as the nation's energy storehouse 
by delivering our enormous natural gas reserves to thirsty American 
markets.
    Alaska's North Slope has 35 trillion cubic feet of discovered 
natural gas, most of which today is being re-injected to increase 
Prudhoe Bay oil production. Yet geologists estimate we're sitting on 
perhaps triple what we're already discovered--more than 100 trillion 
cubic feet.
    The most viable way to get that gas to market is through an 1,800-
mile pipeline from Alaska's North Slope, through Fairbanks and along 
the Alaska Highway into the North American gas distribution system.
    This development would be America's largest privately funded 
construction project, creating jobs and delivering environmentally 
friendly energy for a generation or more. I'm pleased the nation's 
governors unanimously endorsed the Alaska Highway natural gas pipeline 
project at last month's National Governors' Association conference.
    In closing, Mr. Chairman, let me address two issues: conservation 
and access.
    Conservation must be a cornerstone of America's energy policy. 
Improved mileage for vehicles, efficiencies in manufacturing and 
electricity use can substantially expand the efficiency in using our 
energy supply.
    Yet conservation alone cannot address the challenge before us. We 
must increase our supply to stabilize prices and prevent shortages. 
America's energy security depends on access to public lands.
    With new technology and strengthening our resolve to protect the 
environment, we can go beyond the old approach of either development or 
the environment, to the 21st century paradigm of recognizing the 
necessity and interdependence of both.
    On behalf of the IOGCC, I recommend three steps to improve access 
to our public lands which hold the key to our future energy 
independence.
    First, let's complete the inventory of oil and natural gas 
resources on public lands required in last year's Energy Policy 
Conservation Act. The BLM must have adequate resources to complete this 
study in a timely manner.
    Second, let's expedite action in the agency processes that will 
lead directly to exploration for energy resources, such as applications 
to drill and offers to lease.
    Third, let's better share with independent energy producers and 
others the results of state and Federal research so that resources 
developed on public lands are maximized. The Federal government could 
make a strong commitment to research by reinvesting a part of the 
revenue received from royalties on gas production.
    Mr. Chairman and Committee members: Alaska, my administration and 
the IOGCC stand ready to assist you and our national administration in 
crafting a sensible national energy policy that provides greater access 
to public land for domestic production of oil and natural gas; that 
encourages conservation; and that recognizes the important partnership 
with our private oil and gas industry to get the job done.
                                 ______
                                 
    The Chairman. Thank you, Governor Knowles. We appreciate 
your testimony.
    I recognize the gentlelady from Wyoming to introduce 
Governor Geringer.
    Mrs. Cubin. Thank you very much, Mr. Chairman. It is truly 
an honor for me to represent Governor Geringer. Governor 
Geringer has excelled nationwide in many, many areas since he 
has been Governor. He has led the country in many areas, as 
well, as far as taking his State forward is concerned--
telecommunications, the deployment of the infrastructure 
required for connecting every single school to computers. He 
has been in the forefront suggesting that we had an energy 
crisis long before other people recognized that we had an 
energy crisis.
    Governor Geringer represents the least-populated State in 
the country, but he also represents the only State in the 
country that has three Senators--they are all men; the Governor 
is a man--and one Congressman, a woman, but it really only 
takes one woman to do the work of those three guys.
    The Governor has always been on my side, so it is truly an 
honor to represent a man that I think has been one of the best 
governors that Wyoming has ever had, Governor Jim Geringer.

   STATEMENT OF HON. JIM GERINGER, GOVERNOR, STATE OF WYOMING

    Governor Geringer. Thank you, Congresswoman Cubin, and 
thank you, Mr. Chairman, Ranking Member, and other members of 
the Committee for your invitation to address you today.
    Mr. Chairman, I ask that my written testimony that has been 
presented and the attachments that are included be made a part 
of the record.
    The Chairman. Without objection.
    Governor Geringer. I thank you for that. I will not provide 
all the testimony that is included there, but I ask that it be 
considered.
    As Congresswoman Cubin mentioned, Wyoming has the least 
population of all States. We are here as Western governors, and 
we particularly appreciate your invitation that the Western 
governors join you because of the mineral resource that is in 
the West and because so much of the public lands that will be 
debated and considered during this testimony are in the West. 
And you have heard a very vivid example of that in Alaska.
    In the Western Governors' Association, we have the least 
populated State in Wyoming; the most populated State is 
California; the largest States, Alaska and Texas. And as we 
consider the resources there and the huge numbers that are 
involved with the oil, gas, coal, hydroelectric power, wind 
energy, all the variety of renewable and non-renewable 
resources, we are first to point out that Wyoming had the first 
National Park in Yellowstone; the first National Monument, 
Devil's Tower; the first National Forest, the Shoshone.
    So we understand the environment and we understand the 
economy, and we are here to tell you that as we discuss the 
effect of becoming self-reliant in energy for America, we also 
understand the balance among environment, the economy, and 
community, because we as a community cannot ignore the impact 
that energy may or may not have on our States.
    Some of the discussion, I am sure, will center on whether 
or not something is broken. If it ain't broke, don't fix it, is 
the common term that is out there. But we ought to recognize 
that you ought to avoid breaking it. If you do preventive 
maintenance, you can avoid breaking it and you don't have to 
recover from a disaster.
    The model that we have developed in the West among our 
Western States is that we work together to prevent the crisis 
from happening rather than having to deal with recovering from 
a crisis. We almost didn't make it last year when the fires 
almost overwhelmed the West, and could possibly again this 
summer. But we developed a model among ourselves, Republican 
and Democrat. We don't even use the terms ``bipartisan'' or 
``nonpartisan.'' We just get the job done, as Governor Knowles 
said, because it is far better to have avoided the problem than 
to have been engaged in the recovery of a disastrous situation.
    Chairman Greenspan has addressed various members of 
congressional Committees over the last couple of weeks, and 
even the governors, as to what is happening with our national 
economy. Our national economy seems to have flattened out and 
the productivity gains seem to be declining. They don't have 
to.
    One of the things that can dramatically impact that is the 
availability on time of energy, because energy drives the 
economy today. The economy in America is referred to as the new 
economy, and the new economy with its technology base needs the 
electricity in a reliable, high-quality manner or it will not 
be able to sustain itself, nor will the productivity gains be 
able to sustain themselves.
    If there is one thing that we very vividly understand, 
whether you are a Member across the table in your position or a 
governor in our position, it is that our citizens want economic 
security. They want jobs, they want opportunity for their 
children. Their views are intergenerational, so as we debate 
energy, environment, and community, we deliberate that from an 
intergenerational perspective. And if we don't have the jobs in 
the economy, there will be far less that matters to our public.
    We learned from the current crisis that energy solutions 
involve diverse sources and technologies, varying from fossil 
fuels to solar, from wind energy to biomass, and that we can 
work on the demand side as well as the production side. But the 
new economy needs more energy in order to make it.
    On page 2 of my hand-out, there is a graphic that 
illustrates what is happening today in terms of California and 
how, because California has roughly 12 percent of the entire 
population pretty much represented by that graphic, the 
electricity crisis that began in California just recently has 
spread and has drained literally the entire Western power grid 
in many ways because the demand created in California has 
rippled through the rest of our States.
    We need to balance that out with supply, and ironically 
most of the supply is there. While it is not lying dormant, 
much of it could if we don't take steps today. The underlying 
imbalance of supply and demand has been exacerbated by the fact 
that California did not have a long-term contract approach to 
their electricity supply. But that is only on electric 
deregulation; natural gas, of course, has gone through the 
ceiling.
    As Congressman Tauzin said earlier today, with the high 
energy prices that have come about in natural gas, we are 
starting to see a rippling through our agricultural economy as 
well. The very people who put food on the table are going to 
pay extraordinarily high prices for nitrogen fertilizers this 
year, or may just choose not to even raise the crops at all, 
because in the Northwest, in States such as Washington, Oregon 
and Idaho, it is actually cheaper and more profitable for 
agriculture to take money to not use electricity to irrigate, 
to pump their sprinklers and wells, than it is to raise crops 
because of the high input costs. The same applies to the 
aluminum manufacturing industry, where selling already 
committed long-term energy commitments is far more profitable 
to aluminum manufacturers than it is to produce the aluminum.
    But what about the lady in Buffalo, Wyoming, who called her 
county commissioner who said, ``I don't know how to pay my gas 
bill. It is $500 this month and I only have $600 a month 
income.'' This isn't just about the economy and the 
environment. This is about people in our neighborhoods who 
don't understand why this developed as it did in the energy 
crisis.
    The Western Governors have worked long and hard to raise 
citizen awareness to how serious this problem is. We had 
several meetings, culminating in our Western Governors winter 
meeting last December where we adopted a call for an energy 
policy for the Americas. Much will be said about how much of 
America's energy is imported from other countries, but much of 
that is viewed as being from the Middle East.
    In fact, of the 4 primary countries who supply the United 
States with energy, 3 of them are in the Western Hemisphere--
Canada, Mexico, and Venezuela. We ought to be working with our 
neighbors rather than somebody so far away that we don't even 
know who they are or why they exist. With regard to oil from 
the Middle East, instead of sending our military men and women 
to die, send them into the wide-open spaces of the West so that 
we all might live.
    The Western Governors' Association hosted an energy policy 
roundtable in Portland, Oregon. We had participants from the 
Department of Energy, from the Federal Energy Regulatory 
Commission (FERC), from a variety of Federal and State agencies 
to discuss what we could bring to Vice President Cheney and 
President Bush to discuss what to do for Federal action. We 
have attached some of our recommendations to my testimony for 
your review.
    Mr. Chairman, just as you acknowledged in your opening 
remarks, our neighbors want to know who is in charge. Why 
didn't somebody wake up sooner so we wouldn't have this 
uncertainty? Who should be in charge, particularly as it 
relates to our Federal public lands and how they dominate in 
the West?
    In reality, no one person and no one agency should be in 
complete charge of production, of access, of distribution or 
consumption of our nation's energy supply. We are in this 
together. Partnerships are vital and beneficial. Mr. Chairman, 
your letter of invitation to me for my testimony asks for my 
perspective on the role that State governments would have in 
interacting with Federal land managers. Well, the key word is 
``interaction.'' In our view, interaction must be a full, 
participating partner.
    While partnerships in the legal sense may be limited 
partners or they may be general partners, we are asking for 
full general partner status. We have common interests, but we 
also have shared jurisdictions and shared responsibilities. If 
State government has a committed partnership with Federal 
agencies, we will produce the domestic supplies of energy in an 
environmentally safe manner. It is as simple as that.
    The history of energy policy in America has been 
fragmented, at best. The 25-year history of attempting to write 
an energy policy has been confused. It has been fragmented. Six 
attempts have been made formally in 25 years. None of them are 
comprehensive, particularly as it affects public land 
management, and not just the resource to be extracted but the 
other resources there as well for recreation, for wildlife, for 
clean air and clean water, and the amenities that the next 
generation ought to benefit from as well.
    In the past, policy has been more by paranoia than by 
purpose. We need to develop better management directives that 
foster cooperation instead of polarization. Much of the debate 
today will be over who is in favor of the environment and who 
is in favor of development. That is not the issue, Mr. 
Chairman. The issue is how will we assure the future not only 
of today's generation but the next generation.
    Over the last decade, management by litigation and 
intimidation has prevailed over management based on policy 
goals, and that has had far more impact on our national energy 
policy than it should have. The previous Chair of the Council 
on Environmental Quality, Katie McGinty, put in her 25th 
anniversary report, ``Our common ground, the environment, has 
become a battle ground. Somehow, nearly half of the 
Environmental Protection Agency's (EPA) work is not the product 
of our collective will on the environment, but rather it is the 
product of a judicial decree. Somehow, we have become a country 
in receivership, with the courts managing our forests, our 
rivers, and our rangelands.''
    It goes back even further. The former Chief of the Forest 
Service, Jack Ward Thomas, said in a speech in Wyoming 5 years 
ago that he took his appointment as Chief of the Forest Service 
believing that he was the chief resource manager of the 
nation's forests. But he said to us, ``I have the least control 
of anyone over resource management and allocation.''
    So who should manage the land and who does manage the land? 
If I talk first about the public lands, nearly 75 percent of 
all Bureau of Land Management (BLM) and Forest Service lands in 
the United States in total are located in the Western States. 
Our energy self-reliance through public lands will focus, then, 
on much of those public lands.
    But we, the States, have primary jurisdiction over many of 
the activities that take place on all lands, Federal, State and 
private. We have to work together because of those legal 
obligations, but we should work together because it is for the 
good of our people. So whether it be wildlife habitat, resource 
use, mineral extraction, water supplies, flood protection, 
hunting, fishing, ascetic values, tourism, or whatever, we 
should be partners. When you tinker with Federal land issues in 
the West, you affect the economy of all of America, but you 
particularly affect the livelihood of those people in our 
communities.
    I refer you now to the graphic on page 5 of my formal 
remarks because it gives a graphic display of the Federal and 
non-Federal land areas in the lower 48. For whatever reason, 
and with apologies to my fellow governor from Alaska, it didn't 
print Alaska's overlay. In Alaska, though, as Governor Knowles 
has indicated, 375 million acres total; 242 million are 
Federal. So picture in your mind much of the same pattern of 
integrated and interspersed and intertwined activities that you 
see on the rest of that map, but particularly as it affects the 
West.
    Let me illustrate even further the difficulty of 
management, and what your Committee can most enable all of us 
to do is graphically illustrated on page 6 of the hand-out, 
which is a map of the general area of Wyoming. It shows the 15 
ownership categories, each of which has a unique set of 
management procedures when it comes to developing the resources 
of energy in the West.
    I use Wyoming as an example because Wyoming is not as 
Federally dominated as some other lands, but yet is dominated 
enough by Federal agencies, many of whom don't even work 
together, that it will thwart any action that you might take as 
a Committee to understand how we might appropriately develop 
the land in the West. Even that band across southern Wyoming 
that shows rather hazily in the yellow portion--that is because 
every other section of land is private land originally 
developed when the Union Pacific Railroad was extended right-
of-way across the Western States and offered alternating 
sections of land for 20 miles on either side of the railroad 
right-of-way. The message in that map and the message in the 
previous map is we have to work together.
    As far as the environment goes, in Wyoming we produce, 
process, or transport all kinds of extracted minerals, but we 
also have renewable wind energy, hydroelectric power, and 
others as well. Our water is so clean that we are one of the 
few States without a fish advisory. We have the toughest clean 
air laws in the nation. We have proven that a clean environment 
and a robust energy sector are not at odds with each other 
because we as governors live where we govern.
    As far as the potential, you have heard from Governor 
Knowles and you will hear from Governor Martz and others about 
it is not just a matter of the energy that is there; it is how 
we get from there to where the energy is needed. The huge 
amounts of coal, natural gas, oil, uranium, and other energy 
sources that are available in the West are challenged by some 
of these situations.
    For instance, while Wyoming has enough coal reserves that 
if we were a country we would be the number three country in 
the world in coal reserves--not a State, a country --92 percent 
of all coal produced in Wyoming comes from Federal leases. 
Seventy-five percent of all natural or methane gas produced in 
Wyoming is from Federal ownership, and 60 percent of our oil. 
In other words, the Federal resource is a very considerable 
resource, and as the Ranking Member mentioned, much of that is 
already being produced.
    But today's energy production is not and will not be 
sufficient. America needs more energy. We are here to help that 
need be filled, and to produce it not just from our States but 
to distribute it where it is needed and consumed. Transmission 
lines, power lines, gas pipelines will be needed to connect 
supply with demand.
    Governor Hull of Arizona is frustrated with the most recent 
presidential declaration of yet another national monument in 
Arizona that appears to have eliminated a long-approved power 
transmission line that was scheduled to connect energy 
generated in Arizona with consumers in California. Monumental 
decisions in Washington have created political misery in the 
West.
    As far as the availability of products and energy in the 
West, we don't need Organization of Petroleum Exporting 
Countries (OPEC), we need each other. Just the Wyoming resource 
alone could totally supplant and replace the entire OPEC 
production for the next 41 years.
    The Chairman. Governor, may I suspend briefly? You may 
notice on the clock we have got two lights on. We have to run 
for a vote, and I apologize. Could we quickly have a recess? I 
would ask all Members to hurry back and then we will conclude 
with Governor Geringer.
    Would that be all right, Governor? I apologize for that.
    Let me ask unanimous consent that all opening statements be 
included in the record.
    Is there objection?
    Hearing none, so ordered.
    [The statements of Mr. Gallegly, Mr. Calvert, Mr. Pallone, 
Mrs. Cubin, Mr. Radanovich, Mr. Udall of Colorado, Mr. 
McGovern, and Mr. Rehberg, follow:]

Statement of The Honorable Elton Gallegly, a Representative in Congress 
                      from the State of California

    Mr. Chairman, I have concerns about the fairness of some of the 
studies that small hydro power plants have been asked to do in the 
midst of the current energy crisis.
    In my district, the operators of the Santa Felicia Dam and 
hydroplant near Piru Creek, have been asked to do a number of studies 
by various Federal agencies, including the Forest Service, before they 
can relicensed. It is estimated that the costs of the studies outweigh 
the costs of the hydro facility--the hydro facility cost is $1.2 
million, the studies are estimated to cost $2 million. Mr. Chairman, 
the dam currently provides clean hydro-electric power to an estimated 
1,500 homes in my district and operates at a profit of only $6,000 a 
year.
    Although some of the studies are worthy, many are burdensome and 
unrelated to the hydro facility--a study of noxious weeds, road and 
trail studies, and an impact study on the Arroyo Frog who's habitat, 
according to University of California at Santa Barbara Biology 
Professor Sam Sweet, is located more than three miles upstream from the 
Dam.
    Mr. Chairman, we ought to be aiding small hydro-electric power 
facilities, not putting them out of business with undue red tape. I 
urge the Committee to look into the fairness of the relicensing process 
on these small hydro-electric power plants that provide clean energy to 
communities throughout the United States.
                                 ______
                                 

 Statement of The Honorable Ken Calvert, a Representative in Congress 
                      from the State of California

    The Western States are currently faced with the challenge of 
striking a balance among the water needs of agriculture growers, urban 
and environmental communities, industry and hydroelectric power 
generation. As we have seen with the recent energy crisis in 
California, our energy and water systems, and therefore our economies, 
are interdependent.
    While hydroelectric generation comprises only 13 percent of the 
nation's total electricity supply, it is a vitally important component 
of the Western energy grid. Hydroelectric power is clean, efficient and 
necessary for maintaining electric transmission reliability.
    This important resource is currently being underutilized. For 
example, Bonneville Power Administration has lost approximately 10 
percent of its capacity due to environmental regulations. This is 
enough electricity to power 980,000 homes. Over the past years, the 
ability of non-Federal dams to generate power has been reduced by 
ambiguous mandatory conditions issued by Federal agencies for dam 
relicensing. Weather related factors have also decreased the Pacific 
coast hydro-system capacity. Reservoirs have been drawn down to 
dangerously low levels that may compromise fish flows and water 
deliveries.
    To prevent further erosion of potential Federal power generation, 
we must assure that any further reductions be subject to good science 
and peer review. We need to protect state water rights while improving 
hydroelectric generation capacity and efficiency. We cannot afford to 
accentuate one need to the detriment of the others. Instead we must 
strive for a balance that will guarantee a reliable energy and water 
supply.
                                 ______
                                 

            Statement of The Honorable Frank Pallone, Jr., 
a<plus-minus><plus-minus> Representative in Congress from the State of 
                               New Jersey

    Thank you, Mr. Chairman. Let's be responsive to America's energy 
needs but let's make sure we are responsible when we discuss self-
reliant energy policy in the same sentence as public lands.
    Our public lands are not our energy solution; our public lands are 
recreational opportunities for countless families, habitat protection 
areas for numerous endangered species, and preservation areas for 
national historic sites, to note only a few. We must not jeopardize the 
well being of our public lands from the many functions they serve in 
the hope of solving our long-term energy needs.
    As we reexamine our nation's energy resources, we should begin by 
examining public lands that have already been designated as lease 
areas. Federal public lands now produce 26.6 percent of total U.S. oil 
production, and 37 percent of our nation's natural gas production. In 
the past eight years energy production on public lands has exceeded 
production levels of both the Reagan and Bush years.
    A realistic idea to explore--where we can work together for a 
common sense solution--is to expand production on Alaska's North Slope. 
Alaska's North Slope has been open for oil and gas exploration and 
drilling for years--to the tune of 23 million acres or more. 35 
trillion cubic feet of natural gas exist in Alaska's North Slope 
already available for exploration and development. We should find a 
viable pipeline route for making these resources available.
    Mr. Chairman, if we open new public lands for resource extraction, 
we run the risk of destroying our nation's greatest natural resources 
forever. The effects of improperly managed public land resources can be 
disastrous. We run the risk of surface and subsurface water pollution 
from toxic metals including mercury, lead and cadmium caused by 
drilling and mining operations. Contamination of this kind can continue 
for years without being discovered. Industry's improved drilling 
technology does not preclude the need for roads, drilling pads, 
housing, oil processing facilities and other infrastructure that 
inevitably impact the environment.
    It's time to fund common sense programs to conserve energy and 
develop alternative energy sources to reduce our reliance on polluting 
fossil fuels and oil imports from foreign nations. Instead of 
discussing only methods of supplying more fossil fuel energy, we have 
to develop ways to encourage renewable energy use and energy 
conservation. In the past thirty years technology has helped us place a 
computer in the palm of our hand, surely we can find ways for 
technology to provide us with clean, renewable energy that does not 
place our open spaces, our environment, our nation's public lands in 
jeopardy.
    Unfortunately, it seems the Republican Leadership is incapable of 
introducing measures that would conserve energy, promote our long-term 
energy security, develop alternative energy resources, and protect our 
environment, without sacrificing our economic growth. Instead, the 
Republican Leadership wants to drill the Arctic Refuge. They have cut 
funding for energy efficiency, renewable energy, and alternative fuel 
programs during the past several years and now want to disrupt the only 
true wilderness in America.
    We should support funding to advance our technological capabilities 
in the fields of energy efficiency and renewable energy and to advance 
our economic advantage in exporting these technologies abroad. If we 
undertake these proactive types of efforts, then we can tell our 
residents and our children that we're working to protect our nation's 
pristine resources for them their long-term enjoyment, not our short-
term solution.
    It's time to stop gutting our environment--time to stop destroying 
our forests, land, water and air quality. Most Americans want to know 
why we're not doing more to protect the environment. Most Americans 
indicate a willingness to pay more for energy efficient appliances and 
lighting. Most Americans don't want us to drill in ANWR.
    I agree that we need to examine the prospect of a more self-reliant 
energy policy but drilling in the Arctic Refuge will do nothing to 
increase our energy self-reliance.
                                 ______
                                 

Statement of The Honorable Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    Thank you, Mr. Chairman, for holding this important hearing on the 
role of public lands in the development of a more self-reliant domestic 
energy policy. Over the past eight years we have seen what amounts to 
an ``anti-energy'' policy which has discouraged the exploration for and 
development of oil, gas, coal, and uranium on our public lands, and 
made coal-fired electricity generation anathema. At the same time, the 
past Administration was seeking to dramatically reduce 
hydroelectricity's function as the ``peaking power'' of choice.
    Collectively, it is a wonder the crisis we have seen in California, 
and to a lesser extent in the northwest, has not occurred sooner. 
Perhaps it is the ubiquitous ``on-line'' computer presence everyone 
seems to need these days that is the straw that broke the camel's back, 
but there simply is no doubt that domestic demand for electricity has 
risen significantly, despite ``energy star'' ratings on computers and 
other appliances. And, many experts suggest the real test will be when 
folks turn on the air conditioners this summer. Rolling black-outs may 
be back with a vengeance.
    Yes, conservation goals are laudable, but efficiency gains alone 
are insufficient. Our nation must meet the rising demand for energy 
with new domestic exploration and production. We must produce and 
conserve all forms of energy in America. And, we can do so in and 
environmentally sensitive way. Fortunately, we now have an 
Administration that recognizes our national security depends upon 
energy security. The Bush Administration, with Vice President Cheney in 
a leadership role, is working to propose a comprehensive national 
energy policy for Congress to act upon, as well as to formulate plans 
for taking administrative action where Congress isn't needed.
    My Subcommittee on Energy and Mineral Resources will be examining 
areas where public land reforms can make a difference in getting 
domestic energy supplies to market. We kick off this effort next week 
with an in-depth review of natural gas supplies and constraints. I look 
forward to working with the Administration and my colleagues here in 
Congress to begin the process of developing legislation which will help 
to set this country on a focused course, both increasing energy supply 
and increasing incentives for conservation.
    Again, Mr. Chairman, I truly thank you for convening this hearing 
today and look forward to hearing from our distinguished group of 
witnesses, especially the Governor of my home state of Wyoming, the 
Honorable Jim Geringer. Wyoming coal, oil, and natural gas (including 
coalbed methane) and uranium is a treasure trove of energy for our 
nation. I welcome Governor Geringer's remarks as to how to best utilize 
these resources.
                                 ______
                                 

   Statement of The Honorable George Radanovich, a Representative in 
                 Congress from the State of California

    Thank you Mr. Chairman for holding this hearing on the role of our 
natural resources in U.S. energy policy. Today, I will focus on two 
environmentally-friendly energy resources: biomass and hydropower, and 
discuss how we can better use them to provide more energy for 
consumers.
    My district includes three national forests as well as three 
national parks, all of which I am proud to represent. Over the past 
eight years, the previous Administration's policy of closing-off land 
for roadless areas, designating nineteen new national monuments--
comprising five million acres--and adding numerous wilderness areas has 
led to a decrease in the opportunities to utilize Federal lands to help 
meet our nation's energy needs.
    The Clinton roadless policy to lock-up over 60 million acres of our 
national forests, for instance, has led to a logging moratorium in many 
areas of the Sierra Nevada Mountains in California. Such action, 
combined with the Forest Service's ill-conceived Sierra Nevada 
Framework plan amendment, has forced the closure of biomass plants in 
the region. It is true that biomass comprises only about two percent of 
all energy in California, but amidst our current crisis, every megawatt 
counts. Biomass is a clean-burning method of producing energy, and it 
extends the life of our landfills by burning forest waste. I encourage 
the new Administration to reexamine the roadless policy and the Sierra 
Nevada Framework plan to allow for extraction of underbrush from the 
forests to generate green-powered biomass energy.
    On the issue of hydropower, I want to work with the new 
Administration to streamline the cumbersome Federal regulatory process 
that is denying us of the full use of existing hydro facilities. In the 
Pacific Northwest, 10 percent in hydro capacity on Federally-owned 
facilities is consistently lost due to Federal regulations. Also, Glen 
Canyon dam has lost a 1/3 of its own capacity ``enough to supply 
400,000 homes--because of strict regulations to protect fish. The 
Federal government last year released the Trinity River decision in 
California, which diverts 300,000 acre feet of water annually for 
environmental uses. This action is a great cause for concern since that 
water will be lost for hydro generation purposes.
    My own congressional district is home to about 2,000 megawatts of 
hydropower. To give you an idea of what this means, 2,000 megawatts is 
enough to serve approximately 2.8 million people. Long-term licenses 
for these privately-owned facilities are so difficult and arduous to 
complete that some facilities have been operating on yearly permits for 
over a decade. The tremendous red tape involved in relicensing the 
hydro facilities in the U.S. results in about an eight percent loss in 
power each year. Such an amount could provide a safety-net during a 
Stage 3 emergency and be used to help prevent blackouts like those 
California experienced in January. I will work with the Administration 
to facilitate a licensing process that works to benefit both the 
environment and consumers.
    As we all know, the U.S. is in dire need of a national energy 
policy, and our Federal resources must be managed in a manner to 
support a national energy policy. The Federal government's eight-year 
``hands-off'' policy regarding Federal land management has led to an 
increase in the Federal land base and a decrease in opportunities to 
meet our nation's energy needs. Our Federal lands must be managed in a 
reasonable, environmentally-sensitive manner that operates in concert 
with a national energy strategy. Such consistency will prevent various 
Federal agencies from implementing far-fetched policies that conflict 
with a national energy plan. I believe we can achieve balanced, common-
sense environmental goals as well as provide desperately needed energy 
for our nation's citizens.
    Mr. Chairman, thank you again for holding this important hearing. I 
look forward to working with you to further develop a role for natural 
resources in our national energy policy.
                                 ______
                                 

  Statement of The Honorable Mark Udall, a Representative in Congress 
                       from the State of Colorado

    Thank you, Mr. Chairman. I appreciate your scheduling this hearing 
on a most important topic. Unfortunately, the Science Committee is 
holding its organizational meeting this morning, so I will not be able 
to stay for the entire hearing.
    However, I will review carefully the testimony of all the 
witnesses, and will be particularly interested in Mr. Judd's testimony 
regarding biomass, an energy source that is of particular interest to 
me.
    I am not sure just what is meant by a ``self-reliant'' energy 
policy, Mr. Chairman, but I assume that it means a policy that would 
reduce our dependence on imported energy sources--particularly imported 
petroleum.
    I share the goal of reducing our dependence of imported petroleum--
in fact, I think we should reduce our dependence on petroleum, period.
    That is why, along with nearly 170 other members of the Renewable 
Energy and Energy Efficiency Caucus, I am working to promote 
development and use of alternative sources and to reduce inefficiencies 
and waste in the way we use energy.
    So I hope that in the Committee's discussions today there will be a 
recognition of the importance of agreeing on a long-term energy 
policy--one that requires us to think beyond today's oil and gas 
prices.
    I hope there will be discussion of the real crisis that will 
develop ten or twenty years from now when oil prices will probably go 
up permanently as a result of increasing global demand and of passing 
the peak in global petroleum production.
    We haven't done enough to prepare for this eventuality. We very 
much need to do more, beginning with the recognition that even opening 
all the public lands to energy development would not provide a long-
term solution--and, in areas that should remain offlimits, like the 
coastal plain of the Arctic National Wildlife Refuge, the costs would 
exceed the real benefits.
    We cannot just drill our way to a sound energy policy. We need 
balance. And, in particular, we need to recognize that increased 
efficiency and increased use of renewable energy are vital if we are to 
make progress in addressing environmental challenges as well as in 
reducing our dependence on foreign energy sources.
    In fact, by reducing air pollution and other environmental impacts 
from energy production and use, renewable energy and increased energy-
efficiency are the single largest and most effective Federal pollution 
prevention programs.
    And increased development of renewable energy has the potential for 
creating hundreds of new domestic businesses, supporting thousands of 
American jobs, and opening new international markets for American goods 
and services.
    We have already come a long way. Solar, wind, geothermal, and 
biomass technologies have together more than tripled their contribution 
to the nation's energy mix over the past two decades. But we need to do 
more, to build on this progress.
    All these technologies are very important for our country. But 
development of biomass-energy through the conversion of cellulosic 
biomass, which consists of any plant or plant product, is particularly 
important to Colorado and other western states.
    That is because the threat of extreme wildfires in the areas where 
our national forests are in close proximity to major population 
centers. To reduce and control this risk, there is a need to thin the 
fuel build-up. After it is cut, a good part of this underbrush and 
small-dimension material can and should be left to decompose on the 
lands. But some will have to be removed from the forests and there is 
now no effective use or market for much of it.
    As you know, Mr. Chairman, last year's Interior appropriations bill 
established a program for such fuel-reduction projects, and provided 
funding for it to get underway. That was a substantial appropriation, 
but the funds could go further and much more could be accomplished if 
there is a commercial market for this material. The Colorado State 
Forest Service, the Forest Service Research Laboratory, and the 
National Renewable Energy Laboratory have all begun to study the 
possibilities of developing ethanol or other bioproducts economically 
from this wood fiber.
    We need to support those efforts, as well as other efforts to 
increase the availability and viability of other renewable energy 
sources and to increase our energy efficiency. That is the best way to 
go if our goal truly is a ``self-reliant'' energy policy in the long 
run.
                                 ______
                                 

   Statement of The Honorable James P. McGovern, a Representative in 
                Congress from the State of Massachusetts

    Thank you, Mr. Chairman. I appreciate the opportunity to offer a 
statement at today's hearing on the ``Role of Public Lands in the 
Development of a Self Reliant Energy Policy''.
    In the interest of time I would like to get right to the point and 
say that I think that the issue of increasing oil and gas production on 
Federal public lands is a red herring. I honestly do not think that we 
can have a serious discussion about increasing production without 
addressing the underlying issue of fossil fuel consumption.
    According to the Department of Interior, the U.S. consumes over 19 
million barrels of oil a day or 7 billion barrels of oil a year. The 
Natural Resources Defense Council, using Energy Information 
Administration data, projects that this figure will almost double over 
the next 50 years. And yet, the U.S. has less than 3 percent of the 
world's known oil reserves. It just does not seem likely that we could 
produce our way to energy independence.
    Like most Americans, I am concerned with our reliance on foreign 
oil. But at the rate we are going, I am frankly more concerned about 
our reliance on fossil fuels period. Consumption is the long-term issue 
that we need to address, and I am not yet convinced that increased 
drilling on Federal lands is anything more than a temporary fix.
    The topic of drilling on Federal public lands should not lead the 
discussion of a long-term comprehensive energy policy. Eliminating the 
annual freeze on the Corporate Average Fuel Economy (CAFE) law should. 
If we are going to have tax cuts, lets have tax cuts that will provide 
incentives for commuters to use mass transit and tax credits to develop 
alternative energy sources.
    The fact is that production levels on Federal government operated 
oil, gas and coal leasing programs have increased over last eight 
years. Overall domestic production of oil on Federal lands increased 
from 13 percent in 1993 to 26.6 percent of all U.S. production in 2000. 
And Federal lands account over 37 percent of domestic natural gas 
production. And during that same period, total U.S. petroleum 
consumption increased by over 2 million barrels a day. Opening up our 
Federal lands to even more drilling will not solve the long-term 
national security and environmental problems caused by our reliance on 
fossil fuels.
                                 ______
                                 

Statement of The Honorable Dennis R. Rehberg, a<plus-minus><plus-minus> 
          Representative in Congress from the State of Montana

    Thank you, Mr. Chairman. I also want to thank Montana Governor Judy 
Martz for being here this morning. Governor Martz has really taken a 
pro-active stance in dealing with the energy problems we are 
experiencing in Montana, and I thank her for her leadership on this 
issue.
    Mr. Chairman, it is no secret to most of us in this room that the 
United States does not have a coherent energy policy, either long-term 
or short-term. Today we are more dependent on foreign oil than ever 
before. In fact, 56 percent of our oil supply comes from foreign 
sources, which is a 20 percent increase over the 1973 Arab oil embargo 
levels. And the Department of Energy predicts that in less than 20 
years, America will rely on foreign countries for nearly 65 percent of 
our energy needs. This is not only a threat to our economy, it is a 
threat to our national security.
    Unfortunately, our energy problems are not confined to oil 
production. Despite growing demand, our natural gas production has 
fallen 14 percent since 1973. Yet, nearly 40 percent of our gas 
resources in the Rocky Mountains are off-limits to production and most 
of the submerged lands under our Federal waters are off-limits to gas 
leasing until 2012.
    The result: natural gas prices are 20 times higher in some parts of 
the country than they were just one year ago. This dramatic increase, 
while hitting all consumers, is hitting those of us in ag country 
particularly hard because higher natural gas prices mean increased 
fertilizer costs. So I think it's important that we all understand that 
this energy problem we are experiencing affects virtually every aspect 
of our nation's economy. We have got to get a handle on this problem.
    And, as if to add insult to injury, the water levels in the 
northwest are low--this frustrates our ability to generate hydropower, 
which provides enough electricity for 98 million homes. But our 
hydroelectric operations are facing more problems than just low water. 
Federal rules and regulations have made the process of relicensing 
these operations expensive and time-consuming, which in turn 
contributes to the rising cost of electricity in some areas.
    These energy problems have real life consequences. In January, the 
Bonneville Power Administration announced that it is projecting an 
average 60 percent rate increase over the next five years. And high 
energy costs have caused a number of Montana businesses to either shut 
down or cut back operations, which is costing Montana much needed jobs.
    And because of increased power costs, some Montana businesses have 
been forced to produce their own power in-house by using generators, 
which costs about 5 times the amount of what they used to pay for 
electricity, yet is still well below current prices on the open market.
    Mr. Chairman, the California situation--which we are all so 
familiar with and which has sort of become the poster-child for our 
energy problems--combines a lack of generation and transmission 
capacity with low water levels, and should serve as a real wake-up call 
to all of us. Consider this, in California--over the last 10 years--
generation capability decreased 2 percent while retail sales increased 
11 percent. So the current problem California is experiencing should 
not come as any great surprise.
    In short, Mr. Chairman, we must increase our power generation and 
transportation capabilities. And if we don't start developing some of 
our natural resources now, the California crisis of today will become 
the national crisis of tomorrow.
    America has the tools to confront our energy problems, and we must 
use them. While energy conservation is critical, the U.S. cannot 
conserve its way out of this energy crunch. It is vitally important 
that we take steps to increase domestic energy production through 
access to and exploration of oil and gas prospects such as ANWR, and 
through new and expanded energy delivery infrastructure, advanced coal 
technology, nuclear power, and solar and wind power. We also have to 
explore alternative renewable fuels, such as ethanol, which bums clean 
and supplies an important market for our agriculture products.
    America has huge deposits of natural gas, coal and oil. In Montana 
alone we have several hundred years worth of natural gas and coal 
deposits--the eastern front of the Rocky Mountains is rich in natural 
gas and clean burning coal.
    Any national energy policy must include the development of our 
domestic supplies of oil, such as our oil reserves in the Arctic 
National Wildlife Refuge, or ANWR. The vast oil reserves in ANWR could 
replace our Saudi Arabian imports, for example, for the next 30 years. 
That's why I am a cosponsor of Rep. Don Young's legislation to develop 
some of this domestic supply in ANWR.
    America also has large coal deposits--enough to last us nearly 300 
years. And Montana has more coal than any other state, holding 
approximately one-third of the total strip-mineable coal in the nation. 
Current estimates place coal resources for eastern Montana at about 50 
billion short tons, 34.5 billion of which is low-sulfur, clean-burning 
coal.
    Coal is America's largest and cheapest source of domestically 
produced energy accounting for nearly 60 percent of our nation's 
electricity and costing consumers about one-fifth the amount of oil and 
natural gas. And our abundance of coal includes coal bed methane, which 
is a source for natural gas. So clean burning coal and the development 
of coal bed methane as a natural gas resource must play a vital role in 
any national energy policy. This means we must invest in developing 
coal technology.
    It is also important to remember, Mr. Chairman, that while we need 
a national energy policy, we must also seek to include input from our 
state government officials at every step of the way--just like we are 
doing here today. This is especially important in Montana because of 
Montana's vast acreage of checkerboard ownership with the Federal 
government. So it is imperative the Federal government adopt a good 
neighbor policy that allows Montana to help solve the nation's energy 
shortage. Montana Governor Judy Martz has taken the bull by the horns 
at the state level by encouraging new energy production, streamlining 
regulations and building a better relationship with Federal land 
management agencies. Hopefully, today's hearing can allow us all to 
help improve this good neighbor policy so that we can work together 
with state governments to solve our current energy shortage.
    I guess for me, Mr. Chairman, the bottom line is that we have the 
natural resources to head off this problem before it gets even worse. 
But that means we need to develop a national energy policy that 
encourages the development of our resources in an energy efficient and 
environmentally friendly manner. And with the technological 
advancements we've made, I believe we can do it. But it is up to us as 
elected officials to come up with a plan and get the job done, and I 
thank you, Chairman Hansen, for holding this hearing today, and for 
your leadership on this issue, because this is an important step in the 
right direction.
                                 ______
                                 
    The Chairman. We will stand in recess.
    [Recess.]
    The Chairman. The Committee will come to order.
    Governor Geringer, we apologize for cutting you off, but we 
had no choice. Governor, we will turn to you again, sir.
    Governor Geringer. Let me just sum up with a few quick 
statements. First, to get our attention back to the issue at 
hand, much of the discussion today as we deal with energy self-
reliance from public lands will depend a lot on the deadlock, 
the gridlock, if you will, or headlock that pits environmental 
interests against those who would have economic interests. We 
don't view them as mutually exclusive; they are not and should 
not be. The interests are compatible and complementary in every 
sense. Energy policy cuts across so many different 
jurisdictions, as we illustrated in the graphics that I pointed 
out to you in my testimony, and it is time to stop litigating 
and start cooperating.
    The Western States have energy that America needs. As we 
were conversing during the break here, one of the members who 
is here from Wyoming made the comment, it is like we have an 
I.V. container. We have the transfusion that is necessary, but 
not the line to connect it when it comes to the transmission of 
the energy, whether it be in raw form or in converted form to 
electricity.
    Just let me illustrate a little bit of the challenge that 
you will face that we already face in the Western States in 
trying to deal with access to the energy that is in our public 
lands.
    Back in 1969, the National Environmental Policy Act (NEPA) 
was enacted with the purpose that we needed to recognize the 
profound impact that man's activity has on the natural 
environment. But in the purpose clause in the NEPA, as it is 
called, the National Environmental Policy Act, it declares that 
the policy of the Federal Government is to cooperate with State 
and local governments to create and maintain conditions under 
which man and nature can exist in productive harmony and still 
fulfill the social, economic, and other requirements of present 
and future generations.
    What has evolved from that Act, however, has been anything 
except that harmonious relationship. Implementation of what is 
a fairly short and relatively simple Act has resulted in such a 
myriad of regulations and processes that State and local 
authorities have little or no idea which way the whipsaw of 
Federal agencies will go next. There is tremendous 
inconsistency between and among Federal agencies as to how they 
implement this Act.
    What that opens the door to do is allow people to litigate 
or protest or appeal almost without end an infinite number of 
methods to avoid or to thwart better planning and better 
opportunities for energy development. We recommend as Western 
Governors that streamlining start with the adoption of 
management principles that we have developed as Western 
Governors over the years, and that is included as part of the 
testimony called ``Policy Resolution from the Western Governors 
99-13,'' sponsored by Governor Kitzhaber, of Oregon, a 
Democrat, Governor Leavitt, of Utah, a Republican, and endorsed 
in full not only by the Western Governors but by the national 
governors as well.
    It lists eight principles of environmental management that 
can be very effective in resolving the conflict between and 
among the advocates of whatever side you might feel that you 
are on. They reflect a practical, common-sense approach to 
environmental decisions, much along the lines of our native 
son, Dr. W. Edwards Deming's principles that were established 
for quality management that enabled a quality revolution for 
America on the industrial side.
    We have used these principles successfully on several 
difficult environmental issues, and the call is even greater 
today because we are in an age of litigation, with the courts 
not just directly managing our resources, but indirectly 
managing because of the fear of litigation.
    NEPA, in terms of the Act, is not the problem. It is the 
process. It takes too long; it costs too much; it spawns 
litigation; it is inconsistently implemented. Every Federal 
agency requires extra layers of management just for its own 
unique set of regulations. The difference just between the 
Bureau of Land Management (BLM) and the Forest Service is 
dramatic, and yet they are all part of one Government. If you 
would simply require the Federal Government to be consistent 
and speak with a unified voice, we would get a long way, and 
input the States in as partners.
    I want to leave you with the message that the current 
energy crisis is an opportunity to break through the often 
unproductive deadlock that pits energy needs against 
environmental protection. They do not have to be mutually 
exclusive; they should not be.
    The current electricity crisis in the West has awakened us 
as to how much we don't know about the energy resources of our 
nation and how little we have explored the opportunity to meet 
the energy needs of a growing economy and still yet protecting 
our environment. We can have both.
    Mr. Chairman, I have included several recommendations. 
Rights-of-way and transmission lines ought to be looked at. We 
cannot get the energy out of our States if we don't have the 
rights-of-way to deliver it, whether it be the pipeline from 
Alaska or whether it be a transmission line that takes 
generation from Wyoming to California or to Chicago.
    I recommend that this Committee urge the establishment of 
cooperating agency status for all States that are affected 
under any environmental policy review as a routine and regular 
matter, not just on the occasional basis that it has been doled 
out in the past. We can even generate more through renewable 
resources. We have tremendous wind generation capacity in 
Wyoming. Much of that is on Federal lands.
    One young lad from California dropped a note one day and 
said, "You know, you don't have to have all those signs warning 
about high winds the next 5 miles if you would turn off those 
giant propellers up on the hillside."
    Wind generation, hydroelectric generation; the 
hydroelectric that we currently have needs to have equipment 
replaced, replacing 40- to 60-year-old generators with more 
efficient generation, increasing generation, and certain 
minimizing the impact on endangered fish when California needs 
more of Oregon's power. The Bonneville Power Administration, 
the Western Area Power Administration, the Bureau of 
Reclamation, and the Corps of Engineers all need to look at 
opportunities to enhance electrical production even with 
existing activities.
    Ninety-two percent of all coal is taken from Wyoming lands. 
Wyoming is so good at reclamation that you are holding $3 
million of our money. From energy it came, to energy it should 
return. We would like to develop more effective ways to deliver 
energy from the West.
    Let me make one quick comment about the fires that occurred 
last year in the West. Those too, because of the lack of 
coordinated policy on forest health management, severely 
impacted, such as fires in New Mexico that knocked out a 500-
kilovolt transmission line, to fires in Montana that shut down 
a similar line going from Montana to Seattle. The implication 
of additional events this summer, with the drought that is 
already imminent, could lead to even further shortages of 
electricity.
    Thomas Jefferson maintained the solid belief that the 
success of our democracy lies in the ordinary citizen being 
vested with a sense of deep civic responsibility and citizens 
who would engage each other directly in pursuit of the common 
good.
    We in the American West believe that we should reject the 
last two decades of bitter debate among environmentalists and 
resource users that has so polarized us that we have gridlock 
rather than any public benefit from our public lands. As former 
EPA Director Bill Ruckelshaus said, "Business, governments and 
citizens are frustrated by years of litigation and stalemate. 
It is time to turn to the common good, and we are turning to 
that not just out of desperation but more frequently out of 
hope; hope that our decisions will yield less controversial and 
more durable results. Jointly-designed decisions will be better 
and more informed, and the hope that through this process we 
can actually regenerate public confidence in our institutions, 
especially government."
    Mr. Chairman, thank you, and I would be happy to answer 
questions.
    [The prepared statement of Governor Geringer follows:]

  Statement of The Honorable Jim Geringer, Governor, State of Wyoming

    Mr. Chairman and Committee Members, thank you for addressing the 
subject of how America might and should become energy self-reliant, and 
in particular what the role of Federal lands might be in that effort. 
Thank you also for asking for the views of Western Governors. The 
energy future of this nation is dramatically linked to the energy 
future of western states. More than that, we consider that the 
environment, the economy and community are a dynamic balance 
continually in the making.
Self-reliance is more than energy
    America's long term sustained growth in the economy has been jump 
started by increases in productivity fueled by innovation, risk and 
perseverance. We risk losing our economic momentum if we cannot 
literally provide the fuel for the new economy. Rising energy costs 
have been a major contributor to the recent slowdown in economic 
growth.
    The future of our national economy depends upon our sustainable 
energy self-reliance. Public lands are at the forefront in providing 
the potential to provide much in the form of raw energy or access to 
produce and deliver that energy. The development of the New Economy in 
America is heavily inter-dependent upon technology and reliable, high 
quality electric power. Beyond the new economy, agricultural production 
and processing, manufacturing, renewable resources, protection of 
endangered species, recreational opportunities all affect our economy 
and our society and each of them is affected in part by what happens on 
the resource of our public lands. Our economic and social opportunities 
are directly linked to energy solutions. We have learned from the 
current crisis that energy solutions involve diverse sources and 
technologies ranging from fossil fuels to solar, from energy production 
to demand-side management and efficiency.

Energy is affecting everyone, not just California
    The electricity crisis that began in California has spread 
throughout the western power grid, known as the Western 
Interconnection. See map.
    At its core, the crisis is a result of an imbalance of electricity 
demand and supply. Electricity demand has grown with the growth in 
population and a growing economy in the West. Few new powerplants have 
been built in the past decade in the West and energy conservation 
efforts declined. This underlying imbalance of supply and demand has 
been exacerbated by the structure of the electricity market in 
California that put extraordinary reliance on the spot market at the 
expense of more stable, long-term contracts. High natural gas prices 
and a drought in the Northwest are further exacerbating the crisis.
    This crisis reaches well beyond California. The Bonneville Power 
Administration is considering a 100 percent rate increase. Many 
utilities, such as the City of Tacoma, and industries, such as Phelps 
Dodge, are reeling from extraordinary wholesale electricity prices. 
From Montana to Arizona, plants and mines have shut down because of the 
high cost of electricity. The crisis may deepen with summer peak demand 
and continuing drought in the Northwest.
    The reality of the high energy prices was driven home last month 
when one of our county commissioners in northeast Wyoming received a 
phone call from an elderly lady who wanted to know how she was going to 
pay her $500 heating bill when her monthly income was just $600 per 
month.
    Last December when the price of natural gas hit $10 per MMBTU, 
almost half of the nation's nitrogen industry shut down for several 
weeks, since natural gas is the feedstock for nitrogen fertilizer. With 
significantly reduced supply, farmers this spring will be paying 
unusually high prices for anhydrous ammonia and other nitrogen assuming 
not only that it is available but that in the event they can get it 
they can actually afford it. Much of the manufacture of nitrogen has 
shifted off-shore and America is paying other countries to produce as 
much as one third of all our nation's nitrogen. The security and 
affordability of our food supply will be affected.
    I need not spend much time recounting the difficulties experienced 
by California citizens with electricity. Our northwest states of 
Oregon, Idaho and Washington are experiencing one of the driest winters 
on record which will manifest itself in lower than usual runoff, less 
hydroelectric power and serious impacts to endangered fish. This will 
be further exacerbated by the compounding economic effects caused by 
the shortage of electricity. Farmers can make more money by being paid 
for not using electricity than by raising crops and livestock. The same 
is true in manufacturing aluminum.
    Western Governors have worked long and hard to raise citizen 
awareness to the serious nature of the energy situation. On December 1, 
Western Governors adopted resolutions on energy policy, coal and 
natural gas. On December 20, Western Governors held an emergency 
meeting in Denver with and met with former DOE Secretary Bill 
Richardson and former FERC Chairman Jim Hoecker. By January 9, nine 
Western Governors approved a Short-term Energy Conservation Strategy 
aimed at coordinated action to dampen demand. On February 2, the 
Western Governors' Association hosted an Energy Policy Roundtable in 
Portland, Oregon. Joining us were Energy Secretary Abraham, all three 
FERC commissioners, and leaders from major utilities, natural gas and 
coal producers, environmental groups, academic experts, and small and 
large retail customers. We adopted several short- and long-term energy 
policy recommendations. On February 27, Western Governors met with Vice 
President Cheney to discuss the items requiring Federal action. We 
requested that an agreement be developed between Western States and the 
Cheney energy policy team to provide for collaboration on our mutual 
energy challenges. (See attached information given to the Vice 
President.)
    Finally, energy policy has become a high priority nationally. I 
commend you and the rest of the Resources Committee for recognizing 
that management of and access to our Federal public lands will play a 
pivotal if not critical role in developing energy self-reliance.

Who's in charge?
    Today's power shortages in California may only portend the 
aftershocks of even greater shortages in other states this summer and 
compounded next winter. New energy supplies are being developed at only 
one to two percent per year while energy consumption is forecast to 
grow at two to three times that rate. Who's in charge of our nation's 
energy situation? Why didn't someone wake up sooner so that we wouldn't 
have this uncertainty? We need to increase supply and an infrastructure 
to transport that supply. Part of the answer is that we have energy 
policy by default, not by design, policy that is confused rather than 
coherent. Who should be in charge? In reality, no one person or entity 
is or should be in complete charge of managing the production, 
distribution or consumption of our nation's energy supply. We are in 
this together. Partnerships are vital and beneficial. Your letter of 
invitation to me for my testimony asked for my ``perspective on the 
role of state government interacting with Federal land and mineral 
managers in developing a more self-reliant energy policy for the nation 
through increased utilization of domestic supplies in an 
environmentally sound manner.'' The key phrase in your invitation is 
``interaction with Federal land managers.'' Interaction must be as full 
partners progressing towards common goals. If state government has a 
committed partnership (or interaction) with Federal land managers we 
will produce domestic supplies of energy in an environmentally safe 
manner. It is as simple as that.

History of energy policy
    Until 1973, the Federal interest in energy policy and production 
was centered on the primary principle that energy should be cheap and 
plentiful. The Arab oil embargo reinforced the notion that energy 
policy was synonymous with oil policy. Conservation of the resource to 
prevent waste and environmental protection was left to the states, as 
it should be. The Federal policy by default today is that Americans 
should be induced to reduce consumption, especially through higher 
prices brought on by restricted access to production and distribution. 
This equates to an internal embargo. The current discussion and 
research concerning global warming has fostered the policy tenet that 
we should get rid of any fuel that contains carbon. This approach is 
certainly disjointed and confusing.
    The Federal government in the mid-70's began a series of efforts to 
write a national energy policy. Six attempts were made in 25 years with 
none being comprehensive, particularly as it would affect public land 
management. Any successful new attempt must cut across all resource 
jurisdictions, public and private, state and Federal. Likewise, any new 
policy must recognize the balance needed among the economy, the 
environment and the community. Again, give the states full partnership 
or ``interaction'' and we will produce energy.

Policy by purpose, not by paranoia--Develop management directives that 
        foster cooperation, not polarization
    Over the past decade, management by litigation and intimidation has 
prevailed over management based on policy goals and has helped define 
our national energy policy. As one previous chair of the Council on 
Environmental Quality put it, ``our common ground, the environment, has 
become a battleground. Somehow, nearly half of the EPA's work is not 
the product of our collective will on the environment, but rather the 
product of judicial decree. Somehow, we have become a country in 
receivership, with the courts managing our forests, our rivers and our 
rangelands.'' CEQ Chair McGinty, 1997.
    Former Chief of the Forest Service, Jack Ward Thomas, lamented 
during a speech in Wyoming five years ago, that he took his appointment 
believing that he was the chief resource manager of the nations' 
forests. But he said, ``I have the least control of anyone, over 
resource management and allocation. The Fish and Wildlife Service has 
more say over forest management and health than I, through the 
Endangered Species Act. Legal challenges consume the majority of my 
day.''

Who should manage the land?--Shared responsibility, concurrent 
        jurisdictions
    Energy self-reliance through public lands will focus on the West, 
since nearly 75 percent of all BLM and Forest Service lands in the 
United States are located in our Western states, particularly those 
that are rich in environmental as well as energy values. These lands 
are managed for the general national public benefit, but the laws, 
policies and management decisions and judicial direction for public 
lands most directly impact, both socially and economically, the people 
who live in the West. Our residents and communities depend upon the 
total resource for recreation, wildlife habitat, resource use, mineral 
extraction, water supplies, flood protection, hunting, fishing, 
aesthetic values, tourism and monuments. When you tinker with Federal 
land issues in the West, you not only affect the economies of all 
Americans but also the livelihoods of those people and communities 
living near and relying on our public lands in the west.
    As illustrated in the following figure, Federal land ownership in 
America is not collected all in one place. Much of it is intermingled 
with state and private ownership. Regardless of specific ownership, 
public or private, we must recognize that none of our natural resource 
decisions can be made exclusively and independently of other managers 
or owners in the vicinity of our public lands. Again, we must interact 
as partners. States and the Federal government have shared or 
concurrent jurisdictions over activities on our lands. We are both 
rooted as constitutional governments, the Federal with enumerated 
powers and the states with reserved and delegated powers. As a result, 
activities on Federal lands require state as well as Federal permits 
and permissions to be successful. Both must respect the rights of 
private property adjacent to or co-mingled with governmental ownership.
    States own and manage lands that are near, adjacent to, or 
intermingled with Federal lands. To illustrate, I refer to the next 
figure in this presentation that shows land ownership patterns just in 
the State of Wyoming. There are fifteen categories of land ownership, 
each with its own approach to resource management.
    Where Federal land ownership dominates, partnerships are a 
necessity, not just a nicety to be doled out by a patronizing Federal 
government.

Environment
    In Wyoming we produce, process and/or transport coal, oil, natural 
gas, wind generation, and uranium. We have some of the cleanest air in 
the nation. Our water is so clean that we are one of the few states 
without a fish advisory. We have proven that a clean environment and a 
robust energy sector are not at odds with each other.

Potential energy--It's not just a matter of physics, it's location, 
        location, location
    Energy in the West isn't just electricity. Energy takes many forms, 
but is most meaningful in generic terms of heat measurement, such as 
BTU's, or as electrons. Much of that energy is available in and under 
our Federal public lands. For example, there are 478 billion tons of 
Federal coal reserves in undeveloped portions of the Powder River Basin 
in Wyoming and Montana.\1\ There are another 362 billion tons of 
Federal coal reserves on the Colorado Plateau.\2\ Estimated oil in 
undiscovered conventional fields on Federal lands range from 4.4 to 
12.8 billion barrels. Similarly, estimates of technically recoverable 
gas in undiscovered conventional fields on Federal lands range from 
34.0 trillion cubic feet (TCF) to 96.8 TCF. Estimates of technically 
recoverable coalbed gas 3 on Federal lands range from 13.0 TCF to 19.6 
TCF.\3\
---------------------------------------------------------------------------
    \1\ 1999 Resource Assessment of Selection Tertiary Coal Beds and 
Zones in the Northern Rocky Mountains and Great Plains Region, October 
1999.
    \2\ Federally Owned Coal and Federal Lands in the Colorado Plateau 
Region, USGS Fact Sheet FS-145-99, September 1999.
    \3\ 1995 National Oil and Gas Assessment and Onshore Federal Lands, 
USGS Open File Report 95-5-N, January 1998.
---------------------------------------------------------------------------
    Wyoming has enough coal reserves that, if we were a country, we 
would be number three in coal reserves in the world. Ninety-two percent 
of all coal produced in Wyoming comes from Federal leases. Seventy five 
percent of methane gas produced in Wyoming comes from Federal 
ownership. Sixty percent of our oil production is from Federal lands. 
But we don't even come close to Alaska in terms of natural gas or 
petroleum. Highly effective wind generation in the West is situated on 
Federal lands as is much of the hydroelectric generation. But today's 
energy production is not and will not be sufficient. America needs more 
energy. We have the energy but we have a sharp imbalance between where 
energy can be produced and where it is needed or consumed. Transmission 
pipelines and power lines are needed to connect supply with demand. 
Acquisition of rights-of-way is necessary. Governor Jane Hull of 
Arizona is frustrated with the most recent presidential declaration of 
yet another national monument in Arizona that will likely eliminate a 
long-approved power transmission line that was scheduled to connect 
energy generated in Arizona with consumers in California. Monumental 
decisions in Washington have created political misery in the West. If 
we cannot transmit energy it has no utility. If it has no utility we 
have no incentive. If we have no incentive we have a continuing energy 
policy based on default.
    Over 70 percent of Wyoming's mineral estate is Federally owned. As 
with many western states, that amount of Federal domination could 
render us a third-world colony rather than the sovereign states that we 
are. Wyoming ranks first of all states in the production of coal and 
uranium. Our natural gas exploration and production has increased our 
known reserves significantly in recent years so that we now rank 
fourth, but a distant fourth behind Alaska. Our extractable reserves 
are equivalent to 374 billion barrels of oil. With OPEC currently 
producing approximately 25 million barrels of oil per day, Wyoming's 
energy potential could completely replace the entire OPEC production 
for the next 41 years.

We have it, America needs it
    With this world-class base of raw resources at our very feet, how 
come America is in such a critical situation of short supply? The 
answer is simple: access to the resources has become more difficult and 
the ability to transport the products in any form remains unpredictable 
and uncertain. In Wyoming almost any project to develop new production 
or to transport it to consumers involves a Federal action subject to 
the processes of the National Environmental Policy Act, or NEPA. The 
original intent of NEPA was admirable, but the immense body of 
activities developed in its implementation in particular over the past 
eight years has elevated process itself over results and has allowed 
opportunity for political control rather than public disclosure and 
real protection.
    To illustrate, the Bureau of Land Management has been developing an 
Environmental Assessment for an additional 2500 permits for Coal Bed 
Methane wells in Wyoming's Powder River Basin. If the wells are not 
developed on the Federal lands, production on adjacent state and 
privately owned lands will pull the methane gas out of the Federal 
ownership. Following its approved procedures, the BLM had completed its 
work and had given assurances to leaseholders that the additional 
permits would be available by March 1, 2001. At the last moment the 
U.S. Fish and Wildlife Service reported that it had not completed its 
required assessment of impacts and would delay the issuance of permits. 
The lack of coordination and cooperation between two divisions within 
the single Department of Interior will delay access to a much-needed 
supply of gas in a very attractive market. Federal activity is 
primarily focused on process rather than results and there is no 
accountability for improper decisions. You have asked for my views on 
interaction between state government and Federal land managers. One of 
my views is that as a start ``interaction'' must begin with and between 
Federal agencies.

What's a NEPA?--It's not the act, it's the actors
    The National Environmental Policy Act was enacted in 1969 with the 
stated purpose of ``recognizing the profound impact of man's activity 
on the interrelations of all components of the natural environment.'' 
Further on in the Purpose Clause, the act declares that ``it is the 
policy of the Federal Government, in cooperation with State and local 
governments and other concerned public and private organizations . . . 
to create and maintain conditions under which man and nature can exist 
in productive harmony and fulfill the social, economic and other 
requirements of present and future generations.''
    Implementation of this short and relatively simple act, NEPA, has 
resulted in such a myriad of regulations and processes, that state and 
local authorities have little or no idea which way the whip saw will go 
next. Inconsistency between and among Federal agencies is rampant.
    The Act is intended to require Federal, state and private actions 
that are comprehensive, elicit better planning, are inter-generational 
in their beneficial effect, and strike a wholesome balance between the 
environment and the economy.
    Federal regulations for the implementation of NEPA, must be 
streamlined and applied in a manner that reduces costs, eliminates 
interagency conflicts and inconsistencies, and is more efficient and 
timely. Western Governors recommend that streamlining start with the 
adoption of management principles such as the eight Enlibra principles 
we adopted in 1999. These principles, which are attached to my 
testimony, reflect a practical, common sense way to approach 
environmental decisions, just as Wyoming's native son, Dr. W. Edward 
Deming's principles of quality management enabled a quality revolution. 
We have employed these principles successfully on several difficult 
environmental issues.
    Earlier I referenced that we are in an age of litigation with the 
courts directing the management of our resources. But it's not just 
that the courts are directly managing many of our resources, they are 
indirectly managing public resources in our states because of the fear 
of litigation, not just because of actual litigation. Implementation of 
NEPA is not the problem. It's the process. It takes too long, costs too 
much, spawns unending litigation and is so inconsistently implemented 
that each agency requires extra layers of management for its own unique 
set of regulations. It's not the Act, Mr. Chairman, it's the Actors.
    You don't have to amend NEPA, Mr. Chairman, if you would simply 
require the Federal government to be consistent and speak with a 
unified voice of management. That should be among the first tasks that 
your Committee undertakes with Vice-President Cheney in his role as 
Energy Czar.
    Other specific actions that could and should be taken include 
reallocating Federal resources and personnel to activities that are 
focused on the near-term need for more energy. For example, Wyoming's 
Powder River Basin is the nation's largest deposit of clean-burning 
coal. Over 90 percent of current coal production is developed under 
Federal leases. More clean-air-compliant coal could be produced by 
simply increasing the number of LBA's (Leases By Application) from one 
per year to two per year. The processes do not need to be changed. 
What's lacking are the people resources needed for processing the 
applications. As today's coal prices continue to rise, increasing the 
pace of LBA's with competitive bidding would enhance bonuses paid as 
well as production bids. Federal agencies are waiting for direction and 
necessary resources to engage in strategic planning for the enhancement 
of energy supplies developed efficiently and in environmentally sound 
ways on public lands.
    Similarly, State resources for participation in and implementation 
of such activities could be enhanced through the release of the state-
share funds, which now total more than $400 million for the western 
states and energy tribes, from the abandoned mine lands program.
    In addition:
        <bullet> The Clinton Roadless Policy threatens to strand over 
        55 million acres, some of which include significant potential 
        for energy development, both renewable and non-renewable. Four 
        Western Governors asked to ``interact'' by being granted 
        cooperating agency status. We were denied.
        <bullet> The U.S. Forest Service has previously been directed 
        to adopt and revise individual forest plans in an accelerated 
        fashion that is hardly strategic and certainly exclusive of 
        energy development. The fast track plan revision coupled with 
        the Clinton Roadless initiative for 55 million acres is hardly 
        a sound strategy for resource management.
        <bullet> The projected growth in natural gas demand will 
        necessitate a significant increase in pipeline and distribution 
        systems over the next decade, many of which will cross Federal 
        lands. Best estimates are that 38,000 miles of new gas 
        pipelines are needed. The Federal government will have to 
        facilitate this construction by working with each affected 
        state to coordinate rights of way and production.
        <bullet> Natural gas is the fuel of choice for the near term, 
        since well over 90 percent of new electric power generation 
        will be gas fired, even though 60 percent of current generation 
        is from coal.
        <bullet> Alternatives for construction and maintenance of 
        electric transmission grid must be encouraged. Today's problems 
        focus on California, but significant shortages are imminent in 
        the Midwest.
        <bullet> A myriad of directives and solicitors' opinions which 
        flew out of Washington, D.C. on January 19th regarding multiple 
        use of our BLM lands needs to be reassessed for purpose and 
        benefit.
    The recommendation from the West, Mr. Chairman, is that we pursue 
solutions that focus on results, that symbolize balance and 
stewardship, that recognize states as partners and, above all, that you 
resist preempting state laws and jurisdictions. Energy is plentiful 
within the boundaries of public land jurisdictions.

The opportunities
    I want to leave you with the message that the current energy crisis 
is an opportunity to break through the often unproductive deadlock that 
pits energy needs against environmental protection. The western 
electricity crisis has awakened us to how much we don't know about the 
energy resources of the nation and how little we have explored 
opportunities to meet the energy needs of a growing economy while 
protecting our environment. We need to seek out opportunities to 
promote energy development AND environmental protection.
    Below I have outlined several subjects under this Committee's 
jurisdiction that warrant careful and thoughtful examination. There are 
undoubtedly other areas where progress can be made in promoting energy 
development and protecting the environment.

Rights-of-way and permitting
    Far fewer new power transmission lines and oil and gas pipelines 
have been built in the West in the past decade than are needed today. 
The permitting processes of Federal land management agencies and states 
are generally rusty and not capable of the rapid action required to 
meet the energy demands of the West. While some folks may call for the 
heavy hand of Federal preemption of existing state and Federal agency 
permitting processes, there is little reason for such draconian action, 
but much to justify new approaches to integrate and accelerate existing 
permitting process. For example, in the West we are unaware of any 
interstate transmission lines that have ever been blocked by lack of a 
state permit.
    We need to revive the permitting process from the past decade of 
dormancy. This needs to be done in a manner that reduces overall 
permitting time and improves the quality of project reviews. Tomorrow, 
members of my staff will be meeting with Staff of the Western 
Governors' Association and a major information technology firm to begin 
exploring how high performance computing can be employed to expedite 
project assessment and the NEPA review process. This kind of innovative 
activity needs to become the rule, rather than the exception in the 
thinking of our agencies: how can we do our jobs better, faster and 
cheaper without sacrificing the environment or the economy.
    I recommend that this Committee:
        <bullet> Urge Federal permitting agencies to include states as 
        cooperating agencies under NEPA reviews of energy projects 
        whenever a state requests cooperating agency status;
        <bullet> Encourage the BLM and Forest Service to work with 
        Western Governors to develop a process that coordinates and 
        synchronizes Federal and state reviews of proposed energy 
        projects; and
        <bullet> Encourage Federal agencies, including the Department 
        of Energy, to work with the states to develop the information 
        necessary for the consideration of alternatives to energy 
        projects that are required under NEPA.

Enhancing electricity production from Federal dams
    In the West, two Federal power marketing administrations, the 
Bonneville Power Administration and the Western Area Power 
Administration, market electricity generated at dams operated by the 
Bureau of Reclamation and the Corps of Engineers. We are all familiar 
with the arguments over the impact of such dams on the environment. The 
ongoing western electricity crisis is also reminding us how critical 
the hydro-electric system is to meeting the electricity demand. Let's 
develop opportunities to use the hydro-electric system to generate more 
electricity AND protect the environment. For example, a re-regulating 
dam and reservoir downstream from Glen Canyon Dam could enable greater 
peak electricity production, protect downstream environmental resources 
from the problems created by rapid fluctuations in flows and mitigate 
environmental problems for native species. More effective use could be 
made of Federal dams for stored generation capacity to even out the 
power generated by intermittent wind power generation. The BPA in its 
recent announced solicitation of 1,000 megawatts of wind generation, 
may use this wind power to balance hydro-electric generation. There are 
opportunities to replace 40-60 year old generators with more efficient 
generators thereby increasing electricity generation from the same 
amount of water (e.g., rewinds and replacements at Bonneville Dam, The 
Dallas Dam, McNary Dam, Chief Joseph Dam) or build additional power 
plants at existing dams (e.g., Folsom, Anderson Ranch, Black Canyon, 
Lewiston, Grand Coulee. We could evaluate opportunities to modify 
irrigation practices to shift pumping loads off-peak, to use more 
efficient pumps and to improve the efficiency of water use.
    I urge you to direct BPA, WAPA, BuRec and the Corps to seek out 
opportunities to use their assets to enhance electricity production 
while protecting the environment. I recommend that you ask them to 
report in 10 months on measures to achieve this end and to consult with 
governors throughout their work.

Abandoned mine land funds
    In enacting the Surface Mining Control and Reclamation Act of 1977, 
a bargain was struck between coal producing states and Indian tribes 
and the Federal government under which the states and tribes would 
receive at least one-half of the abandoned mine land fee collections 
from coal mining within their borders. Over the years, this fundamental 
agreement has been undercut by limits on appropriations of the state/
tribal share of AML collections, and diversion of the funds to the U.S. 
Treasury and the health benefits of retired coal miners. The result is 
that nearly every coal mining state and Indian tribe is owed 
significant amounts of money. For example, the latest annual data (12/
31/00) from OSM shows: West Virginia is owed $95 million; Kentucky $101 
million; Pennsylvania, $47 million; Montana $36 million; Utah $11 
million; the Council of Energy Resource Tribes, $35 million; and for 
Wyoming, the largest coal producing state, the most recent estimate is 
nearly $300 million.
    As part of the bargain struck in 1977, states that completed their 
clean-up of abandoned mines could use the funds for other public 
purposes. Wyoming is in this position. So may be other states and 
tribes. At this point, our own money is being withheld from Wyoming 
when these needed funds could be put to work expanding our capability 
to develop our energy and related resources and enhance the environment 
of our beautiful state.
    I urge this Committee to enact legislation that will enable states 
and Indian Tribes to access and use the State-share monies they are due 
under the Surface Mining Control and Reclamation Act of 1977.

Energy and fires
    Until last summer, few made the connection between our forest and 
range fires and the reliability of the western electric power system. 
However, the fires of last summer drove home the connection as fires in 
New Mexico knocked out a 500 Kv transmission line from Four Comers to 
Albuquerque causing serious blackouts. In Montana, the major fires 
resulted in the shut down of a major 500 Kv transmission line that 
moves coal-generated power from eastern Montana to Seattle. You can 
imagine the implications of these events if they should recur during 
this summer's peak load.
    Last fall, Western Governors negotiated an agreement with then-
Interior Secretary Babbitt and then-Agriculture Secretary Glickman to 
correct the imbalance in land management decisions. The agreement, 
which the Congress memorialized in the Interior Appropriations 
Committee Report, makes the states full partners and requires that 
local expertise and understanding be incorporated into forest 
management decisions during the extensive forest restoration activities 
over the next ten years. While the issues addressed in this agreement 
extend beyond issues of energy, I commend this agreement to the 
Committee and urge you to support its implementation as a model of the 
right way to manage our public lands and resources.
    I understand that my colleague Montana Governor Judy Martz will be 
testifying tomorrow to the Forest and Forest Health Subcommittee on 
these important issues.
Royalty management and well inspection
    I want to thank you and the Congress for acting last year to remove 
a major irritant limiting state/Federal cooperation on royalty 
management and well inspection which was the deduction of unsupported 
Federal agency costs from the states' share of Mineral Leasing Act 
revenues. With this obstacle removed, we have an opportunity for the 
thoughtful examination of ways in which the states and Federal 
government might further cooperate in enhancing the efficiency of how 
we collect royalties and manage mineral leases, such as by taking 
royalties in-kind rather than in-cash.
    You should encourage new leadership at the BLM and MMS to seek 
greater efficiencies in the execution of their responsibilities through 
enhanced collaboration with states. Both BLM and MMS execute 
responsibilities that parallel those of state agencies. We ought to be 
able to take better advantage of the synergies between these Federal 
and state agencies to improve well inspections and simplify royalty 
management while reducing the burden on lessees.

National parks and gateway communities
    Many of the most spectacular lands and waters in the nation are 
under the jurisdiction of the National Park Service and other Federal 
land management agencies. The public's interest in experiencing these 
national treasurers is growing with the resulting increased pressure on 
the environment and gateway communities.
    We need to find and capitalize on opportunities to show how parks 
and gateway communities can work in harmony with the environment while 
meeting needs of visitors. We need to use the parks and gateway 
communities as educational models of our ability to meet our energy 
needs while protecting the environment.
    I understand that there are examples of steps that can be taken in 
this direction. For example, in the Chairman's state of Utah, the 
state, the local utility (PacifiCorp), and the National Park Service 
have collaborated to replace remote and polluting diesel generation at 
Lake Powell with photo-voltaic. Zion National Park's pressing need to 
reduce traffic in the inner canyon has been integrated with the 
transportation needs of the park's gateway community of Springdale. 
These types of innovations should be the norm, not the exception.
    I urge you to direct the National Park Service, the BLM, the Forest 
Service and the Fish and Wildlife Service to seek out opportunities 
with gateway communities and states to meeting the needs of visitors 
and the gateway communities while providing a showcase of how the needs 
for energy and environmental protection can be met. I recommend that 
you direct these agencies to come back with a plan in 10 months that 
identifies the opportunities for collaboration and necessary resources 
to implement the plan. These plans must be developed in cooperation 
with gateway communities and states.
    Thomas Jefferson maintained a solid belief that the success of our 
democracy lies in ordinary citizens vested with deep civic 
responsibility, citizens who engage each other directly in the pursuit 
of the common good. The American West can and should reject the last 
two decades of bitter debate among environmentalists and resource users 
that has become so polarized that we have gridlock rather than any 
public benefit from our public lands. Former EPA Director Bill 
Ruckelshaus has said ``business, governments and citizens, frustrated 
by years of litigation and stalemate, have begun to turn to the common 
good, sometimes out of desperation, but more frequently out of hope. 
Hope that the decisions they yield will be less controversial and more 
durable. Hope that jointly designed decisions will be better and more 
informed decisions. And hope that stakeholder processes could actually 
help to regenerate public confidence in our institutions, including 
both government and business.''
    Mr. Chairman, thank you. I would be happy to answer any questions.

Suggested Action Plan to Meet the Westerns Electricity Crisis and Help 
           Build the Foundation for a National Energy Policy

    1. Permitting energy facilities.--Direct Federal agencies to 
partner with Western states to expedite regulatory processes governing 
the operation of existing powerplants and the construction of necessary 
new energy infrastructure. This includes:
        <bullet> EPA permits governing operation of existing 
        powerplants and new powerplants;
        <bullet> Federal interface with states on fish management and 
        hydro operations;
        <bullet> Interior Department and Forest Service on the 
        processing rights-of-way;
        <bullet> FERC processing of natural gas pipeline applications.
    2. Reliability legislation.--Enact before summer Federal electric 
system reliability legislation, such as last year's Senate bill making 
reliability standards enforceable.
        <bullet> Delegates to the West authority to devise standards 
        and allows Federal deference.
        <bullet> Governors create state bodies to advise industry and 
        FERC on reliability standards.
    3. Low-income energy assistance.--Increase Federal funding for low-
income energy assistance and low-income weatherization.
        <bullet> Increased natural gas and electricity prices have 
        caused major hardship.
        <bullet> Expected high electricity prices this summer will 
        exacerbate hardship in the West.
    4. Energy production and efficiency tax credits and Federal R&D.--
Federal action is needed to encourage the development of cleaner, more 
efficient powerplants and more efficient use of energy.
        <bullet> Adopt energy efficiency tax credits to complement the 
        Western state efforts to reduce demand this summer.
        <bullet> Extend and expand wind production tax credit to 
        geothermal, solar, and biomass.
        <bullet> Adopt tax incentives for advanced coal use.
        <bullet> Expand Federal fossil and renewable energy R&D.
    5. Federal appliance standards.--Continue development of standards.
        <bullet> Standards adopted by DOE in January (for clothes 
        washers, water heaters, residential air conditioning and heat 
        pumps) are a step in the right direction.
        <bullet> Grant waivers for stronger state standards, such as 
        California's air conditioner and commercial appliance 
        standards.
    6. Administration.--WGA cooperative agreement.--Implement a multi-
year cooperative agreement with Western Governors.
        <bullet> Agreement enhances Western states' standing with 
        Federal agencies and serve as a vehicle for Federal funding on 
        key energy issues.
        <bullet> The cooperative agreement would include: expanding 
        electrical generations, building needed energy infrastructure, 
        and improving the efficiency of energy use.
        <bullet> The cooperative agreement would extend to states 
        cooperating agency status for NEPA reviews on energy projects.
                                 ______
                                 

Western Governors' Association Policy Resolution 99-013--Principles for 
                  Environmental Management in the West

               Sponsors: Governors Kitzhaber and Leavitt

                             A. BACKGROUND
Vision statement
    1. The people of the West face a common challenge. The quality of 
life we cherish is threatened--in part by our own success--as our rapid 
growth impacts much of the environmental quality and many of the 
natural resource systems that characterize our region. A number of 
factors illustrate the change that is occurring.
        <bullet> Throughout the 1990s, the population growth rate in 
        the Western United States has surpassed that of every other 
        region of the country, in part because of the draw of the 
        Western quality of life and magnificent landscapes. Population 
        mobility and growth and the resulting increased diversity in 
        values are changing both the political dynamics and the 
        region's economy.
        <bullet> While its historic base of natural resource-related 
        industries, such as farming, fishing, mining, and wood 
        products, remains important, the West has diversified 
        dramatically and now counts telecommunications, tourism, 
        recreation services, transportation, information technologies, 
        software and entertainment companies among its larger 
        employers.
        <bullet> Globalization of markets, changing preferences, 
        substitute materials, and availability of natural resources 
        have affected the competitiveness and resiliency of many 
        Western communities. Communities must work to retool, adjust 
        and diversify to remain competitive.
        <bullet> At the same time, the nature of environmental and 
        natural resource problems is changing. As large, easily 
        identified sources of pollution are controlled, the threat to 
        the environment has shifted to diffuse, numerous, and smaller-
        scale sources. Our sheer numbers and consumption habits make 
        environmental progress increasingly dependent on the daily 
        behaviors and decisions made by every individual.
        <bullet> Agricultural consolidation and dispersed development 
        have affected land-use patterns resulting in a wide range of 
        economic and environmental impacts. Impacts range from impaired 
        air quality from increasing numbers of commuters and miles 
        traveled, to fragmented habitats and disrupted migration routes 
        for wildlife. Good stewardship born of locally controlled and 
        economically sustainable agriculture may also suffer.
        <bullet> New computer and communications technologies, as well 
        as new environmental monitoring and characterization 
        technologies, create opportunities for innovative solutions to 
        preserve and enhance the environment and communities of the 
        West.
    There is a lot at stake. Westerners enjoy majestic mountains, 
forests, streams and lakes, as well as beautiful deserts, plains and 
coastlines. This landscape includes the vast public lands--national 
parks and forests, wilderness areas and refuges, military bases, tribal 
lands, state and local public lands--and highly productive private 
lands. This landscape harbors a wide array of plant and animal life and 
nurtures a diverse population of people both physically and 
spiritually. The West's natural resource systems are a source of great 
wealth and beauty for the region, the nation and the world.
    Westerners desire to create a region that will provide our children 
an extraordinary quality of life. This future embraces a shared sense 
of stewardship responsibility for our region's natural and cultural 
assets. It strives to ensure for present and future generations clean 
water and air, open lands that are beautiful, life-sustaining and 
productive, and proximity to public recreational opportunities. Equally 
important is an economy where people of any background or age have 
opportunities for education and high quality jobs and the ability to 
contribute to the well-being of their families and fellow citizens.
    It must be clear that in implementing this vision, Westerners do 
not reject the goals and objectives of Federal environmental laws, nor 
the appropriate role of Federal regulation and enforcement as a tool to 
achieve those objectives. Westerners respect treaty rights, 
sovereignty, property rights and other legal rights, and recognize the 
responsibilities associated with those rights in addressing our common 
environmental challenges.
    Our future includes a belief that we are better off if we can 
redirect energy away from polarized battles and toward solving our 
common problems. It is a vision of rebuilding trust, partnerships and 
community; of better understanding the cumulative effects of our 
actions; and of enhancing individual and collective environmental 
understanding and its associated stewardship. It includes individuals 
being able to pursue their objectives in ways that build community 
rather than disrupt it, and commitment to looking for win-win solutions 
sustainable over time.
    2. During the 1990s, the Western Governors have experimented with a 
variety of ways to improve management of the environment of the West 
through collaborative processes. Valuable accomplishments have been 
achieved while lessons have been learned from development of the Park 
City Principles for Water Management, the High Plains Partnership, the 
Grand Canyon Visibility Transport Commission, The Oregon Plan for 
Salmon and Watersheds, the Texas Regional Water Supply Planning 
Process, Trails and Recreational Access for Alaska and the Wyoming Open 
Lands Initiative. These efforts have built on the collaborative process 
which has shown repeated promise, and have demonstrated that the 
environmental strategies that work best have strong commitment from 
state and local government, vested local support, and Federal 
collaboration.
    3. In summary, mindful of our rich Western heritage, recognizing 
the need to sustain a vibrant Western economy, convinced of the 
importance of protecting and enhancing the environment for the well-
being of present and future generations, and acknowledging the benefits 
of existing and new approaches to environmental management, Governors 
and other Westerners with diverse experience have agreed to the 
principles that follow.

                     B. GOVERNORS' POLICY STATEMENT

    1. The Western Governors commit to a new doctrine to guide natural 
resource and environmental policy development and decision-making in 
the West. The doctrine is based upon the principles below, each of 
which is dependent upon the others. The integration of these principles 
is critical to their interpretation and the success of the new 
doctrine.

National Standards, Neighborhood Solutions--Assign Responsibilities at 
        the Right Level
    There is full acknowledgment that there are environmental issues of 
national interest ranging from management of public lands to air and 
water quality protection. Public processes are used to identify and 
protect the collective values of the nation's public. No existing laws 
or identified legal rights and responsibilities are rejected. The role 
of the Federal government is supported in passing laws that protect 
these values as well as setting national standards and objectives that 
identify the appropriate uses and levels of protection to be achieved. 
As the Federal government sets national standards, they should consult 
with the states, tribes and local governments as well as other 
concerned stakeholders in order to access data and other important 
information. When environmental standards have not been historically 
within the Federal jurisdiction, non-Federal governments retain their 
standard setting and enforcing functions to ensure consideration of 
unique, local-level circumstances and to ensure community involvement.
    With standards and objectives identified, there should be 
flexibility for non-Federal governments to develop their own plans to 
achieve them, and to provide accountability. Plans that consider more 
localized ecological, economic, social and political factors can have 
the advantage of having more public support and involvement and 
therefore can reach national standards more efficiently and 
effectively.
    Governments should reward innovation and take responsibility for 
achieving environmental goals. They should support this type of 
empowerment for any level of government that can demonstrate its 
ability to meet or exceed standards and goals through locally or 
regionally tailored plans. The Federal government should support non-
Federal efforts in this regard with funds and technical assistance. In 
the event that no government or community is progressing toward 
specific place-based plans, the Federal government should become more 
actively involved in meeting the standards.

Collaboration, Not Polarization--Use Collaborative Processes to Break 
        Down Barriers and Find Solutions
    The regulatory tools we have been relying on over the last quarter 
of a century are reaching the point of diminishing returns. In 
addition, environmental issues tend to be highly polarizing, leading to 
destructive battles that do not necessarily achieve environmental 
goals. Successful environmental policy implementation is best 
accomplished through balanced, open and inclusive approaches at the 
ground level, where interested stakeholders work together to formulate 
critical issue statements and develop locally based solutions to those 
issues. Collaborative approaches often result in greater satisfaction 
with outcomes and broader public support, and can increase the chances 
of involved parties staying committed over time to the solution and its 
implementation. Additionally, collaborative mechanisms may save costs 
when compared with traditional means of policy development. Given the 
often local nature of collaborative processes, it may be necessary for 
public and private interests to provide resources to ensure these 
processes are transparent, have broad participation and are supported 
with good technical information.

Reward Results, Not Programs--Move to a Performance-Based System
    A clean and safe environment will best be achieved when government 
actions are focused on outcomes, not programs, and when innovative 
approaches to achieving desired outcomes are rewarded. Federal, state 
and local policies should encourage ``outside the box'' thinking in the 
development of strategies to achieve desired outcomes. Solving problems 
rather than just complying with programs should be rewarded.

Science for Facts, Process for Priorities--Separate Subjective Choices 
        From Objective Data Gathering
    Environmental science is complex and uncertainties exist in most 
scientific findings. In addressing scientific uncertainties that 
underlie most environmental issues and decisions, competing interests 
usually point to scientific conclusions supporting their view and 
ignore or attack conflicting or insufficient information. This 
situation allows interests to hold polarized positions, and interferes 
with reconciling the problems at hand. It may also leave stakeholders 
in denial over readily perceived environmental problems. This in turn 
reduces public confidence and raises the stridency of debate. Critical, 
preventive steps may never be taken as a result, and this may lead to 
more costly environmental protection than would otherwise be required.
    A better approach is to reach agreement on the underlying facts as 
well as the range of uncertainty surrounding the environmental question 
at hand before trying to frame the choices to be made. This approach 
should use a public, balanced and inclusive collaborative process and a 
range of respected scientists and peer-reviewed science. Such a process 
promotes quality assurance and quality control mechanisms to evaluate 
the credibility of scientific conclusions. It can also help 
stakeholders and decision-makers understand the underlying science and 
its limitations before decisions are made. If a collaborative process 
among the stakeholders does not resolve scientific disagreements, 
decision-makers must evaluate the differing scientific information and 
make the difficult policy choices. Decision-makers should use ongoing 
scientific monitoring information to adapt their management decisions 
as necessary.

Markets Before Mandates--Pursue Economic Incentives Whenever 
        Appropriate
    While most individuals, businesses, and institutions want to 
protect the environment and achieve desired environmental outcomes at 
the lowest cost to society, many environmental programs require the use 
of specific technologies and processes to achieve these outcomes. 
Reliance on the threat of enforcement action to force compliance with 
technology or process requirements may result in adequate environmental 
protection. However, market-based approaches and economic incentives 
often result in more efficient and cost-effective results and may lead 
to more rapid compliance. These approaches also reward environmental 
performance, promote economic health, encourage innovation and increase 
trust among government, industry and the public.

Change A Heart, Change A Nation--Environmental Understanding is Crucial
    Governments at all levels can develop policies, programs and 
procedures for protecting the environment. Yet the success of these 
policies ultimately depends on the daily choices of our citizens. 
Beginning with the nation's youth, people need to understand their 
relationship with the environment. They need to understand the 
importance of sustaining and enhancing their surroundings for 
themselves and future generations. If we are able to achieve a healthy 
environment, it will be because citizens understand that a healthy 
environment is critical to the social and economic health of the 
nation. Government has a role in educating people about stewardship of 
natural resources. One important way for government to promote 
individual responsibility is by rewarding those who meet their 
stewardship responsibilities.

Recognition of Benefits and Costs--Make Sure All Decisions Affecting 
        Infrastructure, Development and Environment are Fully Informed
    The implementation of environmental policies and programs should be 
guided by an assessment of the costs and benefits of different options 
across the affected geographic range. To best understand opportunities 
for win-win solutions, cost and benefit assessments should look at 
life-cycle costs and economic externalities imposed on those who do not 
participate in key transactions. These assessments can illustrate the 
relative advantages of various methods of achieving common public 
goals. However, not all benefits and costs can be easily quantified or 
translated into dollars. There may be other non-economic factors such 
as equity within and across generations that should also be fully 
considered and integrated into every assessment of options. The 
assessment of options should consider all of the social, legal, 
economic and political factors while ensuring that neither quantitative 
nor qualitative factors dominate.

Solutions Transcend Political Boundaries--Use Appropriate Geographic 
        Boundaries for Environmental Problems
    Many of the environmental challenges in the West cross political 
and agency boundaries. For example, environmental management issues 
often fall within natural basins. These are often transboundary water 
or air sheds. Focusing on the natural boundaries of the problem helps 
identify the appropriate science, possible markets, cross-border 
issues, and the full range of affected interests and governments that 
should participate and facilitate solutions. Voluntary interstate 
strategies as well as other partnerships are important tools as well.
    2. The Western Governors invite state, local and Native American 
leaders, environmental organizations, the private sector, Congress and 
the Administration to embrace these principles in their environmental 
and natural resources policy work and decision-making.

                   C. GOVERNORS' MANAGEMENT DIRECTIVE

    1. The Western Governors' Association (WGA) shall transmit a copy 
of this resolution to the President; Vice President; the Council on 
Environmental Quality; the Administrator of the Environmental 
Protection Agency; the Secretaries of Interior, Energy, Transportation 
and Agriculture; the chairmen and ranking minority leaders of the 
relevant Committees of Congress; the Western delegation to Congress; 
Western tribal leaders; state, municipal and county government 
associations; leaders of business associations and environmental 
institutions; and interested CEOs.
    WGA shall incorporate these principles into its projects and 
activities in environmental and natural resources policy development 
and shall work with the states to identify specific areas where they 
have been demonstrated and adopted or may be in the future.
    3. WGA shall communicate the commitment of the Governors to these 
principles to organizations, institutions and media concerned with 
environmental protection and natural resources management.
    4. WGA shall report to the Governors annually on input received on 
the content of the Shared Doctrine for Environmental Management. In 
conjunction with its Enlibra Steering and Advisory Committees, WGA 
shall use its limited resources to promote the doctrine, and to engage 
and evaluate appropriate projects that seek to advance its principles. 
To carry out these activities, WGA will prepare an implementation plan 
as part of the annual work plan submitted to the Governors.
    Originally adopted as Policy Resolution 98-001 in 1998.
                                 ______
                                 

  Western Governors' Association Policy Resolution 00-033--Natural Gas

                       Sponsor: Governor Knowles

                             A. BACKGROUND

    1. North America is dependent on reliable, reasonably priced energy 
supplies to support its economy.
    2. Demand for natural gas is growing faster than any other energy 
source. Higher than expected recent growth in natural gas use will 
fully utilize current North American gas production, creating the 
relatively high prices consumers are paying for natural gas this 
winter. U.S. natural gas use is currently 21 trillion cubic feet per 
year and is expected to grow to 30 trillion cubic feet by 2015. More 
than 90 percent of planned expansion of electric generation capacity in 
the U.S. is to be fueled with natural gas.
    3. Billions of dollars of investment in production, transmission, 
storage and distribution facilities will be required to ensure that 
North American natural gas consumers have access to an adequate supply 
of fuel.
    4. The Interstate Oil and Gas Compact Commission's recent 
Governor's Summit on Natural Gas concluded, with the support of natural 
gas experts from industry, regulatory and other government officials, 
that a functional marketplace is capable of delivering natural gas to 
North America at reasonable prices.
    5. The largest single untapped supply of natural gas available to 
North American is located in Alaska. 35 trillion cubic feet of gas are 
found in proven reserves. Additional exploration may discover total 
reserves of more than 100 trillion cubic feet.
    6. In the 1970's the United States and Canada agreed to transport 
Alaska natural gas to the rest of the continent via a pipeline from 
Prudhoe Bay through Alaska's interior along the Alcan Highway to the 
existing North American distribution system. This agreement constitutes 
a treaty-like international arrangement which was specifically 
authorized by Congress. Key rights-of-way and regulatory approvals are 
still valid allowing a project to deliver billions of cubic feet per 
day by 2006 or 2007. A pipeline along the Alcan Highway would parallel 
an existing highway corridor and would not cross any U.S. national 
conservation system units. Such a project would be the biggest private 
construction project in North American history.

                     B. GOVERNORS' POLICY STATEMENT

    1. Consistent with Federal and state environmental laws and with 
local community values, Western Governors:
          a. Believe Federal and state governments should endorse 
        policies that increase the availability of North American 
        natural gas at reasonable prices to residential, commercial, 
        industrial, and electric generation consumers,
          b. Call on Federal and state governments to work together to 
        allow for appropriate access to their public-owned lands for 
        natural gas exploration, production and transmission, while 
        protecting environmentally sensitive areas, and
          c. Endorse, pending completion of appropriate environmental 
        review, a project to bring Alaska gas to market via a pipeline 
        from Prudhoe Bay along the Alcan Highway through Canada to the 
        North American distribution system. Any such project must 
        ensure full pipeline safety to protect the public and 
        environment.
    2. Western Governors also believe that the nation must continue to 
identify and develop a full range of economic and efficient alternative 
energy sources, including energy conservation.

                   C. GOVERNORS' MANAGEMENT DIRECTIVE

    1. The Western Governors' Association (WGA) shall transmit this 
resolution to the President, elect, Secretary of Energy, Secretary of 
Energy designee, and members of the U.S. House and Senate Natural 
Resources Committees.
    2. WGA staff shall monitor developments related to the purposes of 
this resolution and report to the Governors as needed.
                                 ______
                                 

Western Governors' Association Policy Resolution 00-036--Energy Policy 
                            for the Americas

                       Sponsor: Governor Geringer

                             A. BACKGROUND

    1. The United States enjoys the strongest economy in the world and 
an increasingly clean environment both of which are made possible by 
abundant and affordable energy and improvements in clean energy and 
renewable energy technologies. To assure all Americans access to 
affordable energy, it is necessary to ensure that diverse energy 
supplies, including coal, hydroelectric, natural gas, petroleum and 
renewable resources such as biomass, ethanol, wind, solar, and 
geothermal, remain available, and that energy resources are used 
efficiently and in a manner that continues the trend to a cleaner 
environment
    2. Since 1973, the Federal Government has attempted, through at 
least six plans, to implement an effective national energy policy. 
Despite the Federal government plans, today we: (a) are increasingly 
dependent on imported energy supplies, particularly transportation 
fuels, from unstable regions of the world; (b) do not have in place 
adequate infrastructure necessary to provide our growing technology-
driven economy with reliable, high-quality and affordable supplies of 
energy; (c) have not adequately improved the efficiency with which 
energy is used or enabled the demand side of the market to more 
effectively respond to energy price increases; and (d) have flawed 
wholesale electricity markets in some areas. These shortcomings are 
particularly apparent in a year when energy prices dramatically 
increased and western electricity markets are in the midst of 
fundamental reforms.
    3. In order for the U.S. economy to be sustained and to grow, 
technologies and policies need to be developed to enable all energy 
resources to be developed cleanly, efficiently and cost-effectively and 
to efficiently use energy resources and enable demand responsiveness to 
energy prices.
    4. The West is particularly critical to the implementation of 
national energy policy because of the significant fossil energy and 
renewable energy resources of the region. The West already produces 
almost 65 percent of the nation's natural gas, 64 percent of the 
nation's oil, more than 50 percent of the nation's coal, and a major 
portion of the nation's renewable resources.
    5. The United States presently relies on fossil fuels (oil, gas, 
and coal) for approximately 85 percent of its total energy needs and 
almost 70 percent of its electrical power.
    6. Renewable energy should be developed and energy efficiency 
promoted to provide sufficient affordable and reliable energy as part 
of a diverse portfolio that includes fossil fuels as sources for 
electric power, transportation and heating. As efforts continue to 
develop technologies to enable a transition to renewable energy, it is 
important to ensure American consumers can reduce demand and utilize 
clean burning natural gas, oil and coal.
    7. In order for the U.S. economy to maintain sustained growth, all 
sources of energy should be developed cleanly, efficiently, and cost-
effectively through the development of a comprehensive energy policy. 
To accomplish this, an initiative must be developed and implemented to 
provide energy security, reliability, diversity, and affordability and 
to ensure environmental protection. Such an initiative must capitalize 
on current and future opportunities to improve the efficiency with 
which energy is used.

                     B. GOVERNORS' POLICY STATEMENT

    1. Western Governors' support a national energy policy that is 
guided by the goals of secure, reliable, diverse, affordable and 
environmentally-sound energy for all citizens. The Governors encourage 
cooperation among states to meet these goals.
    2. A national energy policy should be guided by:
          a. Effective and functional market-oriented approaches to 
        energy supply and use that enable the above goals to be met;
          b. Appropriate government support of energy research in the 
        development of new technologies and commercial applications, 
        with demonstrations by the private sector;
          c. Performance-based Federal and state environmental 
        standards implemented by the states;
          d. Strategic alliances with our international partners in the 
        Americas; and
          e. Conservation by end-users in the transportation, 
        industrial, residential, and commercial sectors.
    3. Western Governors believe that an Energy Policy Roundtable is 
needed to provide a forum for governors, members of Congress, the 
Federal administration, state agencies, and experts to examine issues, 
policies and programs necessary to assure secure, reliable, diverse, 
affordable and environmentally-sound energy into the future.

                   C. GOVERNORS' MANAGEMENT DIRECTIVE

    1. The Western Governors' Association shall transmit this 
resolution to the President, elect, the Secretaries or Secretaries-
elect of Energy, Agriculture, Interior and Commerce, the Administrator 
or Administrator-designee of the Environmental Protection Agency, 
appropriate members and Committees of Congress, the National Governors' 
Association, and the Interstate Oil and Gas Compact Commission and 
other concerned organizations.
    2. WGA staff shall monitor developments related to the purposes of 
this resolution and report to the governors as needed. WGA and 
affiliated organizations shall ensure that all WGA programs and 
initiatives that affect energy development and use incorporate the 
principles and program of this policy.
    3. WGA will work with other interested organizations to convene the 
first Energy Policy Roundtable prior to the WGA Annual Meeting in order 
to prepare a detailed approach to implement the policies in this 
resolution.
                                 _____
                                 

  Western Governors' Association Policy Resolution 00-037--Coal Policy

                       Sponsor: Governor Geringer

                             A. BACKGROUND

    1. Coal mining has a long and proud heritage in the western United 
States with today's coal-fired power plants generating 56 percent of 
the electricity in the United States and over 70 percent of the 
electricity generated in Arizona, Colorado, Montana, Nevada, New 
Mexico, Utah and Wyoming.
    2. The West now mines over half of the coal produced in the United 
States from less than 6 percent of the total coal mines in the United 
States. Western coal comprises approximately 55 percent of the nation's 
reserves and over 80 percent of the low sulfur coal reserves (defined 
as less than 1.67 lbs. SO<INF>2</INF>, per million Btu).
    3. As the nation's growth in energy demand continues, western coal 
development is an important part of the fuel mix necessary to assure 
that U.S. citizens' energy needs are met in an affordable, reliable and 
increasingly clean manner.
    4. Western and national coal-fired power generation is increasingly 
clean, with significant reductions in SO<INF>2</INF>, NO<INF>X</INF>, 
and particulate matter during a period of dramatic increase in the 
demand for electricity. For example, western coal-fired power plants 
currently produce 23 percent of the coal-fired electricity generated in 
the country but emit only 13 percent of the SO<INF>2</INF> emissions 
from such plants.
    5. The western coal industry is among the safest in the entire 
world, and has consistently conducted successful reclamation of mined 
lands.

                     B. GOVERNORS' POLICY STATEMENT

    1. The Western Governors' Association acknowledges the significant 
contribution of the coal industry to many western states' revenues and 
local communities' economics. The Governors also strongly support 
public and private research to reduce emissions from coal-fired 
generation.
    2. Consistent with the Governors' general energy policy resolution 
00-036, Western Governors support the concepts for Federal legislation 
which:
          a. Accelerate technology research and development programs 
        for advanced clean coal technology for new and existing coal 
        based electric generating facilities.
          b. Encourages appropriate incentives for emission reductions 
        and efficiency improvements in existing coal based electricity-
        generating facilities.
          c. Encourages incentives for early commercial application of 
        advanced clean coal technologies for new generating capacity.
    3. Western Governors support the concept of a more comprehensive 
and coordinated approach to environmental regulation.
    4. Western Governors recognize that there are multiple sources of 
emissions that cause regional haze and an effective emissions-reduction 
program must treat all sources fairly.

                   C. GOVERNORS' MANAGEMENT DIRECTIVE

    1. WGA staff shall convey to the Administration, Congress and the 
U.S. Environmental Protection Agency that the Western Governors' 
Association supports the concepts of Federal legislation as outlined in 
Policy Statement No. 2.
    2. WGA staff shall convey to Congress and the U.S. Environmental 
Protection Agency the need to address the multitude of emission 
concerns in a comprehensive and coordinated approach.
    3. WGA staff shall convey this resolution to Mining Associations 
within the membership states of the Western Governors' Association.
                                   ____
                                 

    [Maps referred to in Governor Geringer's statement follow:]

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    The Chairman. Thank you, Governor Geringer. We appreciate 
your excellent remarks.
    I recognize the gentleman from Montana to introduce the 
Governor of Montana.
    Mr. Rehberg. Thank you, Mr. Chairman. It gives me a great 
deal of pleasure to draw attention to the last of the three 
panel members, a woman that I have worked with for many years. 
Twelve years ago, we began working with Senator Conrad Burns 
within the State operation.
    If the gentlelady from Wyoming were here, I would make some 
comment like "My governor can beat up her governor." She is a 
former Olympic speed skating champion. So, Jim, I wouldn't leg 
wrestle her if I were you; also a small businesswoman, very 
successful in that right as well. And in the true tradition of 
firsts in Montana, we were the first State to have a woman 
Congresswoman, Jeanette Rankin, and we now have our first woman 
governor, and we so dearly appreciate the things she is going 
to try and do to build energy independence for this nation.
    Montana's motto is ``oro y plata,'' ``gold and silver,'' 
and it is appropriate now at this time that we talk about coal, 
natural gas, and oil being able to free us from the dependence 
on sources of oil oversees.
    So without further ado, I want to introduce a very good 
friend of mine, a new Governor, Judy Martz of the State of 
Montana.
    The Chairman. Thank you. We appreciate the introduction.
    Governor, we will turn to you.

  STATEMENT OF THE HON. JUDY MARTZ, GOVERNOR, STATE OF MONTANA

    Governor Martz. Thank you. First of all, thank you, 
Congressman Rehberg. We are very proud to have you here 
representing Montana.
    Mr. Chairman, members of the Committee, for the record I am 
Governor Judy Martz, representing the Big Sky State of Montana. 
It is an honor to be here today to testify on the role of 
public lands in developing a self-reliant energy policy. I 
appreciate the efforts and interest this Committee has shown in 
our State and in this issue.
    As Governor Geringer mentioned, we also experienced last 
summer those horrific fires. We have closed down our only large 
aluminum plant, which is now selling back their power and 
closing their doors for the next year. Mines that produce much-
needed resources are at risk of closing because of energy 
prices, and one of our major cements plants. As we lose jobs at 
300 and 350 people a crack, that is a huge impact to the State 
of Montana.
    I ask for your consideration of my prior submission of my 
complete testimony for the record and for your review.
    Now, let me begin by putting into context the size of 
Montana. Overall, Montana has more than 93 million acres of 
land. That is more than 145,000 square miles. Of the 93 million 
acres, more than 19 million acres are managed by the United 
States Forest Service, 8 million by the Bureau of Land 
Management, and another 1.1 million by the National Park 
Service. Thirty-three percent of our land mass is managed by 
the Federal Government.
    We must start to utilize the resources that we have. We 
should not act surprised that after a decade of stopping 
natural resource development on public lands that we are 
suddenly faced with an energy shortage. Natural gas prices will 
continue to rise if we don't focus on the energy that we can 
provide as a nation. Electricity prices will continue to climb 
if we continue to say we can't develop clean coal to burn, we 
can't develop natural gas, and we have to blow up our 
hydropower dams. We can expand our natural resource development 
well into the context of environmental stewardship. This is not 
a zero-sum game.
    Montana has a wealth of natural resources, from vast super-
compliant coal fields in the east, to thousands of acres of 
timber land in the west. Montana can contribute to the economic 
health of this country through responsible and environmentally-
sensible development of our resources.
    Unfortunately, the Federal Government has systematically 
reduced the number of opportunities for reasonable development 
of our natural resources in the past recent years. At the end 
of the last administration's term of office, doors were closed 
on many opportunities to responsible management and development 
of natural resources. The past President's Roadless Initiative 
will lock up over 6 million acres of U.S. Forest Service land. 
Additionally, the Roadless Initiative will prohibit sensible 
and environmentally-sensitive exploration of natural gas and 
oil.
    Also, just days before leaving office, President Clinton 
designated nearly half a million acres of land along the upper 
Missouri River breaks as a National Monument. The past 
administration permanently set aside one of our State's 
greatest natural gas reserves due to concerns over a great 
influx of tourists.
    Last year, approximately 420,000 acres along the Rocky 
Mountain Front were withdrawn from mineral development for the 
next 20 years. The Rocky Mountain Front has untold reserves of 
natural gas. In fact, our Canadian neighbors to the north have 
been responsibly developing natural gas along the Front for 
years.
    But the news for us is not all bad. In fact, despite the 
previous attempts to lock up the West, we believe Montana still 
has tremendous potential to meet the demands of a growing 
nation. Montana anticipates the imminent transfer of Federal 
mineral rights in super-compliant coal reserves in southeast 
Montana. This area of land, known as the Otter Creek tracts, is 
the result of an exchange for the mineral development rights 
outside Yellowstone National Park.
    While I served as Montana's Lieutenant Governor with former 
Governor Marc Racicot, Montana successfully negotiated a deal 
with the Federal Government that resulted in a buy-out of 
mineral rights and an exchange for the lost economic 
development. Under the leadership of Senator Conrad Burns and 
former Congressman Rick Hill, H.R. 2107 was signed into law in 
1998 (P.L. 105-83), mandating the transfer of Otter Creek 
Tracts 1, 2 and 3 to the State of Montana.
    The former Secretary of the Interior ignored the law, 
refusing to make the transfer. I am pleased to say that, 
working with new Secretary of Interior Gail Norton, I am 
anticipating Montana will receive ownership of these tracts in 
the near future, a very important move for Montana. The 
development of over 533 million tons of super-compliant coal is 
at stake here. I call it super-compliant because it far exceeds 
the Federal clean air requirements for high btu values and low 
sulfur output.
    This high-quality coal will be in demand in the Midwest as 
power generating facilities struggle to improve air quality, as 
mandated under the Clean Air Act. The development of these 
tracts is also bringing increased interest from investors who 
recognize the need for additional power sources in the Western 
half of our country. We have already have several inquiries 
about potential coal development, but also coal-fired electric 
generating facilities that will fuel the power needs of Montana 
and the West.
    Along with the potential coal development, Montana has vast 
reserves of resources only recently acknowledged as a viable 
energy source: coal bed methane, or natural gas. Currently, 
Montana's Department of Environmental Quality and the BLM are 
working jointly to assess environmental impacts from the 
proposed development. Wyoming Governor Geringer has had 
tremendous experience in the development of coal bed methane, 
and we hope to learn from his efforts in Wyoming.
    Today, nearly 57 percent of our energy needs are supplied 
by foreign nations. Not only is that a national security risk, 
it takes good-paying jobs away from hard-working Americans, 
hard-working Montanans. I believe that is unacceptable.
    We have the resources to meet a greater portion of our 
country's energy needs, and we can do it in an environmentally-
sensitive manner. As a nation, we need to reevaluate the role 
of our public lands and how they can play a part in supplying 
this country with the energy it so desperately needs.
    We ask for every consideration to be allowed, with new 
technologies, to move forward in our State of Montana and the 
Western States of this country and to assist in the energy 
needs of this country. We want to be there. We want to see that 
environmentally-safe maneuvers or management practices will be 
used in conservation, in transmission lines or pipelines, 
regulation changes on the State and Federal level, increasing 
supply for generation plants, and our immediate long-range 
needs and our short-range needs would be met through those 
usages.
    We want to be a partner with the Federal Government. We 
want our opinions to be heard, as we have not had them heard, 
we believe, in the last 8 years. We appreciate the opportunity 
to be here with you and we appreciate what is going to be 
happening in the future.
    Thank you.
    [The prepared statement of Governor Martz follows:]

   Statement of The Honorable Judy Martz, Governor, State of Montana

    Mr. Chairman, Members of the Committee, for the record my name is 
Judy Martz and I am the Governor of the great state of Montana. It is 
an honor to be here today to speak on behalf of my state on the Role of 
Public Lands in Developing a Self-Reliant Energy Policy. I appreciate 
the efforts and interest this Committee has shown in this issue.
    Let me begin by putting into context the size of Montana. Overall, 
Montana has in excess of 93 million acres of land. That is over 145,000 
square miles. Congressman Rehberg, our states sole voice in the House 
of Representatives has a big job.
    Of the 93 million acres, over 19 million acres are managed by the 
United States Forest Service, 8 million by the Bureau of Land 
Management and another 1.1 million by the National Park Service.
    Adding these public land figures together, and you see that 33 
percent of our land mass is managed by the Federal Government.
    Montana has a wealth of natural resources. From vast super-
compliant coal fields in the east, to miles of timber land in the west, 
Montana has the natural resources to help quest the thirst for energy 
across our nation. Montanans are anxious for the opportunity to 
contribute to the economic health of this country through responsible 
and environmentally sensible development of our resources.
    Unfortunately, we have seen over the past decade, a continual move 
away from the responsible development of our natural resources. We have 
continued to increase our reliance on foreign nations to supply us with 
our energy needs. The result, foreign dependence on energy has reached 
all time highs, which in turn has led to rising energy costs and power 
shortages across the nation.
    And while Montana has the potential to help supply this nation with 
clean, affordable energy, we have seen our ability to responsibly 
develop those resources grind to a halt through Federal inaction and 
mismanagement. At the end of President Clinton's term in office, he 
forced many Federal land grabs through in an attempt to recreate a 
lasting legacy. In Montana alone, we protested to no avail, President 
Clinton's Roadless Initiative, which locked up over 6 million acres of 
U.S. Forest Service land. Never mind the fact that the smoke had barely 
cleared from devastating summer fires that reduced to ash over 900,000 
acres of forest land.
    Additionally, the Roadless Initiative will forever prohibit 
sensible and environmentally sensitive exploration of natural gas and 
oil.
    Also, just days before leaving office, President Clinton designated 
nearly half a million acres of land along the Upper Missouri River a 
National Monument. While the state has been promoting tourist activity 
in Montana in an attempt to replace revenues from resource industries, 
President Clinton and Secretary of Interior Bruce Babbitt permanently 
set aside one of our states greatest natural gas reserves due to 
``concerns over a great influx of tourists''.
    Last year, approximately 420,000 acres along the Rocky Mountain 
Front were withdrawn for mineral development for the next 20 years. The 
Rocky Mountain Front has untold reserves of natural gas. In fact, our 
Canadian neighbors to the north have been responsibly developing 
natural gas along the Front for years.
    But the news is not all bad. In fact, despite the previous 
Administration's attempt to protect the west from itself, we believe 
Montana still has tremendous potential to meet the demands of a growing 
nation.
    Montana is in the process of receiving the Federal mineral rights 
in super-compliant coal reserves in Southeast Montana. This area of 
land known as the Otter Creek tracts is the result of an exchange for 
the mineral development fights outside Yellowstone National Park. While 
serving as Montana's Lieutenant Governor under former Governor Marc 
Racicot, Montana successfully negotiated a deal with the Federal 
government that resulted in the buyout of mineral rights, and an 
exchange for the lost economic development. Under the leadership of 
Senator Conrad Burns and former Congressman Rick Hill, H.R. 2107 was 
signed into law in 1998, mandating the transfer of Otter Creek Tracts 
1, 2 and 3 to the State of Montana.
    However, always mindful of what was best for the citizens of 
Montana, former Secretary of Interior Bruce Babbitt refused to follow 
the Federal mandate and reneged on the Federal government's promise. I 
am pleased to say that working with the new Secretary of Interior Gale 
Norton, I believe Montana will receive ownership of these tracts in the 
near future.
    And at stake is the development of over 533 million tons of super-
compliant coal. And I call it super-compliant because it far exceeds 
Federal Clean Air requirements with high BTU values and low sulphur 
output.
    These tracts will most likely be included as part of our school 
trust land, thus the revenue's from development will add to our state's 
ability to fund public education.
    Additionally, this high quality coal will be in great demand in the 
Midwestern part of our country as power generating facilities struggle 
to improve air quality as mandated under the Clean Air Act.
    The development of these tracts is also bringing increased interest 
from investors who recognize the need for additional power sources in 
the western half of our country. We have already had several inquiries 
about the potential development of not only the coal, but also coal 
fired electric generating facilities that will fuel the power needs of 
Montana and the west.
    Along with potential coal development, Montana has vast reserves of 
a resource only recently acknowledged as a viable energy source. Coal 
bed methane. Currently, Montana's Department of Environmental Quality 
and the BLM are working jointly to assess environmental impacts from 
proposed development. Wyoming Governor Geringer has had tremendous 
experience in the development of coal bed methane and we hope to learn 
from efforts in Wyoming.
    In Montana, we have seen increased interest in utilizing 
traditionally under-valued or no-valued timber byproducts to produce 
electricity. And this prospect grows increasingly attractive as the 
United States Forest Service begins to implement The National Fire 
Plan, a plan that addresses the health of our forests that in part 
focuses on mechanical treatment of small trees and shrubs that 
contribute to catastrophic fires. With the General Accounting Office 
identifying over 40 million acres of interior west forestlands at risk 
for catastrophic fire, we have a tremendous potential energy resource 
at our disposal.
    We have a tremendous amount of energy reserves on our public lands. 
From coal to coal bed methane, from natural gas to timber byproduct co-
generation, we have the potential to be much more self reliant in terms 
of energy production.
    Today, nearly 57 percent of our energy needs are supplied by 
foreign nations. Not only is that a national security risk, it takes 
good paying jobs away from hard-working Americans. It is unacceptable. 
We have the resources to provide a much greater role in meeting our 
country's energy needs. And we can do it in an environmentally 
sensitive manner. As a nation, we need to re-evaluate the role our 
public lands can play in supplying this country with the energy it so 
desperately needs.
                                 ______
                                 
    The Chairman. Thank you, Governor Martz. We appreciate your 
excellent testimony.
    We will now turn to members of the Committee for questions 
for the governors. We will limit the members to 5 minutes each. 
We will start with the ranking member. Mr. Rahall, of West 
Virginia, is recognized.
    Mr. Rahall. Thank you, Mr. Chairman. I certainly don't 
anticipate taking my full 5 minutes. I know of the time 
constraints on the governors, but I want to ask a question of 
Governors Geringer and Martz before yielding to my colleague 
from Massachusetts, Mr. Markey, who just came in.
    Since I'm from West Virginia, it should come as no surprise 
that my first question involves coal, and I do direct it to the 
two governors I mentioned. I take it that you both support 
private property rights?
    Governor Geringer. Absolutely.
    Governor Martz. The same, absolutely.
    Mr. Rahall. Okay. That being the case, you may be 
interested to know that Federal coal leasing activities in the 
West are beginning to intrude on the private property rights of 
my constituents. I believe that Federal coal in the West should 
not be developed for the sole purpose of competing against coal 
production produced from private lands in the Midwest and the 
Appalachian region.
    Western coal serving Western markets is fine, certainly. 
But for publicly-owned resources to be produced simply to 
displace privately-owned resources--well, you can see I have a 
problem with that. Let me give you an example of what I am 
talking about.
    Recently, Morgan Stanley Dean Witter upgraded the two major 
Western railroads, Burlington Northern-Sante Fe and the Union 
Pacific, from neutral to out-perform, based on their potential 
to expand into new Eastern coal markets this year with Powder 
River Basin coal.
    My question is this: How do you reconcile this Federal 
intrusion into the marketplace through coal leasing activities 
that you apparently favor, with the fact that this Federal coal 
is displacing coal produced from private lands in electricity 
markets they have traditionally held?
    Governor Geringer. Mr. Chairman, I am not exactly familiar 
with the situation that Congressman Rahall is describing, but I 
would comment in this way. It is not one versus the other; it 
is both working together. There is enough demand currently 
today that both ought to be producing coal in an 
environmentally sound way.
    We are not about in Wyoming to dictate to West Virginia how 
you ought to manage for environmental considerations, or 
economic, and we would ask the same in return. I indicated that 
Federal lands are producing most of the coal from Wyoming. I 
believe you are correct in the statistics that you have used. 
In fact, Wyoming and the West, in fact, now out-produce the 
East in terms of total quantity of coal.
    Mr. Rahall. Displacing our traditional markets in the East.
    Governor Geringer. Well, with all respect, I don't believe 
it is displacing. I believe that the problem is not what 
Wyoming is doing. It is what is not happening in West Virginia, 
and I certainly invite your questions to someone who has coal 
production in both States; that is, Arch Coal. Terry O'Connor 
is here and will be on the next panel to discuss that. So 
perhaps he, because he has economic interests in both States, 
might be able to give you the very practical, common-sense 
approach to it.
    Let me illustrate it in another way. Nearly 60 percent of 
all generation today is from coal-fired generation. Yet, 
probably close to 90 or 95 percent of all new power generation 
going online is natural gas. Coal ought to be in the mix 
somewhere. We have a national energy policy by default that 
favors natural gas over coal. Yet, coal can be as energy-
compliant, as well as environmentally-compliant.
    Congressman Rahall, I would suggest that we ought to 
evaluate why coal is being displaced by national energy policy, 
not by Wyoming production on Federal lands. It is that lack of 
policy. And to give you a cost comparison, you can generate 
electricity from coal at about 20 percent the cost of 
generation from natural gas at today's prices. That ought to 
affect and benefit the members in your district, as well as 
those who produce the coal.
    So the issue is over the lack of a policy that would 
encourage the use of high-quality, clean-burning coal from 
whatever State it comes from, and we ought to work together.
    Governor Martz. Congressman, I am not so sure that I have a 
lot more to add. Coming from the Western States, we have a need 
out there and the coal is sitting there to be used. I think it 
is advantageous for us to do that, and I don't see it as a 
threat to any other State. This country needs the energy right 
now.
    Sometimes, it is not so popular to talk about the jobs 
involved, but in Montana it is very popular. We need those 
jobs. We also need to have the energy coming from the coal beds 
that are there. Coal beds are one of the least expensive ways 
to produce energy, in comparison to gas. So for that reason, we 
will continue to pursue this avenue.
    Mr. Rahall. Thank you. I am aware of the figures you all 
cited. It is just that overall philosophy that I have a problem 
with, being for property rights on the one hand, and yet, 
allowing Federal help and Federal policy to displace private 
property rights in the East and the production therefrom.
    Governor Martz. Could I just address that one time, too? In 
the particular area that I am talking about, the Otter Creek 
tracts that we are asking to be transferred as the law says 
they should be, former Governor Marc Racicot has visited most 
of the people in those areas and most all of them are amiable 
to having this kind of enterprise go on in that area. I am sure 
that a lot of the lands that you are talking about in your 
State are sitting--I shouldn't say I am sure of that, but I 
would guess some of that is on private property.
    Mr. Rahall. All of our land in West Virginia is private 
property.
    Governor Martz. Sure, and is developed, and that is what we 
want to do, also.
    The Chairman. The time of the gentleman has expired.
    On the Republican side, Mr. Duncan.
    Mr. Duncan. Thank you, Mr. Chairman, and thank you for 
holding this hearing and for your great leadership of this 
Committee.
    About 3 weeks ago, in the small town of Englewood, 
Tennessee, in my district, the mayor there told me that he had 
senior citizens who were having to choose between paying their 
utility bills or eating. And I noticed Governor Geringer 
mentioned something like that in his State.
    I can tell you that, first of all, this is not just a 
Western problem. All over this country, you have groups, 
usually of very wealthy environmental extremists, who protest 
anytime anybody wants to dig for any coal, drill for any oil, 
cut a single tree, produce any natural gas. What I think they 
are ignoring or they don't care about is that who they are 
hurting in that process are the poor and the lower-income 
people because they are destroying jobs and they are driving up 
prices, and I think it is very, sad.
    I read a few years ago that the average member of the 
Sierra Club had an income over four times that of the average 
American. And perhaps they are not hurt by some of these 
policies, but I can tell you a lot of people in my district 
are. So I certainly appreciate the testimony that each of you 
has given here today, and I hope that as you pursue these 
policies--I think people look at a map of the United States on 
one little page in a book and they forget how big this country 
is.
    I serve on the Forests Subcommittee and I was told that in 
the mid-1980's the Congress passed a law that was hailed by the 
environmentalists at the time that we wouldn't cut more than 80 
percent of the new growth in the national forests. Today, we 
are cutting less than one-seventh of the new growth. We are not 
even cutting half of the dead and dying trees. So what does 
that do? It destroys jobs and it drives up prices, and people 
wonder why houses and a lot of other things are costing so 
much.
    Governor Martz mentioned the dependence on foreign oil. 
That increases with each passing year, and I think money is 
behind it because I can tell you that the OPEC countries and 
many shipping companies--there are a lot of people with big 
money or companies with big money that benefit if we depend 
more and more on foreign energy.
    So I appreciate your coming here today, and with that I 
will yield back the balance of my time.
    The Chairman. I appreciate the gentleman.
    The gentleman from Massachusetts, Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    President Bush has made the Arctic Refuge the center of 
this debate. You can talk about all the environmentally-benign 
drilling rigs you want. We are supposed to conjure up in our 
minds Carl Sandburg and little cats' feet on the tundra. But as 
my mother used to say, the most important question in every 
situation in life is ``compared to what.'' So when you compare 
today's rigs to yesterday's rigs, you are missing the point.
    Here is the point: today, the Refuge is God-made, unique, 
roadless, untracked, and undisturbed by man. Nearby is one of 
the most environmentally-benign oil fields in the world, in 
Prudhoe Bay. They go as far as to put diapers on the trucks so 
the amount of oil that leaks from the pans is minimized. Now, 
that is impressive, but don't tell me it changes the fact that 
a huge industrial complex has grown up on the tundra on the 
North Slope that has changed the character of the wilderness 
forever.
    While the diaper catches drippings, the routine operation 
of the fields results in gallons of toxic fluids being spilled 
everyday. Exploring, drilling, producing, connecting, hauling, 
pumping--it is a very dirty business even when you are trying 
to be clean. Now, let me show you what I mean.
    Poster number 1. President Bush says ``. . . leaving only 
footprints.'' That is what he is talking about. That is Prudhoe 
Bay. You can just get an aerial view and just keep going in 
terms of the impact that the drilling has had on that area.
    Poster number 2. Here is the existing footprint. It sprawls 
over 1,000 square miles, permanently scaring the landscape and 
oozing ever outward. And, again, this is all permissible, all 
within the law right now. We are not debating this today.
    Poster number 3. This is what my mother was talking about. 
Right now, the black side is Prudhoe Bay. The Canning River is 
all that separates the protected area of the Refuge from the 
blight. On the black side, you have 1,000 square miles of 
development, 500 miles of roads, 3,893 wells drilled, 170 drill 
pads, 55 contaminated waste sites, 1 toxic spill everyday, 2 
refineries, twice the nitrogen oxide pollution as Washington, 
D.C., 114,000 metric tons of methane and 11 million metric tons 
of carbon emissions each year, $22 million in civil and 
criminal penalties, 25 production and treatment facilities, 60 
million cubic yards of gravel mined.
    On the other side, you have no industrial development, just 
as Congress declared in 1980, this Committee declared, Mo Udall 
and all the Republicans, unanimously in 1980, nothing.
    Now, there is no such thing as a wilderness oil field. It 
is an oxymoron. Jumbo shrimp, Chevy Chase night life, 
wilderness oil field--there is no such thing. The sooner that 
we declare the Refuge a fully protected unit of the Wilderness 
Act, the sooner we will turn our attention to producing energy 
such as natural gas, renewables, clean coal.
    Looking automobiles and SUVs, after all, we consume 20 
million barrels of oil each day, and 13.5 million of those 
barrels go into gasoline tanks. So is it really a great moment 
when Chrysler announced its Unimog last week that gets 10 miles 
a gallon, going further backwards in terms of energy 
efficiency, or do we really want an SUV to get 25 or 30 miles a 
gallon so that we don't have to drill in that wilderness? Where 
would we go first, to the God-made, beautiful Refuge or to the 
man-made problems of automobiles and SUVs and air conditioners 
and refrigerators, et cetera, that are increasingly fuel-
inefficient?
    Why doesn't it make sense, Governor, for us first to try to 
tap the natural gas in Prudhoe Bay and bring that down through 
a pipeline, to tap the National Petroleum Reserve in a way that 
it hasn't been yet? Why don't we first tap all the resources 
that are legally allowed to be tapped by Democrats and 
Republicans, and partner that with a deal on fuel economy 
standards and appliance efficiency standards before we take 
that pristine area and destroy it forever?
    The Chairman. The time of the gentleman has expired, and I 
assume the gentleman is going to ask unanimous consent that the 
Governor of Alaska can respond to your question. Is that 
correct?
    Mr. Markey. I actually need your permission alone, Mr. 
Chairman. I would ask that.
    The Chairman. The Governor of Alaska.
    Governor Knowles. Thank you, Mr. Chairman.
    Mr. Markey, in response to your question about why don't we 
look at other areas first, indeed we are looking at all of 
those possibilities. The infrastructure of the North Slope in 
developing oil and gas for America's needs will be utilizing 
all of the opportunities of where the oil is.
    Congress, in 1980, determined that in creating the 
wilderness, the Arctic National Wildlife Refuge, in creating 
that area, that there was a certain part of it that was going 
to be set aside for study because even at that time, with 
limited technology, they knew that it was probably one of the 
most promising areas for oil and gas development, and that 
remains today.
    So we do utilize the overhead of infrastructure that is in 
place as we reach out to the west to the National Petroleum 
Reserve. I would note that in today's technology, it is 
estimated there may be 5 billion barrels of oil and maybe 5 to 
10 trillion cubic feet of gas in an area that 20 years ago they 
quit holding leases on because no one was interested because 
they didn't think there was any more there.
    So we know today, just as we have reduced the size of the 
footprint by one-tenth of what it used to be 20 years ago, that 
we can go to these areas. We can do so in a way that does 
protect the environment. Nobody pretends that it would be a 
wilderness where there is development, but we can protect the 
environment. We can ensure the health of the wildlife and the 
fish and we can assure in those areas where we do have 
development that it is done right.
    Mr. Markey. But, Governor, it hasn't been economical to 
drill for the natural gas in Prudhoe Bay for 20 years even 
though there are 30 to 50 trillion cubic feet of natural gas 
there. What does that say about the economics of ANWR if the 
industry can't even figure out after 20 years, with Democrats 
and Republicans giving you approval--not giving you, but the 
industry--to bring down the natural gas from Prudhoe Bay? It 
has been uneconomical.
    Governor Knowles. Mr. Chairman and Mr. Markey, if I might 
respond, that has been a very interesting story because 
Congress again approved a gas pipeline in 1977 under the belief 
that at that time it was economical to bring it to the lower 
48. The market really wasn't there.
    At the same time, the gas was being used to repressurize 
the field to increase the recovery of oil in Prudhoe Bay, and 
so it has been hard at work. We reinject 8 billion cubic feet a 
day, recycle it into Prudhoe Bay to increase our recovery of 
oil. As that is winding down and as Prudhoe Bay is winding 
down, it truly is time to come and serve the energy market. The 
price has increased to where an investment in a $10 billion 
pipeline is economical and can meet and help stabilize the 
increased price of gas in America today. So it really works out 
in a win-win situation.
    Mr. Markey. I think it would be better for the industry to 
finish that project first, or at least begin it, and I want to 
help on that and prove that that is economical before we 
destroy the Refuge. I think that is something we could probably 
all agree to work upon, but right now no progress has really 
been made.
    Thank you, Mr. Chairman.
    The Chairman. Governor, if I may, I have got a little 
question here I am not sure of. According to this map, this 
area that they would like to drill in is not a designated 
wilderness area. Is that correct?
    Governor Knowles. Mr. Chairman, no, sir, that is not. That 
was designated as a study area which was set aside from the 
Wildlife Refuge in 1980. It was done as a study area to be 
determined later by Congress as to whether it would be open for 
development, and that is the question that we are coming 
forward with today.
    The Chairman. I appreciate that clarification.
    The gentleman from Maryland, Mr. Gilchrest, is recognized 
for five minutes.
    Mr. Gilchrest. I thank the Chairman. I ask unanimous 
consent for 15. Is there objection?
    The Chairman. Yes, there probably is.
    Mr. Gilchrest. Just kidding, Mr. Chairman.
    Governor Knowles, I crawled down in a grizzly bear's den 
one time in Alaska. The Governor from Wyoming, I once got a set 
of chains for my pickup in Buffalo, Wyoming, in November, in a 
pretty severe snowstorm. And the Governor from Montana, I used 
to live in the wilderness in northern Idaho and would come to 
Missoula once a month for supplies. So it is a beautiful State, 
it is a beautiful region.
    I would like to boil this down, at least in my terms, to 
something very simplistic, and that is lung tissue and mortgage 
payments. We all try to make sure we do both, that we have 
clean air to breathe and we don't exacerbate lung problems, and 
we provide safe and secure jobs for people to raise their 
families and live their lives.
    The issue of drilling for oil or mining in the West always 
arouses a division in the country between East and West. I, 
from Maryland, can recognize the need for employment and for 
jobs, and when I ride around the Washington Beltway or the 
Baltimore Beltway, or I look at places like Tysons Corner, I 
yearn for the open spaces. It is a necessity for me that I know 
still exists in the West.
    In Maryland, we used to have elk, we used to have wolves, 
we used to have salmon, we used to have bison, we used to have 
grizzly bears. We used to have an abundance of otters, of mink, 
of shore birds. Most of those are either diminished or gone. In 
Alaska, none of those are diminished or gone or threatened or 
endangered. They are still there.
    So I recognize that people in the West, when someone from 
the East Coast who drives everyday to work in an SUV on the 
Beltway and is looking for more jobs, and yet they are opposed 
to drilling for oil at ANWR--I find it a paradox, almost, if I 
may, an oxymoron. Even Democratic local elected officials in my 
district that will change the zoning or land use for an area 
that is tree-lined or wetlands or open space so they can add an 
addition to Wal-Mart or another shopping plaza--those people 
will vote against drilling for oil at ANWR. The governor from 
my State, the Senators from my State, pursue dredging at all 
costs, and the reason is for job security, for economic 
development.
    Governor Knowles, you made a comment about we need a 
combination of conservation and increase in supplies. Now, I 
would add one other thing to that list, besides conservation --
we need to aggressively pursue that--and increased supply. I 
understand that. I also understand the idea that jobs in a 
remote area are important for people, but we need to 
aggressively pursue alternative sources.
    It is my judgment that we cannot ever be energy-independent 
if we continue to rely on fossil fuels in the manner in which 
we have done under the present conditions. The cost of fossil 
fuel will probably never go down because the increased 
worldwide demand for fossil fuel is not at a level point. It is 
not going to decrease; it is going to dramatically increase. So 
our dependence on fossil fuel is to a large extent never going 
to enable us to be energy-independent.
    So what are the alternatives? I think we can pursue 
aggressively alternatives, and many of them were mentioned here 
today, whether it is nuclear power; solar power; wind power, 
which we can produce more efficient lines so the resistance is 
less and you get more of the electricity through; and fuel 
cells, what we have been powering our Space Shuttle on for 
decades now.
    I have talked to engineers. In less than 20 years, they say 
most of our automobiles can be running and operating on fuel 
cells, where the emission is pure water. Our power plants in 
about 20 years, a majority of them, if we aggressively pursue 
this, can operate under this technology.
    The last comment, Mr. Chairman, lung tissue and mortgage 
payments, the longing and the necessity for open spaces. And so 
after all that, Mr. Chairman, and my understanding for the West 
and the need for jobs, I would still oppose drilling for oil at 
ANWR.
    The Chairman. Let me ask this. Members of the Majority and 
Minority side, will you raise your hands if you have questions 
for the governors? If you do, then we will take you by 
seniority.
    We will go to Mr. DeFazio; on the Majority side, Mrs. Cubin 
and the gentleman from Indiana, Mr. Souder.
    Mr. DeFazio, you are recognized for 5 minutes.
    Mr. DeFazio. Thank you, Mr. Chairman.
    To Governor Martz, I have followed with concern the closing 
of the aluminum plants in Montana, the threat to the mining 
industry and forest, lumber and wood products industry because 
of sky-high electric prices. I would note that those sky-high 
prices come at a time when your State is generating as much 
electricity as it ever has. It is just under a different 
structure where you have deregulated electricity and you have 
deregulated the price that goes to large industrial consumers.
    Do you support a cap or temporary cap on wholesale energy 
prices in the West? The cause of your plants closing is not a 
shortage of energy, it is an artificial run-up in wholesale 
prices caused by the deregulation in California. Do you support 
the cap?
    Governor Martz. Congressman, no, I do not support capping 
them. We need to produce more generation.
    Mr. DeFazio. Thank you, Governor. Well, if you hadn't 
allowed Montana Power to sell all its generation to an out-of-
state company who is now shipping all the power out of State 
and marking up the price, you might have enough energy to run 
your own plants. I am getting tired of people using the energy 
crisis as an excuse to drill.
    There is a real energy crisis in the West. There is an 
electric energy crisis today. Governor Knowles referred to it, 
people trapped in elevators. But guess what? It has nothing to 
do with oil, it has nothing to do with drilling in ANWR. That 
is being used as a pretty limp excuse to deal with real 
problems while we ignore the real problem, which is speculative 
activity going on in California.
    California had a price spike and a crisis in their low 
season. They are a net exporter in the winter, and guess what? 
This year, they weren't. Guess what? 15,500 megawatts of 
generation was shut down, not because of clean air, not because 
of lack of gas, certainly not because of lack of oil, since 1 
percent of their energy is generated by burning oil, but 
because of a market gone nuts, with huge increases in profits 
for out-of-state energy companies, the same thing that has 
happened in Montana.
    Governor Martz, your own energy commission --you have an 
Advisory Council on Electricity Prices and they voted on Monday 
to keep alive a number of options for further study. Your 
Republican house majority leader has proposed a 3,300-percent--
he says here he wants to have an energy transaction tax paid by 
power companies, and increase the tax phenomenally to raise 
$116 million a year to help lower the rates for consumers.
    Isn't this kind of nuts? We have got a market where you 
allow speculators to gouge your consumers and then we are going 
to try and maybe tax them back to get the windfall. We have 
another proposal for a windfall profits tax of 45 to 50 
percent. Yet, you are coming in here and saying we need to 
produce more energy.
    Yes, there is a long-term energy problem in this country 
and in the Western United States, but today the crisis is 
artificially created. Natural gas prices followed electricity. 
I have met with the largest distributors of natural gas in the 
West and they have the graphs to prove it. The wholesale prices 
at the Canadian border didn't go up until the electricity 
prices went through the ceiling. If we don't deal with the 
underlying cause today--yes, 10 years from now you can have 
more energy production from fluid methane, or if Governor 
Knowles is successful at opening ANWR to add to the production 
from the National Petroleum Reserve and the natural gas that we 
can all agree on.
    But the point is people are going to go broke in the 
meantime. Businesses are going to close in the meantime. We 
need some leadership from Western Governors and other people to 
deal with this. Now, I know Alaska is not on our grid, so this 
doesn't directly impact you. But I would ask you to please 
don't use this and don't use the image of senior citizens 
trapped in elevators to justify drilling in ANWR. There is no 
relationship.
    Governor Knowles, do you support the continued export of 
oil from Alaska to China and Japan?
    Governor Knowles. Madam Chairman and Mr. DeFazio, there is 
no oil that is currently being exported from Alaska to Asia. At 
one time, there was a small amount, a relatively small amount, 
no more than 5 percent, that was exported, just like there is 
currently crude and crude oil products that are being exported 
from every other State in the Union.
    As this Congress and the administration and I also 
personally support many of the free trade aspects that have 
helped our economy, the fact of the matter is--
    Mr. DeFazio. Governor, if I could, we have documents 
showing that the major oil companies on the West Coast of the 
United States have internal documents showing that they only 
wanted to export oil from Alaska to drive up wholesale prices 
in the Western United States.
    Would you support reimposing a ban on the export of oil in 
the future from Alaska? If we are going to develop more oil 
resources in Alaska, would you agree that every drop of that 
oil should stay home?
    Governor Knowles. Madam Chairman, Mr. DeFazio, I believe 
that Alaska should be treated no different than every other 
State in the Union. There is no ban on oil exports from any 
State in the Union except for Alaska, and that was done away 
with, with bipartisan support, signed by President Clinton, 
sponsored by him several years ago.
    The fact of the matter is that there is no oil being 
exported today because the market clearly is in need of all of 
the oil that is had. It has never been a significant amount, as 
I say, never more than 5 percent when it was passed several 
years ago, as I say, with the support of President Clinton and 
bipartisan in Congress.
    Mr. DeFazio. Well, the oil company execs seem to feel that 
it got them two to three cents per gallon on the wholesale 
market in the West, which created a few hundred million dollars 
of illicit profits. So I would urge you to reconsider your 
position and perhaps we could support a ban on any oil exports 
from the United States. If we are in an energy crisis, let's 
put in place a ban before we find new resources and start 
exporting them.
    Thank you, Madam Chairman.
    Mrs. Cubin. [Presiding.] Are there any other Members on the 
Republican side that have questions?
    If not, I just wanted to--excuse me.
    Mr. Souder?
    Mr. Souder. You can go ahead, Madam Chairman.
    Mrs. Cubin. No. I would like you to.
    Mr. Souder. I thank you. I just have a simple question, but 
I wanted to make a comment that illustrates some of the 
frustration of the Western Governors and Western members.
    In my hometown, you can go 600 miles east without hitting 
Federal-owned land. You can go 1,000 miles west without hitting 
Federal land. You can go 250 miles north or 250 miles south. We 
don't have much public-owned land. We have lots of opinions on 
what we should do with your land.
    I have some sympathy with the argument that we messed up in 
the Midwest and the East and we need to figure out how to do a 
better job of environmentally managing. But sometimes the 
extremist rhetoric that we hear turns people who are looking 
for reasonable solutions into armed conflict again.
    One of the statements that I heard here--and I just wanted 
to sort this out for the record--I heard 1,000 square miles at 
Prudhoe Bay. Governor Knowles, I wondered how many square miles 
are in ANWR as a whole. Do you have any idea? When we hear a 
different figure like square miles, square miles is an 
algebraic number; it is a little misleading.
    Governor Knowles. Madam Chairman, in response to the 
question, I am not sure of the square miles. There are about 19 
million acres there. I will have to refer to my--
    Mr. Souder. Of the 19 million, how much is the area that 
was open for discussion as to whether it could be explored?
    Governor Knowles. It is approximately 1.5 million acres is 
the total acres that is left for study.
    Mr. Souder. So it is approximately--what is that, less than 
5 percent, 3 percent?
    Governor Knowles. Eight percent.
    Mr. Souder. Eight percent. Is there an argument that in 
that 8 percent, there isn't enough of a buffer between that and 
the rest of the 92 percent? In order words, would the 
development go right up to the edge of the 8 percent?
    Governor Knowles. Madam Chairman, no, sir. That is the area 
in the coastal plain that was believed in a broad-brush sense 
as to what might be the most probable for oil and gas 
development. Of that, there would be a relatively small part 
that was developed. But as I say, it would not encompass all of 
it.
    Mr. Souder. Is there an argument that the 8 percent, if it 
were all used--is that 8 percent more--and I apologize for my 
relative lack of knowledge in some of these questions, but it 
is hard to tell when people are going back and forth how to get 
the actual answers to some of these questions.
    Is this area more environmentally significant, and if so 
how did it not get designated in the beginning as wilderness?
    Governor Knowles. There is no question it is a unique part 
of the Wildlife Refuge. As the coastal plain, its primary 
environmental consideration for wildlife is that much of it is 
considered to be the core calving area of the Porcupine caribou 
herd. So there would have to be some very careful mitigations 
made to ensure the continued health of that herd. It goes there 
for approximately 3 to 4 weeks for calving, insect relief, and 
prior to their resuming their normal migration habits in the 
fall and winter.
    Mr. Souder. And, in general, are there other things in 
addition to the calving?
    Governor Knowles. There is polar bear denning which is of 
interest. There is also the snow geese, migratory water foul, 
which are also a point of concern. So those are the three 
primary concerns. There are also some musk ox, but they are not 
as environmentally sensitive as the polar bear and the snow 
geese.
    Mr. Souder. I appreciate that. Those of us who are trying 
to balance the needs for our energy consumption and 
environmental concerns are going to be interested in how we can 
address those types of unique questions, not big numbers that 
try to scare people, but how we can actually address the real 
substantive questions underneath that and not potential high-
risk variables.
    Governor Knowles. Madam Chairman, if I might just in 
response, painting a slightly different picture--and I do 
appreciate Mr. Markey's attempt to paint a picture of 
industrial development, but I think, in perspective and in line 
with the questions that were being asked of proportionality, I 
would note that in Alaska there are 53 million acres of 
national parks that will not be developed for oil and gas, and 
that is roughly the complete size of New York and Ohio 
combined.
    There are some 72 million acres of wildlife refuges, three-
quarters the size of the entire State of California, put aside 
that nobody is asking to be part of any oil and gas 
development. There are wilderness areas of some 58 million 
acres. So we are speaking of areas that are truly set aside to 
encompass the wilderness values that people yearn for to be 
part of our permanent national assets.
    The area that is being looked at in ANWR, the 1.5 million 
acres, is part of a geological structure that is the same 
called the Barrow Arch that goes across the entire North Slope 
from NPRA across there to the Canadian border, and is part of a 
responsible development of a significant part of our Nation's 
future. I would note it is not just oil, but there is 
considerable gas, just as there was in the Prudhoe Bay 
geological formation.
    I would say that the oil and gas development on the North 
Slope, with the figures that Mr. Markey has put forth, is the 
most environmentally responsible development anywhere in the 
world. It is the strictest, and it should be that way and it 
ought to be that way.
    Thank you.
    Mrs. Cubin. Because Mr. Rahall has to leave in just a few 
moments, I just wanted to make a comment on his behalf, as well 
as yours. He asked a question of Governor Geringer about 
Federal coal displacing private coal production. And Geringer, 
I understand, answered that very well, but there was a point 
that I wanted to add, also, and that is that that displacement 
occurred more because of the Clean Air Act Amendments and 
because of the court's ruling on mountaintop mining and valley 
fill than it did because of anything that was done Federally.
    Then I also know Mr. DeFazio has to go, and then Mr. Markey 
is moving right over here. President Bush already has the 
authority to reimpose the export ban.
    The Chair now recognizes Mr. Inslee.
    Mr. Inslee. Thank you, Madam Chair.
    I want to thank Governor Knowles for coming here. You have, 
as always, been an articulate, reasonable spokesperson for your 
State and we appreciate it. But in the spirit of candor, I want 
to tell you why so many thousands of my constituents are 
vigorously opposed to drilling in the Arctic Refuge.
    They respect and believe that there would be efforts to 
make small bulldozers that doze the roads and small injection 
facilities that inject product below ground and small buildings 
that emit nitrous oxide and the like. But I will tell you the 
way my constituents feel about it. They feel the same way about 
putting a small mustache on the Mona Lisa. Even though it was 
well-trimmed and well-dyed and well cared for, they think it is 
a major mistake. It is a major mistake because that is an 
international asset, as is the Arctic Refuge.
    Even though those same thousands of people I represent will 
never come to the Arctic Refuge, never even get close to the 
Arctic Refuge, may never go to the State of Alaska, they carry 
a piece in their hearts today, even though they have never been 
there. They feel so strongly about this that I predict this is 
not going to go through the U.S. Congress this year, not just 
in my State, but in all 50 States.
    I want to tell you the other reason they feel that way is 
not just based on emotion. It is based on practicality. I am 
going to ask you in a minute about the numbers, but as best as 
I understand it, under the optimistic projections there would 
be about 300,000 barrels a day, and that is likely not to 
really become economically productive for about 10 years. My 
constituents think that is too little and too late.
    They believe we need a solution today, tomorrow, and they 
recognize that if the U.S. Congress will get off the dime and 
pass some higher mileage standards to improve the efficiency of 
our vehicles, we can have equivalent savings next year. We 
don't have to wait 10 years. I am told that even a minimal 
increase of those mileage standards, of increasing it, say, 2.2 
miles per gallon for light trucks and SUVs, will save more this 
year and next year than what we get in 10 years out of the 
Arctic Refuge. So they believe that it is not just a value 
system in question here, but a practical system that we have a 
better solution today.
    So I want to ask all three of you, have you lobbied your 
Senators and Members of Congress to support higher mileage 
standards, and if so what has been their response?
    Governor Knowles. Madam Chair, Mr. Inslee, thank you for 
your comments. In direct answer to your question, I believe 
that conservation is an important part of the national energy 
policy, and certainly the reduction in the fuel use of 
automobiles is an important part of being able to stretch the 
efficiency and the use of our fuels. But it doesn't make the 
use of fuels obsolete; we still need those fuels.
    In regard to the question about ANWR, just like there may 
be controversy over the projection that we are going to have a 
$5.6 trillion surplus in America, it all depends on who is 
forecasting it. It is estimated that in the Arctic National 
Wildlife Refuge coastal plain study area that there may well be 
up to 16 billion barrels, which would mean approximately 2 
million barrels a day for 25 years, which would provide a third 
of our domestic oil production. That is not an insignificant 
part and I think is part of what could be carefully weighed in 
a judgment as to whether we can responsibly develop it.
    In reference to the portrait, if I might just note that we 
have, as I have explained, a vast number of areas as part of 
our national treasury of lands that are not being questioned 
for development, open for development. And that certainly can 
satisfy, just as when you make decisions in your States about 
what needs to be protected and what not, that balance of 
development and protected areas that we need to look for.
    Mrs. Cubin. The gentleman's time has expired.
    I understand that Governor Knowles--
    Mr. Inslee. The other two governors were not allowed to--
    Mrs. Cubin. I am sorry, Mr. Inslee. Governor Knowles has a 
one o'clock plane to catch.
    Mr. Inslee. I understand. Could you allow the two other 
governors to answer that question?
    Mrs. Cubin. That is what I was going to say.
    Mr. Inslee. Thank you.
    Mrs. Cubin. I would like to interrupt at this point and if 
anyone has a specific question for Governor Knowles, then fine.
    Mr. Calvert, do you have one?
    Mr. Calvert. I apologize that I wasn't here earlier. I was 
at another commitment.
    Governor Knowles, regarding the proposed drilling at ANWR, 
in relationship to the pipeline that already leaves Prudhoe and 
goes to Valdez, I understand right now there are about a 
million barrels a day being shipped down to Valdez in that 
pipeline.
    I also understand that at peak production during the Gulf 
War, they were transporting about 2 million barrels a day oil 
down to Valdez. Is that a correct number?
    Governor Knowles. Yes, sir.
    Mr. Calvert. I also understand that because of declining 
production within existing oil fields in Prudhoe, we may get to 
the point of marginal costs. In other words, it costs more to 
keep the pipeline open than it would to continue to move oil 
out of Prudhoe, and I understand that number is somewhere 
between 500,000 to 700,000 barrels a day. Is that the right 
number?
    Governor Knowles. I couldn't verify that number, but there 
is a point, yes, sir, that it would not be economical.
    Mr. Calvert. It is true, then, that oil coming out of 
Alaska has declined by 50 percent because we are unable to find 
additional supply to get into the pipeline? So at some point in 
the foreseeable future if additional supply is not put into 
that line, is it credible that that pipeline would be shut 
down?
    Governor Knowles. Yes, sir, it would be shut down and then 
it would be dismantled.
    Mr. Calvert. And then we would have no resources at all 
coming out of Alaska in any significant amount, to add to the 
oil supply of the United States?
    Governor Knowles. Yes, sir, unless there was a gas pipeline 
built that would bring that. But in terms of oil, after it 
would be dismantled, it would not be practical to ship any oil 
from the North Slope.
    Mr. Calvert. And at 2 million barrels a day, if we could 
get that back up, that would be a significant--you mentioned a 
third of the total U.S. production?
    Governor Knowles. Yes, sir.
    Mr. Calvert. Thank you.
    Mrs. Cubin. Thank you, Governor, and if the other governors 
have time, we would appreciate it if they would stay and answer 
the questions. But if you need to go, Governor Knowles, the 
Committee certainly understands that. We don't want you to miss 
your plane.
    Governor Knowles. Thank you very much, Madam Chairman and 
members of the Committee. Thank you.
    Mrs. Cubin. Thank you for being here.
    Mr. Inslee, would you like to restate your question?
    Mr. Inslee. Yes, just very quickly if the other two 
governors could let us know--nice to see you, Governor Martz--
has your congressional delegation supported increasing our 
mileage standards for vehicles in America as part of our energy 
strategy, and if not do you know why not and have you lobbied 
them to do so?
    Governor Geringer. Let me answer first by explaining what 
the Western Governors did on February 2nd when we met in 
Portland at the invitation of Governor Kitzhaber and Governor 
Kempthorne. We adopted several suggested actions that we asked 
everyone to consider within our States, as well as the Federal 
Government, including those activities that would enhance 
efficiency and conservation; in addition to automobile usage, 
efficiency tax credits to reduce demand in any form; to shift 
to any other kind of distributed generation where it could be 
done on an individual basis; Federal appliance standards such 
as adopted by the Department of Energy for all kinds of 
appliances.
    In other words, we are pursuing every form of energy 
conservation, whether it be specifically automotive or 
otherwise. Our goal is not to increase consumption. Our goal 
is, given the trends that there are in demand and consumption 
and the demands that will be placed on our States, that we not 
be treated like colonies, that we be evaluated as equal 
sovereign States, as each of your States are.
    Mindful of Mr. Markey's comments about Boston, whether it 
be the Boston Tea Party or the Boston Big Dig, each State does 
things a little bit differently. So when it comes to 
consumption, our goal in being here at this panel is to elicit 
partnerships with the Federal Government as we develop ways to 
better manage the resources and not waste them. So efficiency 
was at the top of our list on what actions could be taken by 
the States, by governors, by the Congress, or whoever it might 
be, automotive or otherwise. We have strongly advocated those 
and presented those to the energy task force chaired by Vice 
President Cheney.
    Mr. Inslee. Has your congressional delegation voted for 
increased Corporate Average Fuel Economy (CAFE) mileage 
standards in this country recently? Do you know?
    Governor Geringer. I am not familiar with their voting 
record on that.
    Mrs. Cubin. What am I, a potted plant?
    Governor Martz. Congressman, I am not familiar whether ours 
have voted in that manner, but I am visiting with all of our 
delegation in the morning and it is something we can talk 
about. I was at the meeting that we agreed on the same things 
that Governor Geringer talked about.
    I do want to say it doesn't matter whether you believe this 
is an artificial problem or not. It is real, and to the people 
that are dealing with it everyday it is very real. So with 
that, conservation with our entire State right now, we are 
asking people to conserve. We are coming up with a plan, taking 
it off of other States' plans who are already in the full mode 
of conservation to present a plan to entire State of Montana on 
how we can conserve. That is our first best thing we can do 
right now. Thank you for the question.
    Mr. Inslee. Do you know if your congressional delegation 
has voted--
    Mrs. Cubin. The gentleman's time has expired. You can ask 
the congressional delegation when you see them.
    Are there any other questions on the other side?
    If not, the Chair recognizes Mrs. Christensen.
    Mrs. Christensen. Thank you, Madam Chair. I want to say 
thank you to the governors for spending so much time with us 
this morning and answering the questions. I know you are very 
busy. I have one brief question and it was particularly 
directed to you, Governor Geringer and Governor Martz.
    Your testimonies are in support of opening up more Federal 
lands for leasing and drilling. Yet, the Department of the 
Interior reports that 95 percent of lands managed by BLM in 
several States--Colorado, Montana, New Mexico, Utah, and 
Wyoming--are currently available for leasing and drilling.
    You may or may not know, but if you do I am interested in 
knowing how much of the lands that are already available are 
leased and being drilled and have they been exhausted. If you 
don't know specifically, how do you reconcile asking for more 
Federal lands to be opened up when already 95 percent of the 
lands are available for leasing and drilling?
    Thank you. That is my only question.
    Governor Geringer. Madam Chairman, if I might respond in 
part, there seems to be confusion over whether we are asking 
for opening up more access or asking for greater cooperation on 
how we develop what is already open. The answer is both.
    I will illustrate by saying that in the Powder River Basin 
of Wyoming, which is one area that has been opened up for coal 
bed methane development, as I indicated, the Federal agencies 
cannot seem to understand how each other works. So whatever 
goals we might have for production, because America wants it, 
we are willing to help enable that. But in the process of doing 
that, we quite often run into--even though BLM and other 
Federal agencies might describe how the lands are open for 
energy production, in fact, they are not by the way the process 
seems to work out, by the appeals that are made, by the 
inconsistent regulations that are applied.
    The economic interest that we have in our States is that 
jobs depend on it locally, but so does the environmental 
appeal. We want to protect both. As we view what is happening 
in America, the demand is starting to draw on our resources. 
Our question is what is the best way we can enable that 
development so that we don't destroy jobs; we don't destroy the 
environment; we enable that on all sides.
    But the statistic that all these lands are open is very 
deceiving when you look at the practicality of how it is 
applied. In fact, most of those are thwarted in some fashion by 
those who, I think, simply for the sake of wanting to 
discourage any development or consumption, manipulate the 
system rather than engage in constructive and cooperative 
approaches. That is what we are asking for.
    Governor Martz. Congresswoman, I don't know if that 95 
percent pertains to Montana that you talked about. I don't know 
if it is 95 percent that is used in Montana, Federal lands, but 
I will know next time I see you. We do know we have 
opportunities there, and we are a State that needs those 
opportunities, and I think the country needs the opportunities 
we are looking for.
    We do know that we are asking for a say in how those lands 
are used in the State of Montana, other than just sitting 
there. With pure coal, very good, compliant coal, it seems 
unreasonable to not want to bring that out to do generation 
with that in an environmentally-sound way. So we are here to 
ask for those considerations and allow our voices to be heard 
in those considerations, as it has not been in the past.
    Mrs. Cubin. I would like to also ask the gentlelady if she 
would be willing to meet with me and we could discuss that 95-
percent issue of BLM lands because that seems extraordinarily 
unlikely to me based on the knowledge that I have of access to 
public lands, whether it is from the Endangered Species Act or 
the roadless areas in the forests, or whatever.
    So I just think that is a very unlikely figure, but we can 
talk about that.
    Mrs. Christensen. And perhaps we can ask for more specific 
information as it relates to the States. Is that 95 percent of 
all the lands and is it all of it in Wyoming or is it 
distributed across the States?
    Mrs. Cubin. Right, and I am sure the gentlelady remembers 
last year the amendment to the Energy Policy Act that asked the 
USGS to do an inventory of the fossil fuels under the public 
lands in the lower 48 States, and then do an overlay of all the 
laws, rules, and regulations that impede production of that 
energy source. Until we actually know what we are dealing with, 
I think it will be very difficult to set a figure like that.
    I know you governors have been very patient with us and we 
appreciate it very much. Thank you for your time and for your 
input. It is truly a pleasure for me to work with Governor 
Geringer, and I know that with Governor Martz in the future we 
will have a good working relationship. We really, really 
appreciate your being here.
    Mrs. Napolitano. Madam Chair?
    Mrs. Cubin. Yes.
    Mrs. Napolitano. May I have a comment or two?
    Mrs. Cubin. Certainly, Mrs. Napolitano.
    Mrs. Napolitano. Thank you. I apologize, like other 
Members, because we have conflicting Committee meetings.
    In listening to the testimony when I walked in of all three 
governors, but essentially yours--I haven't had a chance to 
look at your written testimony, but as a former elected 
official myself, I feel that we have a very grave 
responsibility that we do not abuse our land, and leave some of 
whatever treasure we have for the next few decades, for our 
children and our grandchildren and our great grandchildren.
    I am looking forward to that report Mrs. Cubin was alluding 
to because I think we need to take a good long look at how we 
can best ensure that we have the ability to have this planet 
continue on its course and not deplete ourselves of those 
beautiful natural resources we have within our reach.
    Thank you.
    Mrs. Cubin. Mrs. Christensen?
    Mrs. Christensen. Madam Chair, thank you. I see that the 
acreage is--there is a table in a wilderness report that was 
sent to Congressman Hansen. I would like to have it entered for 
the record because it states specifically how many millions of 
acres BLM is managing in each State and the areas that are open 
to leasing and the areas that are closed to leasing. Really, 
the areas closed to leasing are minuscule compared to the total 
acreage.
    Mrs. Cubin. Without objection.
    Mrs. Christensen. Thank you.
    [The information referred to follows:]

                                    The Wilderness Society,
                                     Washington, DC, March 7, 2001.
Hon. James V. Hansen, Chairman,
Hon. Nick Joe Rahall II, Ranking Member,
House Resources Committee, Longworth House Office Building, House of 
        Representatives, Washington, DC.

Dear Chairman Hansen and Representative Rahall: 

    The House Resources Committee is to be commended for initiating a 
review of the ``Role of Public Lands in the Development of a Self-
Reliant Energy Policy.'' It is our hope that in exercising its 
oversight role regarding this important matter, the Committee will seek 
to be as objective as possible in reviewing the nature and extent of 
fossil fuel resources on our public lands, and the environmental values 
that also reside on those lands that can be placed at risk by oil and 
gas exploration and development activities. For although the oil and 
gas extracted from our public lands are an important component of our 
nation's well-being, the environmental, wildlife, watershed, and 
wilderness values of those lands are equally important to Americans. We 
ask that this letter with attachments be placed in today's hearing 
record.
    One fact of central importance that we wish to draw to the 
Committee's attention is that the vast majority of public lands managed 
by the Bureau of Land Management (BLM) in the Overthrust Belt states of 
Colorado, Montana, New Mexico, Utah and Wyoming are presently open to 
leasing, exploration and development by the oil and gas industry. In 
fact, information presented to the Assistant Secretary for Land and 
Minerals Management by the BLM in 1995 indicated that over ninety-five 
percent of BLM lands in those states (including ``split estate'' lands) 
were available for oil and gas leasing. I have appended to this letter 
the BLM's synopsis of the availability of BLM lands in those states for 
oil and gas leasing, exploration and development.
    Other recent data made available by the BLM indicates that the 
agency has been carrying out a robust onshore oil and leasing program 
for the past decade. For example, the Clinton Administration issued oil 
and gas leases on more than 26.4 million acres of public lands during 
the last eight years (see attachment). According to the BLM 
publication, Public Rewards from Public Lands, there are nearly 50,000 
producing oil and gas wells on the public lands (see attachment). 
Thousands of new drilling permits have been issued during the past 
eight years--3,400 by the BLM in FY 2000 alone.
    Criticism by some that in recent years too much public land has 
been made unavailable for oil and gas activities is simply not 
supported by the facts. Upon close examination, industry criticism of 
``lack of access'' really falls into two categories: lands that are 
off-limits entirely to oil and gas development; and lands available for 
development if the industry takes special care of the environment. The 
former areas include wilderness areas, wilderness study areas, and/or 
areas such as steep slopes, karst areas, and areas where other mineral 
activities are taking place, in other words, places where oil and gas 
activities could pose extreme environmental hazards or be incompatible 
with other values. Currently, such areas comprise roughly 5 percent of 
BLM-managed lands in the five states.
    The latter category often encompasses areas where evidence 
indicates the presence of sensitive wildlife habitats, such as elk 
calving areas, or sage grouse leks, where operations at certain times 
of the year could pose severe threats to wildlife. In such cases, the 
BLM may require that operations only occur at certain times of the 
year, when such areas or not in use by wildlife. In some cases, the BLM 
imposes ``No Surface Occupancy'' leases, whereby the lessee is required 
to access the oil and gas resource from off-site. Such ``NSO'' 
stipulations are also designed to protect wildlife habitats, while 
making the resource available for extraction. (A fuller explanation of 
typical special stipulations BLM includes on oil and gas leases is 
found in the first appended document to this letter.)
    The imposition of special, seasonal, or NSO stipulations are an 
attempt by the BLM to balance the industry's desire for access to oil 
and gas deposits, while balancing the BLM's responsibility to manage 
other resources on the public lands. And although industry public 
relations campaigns frequently emphasize the benignity of contemporary 
exploration and development technologies, it is apparent that when 
required by the BLM to utilize these technologies to minimize 
environmental impacts, the industry is reluctant to do so.
    One of the most challenging environmental problems with oil and gas 
development relates to protection of water quality. Unfortunately there 
is very little baseline data on water quality in Wyoming, for example, 
that would allow the responsible agencies to understand the negative 
impact on water quality for downstream communities from oil and gas 
development. And since water flows across state lines, ranchers in 
Montana, for example, are concerned that the water flowing from Wyoming 
coal bed methane projects does not deteriorate in quality. Given the 
dramatic increase in drilling permits, the cumulative impacts on water 
quality have not been, but need to be, examined carefully through long 
term monitoring. If there is one resource more valuable in the west 
than oil and gas, it is water.
    The national forests currently supply 0.4 percent of total U.S. oil 
and gas production, half of which occurs on the Little Missouri 
Grasslands (Forest Service Roadless Area Conservation FEIS, 2000, pages 
3-312 and 3-316). The remaining national forest land account for less 
than 0.2 percent of total production in 1999 (Ibid.). The vast majority 
of roadless areas on the national forests subject to the new Forest 
Service roadless protection policy have been open to leasing for 
decades, and there has been little interest in exploiting potential 
resources, even though the real price of oil in the past was much 
higher than it is today.
    In conclusion, it is our hope that the Committee's enthusiasm for a 
``self-reliant'' energy policy will be tempered by the realization that 
a country that consumes 40 percent of the world's oil production, but 
harbors only two percent of the world's oil reserves, cannot be ``self-
reliant'' in energy--even if we make 100 percent of our public lands 
available to the oil industry and eliminate all environmental 
protection requirements on them. Instead, policy-makers would serve our 
nation's interest best by seeking ways to reduce our dependence, not on 
foreign oil, but on oil itself We cannot drill our way to ``energy 
independence,'' and we should not ruin the few remaining pristine wild 
places on our public lands in a vain attempt to do so.
            Sincerely,
                                         David Alberswerth,
                       Director, Bureau of Land Management Program.
    Attachments.

                      AVAILABILITY OF PUBLIC LANDS

    The vast majority of public lands are available for leasing. In the 
states with considerable production of 116.6 million acres only 2.9 
million acres are not open for leasing. In Colorado 16.2 million acres 
are open and 600,000 closed to leasing; in Montana out of 19 million 
acres 400,000 are closed; in New Mexico of 29.9 million acres of lands 
only 1.3 million is not open to leasing; in Utah 900,000 acres are 
closed to leasing leaving 21.2 million acres open; in Wyoming 700,000 
acres are closed out of 28.6 million.

                                 LEGEND

    Acreage data are estimates based on best available data.
Categories of stipulations
    1. Standard.--Lands available for leasing generally have no special 
stipulations, except any that may be included in standard lease terms 
regarding conduct of operations or conditions of approval given at the 
permitting stage such as: prohibitions against surface occupancy with 
500 feet of surface water and/or riparian area; on slopes exceeding 25 
percent; construction when soil is saturated; within 1/4 mile of 
occupied dwellings.
    2. Seasonal and Other.--Prohibits fluid mineral exploration and 
development activities for specific time periods, i.e., sage grouse 
strutting areas, hawk nesting areas or calving periods. These 
restrictions are generally for specific months during the year.
    3. No Surface Occupancy.--Prohibits operations because it has been 
determined that other resource values present on the lease cannot be 
managed to coexist with oil and gas operations. Operations may be 
conducted through directional drilling.
    4. Off Limits.--Lands that are statutorily unavailable for leasing, 
i.e., Wilderness Study Areas and Designated Wilderness Study Areas; 
lands within incorporated cities, towns, villages, and National Parks 
and Monuments; and areas prohibited temporarily by policy 
considerations pending analysis of various factors such as social, 
economic, environmental (Areas of Critical Environmental Concern--
ACECs, Wildlife Refuges) and safety concerns, i.e., special project 
areas, unstable soils. Some restrictions are discretionary and may be 
excepted by the authorized officer upon application by the operator.

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    Mrs. Cubin. Governors, please feel free to go. Thank you 
very much for being here.
    We do have a vote on the Floor. It is the ergonomics rule. 
We have 10 minutes left.
    The next panel will be Neal Stanley, testifying on behalf 
of the Independent Petroleum Association of the Mountain 
States; Jim Bowles, Vice President of Phillips Petroleum 
Company, who is testifying on behalf of the American Petroleum 
Institute; and Terry O'Connor, with Arch Coal Company, 
testifying on behalf of the National Mining Association.
    So if those gentlemen would please take their places at the 
table, we will run over and vote and be back here immediately. 
Thank you.
    [Recess.]
    Mrs. Cubin. I would like to welcome the panel, and I know 
other members of the Subcommittee will be coming in as they are 
available.
    So, first, I would like to call on Mr. Stanley, as I said 
earlier, on behalf of the Independent Petroleum Association of 
the Mountain States.

STATEMENT OF NEAL A. STANLEY, PRESIDENT, INDEPENDENT PETROLEUM 
               ASSOCIATION OF THE MOUNTAIN STATES

    Mr. Stanley. Thank you, Madam Chair, members of the 
Committee. I am Neal Stanley, Senior Vice President of Forest 
Oil Corporation, and President of the Independent Petroleum 
Association of the Mountain States, both based in Denver, 
Colorado.
    I would like to thank this Committee for focusing its 
attention on the significance of Government lands in developing 
a sustainable national energy policy. Policies that limit or 
encourage energy development on Government lands have very real 
consequences.
    The oil and gas industry can supply the nation's growing 
natural gas needs, but the costs of natural gas will be 
dependent upon a number of factors, most notably having 
adequate access to the land in a timely manner. Policies that 
promote reasonable access to the nation's abundant supplies of 
natural gas will bring more gas to market quicker, which will 
lower the price.
    Please turn to Exhibit #1 in my written testimony. This is 
a map showing Government lands. The various represent the 
agencies with surface management responsibility. Fifty-two 
percent of the land in the West is Government land.
    Exhibit #2 shows the total estimated natural gas resources 
in the lower 48 with the corresponding percentage of those 
resources that are subject to prohibitions on access. In the 
Rocky Mountains, where abundant supplies of natural gas exist, 
Federal policies limit access to an estimated 137 trillion 
cubic feet of natural gas. This is 6 years' supply at current 
rates of use. Also, in the eastern Gulf of Mexico, 24 trillion 
cubic feet of natural gas is restricted. Lease Sale 181 is 
scheduled for December 2001 and should stay on schedule.
    Impediments to gaining access for natural gas development 
come in many forms. Recent mining designations, road-building 
policies, and wilderness reviews prohibit access to some areas. 
Outdated resource management plans and overly restrictive 
surface use requirements are also preventing access.
    A natural starting point for looking at access is with the 
restrictions that effectively reduce access where oil and gas 
leasing has already occurred. In order to facilitate the growth 
of deer and elk herds, land managers prohibit drilling during 
winter months. My personal experience in over 20 years of 
sitting on many drilling rigs throughout the Rockies has been 
that these animals are not in the least bit bothered by our 
activity. Hundreds of wells could have been drilled this winter 
alone to help supply natural gas.
    For what purpose or benefit do land managers restrict 
drilling? So that the herd can increase in size, only to be 
hunted in the fall. So we must decide, should American 
consumers be paying a higher price for energy to subsidize the 
elk hunters?
    Examples like this point up an important shortfall in land 
management policy. There has been no clear direction with 
respect to energy development on Government land. Throughout 
the gas-rich basins of the Rocky Mountain region, backlogs 
continue to grow for permits to drill and rights-of-way for 
pipelines and roads.
    Exhibit #3 shows the surface use restrictions on a 
southwestern Wyoming Federal lease. Please notice the length of 
time associated with each restriction, and also note the amount 
of time required to drill an 8,000-foot well. As energy 
companies explore for natural gas, we have a very short window 
each year to drill our wells.
    My final point is that the employment of advanced 
technology must occur if we are to reach our goals. Research 
and development spending by the oil and gas industry has 
decreased from $10 billion to $2 billion per year over the past 
20 years as the large, integrated companies have shrunk in 
size. We know that past innovations from this R&D such as 
horizontal drilling and 3-D seismic have provided significant 
increases in the recovery of oil and gas. Federal efforts to 
aid the R&D effort by devoting a portion of Federal oil and gas 
royalties to a research fund would be a win-win program.
    In conclusion, it is important to remember that natural gas 
resources are not uniformly distributed in the landscape. We 
must be allowed to drill where the resources exist if we are to 
supply the maximum available energy. I view the balance between 
energy supply and its price and access to public land like a 
teeter-totter. If the industry is shut out from public land, 
then the price of energy will be much higher. If we have access 
to public land where the resource exists, then the price for 
energy will be much lower. The American people and this 
Congress must decide the balance between access to Government 
land and the supply and price of natural gas to meet the 
nation's energy needs.
    Madam Chair and members of the Committee, thank you for the 
opportunity to appear before you today.
    [The prepared statement of Mr. Stanley follows:]

 Statement of Neal A. Stanley, on Behalf of the Independent Petroleum 
Association of Mountain States and Independent Petroleum Association of 
                                America

    Mr. Chairman, members of the Committee, I am Neal Stanley, Senior 
Vice President of Forest Oil Corporation, and President of the 
Independent Petroleum Association of Mountain States (IPAMS). Both 
Forest Oil and IPAMS are based in Denver, Colorado. Today, I am 
testifying on the behalf of the Independent Petroleum Association of 
America (IPAA), and IPAMS. IPAA and IPAMS represent thousands of 
independent oil and natural gas producers across the nation. 
Independents drill 85 percent of the wells in the U.S., and produce 40 
percent of the oil and two-thirds of the natural gas.
    I would like to thank this Committee for focusing its attention on 
the significance of government lands in developing a sustainable 
national energy policy. Energy policy cannot be developed in a vacuum. 
Policies that either limit or encourage energy development on 
government land have very real consequences. As such, I imagine that we 
all desire land policies that will provide for human needs, contribute 
to the sustainability of communities, and concurrently help secure the 
health of the land for the benefit of current and future generations.
    Despite our best conservation efforts, electricity demand in the 
United States will continue to increase as a function of our growing 
population and the role of computers in our new economy. The role of 
natural gas in meeting this new demand cannot be understated. Ninety-
five percent of all the new power plants now scheduled to be built will 
run on natural gas. Electricity produced from natural gas fired 
generation will increase from 15 percent to 40 percent by the year 
2020. Reports from the Department of Energy, Gas Research Institute, 
National Petroleum Council and American Gas Association show natural 
gas consumption increasing from 22 trillion cubic feet (TCF) this year 
to 35 trillion cubic feet (TCF) in 2020.
    The oil and gas industry can meet the nation's growing demand for 
natural gas, but the price of natural gas will be dependent upon a 
number of factors, most notably, having adequate access to the resource 
in a timely manner. Policies that promote reasonable access to the 
nation's abundant supplies of natural gas will bring gas to market more 
quickly and also lower the price of this energy.
    Exhibit #1 is a map showing government lands. The various colors 
represent the different agencies with surface management 
responsibility. A map showing the Federal government's mineral interest 
in the western United States would encompass an even larger portion of 
the West than is depicted on this map. Fifty-two percent of the land in 
the western United States is managed by Federal and state governments.
    Exhibit #2 shows the total estimated natural gas resources in the 
lower 48 states, with the corresponding percentage of those resources 
that are subject to severe, if not outright, prohibitions on access.
    Developing the substantial domestic natural gas reserves in 
offshore areas of the Eastern Gulf of Mexico, Atlantic Ocean, and 
California is prohibited by moratoria. President Clinton extended these 
moratoria for another ten years in 1998 saying, ``First, it is clear we 
must save these shores from oil drilling.'' This is a flawed argument 
ignoring the state of current technology. It results in these moratoria 
preventing natural gas development as well as oil. In fact, both the 
Eastern Gulf and the Atlantic reserves are viewed as gas reserve areas, 
not oil. Those coasts are not at risk. Too often, these policies seem 
to be predicated on the events that occurred 30 years ago. Federal 
moratoria policy needs to be reviewed. New policies need to be based on 
a sound understanding, of today's technology.
    Offshore Lease Sale 181 is scheduled for December 2001 and is 
outside the areas covered by moratoria. The resources contained in this 
sale area, approximately 7.8 TCF of gas and 1.9 billion barrels of oil, 
are important to the nation and surrounding coastal states. We strongly 
recommend the sale stay on schedule. This sale includes much needed gas 
resources for the Gulf of Mexico to even partially meet this country's 
natural gas needs.
    In the Rocky Mountains, where abundant supplies of natural gas 
exist, Federal policies prohibit access to an estimated 137 trillion 
cubic feet of natural gas. Long-term sustainable gas production will be 
achievable only through the development of frontier areas such as the 
Rockies. Without access to such areas, industry will not be able to 
keep pace with steeper decline rates in the mature basins.
    Impediments to gaining access for natural gas development come in 
many forms. Recent monument designations, new policies prohibiting road 
construction, and continuous wilderness reviews prohibit access to some 
areas. Administrative withdrawals, inaction, and extensive delays work 
similarly to restrict access. Outdated resource management plans and 
overly restrictive surface-use requirements also prevent access. The 
constraints differ in severity, but in each case, these impediments 
work individually and cumulatively to prevent the development of 
natural gas.
    A natural starting point for looking at limits on access is with 
the restrictions that effectively reduce access where oil and gas 
leasing has already occurred. Take for example a common restriction on 
drilling during winter months to protect Big Game Winter Range. In 
order to facilitate the growth of deer and elk herds, land managers 
prohibit drilling during winter months. My personal experience of 
sitting on many drilling rigs throughout the Rockies has been that 
these animals are not the least bit bothered by our activity. 
Nevertheless, the impacts of this restriction are significant. Hundreds 
of wells could have been drilled this winter alone to help offset the 
expected shortages of natural gas that we will encounter this summer. 
And for what purpose, or benefit, do land managers restrict drilling? 
So that the herd can increase in size only to be hunted the next fall. 
If there is any real trade-off between closing an area or opening it to 
development, the tradeoff seems to be between energy development and 
hunting. And so we must decide, should American consumers be paying a 
higher price for energy to subsidize elk hunters?
    Examples like this point out an important shortfall in land 
management policy. There has been no clear direction for land managers 
with respect to energy development on government land. Accordingly, 
each land manager assigns a relative value to the development of energy 
with no sense of how his or her actions contribute to or detract from 
the nation's energy sustainability. Mixed messages and a lack of 
accountability have led to a situation where land managers focus 
entirely on process with no apparent regard for the outcome. If left 
unattended, this lack of direction will become even more disastrous.
    Another example that illustrates the BLM's failure to recognize the 
urgency to develop natural gas can be seen in a recent wildcat well 
Forest Oil drilled in southwest Wyoming. In this case, the BLM's 
interpretation of field rules ended up costing Forest Oil $120,000, and 
even more when you consider the opportunity costs associated with 
delays. The well site was six miles from an improved road with an 
existing two-track road that led to the location. The BLM required 
Forest Oil to design and construct an improved road to the location at 
a cost of $90,000, even though the well was only going to take 20 days 
to drill. If drilling proved it to be a dry hole, we would not need to 
continue to go to that location. Indeed, the well was a dry hole that 
cost the company $800,000 to drill. After we plugged the well, the BLM 
required Forest to either maintain the road forever, or reclaim the 
road to its previous two-track status. It will cost Forest another 
$30,000 to reclaim the road. The money wasted, $120,000, could have 
been spent drilling more wells.
    Natural gas companies rely on Federal land managers to process 
their permit requests in a timely manner. Without the necessary 
environmental studies, permits, and authorizations, access to drill on 
Federal lands is prohibited. Throughout the gas-rich basins of the 
Rocky Mountain Region, backlogs for issuing permits to drill and 
rights-of-way for roads and pipelines continue to grow. Many resource 
management plans are outdated and revisions are being required before 
any leasing and development can occur. Staffing is short in many 
offices and the problem seems to get worse with time. The use of 
sophisticated mapping tools and other technologies could ameliorate 
some of these problems but, as with many other issues, addressing 
agency priorities and goals is a necessary first step.
    Exhibit #3 shows the surface use restrictions and seasonal 
restrictions on a southwestern Wyoming Federal lease. Please notice the 
length of time associated with each restriction and also note the 
amount of time required to drill a typical 8,000-foot well and a 
horizontal well. Companies exploring for natural gas have a very short 
window to drill wells. If the BLM has not processed the permits in time 
to meet that window of opportunity, the company will have to release 
the drilling rig they have contracted and wait another year before 
drilling. Which brings me to my next point, which is the importance of 
agency readiness, staffing, and technological sophistication.
    Exhibit #4 demonstrates the time requirements associated with 
operating on private land and Federal land. The right side of the table 
shows the timeframe, to get a well permitted and drilled. The 
difference between drilling on private land and Federal lands is 3 
months versus 1-3 years.
    To further illustrate the pervasiveness of land access problems 
throughout the Rocky Mountain Region, the following three examples are 
provided.
    Exhibit #5 is a map of the newly designated Canyons of the Ancients 
National Monument in southwestern Colorado. Canyons of the Ancients 
encompasses McElmo Dome, one of the Rocky Mountain region's most 
significant sources of natural gas used for advanced oil and gas 
recovery in Colorado, New Mexico and Texas. On the map, of the 183,000 
acres within the Monument's boundary, there are nearly 155,000 acres of 
active Federal leases, 141,000 of which are held by production or are 
included in four Federal production units.
    When the monument was designated, the BLM proposed stringent 
surface use restrictions on 79,000 acres, including a No Surface 
Occupancy stipulation. Given the BLM's predilection for restricting 
access, the Resource Management Plan that will be developed for the 
monument creates even more uncertainty for producers.
    Exhibit #6 is a map of Jack Morrow Hills Resource Area in 
southwestern Wyoming. The Environmental Impact Statement for the Green 
River Resource Management Plan, which includes the Jack Morrow Hills 
area, was started in 1989, with the Record of Decision finally issued 
eight years later, in October 1997. The decision of whether to lease 
for oil and gas exploration and development in Jack Morrow Hills area 
was deferred in the ROD until a Coordinated Activity Plan for the area 
could be completed, which took another four years. When the Draft EIS 
for the CAP was issued, the preferred alternative was for ``staged 
leasing,'' effectively postponing leasing decisions indefinitely. On 
the map, areas designated as potential Wilderness Study Areas (WSA) are 
shown in light blue stippling. Note that there are active leases and 
leases held by production within the new WSAs.
    The attached map of the Jack Morrow Hills area shows the BLM-
managed mineral estate with active oil and gas leases in yellow. Of the 
623,000 acres within the red boundary of the Jack Morrow Hills area, 
there are 239,000 acres of active Federal leases, 36,000 of which are 
productive. Also note that within the CAP area, there are 137,890 acres 
recommended as Wilderness Study Areas.
    Exhibit #7 is a map showing the entire state of Utah. Current 
leases are shown in yellow, a total of 3,567 active Federal leases. 
Also shown on the map are the BLM's 1990 recommendations for three 
million acres of new Wilderness Study Areas, as well as former Interior 
Secretary Babbitt's reinventory of an additional three million acres, 
described in the map's legend as ``HR1500 Boundaries''. Note that the 
proposed Wilderness Study Areas include lands that are already leased, 
making development as difficult as the examples of Jack Morrow Hills 
and Canyons of the Ancients. Not shown on the Utah map are the nearly 
29,000 leases that were previously leased in the past but were not 
renewed as a direct result of administrative direction from Washington.
    These examples are only a few of many examples of the overzealous 
application of singular surface uses that preclude other resource 
development. Other examples, some even more egregious, would include 
the backlog of drilling permits and rights of way applications in 
northeastern Wyoming; de facto wilderness management of Wyoming's 
Bridger/Teton National Forest and Montana's Rocky Mountain Front; and 
excessively stringent application of NEPA planning documents and 
subsequent delays in Utah, Colorado, Montana, and the Dakotas.
    My final point is that the employment of advanced technology for 
both land managers and industry must occur if we are to reach our 
goals. Research and development spending by the oil and gas industry 
has decreased from $10 billion to $2 billion per year over the past 
twenty years as the large integrated companies have shrunk in size. Yet 
we know that past innovations from this R&D, such as horizontal 
drilling and 3-D and 4-D seismic, have provided significant increases 
in the recovery of oil and gas. Frontier areas like the Rocky Mountain 
region will require new and sophisticated technologies to develop a 
large portion of the unconventional gas resources found in the region. 
Federal efforts to aid the R&D effort by directing a portion of Federal 
oil and gas royalties to a research fund would be a significant win-win 
program. Increased R&D spending will increase oil and gas production, 
resulting in a commensurate increase in Federal royalties.
    In conclusion, I would remind the Committee that natural gas 
resources are not uniformly distributed across the landscape. Even so, 
natural gas development can coexist with other values. We do not need 
to choose between ``this or that'' use of public land. Responsible 
management can allow for ``this and that'' use. Responsible management 
can provide for human needs, contribute to the sustainability of 
communities, and concurrently help secure the health of the land for 
the benefit of current and future generations.
    I view the balance between energy supply, and hence, price and 
access to government land as a teeter-totter. If the energy industry is 
shut out from government lands, then the price of energy will obviously 
be much higher. If we have access to more land where the resource 
exists, then the price of energy will be much lower. The American 
people and this Congress must balance the perceived trade-offs of 
allowing reasonable access to government land with the tangible 
benefits of securing an adequate supply of natural gas to meet the 
nation's near-term energy needs.
    Mr. Chairman and members of the Committee, thank you for the 
opportunity to appear before you today.
                                 ______
                                 

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    Mrs. Cubin. Thank you, Mr. Stanley.
    The Chair now recognizes Jim Bowles, the Vice President of 
Phillips Petroleum Company, testifying on behalf of the 
American Petroleum Institute.

   STATEMENT OF JIM L. BOWLES, PRESIDENT, AMERICAS DIVISION, 
PHILLIPS PETROLEUM COMPANY, ON BEHALF OF THE AMERICAN PETROLEUM 
                           INSTITUTE

    Mr. Bowles. Thank you. My name is Jim Bowles. I am 
President of the Americas Division of Phillips Petroleum 
Company. I represent Phillips and the American Petroleum 
Institute, which has over 400 members engaged in every aspect 
of the oil and gas industry in the United States. I appreciate 
this opportunity to speak regarding access to Government lands 
underneath which much of the country's known reserves of oil 
and gas naturally lie. I ask that my full remarks be submitted 
for the record.
    Today, we import some 57 percent of our crude oil. While we 
cannot eliminate our dependence on imported oil, there are a 
number of things we can do to encourage greater domestic 
production. They all have to do with allowing our companies 
greater access to non-park Government lands to produce the 
great energy resources we have in an environmentally compatible 
manner.
    Today, I plan to focus on three regions where the access 
question is of the utmost importance--the Western United 
States, Alaska, and the Gulf of Mexico. Demand for natural gas 
in this country has never been stronger, and it will continue 
to grow along with the demand for electricity. We have a 
tremendous natural gas resource base in North America. However, 
since 1983, access to Federal lands in the Western U.S., where 
an estimated 40 percent of the natural gas reserves are 
located, has declined by 60 percent.
    Despite the industry's record of sound environmental 
stewardship, the previous administration barred exploration on 
vast regions of Government lands, including nearly 60 million 
acres in the forest system. In the lower 48, some 205 million 
acres of Federal lands in the Western U.S. are under the 
control of two Federal agencies with broad discretionary 
powers--the Bureau of Land Management, the BLM, and the U.S. 
Forest Service. They administer Federal non-park lands. Both 
are required to manage these lands under the congressionally-
mandated concept of multiple use. Yet, both have used 
discretionary actions to withdraw lands from leasing, and long 
delayed other leasing decisions and project permitting.
    There are vast reserves of natural gas in the form of coal 
bed methane beneath Western Federal lands. However, BLM's 
inability to grant timely permits because of understaffing has 
greatly hindered development of this gas.
    In Alaska, a new discovery of oil at Prudhoe Bay on the 
North Slope in the early 1970's offered a significant new 
source of competitive domestic supply. However, North Slope 
production has fallen by nearly 50 percent by the year 2000. 
Alaska still holds much promise for new energy development, not 
only in the much discussed Arctic National Wildlife Refuge, but 
also in NPRA, the National Petroleum Reserve-Alaska, that is 
west of Prudhoe Bay.
    Our industry has made great strides in developing fields in 
these Arctic areas, with less adverse harm to the environment. 
One of these areas, the Alpine field, is a great example of how 
technology has minimized any impacts of Arctic oil and gas 
development. Only 97 acres, an area smaller than the U.S. 
Capitol grounds, are needed on the surface to produce from 
40,000 acres, an area roughly the size of the District of 
Columbia.
    North Slope exploration takes place during the winter using 
ice pads and ice roads that melt in the spring, leaving no 
trace of exploration activity. New technologies developed from 
our experience in the Arctic have tremendously reduced the so-
called footprint of our activities and our operations. Despite 
these examples of the industry's environmentally-sound 
operations, Congress has refused to authorize exploration on 
the small section of ANWR that was specifically set aside by 
law for exploration in 1980.
    In the offshore Gulf of Mexico, production is expected to 
rise to nearly a third of our domestic oil and gas supply 
within a decade. There, too, new technologies have driven down 
the cost of finding oil and gas, with much less disturbance to 
the environment, and allowed us to drill and produce in deep 
waters off the Gulf.
    However, because reserves are being depleted at an ever-
increasing rate, this cannot continue to be offset by future 
development unless new areas are opened for exploration. We 
have the technology and the will to explore and produce in 
these sensitive areas, as is being done in Canada, where oil 
and gas activities in the Atlantic have been conducted 
successfully with environmentally-sound development.
    America will soon have a great opportunity to augment 
reserves. Federal Outer Continental Shelf (OCS) Lease Sale 181 
in the eastern Gulf of Mexico is slated for December 2001. It 
was proposed only after comprehensive environmental reviews and 
consultations with Gulf State governors. The Sale 181 area is 
estimated to contain 7.8 trillion cubic feet of natural gas and 
1.9 billion barrels of oil. Again, these reserves can be 
produced cleanly with advanced technology.
    One potential obstacle to the success of 181 is the Coastal 
Zone Management Act which has been used by States, contrary to 
Congress' intent, to cause serious and costly delays to Federal 
OCS leasing and production that would have no adverse 
environmental impact on coastal zones. We strongly support Sale 
181 to proceed as planned.
    To summarize, our industry can explore for and produce our 
country's reserves of oil and natural gas for national security 
purposes and family and personal security. We are willing to 
make enormous investments to meet these ends, but we must have 
access to our natural resources for exploration and production.
    Thank you.
    [The prepared statement of Mr. Bowles follows:]

  Statement of Jim L. Bowles, President, Americas Division, Phillips 
        Petroleum, on Behalf of the American Petroleum Institute

    My name is Jim Bowles. I am President, Americas Division, of 
Phillips Petroleum. I represent Phillips Petroleum and the American 
Petroleum Institute, which has over 400 members, engaged in every 
aspect of the oil and gas industry in the United States.
    While the U.S. oil and natural gas industry has long provided a 
reliable and affordable supply of energy, the Federal government has 
always played a pivotal role in determining how well our energy needs 
are met. And the increasing energy demands of our new economy make it 
imperative that government and industry work to put forth a new 
national energy policy.

A national energy policy
    A successful national energy policy must be comprehensive in order 
to be effective. It must seek to ensure enough energy to support 
economic growth by promoting responsible development of both domestic 
and foreign resources. It should recognize that sophisticated new 
technology developed by the oil and natural gas industry greatly 
reduces adverse impacts on the environment by exploration and 
production, both onshore and offshore.
    A successful national energy policy will recognize that there is no 
quick fix to our energy problems. It must reflect the reality that we 
need to increase supplies of all forms of energy to fully support our 
growing economy. It is important to encourage responsible use of energy 
and increase supplies of all fuels, including fossil fuels as well as 
alternative fuels.
    A successful national energy policy must be flexible to allow 
companies to adapt to new energy and environmental challenges. It 
should recognize that our refinery and delivery infrastructure 
continues to be stretched to its limit, restraining the industry's 
capability to meet new energy demands. It should remove unreasonable 
and complex regulations on cleaner energy production and transportation 
to accommodate growth and the continued high demand for energy--and to 
meet seasonal or unexpected requirements.
    A successful national energy policy must rely primarily on the 
private sector working through free markets, and it must recognize the 
value of diversified energy sources. To that end, it should encourage 
competitive trade practices and international investment.
    Finally, a successful national energy policy must create a 
predictable operating and investment environment for energy suppliers. 
The Department of Energy projects that producers will have to invest 
some $650 billion through 2015 to meet the growth in natural gas demand 
alone. That should tell us that government must work to create a more 
stable regulatory environment so that producers can invest with 
confidence that they will be able to get a fair return on their 
investment.

Access to government lands
    I am here today to speak to the Committee about access to the 
government lands that contain much of the country's known reserves of 
natural gas and oil.
    Today, the U.S. imports 57 percent of its crude oil. Last year's 
gasoline price volatility was due in part to a cutback in production by 
foreign oil producing countries. While we cannot eliminate our 
dependence on imported oil, there are many things that can be done to 
encourage greater production in this country.
    America has vast reserves to help it meet its future requirements. 
But we must have greater access to government lands to produce this 
energy in an environmentally responsible manner.
    Demand for natural gas in this country has never been stronger. The 
National Petroleum Council (NPC), a Federal advisory Committee of the 
Department of Energy, predicts demand, which is now at about 21 
trillion cubic feet (Tcf) per year, at about 29 Tcf by 2010. The Energy 
Information Administration (EIA) now estimates that, due to Clean Air 
Act requirements, and increased demand for electricity, we will need 35 
Tcf annually by 2015.
    We have a tremendous resource base of natural gas in North America. 
Estimates put it between 1,200 and 1,600 Tcf (including resources in 
coal seams and tight sands formations). But we have a significant 
problem due to two key factors.
    First, volatile energy prices inhibited drilling during the 1998-99 
time period. Second, significantly reduced access to some of the most 
promising areas has suppressed our ability to increase our proven 
reserves. This has resulted in today's high prices, as demand has 
continued to grow.
    With higher prices this year, oil and gas producers are making good 
returns on their investments, and plowing additional capital into new 
exploration. While some increase in supply has taken place, achieving 
the reserve growth needed to meet expected demand growth over the long 
term will require sustained growth in drilling activity.
    We recognize that this has been a costly and painful year for 
consumers. It is, therefore, critical to help consumers understand what 
the United States must do from an energy policy standpoint to ensure 
that the U.S. maintains and enhances its long-term supplies. Put 
simply, increased drilling and stable long-term prices are crucial to 
future supplies.
    Yet, many of the government's multiple use lands have been placed 
off-limits by the Federal government. Since 1983, access to Federal 
lands in the western United States-where an estimated 67 percent of 
conventional onshore oil reserves and 40 percent of our natural gas 
reserves are located--has declined by 60 percent. Equally important is 
the fact that discretionary land management policies often 
unnecessarily restrict or impede efforts to develop resources on public 
lands. Our ability to search for new domestic offshore oil and natural 
gas is limited to portions of the Gulf of Mexico and offshore Alaska 
waters because congressional moratoria have withdrawn most of the rest 
of our Federal Outer Continental Shelf from consideration.
    What is access to government lands? We do not request to drill on 
parklands or in wilderness areas set aside by Acts of Congress. Rather, 
we seek access to areas in the American West that have been designated 
as ``multiple use'' so that numerous activities can take place there.
    Most of these areas are simply vast expanses of non-descript 
Federal lands. However, because they lack the beauty and grandeur of 
the Grand Canyon or the Grand Tetons does not mean that we treat them 
with less respect than we do any other lands entrusted to us by the 
government, or by private landowners. Most people driving near or 
hiking in one of these multiple-use government land areas would be 
hard-pressed to locate one of our facilities once the drilling rig is 
removed. It has become fashionable for editorialists and others to 
refer to our industry as a ``dirty'' or ``messy'' business. Safety and 
environmental protection are critical concerns, regardless of their 
location, and where our contractual lease obligations with the 
government require us to return the land to its original condition once 
drilling and production cease.
    Yet, despite our record of sound stewardship, President Clinton 
used his executive powers under the Antiquities Act to bar oil and gas 
exploration and other activities on vast regions of government lands.
    For example, the designation of the Grand Staircase-Escalante 
Monument in Utah in 1996 summarily withdrew promising valid oil and gas 
leases on state lands without even notice or consultation with state 
and local authorities, or affected communities. Likewise, the U.S. 
Forest Service recently banned our companies from exploring for natural 
gas and oil on promising government lands when it published rules to 
bar road building on nearly 60 million acres in the Forest System.
    Offshore, the ``consistency'' provisions of the Coastal Zone 
Management Act (CZMA), under the guise of due process and consultation, 
have caused serious duplicative and incredibly costly delays to Federal 
OCS leasing and production activities that would have no adverse 
environmental impacts on states' coastal zones. And regulations issued 
by the National Oceanic and Atmospheric Administration (NOAA) in the 
last days of the Clinton Administration appear to add impediments to 
environmentally compatible energy development in the OCS, contrary to 
the balancing of competing interests directed by Congress when it 
enacted the CZMA. Both the summary withdrawal of multiple use 
government lands without stakeholder consultation under the Antiquities 
Act, and the endless due process used by opponents to block Federal 
offshore production that does not affect a state's coastal zone are 
extreme, and must be moderated.
    Further, Congress has refused to authorize exploration on the small 
section of the Arctic National Wildlife Refuge (ANWR) that was 
specifically set aside by law for exploration in 1980, after a 1987 
final environmental impact statement concluded that it could be safely 
developed.
    We respect, and strictly adhere, to all of the nation's 
environmental laws. However, many government lands offshore and onshore 
that should reasonably be open for leasing are, in fact, off limits, or 
severely restricted from responsible development.

Offshore lands
    Offshore, the OCS has assumed increasing importance in U.S. energy 
supply over the past half century. The Federal portion of the OCS now 
supplies 19 percent of the oil and 27 percent of the gas produced in 
the United States. Offshore production promises to play an even more 
significant role in the future. The Department of Energy forecasts that 
offshore production will rise to nearly a third of our domestic oil and 
gas supply within a decade.
    In recent years, exploration and development of the offshore has 
been a major factor contributing to domestic energy supplies. From 1993 
to 1997, new proven reserves replaced over 147 percent of offshore oil 
produced, and over 106 percent of gas produced. In 1997 alone, the Gulf 
of Mexico accounted for over 79 percent of the new field discoveries of 
oil in the United States.
    The relatively shallow shelf of the Central and Western Gulf was 
the focus of past development, and is the location of the majority of 
current oil production and the vast bulk of current gas production. It 
has been a source of growth in gas production in the United States for 
nearly three decades.
    Technological revolutions, such as 3-D seismic profiling of 
promising structures, coupled with astounding computer power and 
directional drilling techniques which allow numerous reservoirs to be 
accessed from one drill site have driven down the costs of finding oil 
and gas. And at the same time these technologies allow development with 
much less disturbance to the environment. Tremendous advances in our 
ability to drill and produce in the deep waters of the Gulf have also 
resulted in vast new reserves being added to our resource base. The 
Deepwater Royalty Relief Act developed by this Committee, and passed by 
Congress in 1995, has significantly aided that endeavor. Those in the 
Federal government who are most familiar with our industry have lauded 
our technological advances.
    A 1999 DOE report, Environmental Benefits of Advanced Oil and Gas 
Exploration and Production Technology, stated that, ``innovative E&P 
approaches are making a difference to the environment. With advanced 
technologies, the oil and gas industry can pinpoint resources more 
accurately, extract them more efficiently and with less surface 
disturbance, minimize associated wastes, and, ultimately, restore sites 
to original or better condition. . . . [The industry] has integrated an 
environmental ethic into its business and culture and operations . . . 
[and] has come to recognize that high environmental standards and 
responsible development are good business.''
    However, there is now accumulating evidence that resource depletion 
is overtaking the effects of technical advances on the cost structure 
of OCS development. The volume of reserves added per dollar of capital 
spent in the OCS has been falling steadily since the early 1990s. Due 
to increased demand, reserves are being depleted at an ever-increasing 
rate. Due to more efficient extraction technologies, the decline from 
new gas wells is now estimated to be as high as 40 percent per year.
    This does not suggest the imminent collapse of OCS production, but 
it does suggest that the drilling and capital expenditures required to 
replace and augment reserves will become increasingly important. We 
must increase deepwater development, and access to areas presently 
restricted. Currently, presidential moratoria, and annual Interior 
Appropriations bill riders preclude leasing in most of the Eastern Gulf 
of Mexico, the entire Atlantic and Pacific Federal OCS, and portions of 
offshore Alaska.
    As a result, only 200 million acres out of a possible 1.5 billion 
Federal OCS acreage is available for environmentally compatible 
exploration and production.
    The National Petroleum Council estimates that more than 76 trillion 
cubic feet of gas are off-limits in the Federal OCS as a result of the 
current moratoria. Twenty one Tcf are estimated to lie in the Federal 
waters beneath the Pacific, 31 Tcf beneath the Atlantic OCS, and about 
24 Tcf are projected to lie beneath the Department of the Interior's 
Eastern Gulf of Mexico Planning Area.
    Again, our companies have the technology, and the will to explore 
and produce in these areas in an environmentally compatible manner. It 
is already being done in Canada's OCS, where oil and natural gas 
activities off the Atlantic coast have been conducted successfully in 
recent years with environmentally sound developments. Those supplies 
are now becoming available for the energy needs of New England.
    America will soon have a great opportunity to augment its reserves. 
Federal OCS Lease Sale 181 represents a plan for leasing by the 
Department of the Interior in the Eastern Gulf of Mexico Planning Area. 
Scheduled since the mid-1990s based on comprehensive environmental 
reviews, and consultations between former DOI Secretary Bruce Babbitt 
and then Governors Chiles of Florida and James of Alabama, Sale 181 is 
slated to be conducted in December 2001. The area available in Sale 181 
is estimated by the NPC to contain 7.8 trillion cubic feet of natural 
gas and 1.9 billion barrels of oil. This means that natural gas from 
the Sale 181 area could satisfy the current natural gas needs of 
Florida's 5.9 million households for the next 16 years. Lastly, the 
crude oil from the Sale 181 area (which is expected to come from the 
deepwater areas, far removed from the coastline) could fuel 74,000 cars 
for 20 years.
    These potential reserves can be produced cleanly, for advances in 
technology have made offshore oil and natural gas exploration and 
production safer than ever. For the 1980-1999 period, 7.4 billion 
barrels of oil have been produced in the OCS with less than 0.001 
percent spilled--a 99.999 percent near perfect record.

Alaska's North Slope
    In the early 1970s, as petroleum production from the Lower 48 
states entered a decline, a new discovery of oil at Prudhoe Bay on the 
North Slope of Alaska offered the U.S. the promise of a significant new 
source of competitive domestic supply on a world-class scale. The 
discovery was initially estimated to be 9.6 billion barrels of oil, 
nearly double the size of the largest field ever previously found in 
North America. Despite high costs, a hostile climate and major 
environmental challenges, supply from Prudhoe Bay came online in 1977, 
offsetting much of the decline in Lower 48 production through the mid-
1980s.
    By the mid 1980s, Alaska's North Slope was supplying about a 
quarter of U.S. oil production. Meanwhile, as Prudhoe production grew, 
the estimated resource potential of the North Slope began to grow as 
well, as other finds occurred. However, North Slope production has been 
falling. North Slope production peaked in 1988, and by 1998 had fallen 
by nearly 40 percent.
    Phillips and other companies operating on Alaska's North Slope are 
actively exploring for new sources of oil in the areas that have become 
available for leasing. This includes the National Petroleum Reserve-
Alaska (NPRA) and the Alpine field, located in state lands west of 
Prudhoe Bay in an incredibly rich and diverse wildlife habitat. The new 
Alpine field is a great example of how technology has minimized any 
impacts of arctic oil and gas development. Only 97 acres, an area 
smaller than the area covered by the U.S. Capitol grounds, are needed 
on the surface to produce from an area of 40,000 acres, an area roughly 
the size of the District of Columbia.
    This winter Phillips will drill 12-15 exploratory wells. Today's 
North Slope exploration takes place during the winter using ice pads 
and ice roads that melt in the Spring, leaving almost no trace of the 
previous Winter's exploration activities. When oil and gas is 
discovered, new technologies developed from our experience in the 
Arctic have tremendously reduced the so-called ``footprint'' of our 
activities in our operations to extract these resources.
    The U.S. Geological Service estimates there to be more than 10 
billion barrels of oil recoverable from the coastal plain of ANWR, and, 
perhaps as much as 16 billion barrels. That is equivalent to the 
volumes we would import, at current levels, from Saudi Arabia for the 
next 20-25 years. If those volumes are found it would be the largest 
oil discovery in the world in the last 30 years.
    And due to technological advances, the ``footprint'' to develop 
ANWR, if exploration confirmed the vast reserves predicted there, would 
be only an estimated 2,000 total acres out of a total area of 19.8 
million acres, a tract roughly the size of South Carolina.

The Lower 48
    In the Lower 48 states, a 1997 study by the Cooperating 
Associations Forum found that Federal lease acreage available for oil 
and gas exploration and production in eight Western states (California, 
Colorado, Montana, Nevada, New Mexico, North Dakota, Utah and Wyoming) 
has decreased by more than 60 percent since 1983.
    Approximately 205 million acres of Federal lands in these states 
are under the control of two Federal agencies with broad discretionary 
powers. The Bureau of Land Management (BLM), whose land management 
planning authority is derived from the FLPMA of 1976, and the USFS, 
whose jurisdiction is derived from the National Forest Management Act, 
administer these Federal, non-park lands.
    Both agencies are required to manage lands they administer under 
the congressionally mandated concept of multiple use. Yet, BLM and USFS 
discretionary actions have withdrawn Federal lands from leasing, and 
long delayed other leasing decisions and project permitting.
    Congress has directed the BLM and the Forest Service to allocate 
non-wilderness lands for resource use, identify areas that are 
available for oil and gas leasing, and identify important wildlife 
habitat areas, and inventory wilderness candidate lands among other 
uses. Each agency has completed land use plans for the lands they 
administer, including lands that are candidates for wilderness 
designation. Yet, some lands found unsuitable for wilderness 
designation are, however, managed as ``wilderness study areas,'' 
effectively removing these lands inappropriately from consideration for 
resource development. Further, these agencies often dictate lease 
stipulations as conditions of approval for exploration and production. 
Stipulations are intended to protect resource values in conjunction 
with proposed projects, such as exploratory wells, yet many conditions 
required, such as ``no surface occupancy,'' essentially preclude 
exploration and production from occurring.
    The NPC study on natural gas referred to earlier also points out 
that vast reserves of natural gas in the form of coal bed methane (CBM) 
lie beneath Federal lands, especially in Wyoming and Montana. However, 
BLM's inability to grant permits in a timely manner has greatly 
hindered CBM development, and may contribute to further shortfalls in 
necessary future gas production. In some instances we recognize that 
individual BLM offices may be understaffed and therefore are simply 
unable to efficiently process permitting requests. We therefore support 
increased funding for BLM to adequately address these critical 
permitting backlogs.
    We applaud this Committee's involvement in legislation enacted in 
the last Congress directing the Departments of the Interior and Energy 
and the Forest Service to conduct an inventory of oil and gas resources 
on Federal lands and the restrictions that prevent access to these 
critical resources. We urge Congress to fully fund this inventory in 
the FY 2002 appropriations process so that adequate information will be 
available on resource availability.
    In conclusion, we must recognize that this industry in the 21st 
Century has the technologies, and sensibilities to explore for, and 
produce our nation's vast reserves of secure oil and gas--resources 
that keep factories and offices running, and our homes comfortable 
regardless of the weather. Oil and natural gas are the key ingredients 
in thousands of products that we use, from life-saving medical devices 
to fertilizers that help feed the world.
    I am grateful to the Committee for the opportunity to present our 
views on a national energy policy for the long-term health and 
continued prosperity of our nation.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. Bowles.
    Mr. O'Connor?

STATEMENT OF TERRY O'CONNOR, VICE PRESIDENT, EXTERNAL AFFAIRS, 
 ARCH COAL, INC., ON BEHALF OF THE NATIONAL MINING ASSOCIATION

    Mr. O'Connor. Good afternoon, Madam Chairman. It is good to 
see you again. For the record, my name is Terry O'Connor. I am 
Vice President of External Affairs for Arch Coal, the second 
largest coal producer in the United States. We will produce 
about 115 million tons of coal this year, we estimate, and 
about 70 percent of those tons will come from Federal lands in 
the Western States of Wyoming, Colorado, and Utah.
    I am here also on behalf of the National Mining 
Association, and before commencing my testimony I just want to 
thank you and ask you to relay to Chairman Hansen our 
appreciation for both of you scheduling this all-important 
hearing.
    Most of us here in the room today are aware that coal is 
America's most abundant and reliable domestic energy resource. 
The coal produced in the United States is used to generate over 
50 percent of the electricity generated in this country. We are 
also probably all aware that coal represents somewhere between 
85 percent and 95 percent of the discovered and economically 
recoverable fossil fuel resources in the United States.
    Finally, it is generally known that the Western United 
States coal fields on Federal lands are blessed with an 
abundance with some of the lowest-sulfur coal in the United 
States, if not the world. Western coal, in particular, is quite 
low in inherent NOx when burned in U.S. power plants.
    What may not be quite as generally known is that today a 
majority of coal production comes from the Western United 
States. The bulk of that production is actually coming from 
Congresswoman Cubin's district or a portion of her district, 
the prolific coal-producing region of northeastern Wyoming and 
to some extent Montana, called the Powder River Basin, and 
referred to by many as the Saudi Arabia of coal. If Campbell 
County, Wyoming, in northeastern Wyoming, were a separate 
country, it would be one of the five largest coal-producing 
nations on Earth, with the United States being number two.
    Forecasts show that over 90 percent of expected new coal 
production in the United States likely will come in the next 20 
years from mines on Western Federal lands. However, a group of 
ominous clouds are on the horizon, in that numerous Federal 
policies now in effect discourage or in some cases prevent the 
exploration, development, and investment that will be required 
to bring additional Federal coal production online. This 
Congress has a unique opportunity to deal with some of these 
issues and help us contribute toward the goal of making our 
country less energy-reliant on unstable foreign sources.
    Madam Chairwoman, in the interests of time I will dispense 
with a discussion of most of the issues that are raised in our 
written testimony, but I would quickly like to address three of 
the most serious issues that we hope Congress will take an 
early look at.
    The first issue I would like to address today and take a 
moment or two on is the U.S. Forest Service Roadless 
Initiative. In addition to the much publicized restrictions on 
timbering, as a consequence of this initiative the coal mining 
industry will also be significantly and adversely impacted.
    I refer you to a statement in the Forest Service's own EIS 
which says that the initiative, quote, ``'will preclude further 
development of leasable mineral resources within inventoried 
roadless areas, which will result in decreases in jobs, income, 
and payments to States.'' My company, our employees, and the 
consumers of our coal will be ultimately adversely impacted by 
this Roadless Initiative unless it is somehow amended.
    For example, in Colorado we operate the West Elk 
underground mine, the second largest coal-producing mine in the 
State, where we employ 360 people with an annual payroll of 
over $26 million. An estimated 200 million tons of very low-
sulfur, high-Btu coal is adjacent to our West Elk mine. If this 
Roadless Initiative is not somehow changed, this will result in 
the premature abandonment of the mine and the loss of an over 
$100 million capital investment that we have made.
    Similarly, in Utah, we operate three large underground 
mines, and actually are the largest coal producer in the State. 
Our coal represents about 40 percent of the State's coal 
production. Our coal underlies a large forest service tract. I 
refer you to a map that is either in the back of the room or 
back in the Resources Committee room that identifies the 
enormity of the Roadless Initiative and what it will do.
    Ironically, as California attempts to dig out from its 
energy crisis, one of California's most viable, low-cost, 
lowest-hanging fruit is the construction of power plants to 
supply California much-needed electricity. This Roadless 
Initiative will put in harm's way their capacity to do so. We 
recommend that Congress, at a minimum, amend this Roadless 
Initiative somehow to exclude sub-surface leasable minerals, 
and that includes oil, gas, and coal.
    Secondly, and very quickly, an area I would like to address 
for just a second is an issue you are very familiar with, and I 
certainly thank you for your past efforts on this--the issue of 
conflict involving the simultaneous development of coal and 
coal bed methane in the Powder River Basin. This issue sits as 
a potential cloud that can impact far more than the very, very 
small, isolated areas of conflict, and we urge that Congress 
move quickly in order to free up the much needed coal bed 
methane, as well as low-cost, low-sulfur coal.
    Third, an issue that I would like to second Mr. Bowles, to 
my right, is the administrative backlog which is occurring in 
the Powder River Basin, in his case with regard to coal bed 
methane. In our case, it is the lease by application process 
for coal.
    Because of the dramatic increase in requirements for low-
sulfur coal in the West, BLM is simply not keeping up with the 
processing of lease by applications. If an application were 
submitted today, because they are only processing one a year, 
it would be probably 2009 before a lease sale was held, then 
another 3 years to permit it, another year after that to move 
the infrastructure. And we would be looking at 2012 before we 
could be in production on a new LBA. This cries out for 
congressional oversight.
    Finally, and in conclusion, as important as all of these 
issues are, the other side of the potentially even more 
leveraging portion of the energy coin is that as a nation we 
must authorize the construction of additional coal-fired 
generation facilities, as well as the equally essential 
transmission lines to be able to move electricity to places 
where it is needed.
    The United States and the Western United States must escape 
the banana syndrome, which many of you are familiar with as the 
next step beyond NIMBY; it is build absolutely nothing anywhere 
near anything. If the next generation of lower-emitting, 
higher-combustion-efficiency coal-fired plants are not allowed 
to be built, constructed and operated, any additional Federal 
coal which is produced in the West will not be able to help 
reduce our nation's reliance on unstable foreign sources of 
energy or to prevent the spread of the California syndrome 
nationally.
    Thank you very much for your time.
    [The prepared statement of Mr. O'Connor follows:]

  Statement of Terry O'Connor, Vice President, External Affairs, Arch 
        Coal, Inc., on Behalf of the National Mining Association

    Mr. Chairman, my name is Terry O'Connor. I am Vice President of 
External Affairs for Arch Coal, Inc. I am appearing here on behalf of 
the National Mining Association (NMA) to testify on the important role 
that energy resources on Federal lands, specifically coal resources, 
have in the development of strategies and policies to take the United 
States closer to the goal of being self-reliant for energy supply. 
Thank you for the opportunity to present the mining industries views on 
this subject.

Summary
    Affordable, reliable energy is a necessity for economic growth. 
Domestic, affordable and increasingly clean coal provides over 20 
percent of all the energy that is used in the United States and is the 
fuel of choice for over 50 percent of the electricity generated in our 
nation today. Nearly 40 percent of our coal production is from mines 
located on Federal lands. Over one-third of the nation's coal reserve 
is found on lands owned or controlled by the Federal government. 
Forecasts show that over 90 percent of new production expected to come 
on line over the next 20 years will be from mines on Federal lands. 
However, policies now in effect discourage, or prevent the exploration, 
development and investments that will be required to bring this new 
production on line. This Congress has an opportunity to change current 
policy direction to ensure that the vast resources on Federal lands can 
contribute towards the goal of energy self-sufficiency while at the 
same time ensuring that both the environment and the economies of the 
regions in which these resources are located are protected and 
advanced.

General introduction
    Arch Coal, Inc., headquartered in St. Louis, is the second largest 
coal producer in the United States. In 2000, our operating subsidiaries 
mined more than 107 million tons of coal--nearly 10 percent of the 
nation's production--from surface and underground mines in Wyoming, 
Colorado, Utah, Illinois, West Virginia, Kentucky and Virginia. Arch 
shipped coal to approximately 140 power plants in 30 states providing 
the fuel for 6 percent of the electricity used by Americans last year. 
Arch owns or controls approximately 3.2 billion tons of coal reserves 
including reserves on Federal lands.
    In 2000 our company mined nearly 65 million tons of low-sulfur, 
sub-bituminous coal from our two large surface mines in the Powder 
River Basin (``PRB'') of Wyoming, Black Thunder and Coal Creek mines. 
We also produced 3.4 million tons in our West Elk Mine in Colorado and 
9.4 million tons in three mines in Utah. This coal is almost 
exclusively mined on Federal lands. One of Arch Coal's highest 
priorities is to operate safe and environmentally responsible mines. 
Our production and reclamation experience on our mines on Federal lands 
are prime examples of the way that our priorities are met.
    The National Mining Association represents producers of coal, 
metals and non-metal minerals, as well as manufacturers of processing 
equipment, machinery and supplies, transporters, and engineering, 
consulting and financial institutions serving the mining industry. The 
members of National Mining Association produce over 80 percent of 
America's coal, a reliable, affordable, domestic fuel choice used to 
generate over 50 percent of the electricity used in the nation.

A balanced national energy strategy is a basic element of our nation's 
        economic future
    Mr. Chairman, we would like to commend you for holding these 
oversight hearings on the need for a balanced national energy strategy. 
Energy, whether it is from coal, oil, natural gas, uranium or renewable 
sources, is the common denominator that is imperative to sustain 
economic growth, improve standards of living and simultaneously support 
an expanding population. Affordable and reliable energy--much of it 
from coal produced on Federal lands--has made the last decade of 
expansion possible. The recent sharp increase in the overall cost of 
energy along with concerns over current and future supplies together 
remind us of the importance of affordable energy as these factors are, 
in part, behind the downturn in the economy that is now occurring.
    The policies of the past eight years have actively discouraged and 
even prevented investments in domestic energy supplies and in the 
energy delivery infrastructure on both public and private lands. As a 
result no energy source be it petroleum, natural gas, coal or uranium 
is in a position to quickly increase output, to even to meet the new 
demands that are forecast. Our energy supply industry has not been able 
to make the investments or develop and maintain the infrastructure that 
is necessary for the future. The policies that have discouraged or 
outright prevented development must be identified and reversed. The 
United States is fortunate to have a large domestic energy resource 
within our borders but, to even approach energy self-sufficiency our 
policy direction must be returned to one that encourages 
environmentally sound development and use of our nation's vast energy 
resource base.
    Forecasts of future energy demand all consider technological 
advances, conservation and increased efficiency. But all forecasts also 
point to an increase in energy demand. For example, the Energy 
Information Administration (EIA) is predicting that energy use will 
increase by over 32 percent by 2020. Meeting this demand with reliable 
affordable energy while maintaining our high environmental standards 
will be a challenge, but a challenge that can be met with the correct 
policies that consider and enhance the role of all energy sources, 
including those sources found on Federal lands.

The role of coal in U.S. energy
    Coal reserves, which are geographically distributed throughout the 
US, comprise the greater share of the nation's energy resource base. 
The demonstrated coal reserve is over 500 billion tons, a reserve large 
enough to support a growing coal demand for over 200 years. In 2000, 
1.1 billion tons of coal were produced in mines located in 26 states. 
Coal, or electricity generated from coal is used in all 50 states. The 
coal industry contributes some $161 billion annually to the economy and 
directly and indirectly employs nearly 1 million people.
    Last year 1.026 billion tons of coal were used to generate over 50 
percent of all electricity used in the US. Although this is more than 
triple the amount of coal used for electrical generation in 1970, 
emissions have declined by over one-third. The Energy Information 
Administration forecasts show that electricity use will increase by 
another 35 percent by 2020 and that coal use for electricity will total 
at least 1.25 billion tons in 2020, some 250 million tons or 20 percent 
more than is currently burned. Meeting electricity demands will require 
construction of new power plants including coal fired power plants. 
Although beyond the scope of this hearing, a national energy strategy 
must include provision for incentives that allow companies building 
these new plants to assume the risks of commercializing new advanced 
clean coal technologies. The mining industry supports legislation 
designed to provides a measure of burden-sharing to cushion the cost of 
improving the environmental performance of existing coal-based 
generating facilities and to stimulate deployment of advanced 
technologies to further reduce emissions and improve efficiency in new 
generating facilities.
    Coal fired electricity is and will remain the most affordable 
electricity available. Electric rates in regions dependent upon coal 
for electricity average at least one-third lower than rates in regions 
dependent upon other fuels for electricity. Forecasts show that these 
differentials will remain in place over at least the next twenty years.
    Because coal is a domestic energy resource that is reliable, 
affordable and, with new advanced clean coal technologies, increasingly 
clean, coal can and should continue to play a major role in meeting the 
energy needs of our nation in the future. Coal production will increase 
and nearly all this new coal will be from reserves located on Federal 
lands.

Coal on Federal lands
    Coal mined on Federal lands provides a vital portion of the 
nation's domestic energy supply. In 2000 approximately 405 million tons 
of coal, 37 percent of national production, were mined on Federal 
lands. Considering western production only, a full 80 percent came from 
mines on Federal lands and, considering that the majority of privately 
held western reserves are on lands that are effectively controlled by 
Federal land policies one can assume that 85 percent or more of the 
growing western coal industry depends upon Federal land management 
policies. Coal mines on Federal lands are found in Colorado (89 percent 
of production within the state), Montana (46 percent), New Mexico (24 
percent), North Dakota (7 percent), Oklahoma (35 percent), Utah (88 
percent), Washington (33 percent) and Wyoming (92 percent). Less than 
0.1 percent of coal production on Federal lands--365,000 tons--were 
from lands located in the Appalachian states (Alabama and Kentucky).
    Coal produced on Federal lands contributes directly to local 
economies in a positive way. In 2000, this coal was worth an estimated 
$3 billion. Production activities provided high paying jobs for over 
15,000 workers in 2000, paying wages in excess of $600 million. 
Considering both direct and indirect economic benefits, coal produced 
on Federal lands provided employment for nearly 150,000 workers with 
wages of over $3.5 billion dollars.
    Coal produced on Federal lands contributed nearly $400 million to 
state and local tax revenue. Royalties paid to the Federal Government 
were an estimated $330 million in 2000.
    The benefits of coal mined on Federal Lands do not remain within 
the region as this coal is shipped to electric generators in 30 states. 
Major destinations outside the western region include generators in 
Michigan, Minnesota, Illinois, Indiana, Iowa, Wisconsin, Texas, Kansas, 
and Arkansas with some being shipped as far as Alabama, Mississippi and 
Georgia. Taken as a whole, coal mined on Federal lands is used to 
generate nearly 40 percent of all electricity generated from coal, or 
approximately 20 percent of all electricity produced in the US. This is 
not an insignificant amount being enough to supply electricity to the 
entire South Atlantic census region or to all the customers in the East 
North Central and West North Central states combined or to 3.2 
Californias.
    The Federal Government owns about one-third of the nation's coal 
resources, which are located on approximately 76 million acres of land 
principally in the Western United States. Western Federal lands contain 
approximately 60 percent of the total western coal reserve base. An 
additional 20 percent of the coal resources in the West are managed or 
impacted by the Federal Government by virtue of (1) the commingling of 
State and private coal reserves with Federal leases and (2) trust 
responsibilities for Indian lands.
    It is important to note that the enormous coal reserves on Federal 
lands include some of the best coal from an environmental standpoint. 
Many of the reserves, especially those located in Wyoming and Montana, 
are low in sulfur and also low in inherent NO<INF>X</INF> when burned 
in power plants. These coals are ideally suited to meet the 
increasingly stringent emission requirements of the Clean Air Act 
Amendments of 1990 and the regulations that EPA has promulgated.
    Whether viewed as an environmental, an economic or as a domestic 
energy security and reliability issue, continued coal production from 
reserves on Federal lands is critically important to the economy and 
the well being of the United States. Energy, especially electricity 
would not be as readily available or as affordable if it were not for 
coal from Federal lands.
    Coal from Federal lands is projected to increase over the next two 
decades. The EIA Annual Outlook 2001 forecasts shows that over 90 
percent of the expected 250 million tons increase in U.S. coal 
production will come from coal reserves located on Federal lands. If 
this forecast is to be realized policy changes must occur.

Policies should encourage, not discourage or prevent responsible 
        development of coal resources on Federal lands
    Interpretations of legislation over a long period of time added to 
the policies of the previous Administration over the last eight years 
have acted to discourage or actually prevent responsible development of 
coal resources on Federal Lands. There are several issues that need to 
be considered the first of which is access to the resources located on 
Federal lands for responsible exploration and development activities. 
Large reserve blocks have already been effectively removed from 
development by actions by the Federal Government. To cite just two 
examples:
        <bullet> According to the U.S. Geological Survey, the 
        unsuitability provisions under SMCRA (the Surface Mine Control 
        and Reclamation Act of 1977) and land use planning policies 
        under FLPMA (the Federal Land Policy Management Act) have 
        removed some 53 billion tons of Federal coal from future 
        leasing which in effect reduces the National surface mineable 
        reserve base by almost 25 percent.\1\
---------------------------------------------------------------------------
    \1\ W.D. Watson, Opportunity Costs of Federal Land-Use Restrictions 
for U.S. Coal Markets (1992).
---------------------------------------------------------------------------
        <bullet> The previous Administrations use of the Antiquities 
        Act to create National Monument designations removed additional 
        blocks of reserves from development. In 1996, this Act was used 
        to create the Grand Staircase-Escalante National Monument 
        removing 23 billion tons of mineable coal reserves in Utah's 
        Kaparowits coalfield.
    Pending actions, such as the Forest Service Roadless Area 
Conservation Rule will remove even larger portions of the coal reserves 
located on Federal lands from responsible development.

Forest service roadless conservation areas
    This Committee, and its members who serve on the Forest and Lands 
Subcommittee in particular, know well the history and the effects of 
the last administration's Roadless Area Conservation rule that was 
published on January 12, 2001. The lack of available information 
regarding affected areas of Forest Service administered lands made it 
extremely difficult for mineral developers to determine the impacts of 
the rule. Since the Forest Service did not identify or consider mineral 
resources in its draft environmental impact statement, industry had to 
create its own maps by identifying proposed roadless areas and areas 
containing known mineral resources on a forest-by-forest basis. The 
results of this exercise were particularly staggering, especially for 
leasable Federal minerals such a coal. In fact, the implementation of 
this rule could sterilize over 40 percent of the coal production in 
Colorado and Utah.
    According to the Department of Energy:

        <bullet> The roadless initiative will have an impact on coal 
        reserves in Colorado and Utah, including both the expansion of 
        existing mines and tracts of coal of near-term commercial 
        interest. While these resources are recovered using underground 
        mines, roads are needed to build ventilation shafts and for 
        safety, e.g., to fight underground fires. The mines would not 
        be built or expanded if roads cannot be constructed.
        <bullet> Existing leases may also be affected . . .\2\

    \2\ Department of Energy Report to the Forest Service, William 
Hochheiser (November 2000).

    In Colorado, one of the mines in the Grand Mesa-Uncompahgre Forest 
is my company's, Arch Coal, West Elk Mine where 200 million tons of 
coal could become unrecoverable because of the rule. This loss of 
reserves will result in the premature abandonment of the mine and its 
$100 million infrastructure. The DOE report predicts that over $10 
billion economic activity would be lost as a consequence.
    The Bowie Mine in the Grand Mesa-Uncompahgre Forest will be blocked 
from developing 50 million tons of high quality coal reflecting over 
2.5 billion in economic activity. The Oxbow Mine, adjacent to the Bowie 
leases is surrounded on the east and north by roadless areas. These 
roadless prohibitions will thwart future development at this operation.
    The Forest Services Final Environmental Impact statement for the 
roadless rule declares that in Utah's Manti-La sal Forest three tracts 
alone account for 185 million tons of high Btu coal that are prejudiced 
by the rule. Further investigations of coal resources in the area 
indicate the impact could be much greater.
    The Forest Service chose to accept these severe prescriptions even 
though mine roads are temporary and the Surface Mining Control and 
Reclamation Act (SMCRA) mandates that these roaded areas be reclaimed 
to a condition as good or better than they were before mining. It 
should be noted that surface coal mines cannot be permitted on Forest 
Service administered lands unless the Secretary of Interior ``finds 
that there are no significant recreational, timber, economic, or other 
values which may be incompatible with such surface mining operations . 
. .'' In other words, the values the rule is supposed to safeguard have 
already been considered and protected by an existing statute. Yet, 
millions of tons of low sulfur coal have been sterilized by this 
needless and unlawful regulation.

Federal leasing
    In August 1976, the Federal Coal Leasing Amendments Act (``FCLAA'') 
was enacted. FCLAA's imposed for the first time a series of radically 
more stringent requirements upon Federal coal lessees, the compliance 
with which forced such lessees to make a host of major financial and 
operational commitments, many of which made good policy sense but 
others were counterproductive. Over the past 25 years, those Federal 
coal lessees who have managed to stay in business have fully complied 
with both the rational and the questionable requirements.
    Federal coal lessees are not today calling for major reform of the 
FCLAA program, although over time certain of FCLAA's provisions 
ultimately may need to be revisited and modified. Even where 
modifications ultimately may be needed, in most instances, the debate 
on such modifications can be deferred to a later time when adverse 
impacts become more focused and imminent. There are two areas that need 
attention however.

            1. Advanced royalty provisions
    The first issue that must be addressed is a segment of FCLAA's 
current ``advanced royalty'' provisions, which call for early 
legislative reform by Congress. The current advance royalty provisions 
provide, among other items, that:
          Advance royalties may not be paid for more than an aggregate 
        of 10 years,
          Advance royalties paid during the initial 20 year term of a 
        lease may not be carried over past the 20th year, and
          The Secretary of Interior may unilaterally cease to accept 
        advance royalties.
    With the progressive deterioration of U.S. coal market prices, 
several Federal coal lessees have been forced temporarily to curtail 
production or to idle uneconomic mines.
    We recommend that narrowly drafted, surgical changes be made to 
FCLAA's advance royalty provisions which would:
          Extend the aggregate entitlement to pay advance royalty in 
        lieu of continued operations from 10 years to 20 years;
          Delete the current prohibition on the carry-over of advance 
        royalty payments made during the initial 20-year period of the 
        lease;
          Delete the current authorization for the Secretary 
        unilaterally to cease to accept advance royalties in lieu of 
        continued operations; and
          Delete the last sentence of Section 39 of the MLLA of 1920 
        (Section 14 of FCLAA) prohibiting the waiver, suspension, or 
        reduction of advance royalties.

            2. Address the need to move expeditiously on lease-buy 
                    applications
    The Federal Coal Leasing Amendments Act of 1976 (``FCLAA'') 
requires that all leases for Federal coal be conducted by a competitive 
leasing process. One of the mechanisms for initiating competitive 
leasing is through a lease-buy application (``LBA'') procedure, which 
allows an existing coal mining operation to nominate a tract for the 
expressed purpose of prolonging the life of the existing mine. The LBA 
process has been effectively used in Utah, Colorado and Wyoming for 
over a decade now. In the Powder River Basin (``PRB'') of Wyoming, 
which is called by many the ``Saudi Arabia of coal'', since that area 
is producing in excess of 1/3 of all U.S. coal, the LBA process has 
been critical to the orderly development of Federal coal reserves.
    As pointed out, coal production in the PRB has jumped dramatically 
since the Clean Air Act Amendments of 1990 primarily because western 
coals are typically very low in sulfur and also very low in inherent 
NO<INF>x</INF> when burned in power plants. With this dramatic increase 
in demand for low sulfur western coal has come the need for continued 
access to Federal coal reserves. Western coal producers clearly 
recognize this need and make their leasing plans accordingly. 
Unfortunately, the Bureau of Land Management now is only processing and 
holding one Federal coal lease sale per year in the Wyoming PRB. Thus, 
the most recent coal lease applications filed may not be offered for 
sale for eight years. Permitting requirements will then add another 
approximately three years. As a consequence, it is readily apparent 
that there is an excessive backlog of Federal coal lease applications 
on file and that the timeframe for processing LBAs and issuing leases 
has become unacceptable to orderly development of this most important 
domestic energy resource.
    There are several administrative opportunities to address this 
backlog. The first opportunity is to consolidate the NEPA process 
instead of conducting separate EIS's for each lease application. 
Several LBAs should be combined into one document. Second, and even 
more importantly, the Department of Interior expeditiously should 
evaluate the workload of other BLM offices to determine if there are 
any personnel available to help work through this backlog. Finally, and 
of relevance to this hearing, Congress should give favorable 
consideration to supporting additional Federal funding for the 
processing of these lease applications in order to short the 
intolerable backlog.

Coal/coal bed methane conflict in the Powder River Basin
    The Powder River Basin of Wyoming and Montana is one of the world' 
richest energy resource regions and includes the largest reserves of 
low sulfur coal in the United States. Virtually all of the coal and 
about 50 percent of the oil and gas reserves in the Basin are owned by 
the Federal government and managed by the Bureau of Land Management 
(BLM) under the Mineral Leasing Act of 1920. Problems have arisen, 
because BLM has issued Federal coal leases and Federal oil and gas 
leases for the same locations in the Basin. In many cases when these 
oil and gas leases were issues coal bed methane resource development 
was not contemplated.
    In those areas leased both for coal and oil and gas, disputes over 
timing of mineral development have arisen. The sequence of development 
frequently becomes a critical issue, because the production of any one 
of the minerals can result in the loss of another. For safety and 
operational reasons, concurrent development typically is impossible. No 
clear statutory direction exist to resolve disputes over the sequence 
of mineral development in these areas where the Federal government has 
``double leased' its minerals. BLM has not provided effective guidance 
or included conditions in its leases that would provide a resolution to 
these disputes.
    In order to achieve optimum recovery of the Basin's energy assets, 
legislation that would provide the missing statutory direction to 
resolve these mineral development contests should be enacted. 
Legislation should be used only in the conflict areas of the Powder 
River Basin and only as a last resort if private negotiations and BLM 
administrative policies fail.

Mineral management service administrative appeals process
    Under Department of Interior (DOI) rules promulgated in 1973, the 
Minerals Management Service (MMS) is the only DOI agency with an 
intermediate appeal to the director of the agency. All other DOI agency 
appeals go directly to the Interior Board of Land appeals (IBLA). The 
principal purpose of the MMS administrative appeals process should be 
the expeditious and independent review of cases involving disputed 
facts, legal issues, or policy upon request of the adversely affected 
party. This two-stage process can extend 5 to 7 years, even before the 
controversy can enter the courts.
    In spite recommendations from a Federal Advisory Committee urging 
Secretary of Interior Babbitt to direct MMS develop a one-stage process 
for all MMS appeals, the Secretary decided to retain the current two-
tier process. He made this decision even though he stated in the 
decision document that he agreed with the Advisory Committee's report 
in support of its recommendation.
    The current unwieldy appeals process needlessly ties up what may be 
considerable industry resources with no competing benefit. The 
Department should revisit Secretary Babbitt's ill-advised decision and 
implement a streamlined appeal process like that used by all other DOI 
agencies. This action would save the agency and the industry time and 
resources.

Revitalizing the abandoned mined lands program
    The 1977 Surface Mining Control and Reclamation Act, SMCRA, 
mandates that lands disturbed by coal mining be restored to their pre-
mining conditions. Inactive mines are addressed through the Abandoned 
Mine land, AML, provisions which require coal operators to pay at fee 
to the Office of Surface Mining's AML fund of 35 cents per ton for 
surface mined coal and 15 cents per ton for underground mined coal. The 
funds are used to clean up pre-SMCRA abandoned sites. The fee has been 
extended twice and is currently set to expire at the end of FY-2004.
    To date $5 billion in contributions have been paid by the coal 
industry into the fund but only $1.3 billion in Priority 1 and 2 
reclamation work has been completed. Approximately $2.5 billion in work 
remains to be completed and the AML fund currently has an 
unappropriated balance of $1.5 billion. This has occurred because 
annual appropriations have been significantly less than the fees paid 
by industry and the distribution formula is out-of-date and does not 
reflect significant increases in western production. Further, the fund 
is paying for excessive Federal and state administrative costs of 
approximately $45 million annually.
    The coal industry believes that 2001 provides a unique opportunity 
to reform the AML program. The coal industry would support an extension 
of the AML program if additional funds are dedicated to clean up of the 
remaining Priority 1 and 2 areas and IF the current fee structure is 
reduced beginning in FY-2002. Suggested program reform should include a 
major reduction in administrative costs and a freeze on the inventory 
of eligible reclamation projects. These actions would give long-term 
financial stability to the various state AML programs and would ensure 
that the Surface Mining Acts original environmental goals are achieved 
and that reclamation is completed more quickly and effectively.

The Thunder Basin National Grasslands
    There is a goal that is stated in the Thunder Basin National 
Grasslands (TBNG) Draft Management Plan that purports to: ``conserve 
air quality-related values over Class I and Class II airsheds.''
    The U.S. Forest Service claims additional responsibility and 
authority with respect to air quality-related values on all Federal 
lands (Class I and Class II) via broad interpretation of the Organic 
Administration Act of 1897, Wilderness Act of 1964, the Forest and 
Range Renewable Resources Planning Act as amended by the National 
Forest Management Act of 1976. Additionally, The Federal Land Managers' 
Air Quality-Related Values (AQRV) Work Group (FLAG) published a 
``guidance document'' on December 29, 2000. This guidance seeks to 
identify AQRV's and define adverse impacts in Class I areas. This 
document also purports authority for Class II areas under management by 
USFS, U.S. Fish and Wildlife Service and the National Park Service via 
broad interpretations of various Acts delegating authorities to the 
aforementioned Federal Land Managers.
    Currently, the Wyoming Air Quality Division does not evaluate the 
effect of new or expanding surface coalmines on Class I (or II) areas 
with respect to Air Quality-Related Values. This is mainly because 
these particular facilities do not meet the criteria of major 
facilities under the Prevention of Significant Deterioration sections 
of the state or Federal air quality rules and regulations.
    However, the Federal land managers have recently begun to require 
an evaluation of cumulative impacts to air quality-related values 
(specifically visibility) in Class I and selected Class II areas as 
part of the NEPA process for Federal actions such as leasing Federal 
coal. This action is out of the State of Wyoming's direct jurisdiction, 
as opposed to the permitting program where the Wyoming Air Quality 
Division is the lead agency.
    This practice is especially concerning in light of the fact that 
six (6) new ``Special Interest Areas'' are being proposed as part of 
the Thunder Basin Grasslands Draft Management Plan. These areas were 
originally proposed for ``Wilderness'' designation in the draft plan 
and are also considered ``roadless''. These areas are located from six 
to thirty (6) to (30) miles from five (5) existing surface coalmines. 
Each of these mines has a history of continued leasing interest for 
Federal coal reserves located adjacent to the existing operations. The 
additional leases serve to allow the continuation of these operations. 
Each of these five (5) mining operations submitted applications for 
additional leases in the year 2000. Representatives of the USFS Douglas 
Ranger District have noted in past discussions that these Class II 
``Special Interest Areas'' would likely be reference points in computer 
modeling evaluations of Air Quality-Related Value impacts during the 
leasing process. There is very little doubt that significant impacts 
will be predicted considering the vicinity of the proposed special 
areas to the mining operations and the highly conservative nature of 
the modeling tools used for these purposes.
    Risks: The possibility exists that predictions of significant 
impacts from existing and expanding coal mine operations within the 
general area of these proposed ``special'' areas could negatively 
affect the ability to continue leasing Federal coal reserves.
    Five (5) large surface coalmines are located either wholly or 
partially on the Thunder Basin National Grassland, which is located in 
the southern Powder River Basin and is managed by the U.S. Forest 
Service. These five (5) mines produce Federally owned coal with the 
lowest sulfur content of any coal mined within the Powder River Basin 
and the United States. Of the 316 million tons of coal produced in the 
Powder River Basin of Wyoming in 1999, 178 million tons or fifty-six 
percent (56 percent) were shipped from these five (5) mines. In 1999, 
these five (5) mines provided over sixteen percent (16 percent) of all 
U.S. produced coal.
    In 1999, the average production rate of the five (5) mines on and 
adjacent to the Thunder Basin National Grassland was approximately 36 
million annual tons each. At these production rates, the mines must 
periodically replenish reserves by applying for and purchasing new 
Federal coal leases through the Bureau of Land Management's (BLM) 
Lease-by-Application, (LBA) process. Historically, the mines on and 
adjacent to the Thunder Basin National Grassland have applied for new 
Federal coal leases through the LBA process every five (5) years 
beginning in 1989 to present.
    Impacts: Currently, applications for coal leases in the Powder 
River Basin filed with BLM and pending sales total nearly 2.3 billion 
tons of mineable reserves. The pending lease reserves represent one-
hundred forty percent (140 percent) of the coal lease sales that 
occurred for the five (5) years of very active coal leasing from April 
1995 through the end of 2000. This indicates the strongest interest in 
coal leasing in the region since initial establishment of extensive 
mining operations in the late 1970's and early 1980's.
    The pending lease reserves represent an amount equal to 86 percent 
of the total Federal reserves of coal leased in the Powder River Basin 
from 1991 through 2000. The coal volumes in the pending lease 
applications represent approximately $560 million in bonus bids alone, 
to be shared equally by the Federal treasury and the state where the 
lease is located.
    The $560 million in potential bonus bids does not take into 
consideration 12.5 percent production royalty payments. Another $1.1 
billion will be generated (assuming an average prices of coal over time 
of $4.00 per ton). These royalty payments are fifty-fifty (50:50) 
between the Federal treasury and the appropriate state.
    Five (5) of the pending eight (8) Federal leases will be located on 
or immediately adjacent to the Thunder Basin National Grassland. Future 
coal lease applications can and will involve USFS managed surface.

Regional haze
    EPA's Regional Haze rule has the potential to impact energy 
production and generation on Federal lands in several different ways:
          Siting--modeling of new state-of-the-art sources can show an 
        impact on Class I Areas (national parks, wilderness areas, 
        etc.). This modeling effort can have the result of denial of a 
        permit and force the abandonment of the project.
          The Federal Land Managers will have two bites at the apple 
        under the Regional Haze Rule: the first is regional haze Best 
        Available Retrofit Technology (BART) in which targeted emission 
        reductions are met based upon overall technology assumptions in 
        a region. This approach allows for the regulated community to 
        have flexibility in meeting the reductions by over complying in 
        one area to meet the reduction goals. The second bite is 
        reasonably attributable BART, in which an impact in a Class I 
        area is tied to a specific source (based upon modeling). The 
        dual regulatory program virtually eliminates any flexibility 
        and cost effectiveness achieved through a market based program.
          As an example, the western United States is far ahead of the 
        rest of the country in addressing Regional Haze. The modeling 
        analysis showed that throughout the range of potential emission 
        reductions (moderate to extreme), there is no perceptible 
        improvement in visibility.
          A review of assumptions made in the western plans needs to be 
        initiated. The plan was developed at a time of low natural gas 
        and oil prices, and at a time when it was believed that 
        virtually all new electric generation plants would be fired by 
        natural gas. Assumptions regarding fuel price and the demand 
        for electricity (growth) need to be reevaluated to ensure that 
        the proposed caps on SO<INF>2</INF> do not inadvertently impact 
        the development of new sources.

Electric power plants built near western coal fields can help solve 
        electricity shortfalls, but changes need to be made in 
        permitting transmission lines
    An electric transmission system providing operational and 
investment certainty is a key element in a coherent and effective 
energy policy. For companies to invest in new power plants providing 
affordable energy, there must be significant reform of permitting and 
siting regulations not only for the plants, but for the transmission 
lines and facilities that follow. The lengthy and uncertain permitting 
process is the problem, not the environmental protection required. We 
would recommend Federal action reducing the permitting and review 
timeframes required. We would further recommend a Congressional or 
Executive directive fashioned along the lines of the Executive Order 
addressing California's energy needs. That order gave DOE lead 
responsibility in ensuring priority focus on siting and permitting 
action by the various Federal agencies involved, and facilitating those 
actions with the appropriate state authorities. We also encourage the 
Congress to put in place an expedited and simple permitting and siting 
processes for the vast areas of Federal Lands in the West, which need 
to be crossed by transmission lines.
    In addition to permitting and siting reform, uniform and 
enforceable rules governing the operation of the transmission system 
are needed. Our current and arguably antiquated power grid was designed 
for localized demand and reliability. Electricity today must be wheeled 
between states and regions. Given the interconnected nature of the 
nation's transmission system, it is critical to optimize system 
reliability and consumer benefit by ensuring that the state and Federal 
governments enter into an effective regulatory partnership. However at 
present, it is still uncertain who will own or operate the lines, what 
rate of investment return will be allowed, and what will be the 
transmission charge. The absence of uniform and enforceable rules has 
delayed investment in improvements to the grid. The grid must be 
operated as an integrated entity, not a balkanized confederation.
    Mr. Chairman, this concludes my comments. I would be happy to 
respond to your questions.
                                 ______
                                 
    [The response to questions submitted for the record by Mr. 
O'Connor follows:]

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[GRAPHIC] [TIFF OMITTED] T0888.028

    Mrs. Cubin. I thank the panel for their testimony. I have a 
few questions.
    Mr. Bowles, in your oral testimony you said that 
understaffing of BLM was the problem for permitting coal bed 
methane drilling, and I think you were talking about in the 
Powder River Basin area. The Congress got special 
appropriations for funds on permitting coal bed methane 
production, for wells and for drilling.
    It is my understanding, and it could be wrong--we tried to 
verify this and didn't follow through on it--that a lot of that 
money that we got to hire personnel to do permits was spent on 
12 pickup trucks. Another problem that has occurred, at least 
in that area, as you know, was the cumulative effects of all of 
the wells having been built.
    So I guess what I want to know is are you saying--I know 
Mr. O'Connor said that Congress needs oversight of this, and I 
absolutely agree that we do. Are you saying that the Congress 
needs to appropriate more money to hire more people to permit 
this, or are you saying that the administration needs to get 
involved and make sure that the money is spent the way it is 
intended to be?
    After all, the Interior Department really is one of the 
only, if not the only agency of Government that produces 
revenue for the Government, and you have to have the permitting 
done in order to do that.
    Mr. Bowles. For one, BLM does not have a very responsive 
way of permitting. Whether or not the money has been made 
available or they have aggressively tackled the problem head-
on, we have not seen permits issued in a timely manner.
    I might say that in one State that is outside of Wyoming, 
in Utah, where we do business, we see a State application going 
through in 30 to 45 days to drill a new well. That same State 
in BLM applications is taking upwards of 240 days to drill a 
well. So there is not only a possible manpower issue that is 
out there, there is also what might be considered a mandate to 
the BLM as far as their role in handling oil and gas activities 
for multiple use.
    Mrs. Cubin. So then your answer would be both?
    Mr. Bowles. Yes, ma'am.
    Mrs. Cubin. Mr. O'Connor, you heard Governor Geringer's 
testimony, and a lot of your written statement and your oral 
statement focuses on the problem with the Forest Service's 
roadless policy and the management of the Thunder Basin 
National Grasslands.
    What do you think of the governor's approach to State and 
Federal partnerships in that regard? Do you think his ideas 
will work to undo a lot of the permitting complications that we 
have now?
    Mr. O'Connor. Madam Chairwoman, I philosophically and 
strongly believe that the people closest to the issues are the 
people who should be empowered and sought out in a 
collaborative manner to work closely with the State as well as 
the Federal Government in seeking solutions to these problems.
    I think it is inappropriate for the Federal Government to 
take a one-size-fits-all approach to problems that are regional 
or local in scope, and I think it is appropriate and necessary 
and just flat the right thing to do to empower States and to 
empower communities and the citizens of those communities to be 
able to work with all levels of State and Federal Government in 
order to seek out these solutions.
    Mrs. Cubin. You also referred to the problem that you are 
having with the Forest Service roadless rule at the West Elk 
mine in Colorado. I wondered, was there any attempt by your 
company to work with the previous administration, interact with 
them, or the National Mining Association about the concerns 
before the rule was promulgated?
    Mr. O'Connor. One of the major difficulties we had was when 
the roadless environmental impact statement and the rules came 
out last fall, they were so vague and so difficult to 
comprehend that we had a hard time really identifying with any 
specificity what areas in the Western United States would be 
impacted and which areas would not be.
    On a number of occasions, we formally as well as informally 
requested maps of areas in order to make a determination of 
potential areas of impact, and we were told by the Forest 
Service that no maps existed. It was not really until the very 
end of the process, really when the comment periods were over 
and the initiative was about to be implemented, that we were 
able to go back and on our own initiative put together maps 
based upon indirect data that we had gotten through the EIS 
that would be able to identify specifically what lands would be 
covered.
    We have asked the Forest Service to advise us if they 
believe that these maps that we have done have been incorrect, 
and so far all indications are that in almost all cases what we 
have done appears to be correct. But we had to put it together 
ourselves. There were no maps by the Forest Service done, and 
we think that this really did a disservice to the potentially 
impacted citizens around the area who were not able to really 
identify during the comment period what might or might not be 
happening in their areas.
    Mrs. Cubin. So it sounds to me like the rules and 
regulations--that input didn't really happen or they just 
rushed it through without considering fully input from the 
public and from you and from other folks as well.
    Mr. O'Connor. I agree.
    Mrs. Cubin. My time is up, but I do have one other question 
that I wanted to ask Mr. Bowles.
    What is the Cooperating Associations Forum? I wonder, is it 
possible to make a copy of their study available to the 
Committee?
    Mr. Bowles. We would be pleased to do that.
    Mrs. Cubin. Would you tell me what it is?
    Mr. Bowles. Well, that was a group that--I think you see 
that in written testimony that listed 7 States that actually 
did a study to look at what has happened in land access over 
the course of years. That is one of the unfortunate things that 
we have in many of our Western State resources, is really 
getting our hands around what kind of available resource is 
there. This group did take a stab at that and I would be 
pleased to make it available to the Committee.
    Mrs. Cubin. Thank you. I would like that for the record.
    Mrs. Cubin. I have quite a few other questions that I 
wanted to ask the panel, but time is wearing on and I do need 
to go to another meeting. So I will submit the questions in 
writing, if you would be so kind as to answer them.
    Mrs. Cubin. At this time, I recognize Mrs. Napolitano for 
questions.
    Mrs. Napolitano. Thank you, Madam Chair.
    This question is for Mr. Stanley, and one of the things you 
referred to in your hand-out, in the map, was the Rocky 
Mountain area, that it is closed to industry. I wonder if you 
can provide a more detailed explanation of what you mean by the 
restricted areas.
    The Department of the Interior has given us information 
that shows 95 percent of the those lands have been open, and 
you indicated on this map only 40 percent, because it is 
restricted. Could you explain or even give us in writing what 
your industry is referring to so that we can better understand 
specifically what you are referring to, and also to see how we 
can understand your claim from the industry that this is 
happening?
    Mr. Stanley. Yes. The 40 percent is the total restriction 
from many different sources of restrictions. There are roadless 
policies, there are the restrictions during the year, there 
are--
    Mrs. Napolitano. Of what kind, sir?
    Mr. Stanley. We are not really talking about national parks 
and wilderness areas. We are talking about other general 
restrictions within this. I will be happy to submit in writing 
the documentation for this. I don't have that with me.
    Mrs. Napolitano. Would you, please, sir? I would really 
like to have it entered into the record so that we have that 
clarification.
    Mr. Stanley. Yes, ma'am.
    Mr. Calvert. [Presiding.] The Chair will keep the record 
open for any additional information to satisfy the gentlelady 
from Southern California.
    Mrs. Napolitano. Thank you.
    [The information referred to follows:]
    Mr. Calvert. Any additional questions?
    Mrs. Napolitano. No, thank you.
    Mr. Calvert. I just have one quick question for Mr. Bowles, 
representing API. I understand you are also with Phillips 
Petroleum.
    Mr. Bowles. Yes, sir.
    Mr. Calvert. For the interest of the Committee, at what 
capacity are the West Coast refineries operating right at 
present? I know that is not your--
    Mr. Bowles. It really is not my area.
    Mr. Calvert. Do you have any information that leads you to 
believe that are operating pretty close to 100-percent 
capacity? That is what I understand.
    Mr. Bowles. Generally, in the U.S., refinery capacity is 
running at or close to maximum capacity.
    Mr. Calvert. At maximum capacity?
    Mr. Bowles. Yes, sir.
    Mr. Calvert. This is really outside the jurisdiction of 
this Committee, but it does have an interrelationship to supply 
because as we increase the supply of domestic production in the 
United States, obviously we want to move that domestic 
production to refiners. If we increased our domestic production 
by a particular amount, say 10 percent--and oil is a fungible 
commodity--what we don't produce domestically we will import, 
and vice versa.
    Do you foresee additional refining capability coming online 
in the foreseeable future to take care of that increased 
supply?
    Mr. Bowles. Well, I would say in the near term more likely 
what you would see is the displacement of the import of foreign 
crude into the West Coast markets.
    Mr. Calvert. Now, are more and more of the imports coming 
into the United States refined elsewhere prior to entry into 
the United States?
    Mr. Bowles. I don't have any good statistics on that, 
Congressman.
    Mr. Calvert. I bring that up because obviously the energy 
issue is beyond just the supply issue. I know in our State of 
California a significant amount of the refining capability went 
away when we put in a clean air standard to lower sulfur 
content in oil, which is a good thing. And now we are doing it 
nationally. In my previous Committee Chairmanship we wanted to 
make sure we maintained refining capability in order to make 
sure we don't have an increase in gasoline prices nationally as 
we have seen in California. So that is the reason I brought 
that subject up for the Committee's edification.
    Mrs. Napolitano?
    Mrs. Napolitano. Mr. Chairman, thank you for recognizing 
me. There was one question that I neglected to ask.
    Mr. Calvert. The gentlelady is recognized.
    Mrs. Napolitano. Thank you.
    I believe it was Mr. O'Connor who made the statement that 
somehow California would be hurt in its ability to recover. I 
wonder if you would elaborate on that statement. I think you 
mentioned something to the effect that if production is 
curtailed, it would hurt California's recovery.
    Mr. O'Connor. I am sorry that I am unfamiliar with what 
your reference is. Could you restate it?
    Mrs. Napolitano. There was a statement earlier, I believe, 
when I walked in that you were speaking to it. I unfortunately 
didn't continue to make notes on it because I was trying to 
catch up.
    Mr. O'Connor. Perhaps it was reference to a large 
underground coal mine that we have in Colorado that could be 
adversely impacted by the Roadless Initiative. It is called the 
West Elk mine. It is the second largest coal mine in Colorado. 
It is a very high-Btu, very, very low-sulfur coal that is 
supplying energy into the Midwest.
    The Roadless Initiative stands the prospects of preventing 
us from moving our existing operations into an adjacent 200-
million-ton reserve that is adjacent to our existing reserves. 
And if we are not able to do so, the 360-some employees, the 
$100 million investment, and the annual payroll of $26 million, 
as well as the major impacts that would occur in west central 
Colorado, would be drastically impacted as a result of our 
premature closure of this mine because of our inability to move 
into an adjacent reserve.
    Mrs. Napolitano. How would that affect or impact 
California?
    Mr. O'Connor. Now, I understand the question.
    Mrs. Napolitano. That is what your statement included.
    Mr. O'Connor. I am sorry for the redundancy.
    With all of the controversy and publicity that has occurred 
in California in the last 6 months involving high energy and 
high electricity prices, ironically there is a small island 
within the southern part of the State that is enjoying 
inexpensive electricity and very reliable electricity, and it 
is 6 million people in the Los Angeles area.
    The reason they are is because the Los Angeles Division of 
Water Power many years ago went to Utah and built a large coal 
generation plant and they are bringing in their electricity 
from Utah to California. That electricity is very inexpensive. 
It is reliably priced and reliable long term. Mayor Riordan has 
called for the construction of an additional power plant in 
Utah in order to meet Los Angeles' long-term needs.
    The point of my testimony was that because of this Roadless 
Initiative, as much as 40 percent of the unleased Federal coal 
in this area will not be able to be developed, and that puts 
into harm's way the city of Los Angeles' ability, and in a 
broader sense California's ability to be able to pluck out this 
very low-hanging energy fruit and take advantage of it because 
of its growing electrical needs.
    Mrs. Napolitano. Okay, I get your point. The thing that 
puzzles me, though, is that the city of Los Angeles is fueled 
by the California Department of Water and Power, which so far 
has not been impacted because they stayed out of the 
deregulation. They have apparently been able to supply enough 
to its over 11 million customers so that they are staying 
afloat very well.
    I just did not correlate what you were talking about 
because Los Angeles is being taken care of. It is the northern 
part of California, and to some lesser degree the rollouts are 
starting to affect mid-California and Southern California. So 
it just does not correlate. I think it is kind of stretching it 
a little bit to say that our ability to be able to produce in 
that area is going to have a tremendous impact or will be a 
significant change for us in California.
    Mr. O'Connor. Certainly, the impacts are not going to be 
immediate. But in the longer-term scheme of things, not just 
for the city of Los Angeles but for California itself, these 
Utah coal reserves stand available to be a major low-cost, 
reliable and affordable energy supplier, and this Roadless 
Initiative is a major impediment to that potential.
    Mrs. Napolitano. Well, hopefully, California will be found 
in a situation where it will not have to rely on outside help. 
The fact that the governor has promoted 6 new generation plants 
and has--actually, 3 being built, 3 on the books, and 6 more or 
7 more, should be able to take care of the futuristic needs of 
California without having to rely on outside interests of any 
kind, and I am looking forward to that.
    Mr. O'Connor. I honestly hope you are right.
    Mrs. Napolitano. Well, add to that the use of other kinds 
of power producers that are beginning to become more viable. At 
one time they were dormant and now they are becoming more 
interested in providing energy for those of us in California. 
So while I understand and I thank the State for its interest 
and for being there when we need them, I don't think that our 
reliance is going to be something they can count on.
    Mr. Calvert. I am going to wrap it up.
    I am just curious. The coal that was mentioned in Utah is 
the cleanest coal that is available in the continental United 
States, as I understand it, or amongst the cleanest coal in the 
United States?
    Mr. O'Connor. It is among the cleanest coals.
    Mr. Calvert. Right. How many megawatts is that power plant 
that you mentioned producing in Utah?
    Mr. O'Connor. I don't recall exactly, but I think it is 
about 3,500 megawatts.
    Mr. Calvert. 3,500 megawatts.
    Mr. O'Connor. There are three units there and Mayor Riordan 
has called for a fourth unit.
    Mr. Calvert. And the expansion is for an additional 1,000-
megawatt plant?
    Mr. O'Connor. Yes.
    Mr. Calvert. So bringing that up to 5,000, which is about 
10 percent of the total load in the State of California. Is 
that a correct statement?
    Mr. O'Connor. Yes.
    Mr. Calvert. Thank you, and this panel is excused. Thank 
you for coming out and attending today.
    We are going to bring up our last panel as the gentlemen 
are leaving. I would like to recognize the people we have on 
our panel: Mr. Leland Hogan, a rancher from Utah; Mr. Chris 
Hocker, President of the National Hydropower Association; Mr. 
Robert Judd, Director of the USA Biomass Power Producers 
Alliance; and Ms. Leslie James, Executive Director of the 
Colorado River Energy Distributors Association.
    With that, I would recognize Mr. Hogan for 5 minutes. 
Please limit your testimony to 5 minutes so we will have some 
time for questions.
    Thank you.

          STATEMENT OF LELAND J. HOGAN, STOCKTON, UTAH

    Mr. Hogan. Thank you very much. It is a pleasure to be 
here, Mr. Chairman and Committee members. I am a rancher and a 
farmer from Stockton, Utah, which is about 50 miles west of 
Salt Lake City.
    My other credentials are in my written statement. I won't 
take the time to go through that and I will try and talk about 
things that are pertinent to our specific operation rather than 
to reiterate those things that are in the written comments.
    My brother and I run a diversified farm operation, as I 
said, about 50 miles west of Salt Lake City. We have to pump 
our water in order to gain the water that we need in order to 
irrigate our crops. We are about fourth generation in this 
country. We came from the Scandinavian countries to this 
country, and we have been in agriculture back as long as our 
history records.
    We are in agriculture for the long term, and our contracts 
that we sign or the indebtedness that we take on indicates that 
we are there for the long term. In order to accomplish that, we 
need power that is affordable and also available in order to 
continue farming as we have in the past.
    The data that has been collected by a magazine that is 
circulated through the industry called Irrigation magazine that 
gathers data from land grant colleges across the country 
indicates that a continued rise in irrigated crop land is 
happening across the country. In order for us to continue to be 
as productive as we have in the past and increase our 
production, irrigation seems to be the way that it is headed. 
With irrigation comes more consumption of power.
    Where we live, it seems as though coal-fired power plants 
have produced power the most economically; it produces the most 
economic power that is available. If there is a better economic 
way to do it--and some of those things have been discussed 
today--I hope that those things are explored and that we insert 
them into our national energy policy.
    I have seen and participated in this cycle as it has gone 
on over the past 30 years--an abundance of power, a shortage of 
power, a decrease in prices, an increase in prices. That really 
hurts us as individuals being on the farm. Our net income is 
affected directly. We are a taker of prices and not a setter of 
prices. Because our markets are national and international, we 
take prices that are set a long way away from where we produce. 
We have to fit within those categories or we go out of 
business. As prices escalate and we see these things happening, 
it is very disturbing to us.
    With the stroke of a pen, the Grand Staircase-Escalante 
National Monument was created, engulfing approximately 2 
million acres of land. Under that land lies a great coal 
reserve; no one knows exactly, but perhaps enough coal to last 
the area that it is producing for for maybe hundreds of years.
    As I said before, an affordable and available, consistent, 
readily usable amount of electricity is so important. Our 
production cycle is very short. We produce what we produce in 
approximately 6 months of the year. If we miss any portion of 
that time, our production decreases. Our ability to stay 
financially viable also decreases. So we are locked into a 
situation where we can't change things too much. We have to use 
the power.
    It was alluded to this morning in some of the discussion 
that large users of power in the agricultural industry will not 
produce this next year. Well, that break-off is about at 4 
megawatts. I don't think there is a producer in the State of 
Utah that uses 4 megawatts. There are those in Idaho, and there 
probably will be some who won't produce this year, but they 
will take a payment instead of production. That will cause a 
ripple effect throughout the whole agricultural industry 
because the feed or the commodities that would have been 
produced by those people will be minus from the equation this 
next year. Therefore, we are going to see ripple effects 
through the whole agricultural economy because of this isolated 
situation that is taking place this year. It will be very 
interesting to watch.
    As a farmer, as a former elected official, a parent and as 
a grandfather, I plead with the members of the Committee to 
move toward a national energy policy that puts us in a position 
that we do not find ourselves today, a position where we have 
what we need in order to continue the standard of life that we 
have set for ourselves.
    I thank you very much for the opportunity to be here today.
    [The prepared statement of Mr. Hogan follows:]

              Statement of Leland J. Hogan, Stockton, Utah

    My name is Leland J. Hogan. I am a fourth generation farmer. My 
brother and I operate a diversified ranch and farming operation, which 
includes 600 acres of alfalfa hay and grain crops in Stockton, Tooele 
County, Utah. In my area, as is true with much of the farmland in the 
West, crops must be artificially irrigated by pumping underground water 
or pressurizing surface water for sprinkler systems. I have served as a 
member and chairman of the Utah Committee of Consumer Services, an 
agency of Utah state government responsible for analyzing economic 
impacts of utility pricing on consumers. I have also served as chairman 
of the Tooele County Commission, a member of the Utah Quality Growth 
Commission, vice president of the Utah Farm Bureau Federation, and 
chairman of that organization's irrigation pumpers' committee. I am 
particularly pleased to appear before this Committee, because Chairman 
Hansen is my congressman.
    Energy costs comprise a major, and rapidly growing segment of the 
cost of producing food and fiber for America's consumers. From the fuel 
for our farm implements, to the irrigation pumping costs, to the 
processing and transportation of this food and fiber, the impact of 
these skyrocketing energy costs is placing farmers in a serious 
economic squeeze.
    The agriculture industry's ability to directly pass on these 
increases in energy costs is limited or non-existent. Due to the highly 
competitive national and international market for agricultural 
products, the price for our products is set by market forces and not by 
producers. As ``price takers,'' producers and processors must absorb 
increased costs resulting in the higher threat of widespread business 
failure. Moreover, in the long-run, increased energy costs to 
agriculture producers will ultimately be passed on to American 
consumers through higher retail pricing of goods.
    There are roughly 3,500 agriculture producers in Utah who rely on 
electricity to irrigate crops. Approximately 1,300 of these irrigators 
are customers of Utah Power, Utah's only investor-owned electric 
utility company. Last June, these regulated customers used 54 megawatts 
of power on the company's peak load, which, to put in perspective, is 
enough power to provide electricity for 30,000 homes for one month. The 
collective annual cost for electricity to these 1,300 irrigators was 
$7.2 million. However, these irrigators, along with all customer 
classes of the company, will be facing a 9.5 percent increase in their 
utility rates due to a recent interim rate adjustment ordered by our 
Public Service Commission. A rate case recently filed by Utah Power to 
adjust rates even higher is also pending.
    To top it off natural gas pricing to Utah retail customers is up 50 
percent from a year ago. While natural gas generally does not play as 
big a role in the cost of production for agriculture in Utah as 
electricity, it still takes a significant toll on residential cost of 
living.
    So what can be done about these rapidly rising costs? While 
conservation and more prudent use of the energy we have is always a 
good idea, the current situation cries out loudly for the Bush 
Administration, working with congress, to develop a sensible energy 
policy. May I assure the Committee that this comment is not a call for 
nationalization of our energy production in any form. Rather it is a 
call for a new commitment to development of existing known reserves of 
crude oil, natural gas and other fuels in the carbon-based family. It 
is also a plea for the United States government to devote far more 
funding and other incentives to foster development of alternative 
energy sources, including plant-based sources.
    As a Utahn I cannot fail to again point out that in our state there 
is a vast supply of high grade, low sulphur coal. And perhaps hundreds 
of years' supply of it was locked up with the sweep of a presidential 
pen when the 1.7 million acre Grand Staircase-Escalante National 
Monument was declared in Southern Utah four years ago. Indeed, there 
are within that monument some important and apparently rare plant 
species and some rare, even spectacular scenery. As a farmer I am 
vitally interested in identification and preservation of endangered 
plants species. Future commercial agriculture plant genetics may depend 
on it. But there are vast acreages of that monument underlain by this 
high quality coal that could be harvested with very little surface 
disturbance. Isn't it time that we start to make the connection between 
the light switch on the walls of our houses and the coal mines of 
America?
    In Utah most of the natural gas wells are on land managed by the 
Bureau of Land Management. The permitting process to gain access to 
these lands for energy development is daunting. Although I will defer 
to those who are experts in this area, surely this process can be 
streamlined and our government can encourage energy production rather 
than impede it. These are public lands. The resources they hold should 
benefit the public--all the public! We have learned much about more 
environment-friendly energy exploration and restoration of disturbed 
areas. I urge this Committee to move our government back towards 
multiple use of these lands.
    Some of my farm and ranch colleagues have visited Alaska's Prudhoe 
Bay oil fields. Then, after flying directly over the Arctic National 
Wildlife Refuge while in that area, they came back convinced that with 
modern technology and the existing commitment to environmental 
protection while harvesting energy, there is no real reason to deny 
ourselves the vast quantities of recoverable high quality crude oil 
available within that refuge.
    As a citizen, farmer, former elected public official, a parent and 
a grandfather, I plead with the members of this Committee to move this 
nation away from an ever-growing dependence upon foreign sources of 
energy supplies. I believe we can do it, and I believe we must do it. 
If the recent escalations in energy costs, including the manipulated 
oil prices by the cartels don't make us understand this, I am at a loss 
as to what will.
                                 ______
                                 
    [Mr. Hogan's response to questions submitted for the record 
follows:]

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[GRAPHIC] [TIFF OMITTED] T0888.024

[GRAPHIC] [TIFF OMITTED] T0888.025

    Mr. Calvert. I thank the gentleman for his testimony.
    Next, Mr. Chris Hocker, President of the National 
Hydropower Association.

   STATEMENT OF CHRIS HOCKER, PRESIDENT, NATIONAL HYDROPOWER 
                          ASSOCIATION

    Mr. Hocker. Thank you, Mr. Chairman. My name is Chris 
Hocker. I am President of the National Hydropower Association, 
and I appreciate this opportunity to talk about hydropower, 
which is the number one renewable resource in the U.S.
    Hydropower is the leading renewable. It represents about 10 
percent of the nation's electricity overall and about 80 
percent of its renewable energy overall. 98,000 megawatts of 
clean hydropower is produced, which is enough for about 98 
million homes. But as was alluded to earlier today, hydro's 
contributions are beyond energy. They include irrigation, water 
supply, and recreation. They also contribute to clean air and a 
safe, reliable transmission system.
    Despite all that, I would like to call your attention to 
two troubling facts. First, hydropower is on the decline. 
Second, there is quite a large amount of untapped hydropower 
that is being ignored. At a time when hydro should be most 
valuable, it is waning, and this is due to a regulatory scheme 
and actions by resource agencies who hold the upper hand in the 
licensing process. These are the same problems, frankly, that 
play a large part in why the development of new hydro capacity 
is being neglected. These problems can be fixed, but the time 
to do so is running short.
    Hydropower is losing capacity due to FERC's hydro licensing 
process. We strongly believe the process is broken and badly in 
need of repair. In fact, the Energy Information Administration 
(EIA) said for the first time last year that hydro capacity 
will decline due to regulatory constraints. This demands urgent 
attention, as half of the licensed capacity in the U.S. must be 
relicensed in the next 15 years, and over half of that is 
located in the West, where the energy crisis is paramount.
    The licensing process is exceedingly complex, needlessly 
fragmented, excessively costly, and frustratingly inefficient. 
It fails to fully weigh the benefits of hydropower and often 
results in extended litigation, which costs both the project 
and the environment.
    What can be done to fix this? Enact legislation this 
Congress which requires a more balanced review by resource 
agencies such as the Departments of Interior, Commerce, and 
Agriculture in their mandatory conditioning authority. We 
support legislation action because we honestly believe that our 
largest concern, which is balancing energy and non-energy 
values, can be achieved only through legislation. 
Administrative reform efforts that have already taken place 
have been helpful. We encourage them to continue, but we don't 
believe that administrative reform alone is enough. The problem 
must be addressed legislatively.
    We must develop a process that permits agencies to consider 
non-resource issues in their review and conditioning authority. 
They should also be required to consider the economic effects 
of resource protection and bring balance and certainty to the 
process. Otherwise, we will continue to lose hydropower.
    We must also act to encourage undeveloped hydropower. We 
have an impressive amount of potential. A Department of Energy 
(DOE) study shows that there are 21,000 megawatts of potential 
at existing dams. There are over 4,000 megawatts available at 
existing hydro facilities, and again much of this potential 
capacity that is being undeveloped is in the West.
    Again, this is undeveloped because of the complex 
regulatory scheme, and also because there are no incentives for 
producers to bring new generation online. Therefore, we 
strongly support production incentives that would encourage new 
hydro capacity at existing sites; that is, without the need to 
build new dams.
    As I conclude, I want to leave you with a few final 
thoughts. First of all, the hydro industry takes very seriously 
its role as stewards of the rivers that we are privileged to 
use. We strongly believe that healthy rivers and hydropower can 
coexist. Resource agencies need to develop a better 
understanding that we can do both. We can achieve both 
environmental and energy goals, and we should all be in the 
direction of pursuing policies that recognize this.
    Second, as we look for solutions to our energy problems, it 
is without question in our greatest interest to expand the use 
of our domestic renewable resources such as hydro. It is 
important for fuel diversity, energy security, reliability, and 
clean air.
    Finally, I want to emphasize that the time is running 
short, with 20,000-plus megawatts being relicensed in the next 
15 years. As we look to self-sustaining energy strategies, now 
is the time for policymakers to better incorporate hydro into 
the nation's energy mix. We can no longer afford to encourage 
energy policies that ignore this extremely valuable resource. 
We should no longer contribute to its decline.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Hocker follows:]

 Testimony of Chris Hocker, President, National Hydropower Association

    Good morning Mr. Chairman, members of the Committee. My name is 
Chris Hocker. I am the President of the National Hydropower Association 
(NHA). I appreciate the opportunity to appear today to talk about 
hydropower--the nation's most valuable domestic renewable resource--and 
its relationship with Federal resource agencies.
    As you may know, hydropower is the nation's leading renewable. It 
represents about 10 percent of the nation's electricity and about 80 
percent of its renewable energy. Overall, 98,200 Megawatts (MW) of 
clean and efficient power is produced from hydro facilities--enough 
electricity for 98 million homes.
    While these are impressive facts, hydro's contributions go well 
beyond energy. These benefits include irrigation, transportation, water 
supply, recreation, and invaluable contributions to cleaner air and a 
safe, reliable transmission system. De spite these benefits, today I 
bring to your attention two troubling facts I believe deserve policy 
consideration.
    First, hydropower is on the decline. And second, there is a large 
amount of untapped hydropower that has been ignored for too long. I 
find it somewhat ironic that at a time when hydro should be most 
valuable, it is waning due to an arcane regulatory scheme and actions 
by resource agencies who hold the upper hand in the licensing process. 
These problems also play a large part in why development of potential 
new capacity is neglected. These problems can be fixed, however, but we 
need your help, and that of the Administration, to resolve them. And 
quite frankly, time is running short.
    Hydropower is losing capacity and operational flexibility due to 
the Federal Energy Regulatory Commission's (FERC) hydropower licensing 
process. We strongly believe the process is broken and badly in need of 
repair. In fact, the Energy Information Administration (EIA) said for 
the first time last year that hydro capacity will decline due to 
``regulatory constraints.''
    This problem demands urgent attention as half of licensed 
capacity--28,784 MWs--must to be relicensed by 2016, and over 52 
percent of it is located in Western states where energy supply and 
reliability issues have already reached a critical stage, and water 
resource issues are paramount.
    The licensing process is exceedingly complex, needlessly 
fragmented, excessively costly and frustratingly inefficient. Further, 
it fails to fully weigh the benefits of hydropower and often results in 
extended and contentious litigation, costing both the project and the 
environment.
    Attached to my written statement, you will find a document that 
shows case after case where the process has failed, strongly 
highlighting the need for reform. I encourage you to carefully review 
it.
    What can be done to fix a process all stakeholders agree needs 
improving? Enact legislation this Congress which requires a more 
balanced review by resource agencies such as the Departments of 
Interior (DOI) and Commerce (DOC) in their mandatory conditioning 
authority under Section 18 of the Federal Power Act, as well as the 
Department of Agriculture (USDA), under Section 4(e). We support 
legislative action because we honestly believe our largest concern, 
balancing energy and non-energy values, can only be achieved through 
legislation.
    This is not to say that administrative reform efforts over the last 
18 months have been useless. They have been very helpful, in fact, and 
we encourage these efforts to continue. We hope Congress will provide 
support and encourage agencies to continue efforts devoted to 
administrative solutions in the areas that are most appropriate. We 
also commend the resource agencies for their efforts as progress has 
been made. The fundamental problems with licensing, however, must be 
addressed legislatively.
    We must develop a process that permits agencies to consider non-
resource issues in their review and conditioning authority. By 
requiring agencies to consider the economics effects of resource 
protection on other project values, we will bring balance and certainty 
to the process that is desperately needed. In addition, we ask that the 
process allow licensees to review and comment on mandatory conditions 
during the process, limit conditions to project-induced impacts, 
enforce process deadlines, and improve the collaboration amongst 
agencies and stakeholders. Otherwise, we will continue to lose clean, 
reliable hydropower.
    While we must act to stop the bleeding of lost hydro capacity due 
to licensing, we can also act to encourage undeveloped, 
environmentally-sound hydropower. The U.S. has an impressive amount of 
new hydropower potential. A Department of Energy (DOE) study shows 
there are approximately 21,000 MWs of potential capacity at existing 
dams. Over 4,300 MWs are available at existing hydro facilities alone. 
More importantly, much of this potential--over 10,000 MWs--is located 
in the capacity-hungry west.
    This hydro capacity sits unused largely because of the complex 
regulatory scheme I already mentioned. But, it is also undeveloped 
because there are no incentives for producers to bring new generation 
on-line, a process that is more expensive and complicated than ever.
    Providing production tax credits for new hydropower capacity at 
existing sites will help resolve this problem. Production credits 
already exist for wind and biomass, why not hydro? Several proposals 
have been circulated this Congress to extend the credit to other 
renewables. NHA strongly supports the tax credit expansion to include 
hydro at existing facilities and non-hydro dams. Without it, 
development will not occur and we will fail to gain the benefits of 
additional hydro. Further, we will fail to replace capacity already 
lost.
    Before I conclude my remarks, I want to leave you with a few final 
thoughts I hope you will remember as you examine policies regarding our 
natural resources and energy strategies.
    One, the hydropower industry takes very seriously its role as 
stewards of the rivers we are privileged to use. We strongly believe 
that healthy rivers and hydropower can coexist. Resource agencies need 
to develop a better understanding that we can achieve both and they 
should be directed to pursue policies that recognize this.
    Our attempts to reform the licensing process will not remove the 
conditioning authority of the agencies or undermine existing 
environmental laws designed to protect our resources. NHA believes in 
both resource protection and the pursuit of effective and meaningful 
energy strategies that include hydropower.
    Two, as we look for solutions to our energy problems, it is without 
question in our greatest interest to expand the use of our domestic 
renewable resources such as hydropower. It is important for fuel 
diversity, energy security, reliability and clean air.
    Finally, time is running short. As we look to self-sustaining 
energy strategies, now is clearly the time for policymakers to better 
incorporate hydropower into the nation's energy mix. It behooves us all 
to craft energy policies that embrace this extremely valuable resource, 
not further contribute to its decline.
    Thank you. I look forward to your questions.
                                   ____
                                 

          What's Wrong With the Hydropower Licensing Process?

                           Real-Life Examples

    Roughly half of all Federally-regulated hydroelectric capacity--240 
projects in 38 states, representing 28,784 megawatts of electricity 
generation--is due to be relicensed by FERC in the next fifteen years. 
An inefficient licensing process that is time-consuming, arbitrary, and 
costly places all of these projects, and the future of hydropower as a 
clean, renewable energy source, at risk. The following examples, taken 
from hydro projects around the nation, illustrate some of the many 
problems associated with the current hydropower licensing process.
 arbitrary and unilateral exercise of mandatory conditioning authority
    On February 23, 2000 FERC rescinded a license previously issued for 
the 4.1 MW Enloe Dam Project in, Okanogan County, Washington. Although 
FERC was in the process of engaging all parties in addressing fish 
passage issues at the dam, the National Marine Fisheries Service (NMFS) 
challenged that process as encroaching its unilateral conditioning 
authority under Section 18 of the Federal Power Act. NMFS insisted on 
imposing a fish passage requirement in the project license despite (i) 
opposition to such passage by the Washington Department of Fish and 
Wildlife, the Okanagan Indian Nation, and the Canadian government; and 
(ii) the desire of the Congressionally authorized Northwest Power 
Planning Council to assign financial responsibility for fish passage at 
Enloe Dam to regional entities.
    NMFS had stated that its preferred position in the proceeding was 
license denial and dam removal. By insisting on fish passage as a 
condition of the license and at the licensee's expense, NMFS not only 
acted, in the words of FERC Commissioner Massey, ``out of sync with 
regional planning,'' but ultimately prevailed in gaining denial of the 
license application. As FERC Commissioner Hebert explained in his 
concurring opinion:

          Unfortunately, the Commission's hope that this protracted 
        dispute could result in a mutually-acceptable agreement has 
        been undermined by the recalcitrance of a single agency. . . In 
        today's order, the Commission states that it no longer has the 
        discretion to continue to resist NMFS' overtures. . .
          One party, carrying mandatory conditioning authority, and 
        focusing myopically on its own particular interest, can upset 
        the collaborative process if so inclined. To a party opposing 
        licensing, stalemate may mean victory for one party and defeat 
        to the rest of America. . .
          I view this process, where some participants, bearing veto 
        power, have more negotiating authority than others, if indeed 
        inclined to negotiate at all, as absurd. As a result, I am 
        encouraged by pending legislative efforts to rationalize this 
        process, by requiring a greater level of cooperation among 
        Federal and state resource agencies. Such reform would benefit 
        consumers by forcing all parties to the table in an effort to 
        resolve such disputes in a fashion that is best suited for the 
        benefit of all Americans.

    ARBITRARY NATURE OF PROCESS/INAPPROPRIATE APPLICATION OF AGENCY 
                              AUTHORITIES

    PacifiCorp is currently seeking a new FERC license for its eight-
dam, 185 MW North Umpqua project in Douglas County, Oregon. PacifiCorp 
initiated the process in 1992 and went far beyond the normal 
requirements for public involvement and science collection in the hope 
that the North Umpqua licensing process would become a model of how a 
utility could work collaboratively with all stakeholders.
    After submitting its relicense application in 1995, PacifiCorp 
initiated the North Umpqua cooperative Watershed Analysis to identify 
and address specific resource concerns that emerged during the 
relicensing process. The watershed analysis was the first-of-its-kind 
for a hydro project and involved PacifiCorp, Federal and state resource 
agencies, academic institutions and interested members of the public. 
PacifiCorp and other interested parties then entered detailed 
settlement discussions in 1997.
    After two years of discussions, yielding little consensus, the U.S. 
Forest Service (USFS) insisted--without providing an adequate 
scientific explanation--that Soda Springs Dam (one of the eight dams on 
the project) be removed as a condition of settlement to meet objectives 
contained in the President's Forest Plan. This, despite the fact that 
removal of Soda Springs Dam would put the viability of the entire 
project at serious risk, from both an operational and economic 
standpoint, and despite there being other mitigation alternatives 
available. This also represents the first time that the Forest Service 
has indicated it intends to use its 4(e) conditioning authorities under 
the Federal Power Act to require a dam removal. This would create a 
broad, adverse precedent for other hydroelectric projects in the West 
located wholly or in part on Forest Service lands.
    PacifiCorp had recently agreed to remove its Condit Dam in south 
central Washington because compelling reasons existed. By contrast, no 
compelling reason exists for removal of Soda Springs. Citing an 
unreasonable bargaining position by USFS, and concerns over the 
precedential nature of the removal requirement, PacifiCorp walked away 
from settlement negotiations in November, 1999.
    PacifiCorp remained interested in achieving a settlement that 
balances the need to mitigate for project impacts with the need for 
cost-effective renewable resources. The company and other stakeholders 
have been able to restart settlement negotiations and those discussions 
continue. But the North Umpqua experience points to significant flaws 
in the current law. If the Federal Power Act required conditioning 
agencies to take a balanced approach in setting their demands and 
included some accountability over them, the settlement negotiations 
might have been conducted more smoothly and efficiently in this case.

 EXCESSIVE LENGTH OF PROCESS/JUDICIAL CALL FOR LEGISLATIVE IMPROVEMENTS

    In March, 1997, the Eugene Water & Electric Board (EWEB) received a 
new FERC license for two projects (23.2 MW combined) on the McKenzie 
River in Oregon. In the license, FERC incorporated certain fishery 
conditions prescribed by Federal resource agencies under Section 18 of 
the Federal Power Act (FPA)--at a cost to EWEB of $14,000,000--but 
rejected several conditions because they did not meet the requirements 
of the FPA for ``fishway prescriptions.''
    Despite the $14,000,000 of project improvements, several interest 
groups and agencies requested an administrative rehearing of the 
license before FERC; upon denial of the requests, the parties 
challenged the license before the U.S. Court of Appeals for the Ninth 
Circuit. Among other claims, the parties contended the FPA does not 
authorize FERC to refuse to accept any condition prescribed under 
Section 18. In other words, the parties asked the court to rule that 
the resource agencies had absolute power to dictate license conditions 
under the FPA whether they met the intent of the FPA for a fishway 
prescription or not.
    In its August, 1999 decision, the court did just that--concluding 
the FPA denied FERC the authority to modify, reject, or reclassify 
prescriptions submitted by resource agencies under Section 18, even 
while noting FERC's observation that the resource agencies ``do not 
concern themselves with the delicate economic versus environmental 
balancing required in every license.'' The court went on to acknowledge 
Congressional ``failure'' to require agencies to develop improved 
``regulations, procedures or standards for implementing Section 18.'' 
The court noted that, absent Congressional action, the court was 
powerless to rewrite the statute. ``Our task,'' the opinion stated, 
``is to apply the statute's text, not to improve upon it.'' The court's 
decision means that currently only a Federal court of appeals has the 
authority to determine whether a fishery condition offered by a Federal 
resource agency and required to be included in a license meets the 
requirements for a ``fishway prescription'' under the FPA.
    With its hands thus tied, the court's decision will mean a remand 
of the license back to FERC to be re-written once the appeal is 
completed--8 years after EWEB first submitted its license application; 
with only the Ninth Circuit then having the authority to decide whether 
any condition prescribed by a resource agency meets the FPA 
requirements for ``fishway prescriptions.''

   CONDITIONS MAKING PROJECT UNECONOMIC/ARBITRARY NATURE OF PROCESS/
                      INSUFFICIENT IMPACT ANALYSIS

    In 1996, during the relicensing of the Edwards Dam near Augusta, 
Maine, the U.S. Fish and Wildlife Service (USFWS) and the National 
Marine Fisheries Service (NMFS) prescribed a fishway system on the dam 
to safeguard a few species of fish. The fishery agencies estimated this 
fishway system would cost approximately $9 million while the licensee 
estimated the cost at $12 million--both of these estimates effectively 
rendered the project uneconomic. Lacking the authority to amend the 
prescription or otherwise balance it against the energy or other 
resource values of the project, FERC instead ordered the removal of the 
dam in November 1997.
    During the relicensing process, the USFWS and NMFS also recommended 
that flows of 4,500 cubic feet per second be released annually in July 
into a deep hole below the dam they determined was a spawning and 
nursery habitat for the Atlantic sturgeon. This flow recommendation had 
severe economic implications on the project since it would force the 
project to forgo power generation completely in July most years. This 
deep hole was located just below the area where the dam was eventually 
breached and this once-important spawning and nursery habitat is now 
assumed to be filled with rubble.
    The U.S. Department of Interior and segments of the environmental 
community have hailed FERC's decision as a means of restoring a 17-mile 
stretch of the Kennebec River to its ``natural condition''. Moreover, 
certain environmental groups are now claiming that the simple act of 
removing the dam has successfully restored this section of the river 
yet no comprehensive studies are being planned to actually measure the 
success of this dam removal on the restoration of the river ecosystem.

              ARBITRARY NATURE/EXCESSIVE LENGTH OF PROCESS

    In an ongoing relicensing of a 35.5 MW facility in New York State, 
arbitrary fishway prescriptions have been proposed by the USFWS, at a 
cost of over $2 million. Why arbitrary?
          The blueback herring, the primary species on which the 
        prescriptions were premised, is not native to the river where 
        the project is situated.
          With an 80-foot waterfall, blocking upstream fish passage, 
        there would be no migration without the man-made lock system 
        adjacent to the project.
          The project (and other hydro facilities on the river) have 
        operated without fishways for several decades and during that 
        time the fish population has grown to over 100 million 
        annually.
    Pre-filing consultation started on this project in 1986, and a 
final license order still has not been issued. If the fishway 
prescription is included in the license along with other resource 
protection measures, the project would become economically unviable.

 ARBITRARY NATURE OF PROCESS/FERC APPROVAL OF INAPPROPRIATE CONDITIONS

    In a recent relicensing of a Western project, the U.S. Forest 
Service imposed numerous conditions, including one that required the 
project owner to annually send the Forest Service a set payment, 
expected to cover all operation and maintenance costs associated with 
existing campgrounds in the project vicinity. The owner pursued an 
administrative appeal of this condition at the Forest Service, arguing 
that the Forest Service failed to demonstrate that most of the 
campgrounds' use was related to the project. Furthermore, the Forest 
Service did not attempt to justify the amount of the annual payment for 
the operation and maintenance costs it sought from the licensee.
    Nonetheless, FERC included the condition in the project license, 
concluding that it lacked the authority to even consider if a 
relationship between the condition and the project justified the Forest 
Service condition. Similarly, FERC was unable to reject an instream 
flow release imposed upon the project by the Bureau of Land Management, 
even though FERC summarily dismissed as inappropriate and unsupported 
the same exact amount of instream flow release recommended by the 
California Department of Fish and Game.
    After FERC issued the new license for the project, containing the 
contested condition, the owner challenged the condition at FERC and 
took the case before the U.S. Court of Appeals. Just prior to the case 
being heard and five years after the first of the two administrative 
appeals were filed with the Forest Service, the Forest Service decided 
that the operation and maintenance costs were indeed inappropriate and 
accepted an owner-proposed method for reimbursement of only those 
campground operation and maintenance costs related to the project--
approximately 1.25 percent of the amount originally demanded by the 
Forest Service.

FERC APPROVAL OF CONDITIONS THAT RESULT IN ``NO QUANTIFIABLE BENEFIT''/
                      EXCESSIVE LENGTH OF PROCESS

    After FERC asserted jurisdiction over a 70 year old, 1.2 MW project 
in New England, the project owner reached agreement with one state 
agency on the level of minimum flows to be released from the project. 
However, a resource agency from an adjacent state and the USFWS 
prescribed a minimum flow that was nearly twice the agreed upon level. 
In its final environmental assessment for the project, FERC concluded 
that the owner's minimum flow could be provided with existing project 
equipment and that there was no ``quantifiable benefit'' from requiring 
the USFWS flow level rather than the level proposed by the owner.
    However, because the recommendation was made under section 10(j) of 
the FPA, and because the recommendation appeared ``consistent with the 
FPA,'' FERC incorporated the higher minimum flow requirement in the 
license. FERC's rubber stamp approval of the USFWS 10(j) 
recommendation, along with other conditions imposed on the project, had 
the effect of reducing net revenue from the project by 60 percent, 
making the project economically marginal at best. (Note: Issuance of 

THE LICENSE FOR THIS SMALL PROJECT TOOK MORE THAN 8 YEARS.)
                     DUPLICATIVE NATURE OF PROCESS

    The Energy Policy Act of 1992 specifically prohibits Federal land 
managing agencies from requiring an existing hydropower project to 
obtain a Special Use Permit. However, in a number of licenses, the 
Forest Service has taken the standard Special Use Permit terms and 
included them in the conditions submitted to FERC under section 4(e) of 
the Federal Power Act. In turn, FERC has had no choice but to impose 
these conditions on the project license. These Special Use Permit 
conditions are designed to allow the Forest Service to regulate the 
project in the same manner that FERC administers the licensed project. 
Thus, despite the Energy Policy Act prohibition, the Forest Service is 
duplicating FERC's legislative mandate to administer Federally licensed 
hydropower projects.

                  CONDITIONS MAKING PROJECT UNECONOMIC

    In 1997, six years after the licensee filed its initial plan, FERC 
issued an order approving a mitigation and management plan for the 170 
MW Kerr Project in Montana. The FERC plan incorporated conditions 
submitted by the Department of the Interior requiring a variety of non-
operational measures, including: a fish and wildlife implementation 
strategy to be funded through a one-time payment of $12.5 million and 
annual payments of $1.27 million, a fish stocking plan, the acquisition 
of 6,800 acres to serve as replacement wildlife habitat, the 
construction of five islands to serve as waterfowl habitat and 
construction of erosion control structures.
    The FERC environmental impact statement (EIS) on the mitigation and 
management plan concluded that the conditions imposed by Interior would 
``eliminate the project's positive economic benefits.'' The EIS found 
that the project's current annual net benefits were approximately $9 
million, but that with Interior's conditions, the annual net benefits 
would be a negative $2.7 million. Not even Interior disputed that the 
conditions would reduce the project's net annual benefits by many 
millions of dollars. However, the Commission noted that ``any economic 
analysis of the impact of Interior's conditions is of at best 
tangential relevance to our decision,'' since FERC was obligated to 
impose the Interior conditions.

  CONDITIONS MAKING PROJECT UNECONOMIC/INSUFFICIENT IMPACT ANALYSIS/ 
        ARBITRARY NATURE OF PROCESS/LITIGATION AS ONLY RECOURSE

    The 700kW Yaleville project in upstate New York is one of the 
smallest hydro facilities operated by Niagara Mohawk Power Corporation. 
In pre-filing consultation in connection with the 1988 licensing of the 
project, the USFWS raised the issue of fish passage. The agency 
recommendation was to provide for downstream passage of freshwater non-
migratory resident species, namely bass and walleye. This, despite:
          Spillage over the dam provided natural passage of fish at 
        least 85 percent of the time;
          Despite decades of hydro project operation, an abundance of 
        bass and walleye was evident on the river both above and below 
        the project; and
          The $400,000 price tag for the agency-recommended fishway was 
        prohibitive for such a small project.
    Niagara Mohawk disputed the agency recommendation in its license 
application and FERC, in its 1991 draft Environmental Assessment (EA) 
for the project, agreed with the owner and recommended a lower cost 
fish protection alternative. USFWS, after failing to sway FERC away 
from its position in dispute resolution proceedings, responded by 
prescribing the downstream passage fishway under its Section 18 
mandatory conditioning authority.
    FERC denied the fishway prescription in its 1992 license order 
because it did not meet the day's definition of ``fishway'' [at the 
time, a fishway had to serve the purpose of passing fish whose life 
cycle depended entirely on migration past the hydro facility--which was 
not the case with the Yaleville bass and walleye]. A broader 
``fishway'' definition was established with the passage of the Energy 
Policy Act of 1992; accordingly, FERC had to rescind its prior denial 
and require Niagara Mohawk to install the fishway--despite the lack of 
biological basis and the fact that its cost would negate the economic 
operation of the project.
    Niagara Mohawk promptly appealed the FERC order. Negotiations with 
USFWS ultimately led to an agreement to install a less expensive 
fishway design (at a cost one tenth of that originally prescribed). If 
the owner had not pursued an aggressive litigation action, USFWS would 
likely never had agreed to negotiate. Litigation, in this case, spawned 
reason; but only after more than 8 years of licensing process and a 
cost to the owner of nearly $300,000.

                  CONDITIONS MAKING PROJECT UNECONOMIC

    In 1997, FERC issued a license for a 70 MW project in Washington 
state. In the text of the license itself, FERC noted that the 
prescribed resource agency conditions would result in a yearly 
operating loss of over $6.5 million for the project owner. Indicating 
that the project as licensed would not be ``economically beneficial'', 
FERC issued the license with the conditions, leaving it to the owner to 
``make the business decision whether [to operate the facility] in view 
of what appear to be the net economic costs.''
                                 ______
                                 

      National Hydropower Association--Sustaining Hydropower: How 
  Policymakers Can Reverse the Decline of America's Leading Emissions-
                        Free, Renewable Resource

    Hydropower is our largest renewable resource--accounting for about 
ten percent of the nation's electricity and over 80 percent of its 
renewable energy. It is an emissions-free, clean, reliable source of 
domestic energy which possesses many valuable benefits beyond power 
supply. Among its benefits are transmission system reliability, water 
supply, irrigation, flood control, recreation and transportation. More 
importantly, as an emissions-free power source, hydropower helps our 
nation meet its clean energy goals and reduces the number of health 
problems associated with air pollution.
    Supply of hydropower is waning, however, and America is in danger 
of losing significant hydropower capacity at a time when it is most 
needed. As we face rising energy prices, increased levels of pollution, 
energy shortages and reliability concerns, now is clearly the time for 
policymakers at the Federal level to better incorporate hydropower into 
the nation's long-term energy strategy.
    As we devise a clear long-term energy strategy, there are steps 
policymakers can take now to address the decline of hydropower. What's 
more, steps can also be taken to encourage development of additional 
hydropower capacity at existing sites, allowing the country to increase 
its use of renewable, emissions-free generation and strengthen the 
reliability of the transmission system.
    What can be done to reverse the decline of hydropower and bring new 
growth to an industry that is crucial to the nation's energy strategy? 
The National Hydropower Association (NHA)<SUP>1</SUP> suggests the 
following:
---------------------------------------------------------------------------
    \1\ NHA is the only national trade association committed 
exclusively to representing the interests of the hydroelectric power 
industry. Our members represent approximately 60 percent of domestic, 
non-Federal hydroelectric capacity and nearly 80,000 megawatts overall. 
Its membership consists of more than 140 companies including public 
utilities, investor owned utilities, independent power producers, 
equipment manufacturers, engineers, consultants and law firms.
---------------------------------------------------------------------------

Hydropower relicensing reform
    First and foremost, the hydropower relicensing process needs to be 
reformed. Over the next 15 years, two-thirds of all non-Federal 
hydroelectric capacity--nearly 29,000 MW of power (enough to serve six 
million retail customers)--must undergo the Federal Energy Regulatory 
Commission's (FERC) relicensing process. This includes 284 projects in 
39 states, much of it in western states where power supply is a major 
concern.
    While there are many perspectives, all stakeholders agree that the 
relicensing process is in need of improvement. A multitude of statutes, 
regulations, agency policies and court decisions has made the process 
time-consuming, costly, contentious, duplicative and generally 
frustrating for all. Federal agencies are allowed to set conditions on 
licenses without regard to their effects on project economics, energy 
benefits and values protected by other statutes or regulations. Many 
times, agencies fight agencies and conflicting demands are issued. 
Worse, conditions are placed on a license that have little to do with 
project impacts.
    Hydropower licensees have no recourse to appeal, or even question, 
the basis of mandatory conditions set by the agencies, except through 
litigation. Further, a typical hydropower project can take eight to 10 
years to weave its way through the process--some have taken more than 
20 years--and cost up to a million dollars a year. The end result of 
this broken process is the loss of operational flexibility and 
generation capacity--on average 8 percent per project--possibly putting 
at risk system reliability and clearly resulting in the loss of clean, 
renewable power.
    Enacting legislation, such as bills offered in the 106th and 107th 
Congresses--Congressman Joe Barton's substitute amendment to 
Congressman Ed Towns' H.R. 2335, or Senator Larry Craig's S. 71--would 
give Federal resource agencies the responsibility to consider and 
document the power, economic, and other impacts of their mandatory 
conditions before imposing them on a hydro license. The bills would 
also impose deadlines on Federal resource agencies for submission of 
final conditions. Reform legislation will not change or modify any 
existing environmental laws, nor will it eliminate mandatory 
conditioning authority of Federal resource agencies. What legislative 
reform will do is bring a much needed balance and certainty to the 
relicensing process and help stop the decline of hydropower, all while 
protecting the river resource.
    Properly developed and implemented administrative remedies can 
certainly help on a number of fronts and should be encouraged as well. 
Taken alone, however, administrative reforms can not fully address the 
substantive problems with the process. In some instances, 
administrative reform can actually complicate matters. For example:
    In January of 2001, the U.S. Departments of Interior (DOI) and 
Commerce (DOC) proposed a new policy regarding Section 18 fishway 
prescriptions. The proposed policy serves to define ``fishways'' 
broadly to include virtually any project structure or operational 
measure related to fish and would redefine the term ``fish'' to include 
virtually every form of water-related animal life other than mammals 
and birds. Further, it would give the agencies virtually unbounded 
authority to prescribe new or modified fishways, throughout the term of 
a license. This will result in further overlapping and conflicting 
Federal roles in the relicensing process and will exacerbate the 
uncertainties for licensees and other stakeholders that currently 
plague the relicensing process.
    Also in January, DOI and DOC implemented a new policy for 
administrative review of mandatory conditions and prescriptions 
developed by the departments under the authorities in sections 4(e) and 
18 of the Federal Power Act. Despite agency intention to ``improve'' 
the hydro licensing process, the new policy fails to define substantive 
standards for review of mandatory conditions and to detail procedures 
for the development of an administrative record. While the proposal 
does represent a good faith effort to improve the process within the 
confines of current law, it does not resolve industry's concerns and it 
fails to address the fundamental problems with the process.
    Again, NHA believes that legislative fixes are necessary to reform 
the relicensing process in a manner satisfactory to most stakeholders.
Market incentives for hydropower development
    Although maintaining a strong and viable hydropower industry is a 
critical component of the nation's long-term energy strategy, 
hydropower development has been stagnant--almost nonexistent--for a 
long period of time. Yet, most legislative proposals that address 
renewable energy ignore hydropower and its increasingly marginal 
economic state due to regulatory costs and capacity restrictions. This 
misguided omission threatens to jeopardize our country's most 
successful renewable energy resource as competition, and serious 
concerns over reliability and power supply, comes to the electric power 
industry.
    NHA forecasts that 21.3 GW of additional power from hydroelectric 
resources could be developed by 2020--none of which would require the 
construction of a new dam or impoundment. In terms of greenhouse gas 
reductions, this would equal displacing 24 million metric tons of 
carbon emissions. Of the 21.3 Gigawatts (GW), over 4,000 Megawatts (MW) 
can be developed at existing hydroelectric facilities alone.
    Bringing new hydro generation on-line, however, is increasingly 
difficult and expensive. While not the same disadvantages as those 
encountered by other renewable industries, hydro's disadvantages hold 
equal merit and demand similar counter-measures in policies designed to 
encourage the development of renewable sources of power. Providing 
financial incentives for hydro producers--such as those proposed in the 
106th Congress by Congressmen John Shadegg and Albert Wynn, or 
proposals in the 107th Congress that expand the Section 45 production 
tax credit to include all renewables, including hydropower--will 
encourage hydropower development at existing sites, allowing the United 
States to rely more on a clean, domestic resource.
    In the west, for example, 45 percent of hydro capacity in 
California, and 73 percent of Northwest capacity, faces the gauntlet of 
relicensing in the next 15 years. Given the current trend in 
relicensing, California and the Pacific Northwest might retire 1,200 or 
more megawatts of generation capacity. On the other hand, with changes 
to the process, and the proper financial incentives described above, 
another 8,800 MW of new capacity could be developed without building a 
single new dam. Given the current state of affairs in this region of 
the country, it is hard to imagine why we would not pursue policies to 
encourage additional clean, renewable hydropower capacity.
Dam decommissioning and removal
    Hydropower dams have been a rich and vital part of our American 
history and continue to be an important part of our American landscape. 
Many of their benefits play a crucial role in regional economies and in 
national energy policy. Dams are not simply a remnant of our past, they 
continue to play an important role for our future.
    Despite this importance, there are some dams that have outlived 
their usefulness when considered within the context of rigorous new 
environmental standards. NHA recognizes the fact that maintaining some 
hydro dams, once their full public benefit is weighed against 
environmental and other social needs, may no longer be prudent. In 
these cases, decommissioning and removal may be the most appropriate 
course. However, we believe that when all benefits are considered, dam 
removal will occur only in rare instances. The real issue in dam 
removal is whether all of the benefits of a dam are appropriately 
weighed against the real, not subjective or hopeful gains.
    There is a movement, mostly an ideologically driven one, to remove 
many of the dams in the country. As we consider all the aspects of dam 
removal, we must remember that this infrastructure is not easily 
replaced. Smart policy dictates that dam removal should be considered 
as a last resort when there is no other means to address the 
environmental consequences of the impoundment and all of the project 
benefits have been appropriately considered. Obviously, the growing 
interest in dam removal stems from our common concern over the health 
of our nation's rivers. The fact remains, however, that dams and 
healthy rivers can coexist. As a nation, our goal should be the 
preservation of both.
    In those cases where prudence dictates removal, the hydropower 
industry believes that all stakeholders must be in common agreement. 
Removal should be a collaborative effort. FERC does not have the 
authority to unilaterally order removal of a facility, and the owner of 
the facility must be made whole in the process.
    Hydropower owners and operators are good stewards of our waterways. 
Dam removal is a major issue of concern, not only to the industry, but 
also to the nation. Working with all stakeholders, policymakers can 
develop a rational national policy that can both protect and preserve 
our waterways and the infrastructure within them.
Actions needed in the 107th Congress
    1. Enact hydro relicensing reform legislation as soon as possible 
and continue to pursue administrative reform efforts where helpful.
    2. Enact incentives legislation such as tax credits or incentives 
payments for capacity upgrades and efficiency improvements at existing 
hydroelectric facilities, and for new development at existing dams.
    3. De-politicize the debate over dam decommissioning and dam 
removal and pursue national policy based on sound science with full 
consideration of all project benefits.
    By focusing on the three areas NHA has discussed, Federal 
policymakers have an opportunity to not only protect our hydropower 
resource, but to also promote modest growth of a clean, renewable, 
domestic energy resource that is crucial to meeting long-term energy 
strategies.

 National Hydropower Association--Hydropower Licensing Improvement: A 
     Balanced Approach to Preserving Our Nation's Leading Renewable

Overview
    In the wake of ongoing energy supply shortages and reliability 
concerns in California, the Pacific Northwest and throughout the 
nation, it is crucial that existing sources of energy--especially those 
that are clean, low-cost, reliable and efficient--remain in abundant 
supply. Yet, domestic generation of hydropower, our nation's leading 
emissions-free, renewable energy resource, is waning as a result of a 
Federal Energy Regulatory Commission (FERC) licensing process that all 
parties agree is in need of repair. It is indeed ironic that our 
nation's hydro supply is in decline when our nation needs it most.
    Hydro licensing improvement legislation introduced in the 106th 
Congress (H.R. 2335/S. 740) gained strong bipartisan support in both 
Chambers and was approved by the House Commerce Subcommittee on Energy 
and Power. With energy policy concerns taking center stage in the 107th 
Congress, Congress has an opportunity to build on this momentum and 
enact meaningful hydro licensing process improvements this year to 
ensure that crucial megawatts (MW) of hydropower are preserved for 
current and future generations.

Background
    Since 1986, FERC has been required, under the Federal Power Act, to 
give ``equal consideration'' to a variety of factors when issuing hydro 
project licenses and relicenses. This balancing authority requires FERC 
not only to consider the power, economic, and development benefits of a 
particular hydro project, but also to consider energy conservation and 
the protection, mitigation of damage to, and enhancement of fish and 
wildlife. In other words, under Federal law, FERC has the 
responsibility and authority to strike a balance between power and 
environmental values.
    The courts, however, have interpreted the Federal Power Act so as 
to prevent any balancing from taking place. The courts, in effect, have 
given Federal resource agencies the authority to set ``mandatory'' 
conditions on FERC licenses--conditions that are automatically attached 
to a final license. This means that FERC has no opportunity to question 
the basis of mandatory conditions set by the agencies.
    This would not be a problem if Federal resource agencies, when 
imposing a mandatory condition, considered the various factors that 
FERC is required to examine pursuant to the Federal Power Act. However, 
this is simply not done. The net result is that no one is balancing. No 
one has the authority to look at the big picture of how hydro fits into 
our national energy policy.
    The implications are significant. Hydro project owners are facing 
higher costs, loss of operational flexibility, and lost generation due 
to new constraints imposed on operations. A typical hydro project can 
take from eight to 10 years to weave its way through the licensing 
process, at an average cost of $1 million per year. In its Energy 
Outlook 2000 Report, the Department of Energy's Energy Information 
Administration (EIA) for the first time forecasted decreased 
hydroelectric capacity as ``regulatory actions limit capacity at 
existing projects.''

The urgency
    Over the next 15 years, more than half of all non-Federal 
hydroelectric capacity (nearly 29,000 MWs of power--enough to serve six 
million retail customers) must go through the FERC licensing process. 
This includes 284 projects in 39 states. What's more, 45 percent of 
hydro capacity in California, and 73 percent of Northwest capacity 
faces relicensing in the next 15 years. Given the current trend in 
relicensing, California and the Pacific Northwest might retire 1,200 or 
more MWs of generation capacity--enough power for 1.2 million homes. 
Given the current state of affairs in this region of the country, it is 
hard to imagine why we would not pursue policies to improve the 
licensing process.
    Congress must do its part to ensure that this important renewable 
resource continues to operate in a cost-effective and environmentally 
compatible manner. If current trends continue, the nation could lose a 
number of hydropower projects and, with them, enormous clean energy, 
reliability, drinking water, flood control, irrigation, transportation 
and recreation benefits. Moreover, consumers could face increased 
energy replacement costs with polluting sources.

Summary
    Hydropower has been a rich and vital part of our American history 
and continues to be an important part of our American landscape. Many 
of its benefits play a crucial role in regional economies and in 
national energy policy. Hydropower is not simply a remnant of our past, 
it continues to play an important role for our future. Working with all 
stakeholders, policymakers can develop a rational national policy that 
can both protect and preserve our waterways and environment, as well as 
the infrastructure within them.
    The hydro relicensing debate has, for years, been a search for 
balance: can the nation balance the benefits of hydropower with 
environmental protection and mitigation? A growing number of members of 
Congress from both parties believes it can. Given the enormous role 
that hydro plays and must continue to play in our national electricity 
grid, the time for balancing--and the time for Federal policymakers to 
better incorporate hydropower into the nation's long-term energy 
strategy--is clearly now.
                                 ______
                                 

 National Hydropower Association--Forecast for Hydropower Development 
                              Through 2020

    Two Federal agencies have estimated large potential capacity from 
hydroelectric facilities in the U.S. But the National Hydropower 
Association (NHA) expects that the existing licensing process will 
prohibit realizing any new capacity in the future. In fact, NHA is 
currently predicting a loss of renewable hydroelectric power in the 
U.S. without legislative changes to hydropower regulations.
    The Federal Energy Regulatory Commission's (FERC) river basin 
studies show a potential of 73,200 MW of additional U.S. hydroelectric 
capacity.\1\ Emphasizing engineering feasibility and some economic 
analysis, but no environmental considerations, the FERC estimate is the 
likely ``upper limit of conventional water power potential in the 
United States''.\2\
    The U.S. Department of Energy (DOE) has undertaken an assessment of 
hydropower resources using FERC's river basin analysis while also 
screening for environmental, legal and institutional constraints at 
potential sites including threatened or endangered species, national 
designations, cultural values and other non-power issues.\3\
    DOE's results show there are 5,677 undeveloped hydropower sites 
with a potential capacity of about 30,000 megawatts.\4\ Of that amount, 
57 percent (17,052 MW) are at sites with some type of existing dam or 
impoundment, but no power generation. Another 14 percent (4,326 MW) 
exists at projects that already have hydropower generation, but are not 
developed to their full potential. Only 8,500 megawatts or 28 percent 
of the potential would require new dams.\5\
    NHA anticipates that, given the regulatory burden associated with 
the Federal licensing process--the cost, delay and duplication--none of 
this new capacity will.be developed by 2020. And worse, with no changes 
in the current licensing process, studies show an average eight percent 
6 loss of hydroelectric generation in relicensing.\6\ Furthermore, 
considering the uncertain future of some Federal projects, the 
potential loss of generation from our nation's hydroelectric system 
could be very significant.
    However, there are factors that could change NHA's bleak forecast:
          The need for greenhouse gas reductions that would drive 
        domestic policy to again encourage hydropower development;
          The hydro licensing process is improved so that it increases 
        investor certainty and recognizes the unique energy 
        characteristics and environmental benefit of hydropower; and
          The resulting licensing rules fairly balances environmental 
        and energy needs.
    Under these circumstances, NHA forecasts that 20,915 MW of 
additional power from hydroelectric resources could be developed by 
2020--none of which would require the construction of a new dam or 
impoundment. In terms of greenhouse gas reductions, this would mean 
displacing 24 million metric tons of carbon emissions from coal.\7\
    Hydroelectric generating capacity would rise to 99,478 MW--a 27 
percent increase from current levels--and this nation's use of 
hydropower resources would rise to 4.9 quads.\8\
    Other factors that could further stimulate the development of 
hydropower capacity are:
          The development of commercially viable advanced turbines that 
        further improve biological conditions for fish (fish friendly 
        turbines);
          Greater efficiency from these advanced turbines;
          The trend in the growing deregulated market to value 
        hydropower's ancillary benefits--its unique ability to 
        stabilize the electric grid.
          Increased acceptance of green power programs that charge a 
        premium for the delivery of clean and renewable electricity in 
        a deregulated market.

                               FOOTNOTES

    \1\ Hydroelectric Power Resources of the United States; Developed 
and Undeveloped, FERC, Washington, DC, January 1, 1992, p. xi.
    \2\ Id. p. xxxv.
    \3\ ``Identification of Undeveloped Hydropower Resources in the 
United States, Based on Environmental, Legal, and Institutional 
Attributes'', Table 2, J.E. Francfort and A.M. Conner from Waterpower 
'97 Proceedings of the International Conference on Hydropower, Volume 
2, ASCE, New York, NY, p. 1307.
    \4\ Hydropower Resource Assessment program draft report U.S. DOE 
Hydropower Program, Idaho National Engineering and Environmental 
Laboratory, <www.inel.gov/national/hydropower/index.html>, November 
1998.
    \5\ Interview with Jim Francfort, Hydropower Resource Assessment 
program, September, 1998.
    \6\ ``Scenarios of U.S. Carbon Reductions: Potential Impacts of 
Energy Technologies by 2010 and Beyond'', Office of Energy Efficiency 
and Renewable Energy, U.S. DOE, September 15, 1997, p. 7.21.
    \7\ According to ``Impacts of the Kyoto Protocol on U.S. Energy 
Markets and Economic Activity,'' prepared by the Energy Information 
Administration, October, 1998, Table 17, p. 75, coal fired technologies 
emit 571 pounds of carbon per MegaWatthour.
    \8\ In 1996, total hydropower consumption was 3.911 quads. 
Hydropower capacity in 1996 was 73,129 MW. The ratio of quads consumed 
to capacity is .0000491.
                                 ______
                                 
    [Responses by Mr. Hocker to questions submitted for the record 
follow:]

Question 1 submitted by Representative James Hansen, Chairman of the 
        Committee

    In the early 1990's, the Advanced Hydropower Turbine Systems (AHTS) 
program was initiated by industry with a request to DOE for matching 
funds. The goal was to develop advanced turbines and other systems to 
improve safe fish passage while maintaining the operational efficiency. 
DOE responded positively, focusing its attention--and its hydro R&D 
funding--on the program. In some cases, interested parties in the 
hydropower industry also supported specific research items important to 
the AHTS program when funds were not available from DOE. Completion of 
the program would: minimize environmental impact to aquatic life; 
increase facility efficiency--savings that can be passed along to the 
consumer; improve relicensing negotiations; lower government's 
regulatory enforcement costs; increase government revenue from idled 
Federal projects that will benefit from this new technology; and 
encourage cooperation over conflict between industry, government and 
environmental advocates.
    The Advanced Hydropower Turbine System program is important to 
industry and should be fully funded to its completion, including field 
verification. The focus of the research should be broadly conceived to 
include the transfer of technology to smaller applications at a variety 
of sites, as well as potentially contributing to salmon restoration in 
the Northwest.
    Currently, the majority of the DOE's AHTS funds are being directed 
to Alden/NREC turbine laboratory pilot testing. To minimize the elapsed 
time between laboratory and field tests of the new Alden/NREC turbine, 
it is important to establish criteria for site selection, to select a 
site(s) for field testing, and to design features needed for the 
turbine installation, all while the turbine is being evaluated in the 
laboratory. The selection process should be defined and one or more 
field sites should be selected. Due consideration would be given to the 
need for owner participation, site characteristics and changes, 
construction methods, design of the turbine for the site head and flow, 
means and scope of the fish testing, and cost and schedule.
    The other focus of the AHTS program is devoted to the Voith Siemens 
Hydro AHTS design which is based on enhancing current turbine designs. 
A modified Kaplan turbine has been developed based on improved flow 
conditions and supported by field testing of existing turbines. Some of 
the advanced design features were included in the Bonneville Dam 
Minimum Gap Runner (MGR). Fish injury/survival tests were conducted at 
Bonneville Dam on the new MGR and on an existing turbine through a 
collaboratively funded project of DOE, U.S. Army Corps of Engineers, 
Bonneville Power Administration and Grant County PUD. To demonstrate 
that improvements have been made, it is essential to install and test a 
full size machine to prove these concepts.
    An improved AHTS concept Kaplan design has been developed to 
replace existing turbines for a site on the Columbia River and is ready 
for testing. Additionally, industry-developed technology for advanced 
control systems to optimize fish-passage survival is also available for 
field verification in conjunction with the advanced Kaplan design. 
Further opportunities exist for collaboration with industry in the 
field verification phase.
    The hydropower industry has demonstrated its commitment to a 
competitive and environmentally sound future for hydroelectric 
generation. The industry's partnership with DOE and its willingness to 
contribute funds and resources to the AHTS program should be seen as 
the foundation for a new cooperative era between industry, government, 
and the public in addressing our nation's energy and environmental 
needs.
    Industry urges that Federal water development agencies, principally 
the U.S. Army Corps of Engineers, the Bureau of Reclamation, and the 
Tennessee Valley Authority better coordinate their hydropower R&D 
efforts among themselves, with the DOE and with the private sector. In 
addition, Federal executive branch offices with science, technology and 
natural resource portfolios must pay closer attention to hydropower R&D 
as they examine their respective disciplines and coordinate R&D across 
Federal agencies.
    Most importantly, industry stands ready to collaborate with the DOE 
in the expansion and coordination of R&D related to hydropower. Basic 
research of water-related environmental issues must receive greater 
attention across multiple DOE offices and its laboratories where it is 
mission-appropriate (e.g., Office of Basic Energy Sciences, Office of 
Biology and Environment, and the Office of Policy).
    While much progress has been made already in devising new 
approaches to generating hydroelectricity while supporting healthy 
fisheries, much more work remains to be done. Now, DOE must expand its 
focus and devote attention and resources to other areas of hydropower 
R&D, while continuing to fund the AHTS program.
    Research and development efforts in the private sector tend to 
focus on meeting short-term objectives and, increasingly in the 
restructured electricity sector, must be justified by a short-term 
return on the investment. Only the Federal Government can take a 
longer-term, higher-risk approach to research that addresses strategic 
national interests.
    The hydropower industry proposes that the DOE should take a ``three 
track'' approach to hydropower R&D. One track should continue the 
efforts to improve hydropower systems that support safe fish passage. 
The second track should be focused on laboratory and field verification 
projects that optimize hydro operations, increase efficiencies, and 
enhance environmental performance. The third track should focus on 
policy issues affecting hydropower. This final track would include, but 
not be limited to, stimulating hydro upgrades and new development, 
valuing hydro's role in electric reliability, assessing hydropower's 
environmental performance, and expanding hydro's contribution to 
avoiding greenhouse gas emissions (please see attachment on specifics 
of NHA's recommendations to DOE).
    Funding for hydropower research has never reached the 1997 
President's Committee of Advisors on Science and Technology (PCAST) 
Report recommended levels. Because of the lack of support for 
hydropower, and the Advanced Hydropower Turbine specifically, the 
program is behind schedule and possibly in jeopardy. The millions of 
dollars that have been spent, and the progress that has been made, may 
all be for naught if the program if the program is not fully funding in 
2002 and beyond.
    NHA strongly encourages Congress to appropriate finances for the 
turbine program that are much closer to the recommendations of the 
PCAST report. The program is at a critical stage and needs the 
appropriate financing to move to the next stage.
    For 2002, NHA recommends $16,000,000. The amount provided is for 
cost-shared research and development of the AHTS. The amount is also 
for research to examine hydropower mitigation efforts; develop 
biological criteria for mitigation efforts; research and testing on the 
effectiveness of hydrokinetic energy systems; the development of 
consistent methodology for lifecycle analysis and total valuation of 
hydropower, including contributions to clean air; and to study the 
ancillary electric benefits of hydropower.

Question 1 Submitted by Representative Ken Calvert
    During the last 18 months, industry has been primarily involved in 
two non-legislative processes to address and resolve hydro relicensing 
issues--the Federal Advisory Committee (FACA) to the Interagency Task 
Force to Improve Hydroelectric Licensing Processes (ITF) and the 
National Review Group (NRG) headed by the Electric Power Research 
Institute (EPRI). Both of these administrative reform working groups 
produced a very helpful and positive dialogue concerning many of the 
relicensing issues and brought some helpful process-related 
improvements. The ITF and FACA completed their work for the most part 
(an implementation plan of the groups' recommendations is occurring but 
there is some concern regarding the level of implementation) while the 
NRG will continue into 2001 and focus on a few key issues. Industry 
will continue to play a very active role in those discussions and looks 
forward to working with the broad range of hydro stakeholders.
    Properly developed and implemented administrative remedies can 
certainly help on a number of fronts and should be encouraged. Taken 
alone, however, administrative reforms cannot fully address the 
substantive problems with the process. In some instances, 
administrative reforms (in these cases, led by the Clinton 
Administration) can actually complicate and worsen matters. For 
example:
    In January of 2001, the U.S. Departments of Interior (DOI) and 
Commerce (DOC) proposed a new policy regarding Section 18 fishway 
prescriptions. The proposed policy serves to define ``fishways'' 
broadly to include virtually any project structure or operational 
measure related to fish and would redefine the term ``fish'' to include 
virtually every form of water-related animal life other than mammals 
and birds. Further, it would give the agencies virtually unbounded 
authority to prescribe new or modified fishways throughout the term of 
a license. This will result in further overlapping and conflicting 
Federal roles in the relicensing process and will exacerbate the 
uncertainties for licensees and other stakeholders that currently 
plague the relicensing process.
    NHA strenuously objects to the Proposed Interagency Policy on the 
Prescription of Fishways and has asked that it be immediately rescinded 
and all processes related to this proposed policy be halted. Section 
1701 (b) of the National Energy Policy Act of 1992 rescinded the 
Federal Energy Regulatory Commission's (FERC) definition of fishways. 
The Act clearly defers to FERC to redefine fishways by rulemaking with 
the concurrence by the Secretaries of Commerce and Interior. Quite 
simply, the Departments' proposed policy attempts to evade the express 
intent of Congress.
    In addition to the serious concerns over the process of the 
Departments' proposed policy, we also stress that the proposed policy 
is premature, flawed and unbalanced. Moreover, contrary to the 
Departments' assumptions, the proposal could have serious economic 
impacts and should undergo review required by the Regulatory 
Flexibility Act.
    As we face rising energy prices, increased levels of pollution and 
greenhouse gases, energy shortages and serious reliability concerns, 
this is the least opportune time, when viewed from the public interest 
perspective, for the Departments to mount a campaign for unbounded 
advocacy for their prescriptive powers. Now is clearly the time for 
policymakers at the Federal level to better incorporate hydropower into 
the nation's long-term energy strategies, not to devise policies that 
further diminish a waning resource that is so vital to energy adequacy, 
diversity and security.
    Also in January, DOI and DOC implemented a new policy for 
administrative review of mandatory conditions and prescriptions 
developed by the departments under the authorities in sections 4(e) and 
18 of the Federal Power Act. Despite agency intention to ``improve'' 
the hydro licensing process, the new policy fails to define substantive 
standards for review of mandatory conditions and to detail procedures 
for the development of an administrative record. While the proposal 
does represent a good faith effort to improve the process within the 
confines of current law, it does not resolve industry's concerns and it 
fails to address the fundamental problems with the process. Again, NHA 
believes that legislative fixes are necessary to reform the relicensing 
process in a manner satisfactory to most stakeholders.

Question 2 Submitted by Representative Ken Calvert
    The industry is committed to exploring options and keeping the 
dialogue open as we move forward on a reform bill. As a matter of fact, 
we are currently involved in such discussions in both the House and the 
Senate. Progress has been made in certain areas and that is largely due 
to the fact that a productive discussion with all stakeholders 
occurred. It is not in the interest of industry (nor is it likely) to 
jam a bill through Congress while ignore other stakeholders' concerns.
    We understand that a bi-partisan approach is best and achievable. 
In fact, we feel ultimately that relicensing reform is a bi-partisan 
issue and we look forward to working in a bi-partisan environment. A 
few years ago, industry decided that taking a moderate approach to 
relicensing reform was best and we continue to believe that.
    We made tremendous progress last Congress and hopefully that will 
pay off in the 107th Congress with a bill that is signed into law. We 
want to work with the resource agencies and other stakeholders so long 
as a bill that brings balance and certainty to the licensing process is 
achieved.

Question 3 Submitted by Representative Ken Calvert
    The primary reason for lost hydro capacity is due to a relicensing 
process that is badly in need of repair. This problem demands urgent 
attention as half of licensed capacity--28,784 MWs--must to be 
relicensed by 2016, and over 52 percent of it is located in Western 
states where energy supply and reliability issues have already reached 
a critical stage, and water resource issues are paramount (please see 
attachment for specific state-by-state numbers).
    The relicensing process is exceedingly complex, needlessly 
fragmented, excessively costly and frustratingly inefficient. Further, 
it fails to fully weigh the benefits of hydropower and often results in 
extended and contentious litigation, costing both the project and the 
environment.
    While there are many perspectives, all stakeholders agree that the 
relicensing process is in need of improvement. A multitude of statutes, 
regulations, agency policies and court decisions has made the process 
time-consuming, contentious, duplicative and generally frustrating for 
all. Federal agencies are allowed to set conditions on licenses without 
regard to their effects on project economics, energy benefits and 
values protected by other statutes or regulations. Many times, agencies 
fight agencies and conflicting demands are issued. Worse, conditions 
are placed on a license that have little to do with project impacts.
    Hydropower licensees have no recourse to appeal, or even question, 
the basis of mandatory conditions set by the agencies, except through 
litigation. Further, a typical hydropower project can take eight to 10 
years to weave its way through the process--some have taken more than 
20 years--and cost up to a million dollars a year. The end result of 
this broken process is the loss of operational flexibility and 
generation capacity--on average 8 percent per project--possibly putting 
at risk system reliability and clearly resulting in the loss of clean, 
renewable power.
    Enacting legislation, such as bills offered in the 106' '' and 107' 
'' Congresses--Congressman Joe Barton's substitute amendment to 
Congressman Ed Towns' H.R. 2335, or Senator Larry Craig's S. 71--would 
give Federal resource agencies the responsibility to consider and 
document the power, economic, and other impacts of their mandatory 
conditions before imposing them on a hydro license. The bills would 
also impose deadlines on Federal resource agencies for submission of 
final conditions. Reform legislation will not change or modify any 
existing environmental laws, nor will it eliminate mandatory 
conditioning authority of Federal resource agencies. What legislative 
reform will do is bring a much needed balance and certainty to the 
relicensing process and help stop the decline of hydropower, while 
protecting the river resource.

Question 4 Submitted by Representative Ken Calvert
    Although maintaining a strong and viable hydropower industry is a 
critical component of the nation's long-term energy strategy, 
hydropower development has been stagnant--almost non-existent--for 
along period of time. Yet, most legislative proposals that address 
renewable energy ignore hydropower and its increasingly marginal 
economic state due to regulatory costs and capacity restrictions. This 
misguided omission threatens to jeopardize our country's most 
successful renewable energy resource as competition, and serious 
concerns over reliability and power supply, comes to the electric power 
industry.
    NHA forecasts that 21.3 GW of additional power from hydroelectric 
resources could be developed by 2020--none of which would require the 
construction of a new dam or impoundment. In terms of greenhouse gas 
reductions, this would equal displacing 24 million metric tons of 
carbon emissions. Of the 21.3 Gigawatts (GW), over 4,000 Megawatts (MW) 
can be developed at existing hydroelectric facilities alone.
    Bringing new hydro generation on-line, however, is increasingly 
difficult and expensive. While not the same disadvantages as those 
encountered by other renewable industries, hydro's disadvantages hold 
equal merit and demand similar counter-measures in policies designed to 
encourage the development of renewable sources of power. Providing 
financial incentives for hydro producers--such as those proposed in the 
106th Congress by Congressmen John Shadegg and Albert Wynn, or 
proposals in the 1071'' Congress that expand the Section 45 production 
tax credit to include all renewables, including hydropower--will 
encourage hydropower development at existing sites, allowing the United 
States to rely more on a clean, domestic resource.
    In the west, for example, 45 percent of hydro capacity in 
California, and 73 percent of Northwest capacity, faces the gauntlet of 
relicensing in the next 15 years. Given the current trend in 
relicensing, California and the Pacific Northwest might retire 1,200 or 
more megawatts of generation capacity. On the other hand, with changes 
to the process, and the proper financial incentives described above, 
another 8,800 MW of new capacity could be developed without building a 
single new dam. Given the current state of affairs in this region of 
the country, it is hard to imagine why we would not pursue policies to 
encourage additional clean, renewable hydropower capacity.

Question 1 Submitted by Representative Ed Markey
    The National Hydropower Association does not advocate any 
particular formula or structure for fees charged for the use of Federal 
lands. As recognized for decades in the Federal Power Act, the 
production of electric energy from our nation's waterways is considered 
to be in the public interest, and licenses are granted based on the 
determination of a hydro project being in the ``public interest, 
convenience, and necessity.'' So long as hydropower is determined to be 
in the public interest, we believe that fees should not be so high as 
to threaten the viability of a hydro project.
    To suggest, as the question does, that hydropower owners may 
``abandon their projects or leave a mess behind'' is purely speculative 
and has no basis in historical fact. NHA advocates the responsible use 
of the nation's waterways and takes very seriously its role as stewards 
of the rivers we are privileged to use. We strongly believe that 
healthy rivers and hydropower can coexist.

Question 2 Submitted by Representative Ed Markey
    See answer to Question 1.

Question 3 Submitted by Representative Ed Markey
    Again, the NHA does not advocate a particular fee structure or 
formula, nor do we take a position on the allocation of funds for water 
projects. Such allocation is currently been made in accordance with 
certain public policy decisions made by Congress, and it is Congress 
who properly should decide whether a change is necessary and if so, 
what the change should be. If such changes are considered by Congress, 
NHA will respond to the issue at that time.

Question 4 Submitted by Representative Ed Markey
    We do not have specific information at this time comparing oil and 
gas leasing with hydropower fees. Even if such information were 
available, such a comparison would likely be inaccurate and incomplete, 
since hydropower is an emission-free renewable resource that is not 
subject to depletion. As far as mitigation efforts to reduce 
hydropower's impacts, industry has spent hundreds of millions of 
dollars to lessen its impacts.

Question 5 Submitted by Representative Ed Markey
    The principle of scarcity applies universally, not just to 
hydropower. Again, a hydro project is recognized as being in the public 
interest by virtue of its holding a Federal license. NHA would be 
prepared to respond to specific proposals that modify the existing 
structure or formula for fees, and would be pleased to work with 
Congress to arrive at a fee structure that is reasonable and fair. In 
addition, NHA is pursuing polices that would maximize the power and 
non-power benefits of existing projects. While there are a substantial 
number of undeveloped sites where hydropower dams could be placed, NHA 
is more concerned with increasing the efficiencies and capacity at 
existing sites.

Question 6 Submitted by Representative Ed Markey
    NHA believes there is merit in shifting money collected from the 
FERC fees to the agencies participating in the relicensing process 
instead of allowing the money to be deposited into the general 
treasury. NHA has been discussing this issue with agencies and other 
stakeholders as the reform debated has moved forward. It is often 
pointed out by agencies and NGO's that resources for agency involvement 
in relicensing efforts are insufficient. We believe it is important for 
agencies to have appropriate resources available so a constructive and 
efficient relicensing process can occur with their full participation.

Question 7 Submitted by Representative Ed Markey
    The question could just as aptly be reversed: How can FERC, which 
is charged with balancing the broad spectrum of power and non-power 
interests in the licensing of a hydro project, be expected to do so 
when other agencies have unrestrained authority over aspects of a 
project that represent only narrow interests? What NHA supports is 
balance--the recognition that power and non-power considerations should 
be treated equally.
    We are not advocating a removal of mandatory conditioning authority 
or attempting to weaken the authorities of resource agencies. We are 
advocating a process that permits agencies to consider non-resource 
issues in their review and conditioning authority. By requiring 
agencies to consider the economics effects of resource protection on 
other project values, we will bring balance and certainty to the 
process that is desperately needed.
    Again, our attempts to reform the licensing process will not remove 
the conditioning authority of the agencies or undermine existing 
environmental laws designed to protect our resources. NHA believes in 
both resource protection and the pursuit of effective and meaningful 
energy strategies that include hydropower.

Question 8 Submitted by Representative Ed Markey
    The Forest Service does have a review process but it is rarely used 
and is mostly ineffective. Hydropower licensees have no recourse to 
appeal, or even question, the basis of mandatory conditions set by the 
other agencies, except through litigation. A review process established 
by reform legislation can hopefully avoid the costly and lengthy 
litigation that is often the result of the current process, costing 
both the project and the environment. In addition, a review process 
within the licensing process would establish an administrative record, 
allow licensees to offer alternative suggestions for resource 
protection and greaten stakeholder involvement. Please see the attached 
comments NHA filed in response to DOI and DOC's Notice for Comments on 
a Proposed Policy For Review of Mandatory Conditions.

Question 9 Submitted by Representative Ed Markey
    Again, what NHA seeks is balance, not a guarantee of profitability. 
We believe that a fair balancing of power and non-power interests will 
result, in an overwhelming majority of cases, in hydro projects that 
are both economically viable and protective of environmental resources. 
Under the current licensing system, however, the balance has been upset 
by the unrestrained mandatory conditioning authority of certain 
agencies who presently are not required to take economic viability into 
account. It's a stretch to suggest that the Federal Government is 
guaranteeing the hydropower industry's profitability. Industry's goals 
and the government's goals should not be mutually exclusive.

Question 10 Submitted by Representative Ed Markey
    I believe your question is attempting to ask how many projects have 
failed to acquire a new license because of actions by resource 
agencies. While there are projects that have not been relicensed, it's 
more important to focus on the overall effects of a broken relicensing 
process--the significant loss of clean, renewable generation capacity, 
and more importantly, the loss of operational flexibility which is 
extremely important from a transmission system reliability standpoint. 
Please see the attached paper that was included with my statement at 
the hearing for specific cases of agency involvement that has caused 
significant problems.

    Mr. McInnis. [Presiding.] Thank you, Mr. Hocker.
    Mr. Judd, Director of the USA Biomass Power Producers 
Alliance.

   STATEMENT OF ROBERT L. JUDD, JR., EXECUTIVE DIRECTOR, USA 
                BIOMASS POWER PRODUCERS ALLIANCE

    Mr. Judd. Thank you, Mr. Chairman, and Mrs. Napolitano. I 
come to you this morning fresh from the heartland of America's 
energy crisis, from Sacramento, California, where issues of 
energy supply and pricing and imports are front and center on 
the daily agenda there.
    I serve as Executive Director of the USA Biomass Power 
Producers Alliance. This is an association of the owners and 
operators of the nation's biomass power facilities. You need to 
know that the biomass power industry, as one of the alternative 
energy producers referenced earlier, converts environmental 
liabilities into clean electricity. Under carefully controlled 
conditions, our industry combusts more than 20 million tons of 
cellulosic residues per year, primarily wood waste from forest-
related activities, into clean electricity.
    To give you an example, in all of California and in an 
entire year, only 40 million tons of material go to the all of 
the landfills in the State. So, in effect, the biomass power 
industry is also a massive waste management system. There are 
currently 85 operating biomass power facilities in America, and 
there are 15 that are operable but idle because of market 
conditions at present.
    Decisions concerning the locating, the siting of these 
power facilities were primarily determined by the proximity of 
a sustainable fuel supply. The reason is simple. The biomass 
power facilities purchase the waste materials they use as fuel 
in the form of wood chips. The principal component of our fuel 
cost is transportation of materials from the point of origin, 
the forest, to the point of use, the facility. To minimize fuel 
costs, many of our facilities were located near their source. 
Now, they travel up to 100 miles to gather their materials.
    The materials used as fuel by the biomass industry are 
residual wastes that remain after all other economic value has 
been extracted from a product. We recycle materials that would 
otherwise be discarded into a product that has societal value. 
The materials we use from forests include slash and brush, 
tops, branches, bark, excess sawdust, et cetera. We buy this. 
It is delivered to us. We, in effect, are the garbage man for 
the forestry industry. We give a productive use to those 
materials that are worthless to someone else.
    There is a recent DOE study which we will submit for the 
record that monetizes the value of the benefits of U.S. biomass 
policy, in addition to the electricity that they produce. It 
turns out that the value of the environmental and economic 
benefits are more valuable than the electricity we produce 
itself.
    Our facilities in the past, in those instances where they 
are proximate to public lands, have taken substantial materials 
from public lands and converted them into electricity. In the 
future, that capability exists and should be expanded. However, 
in recent years we have obtained less and less material from 
public lands because there has been less and less commercial 
activity on public lands. We consequently now get material from 
the urban waste stream which has a much lower societal value 
than materials that might be thinned from the forests to reduce 
forest fire risk and severity.
    Facilities in our industry are dropping like flies. Our 
production is down 20 percent in 5 years, and in the past 3 
months alone 5 facilities, including 3 in Montana, 1 in Idaho 
and 1 in California, have gone down because of the 
unavailability of fuel from adjacent public lands.
    Looking ahead, in my final moments here, biomass facilities 
can and should be integrated into the implementation of the 
National Fire Plan. They can also help fulfill the promise of 
the Herger-Feinstein Quincy Library Group legislation, which 
will test large-scale progressive strategies for land 
management and fire risk reduction. Additionally, there is need 
and justification for the construction of new biomass power 
facilities in many regions.
    We have further recommendations in our comments here. The 
primary recommendation we have is that at a time of need for 
domestic electricity, we have to stop the bleeding first and 
foremost in the existing power facilities to allow them to 
serve the public need and then develop a plan to construct more 
facilities to provide a greater level of electricity output 
from this resource.
    Thank you, sir.
    [The prepared statement of Mr. Judd follows:]

Statement of Robert L. Judd, Jr., Executive Director, USA Biomass Power 
                           Producers Alliance

    Mr. Chairman and Members: Thank you for the opportunity to address 
the Committee today. My name is Robert Judd. I serve as Executive 
Director of the USA Biomass Power Producers Alliance. Based in 
Sacramento, California, we are a nation-wide association of owners and 
operators of biomass power facilities.

The existing biomass power industry
    The nation's existing biomass power industry is in the business of 
converting environmental liabilities into clean electricity. Under 
carefully controlled conditions, our industry combusts more than 20 
million tons of cellulosic residues per year--primarily wood waste from 
forest-related activities--to produce steam which drives a turbine that 
generates electricity for transmission and distribution to homes and 
businesses.
    Prompted by Federal policy and incentives put in place in the late 
1970's, what we now recognize as the biomass power industry emerged 
into its current form between 1985 and 1995. No new facilities have 
been placed into operation since that time, and electricity output from 
existing facilities has declined by nearly 20 percent since 1995, due 
primarily to declining availability and increasing prices in our fuel 
supply.
    The industry is currently comprised of approximately 85 power 
plants located in 14 states across the nation. In total, they have the 
capacity to generate 1,600 megawatts of electricity--or, looked at in 
another way, enough power to serve the needs of 1.5 million households. 
These facilities represent a capital investment in excess of $7 billion 
and they provide significant levels of rural employment and property 
tax revenues in the jurisdictions in which they are located.
    In addition to the 85 operating facilities, there are approximately 
15 facilities that are operable but currently sit idle due to local 
market conditions.
    For clarification, I would note that the facilities described in my 
testimony were constructed for the sole purpose of generating clean 
electricity from the combustion of certain organic residues. They are 
distinct from other facilities that generate electricity from the 
combustion of municipal solid waste or from residues within the pulp 
and paper manufacturing sector.
    Decisions concerning the siting of the existing biomass power 
facilities were primarily determined by the proximity of a sustainable 
fuel supply. The reason for this is a simple one. The biomass power 
facilities purchase the waste materials they use as fuel, and the 
principal component of fuel cost is transportation of materials from 
point of origin to point of use. In order to minimize fuel costs, the 
facilities were located as close to their fuel sources as possible. 
Some facilities are actually located directly at the source of their 
fuel--at a lumber mill, for example--while others are stand-alone 
facilities that obtain fuel from a variety of sources within a radius 
that usually does not exceed 100 miles. Given the decline in mill 
operations in recent years, few if any of the operating facilities are 
self-sufficient. All have the need and capacity to derive fuel from 
external sources.

The fuel supply
    Materials used as fuel by the biomass power industry are the 
residual wastes that remain after all other economic value has been 
extracted. In effect, the industry recycles material--that would 
otherwise be discarded--into a product (electricity) that has societal 
value.
    One can view the biomass power industry as a massive waste 
management system that generates electricity as one of a number of 
valuable by-products.
    Our fuel supply is derived from three major sources. The first and 
principal source is forest-related activities, which account for 
roughly 75 percent of our total supply. Within this category, materials 
include slash and brush from commercial timber harvest operations (we 
use the branches and tops after the tree has been sent to the mill), 
bark and excess sawdust from timber processing, and materials derived 
from thinning of overly-dense vegetation in order to reduce the risk 
and severity of forest fires. The biomass power industry is, in 
reality, the ``garbage man'' for the forestry sector. We gather and use 
only those materials that are worthless to someone else. If a certain 
material has more value as a pulp chip or as an input to another 
commercial product, the market will drive it in that direction rather 
than to us.
    Our second source of fuel is agricultural residues, which comprise 
approximately 15 percent of our total supply. These materials include 
orchard tree prunings and removals, as well as residuals from sugar 
manufacturing and rice milling.
    Our third and final source of fuel is urban wood waste diverted 
from landfill disposal. Included here are broken pallets and shipping 
containers, leftovers from construction and manufacturing activities, 
and selected other materials. Fuel specifications provided to our fuel 
brokers require the exclusion of paper that is commonly recycled and 
materials that are toxic or hazardous. Our industry simply cannot 
afford to find hazardous chemicals in our air emissions or our ash, so 
we take all necessary precautions to exclude them at the front end of 
the process.

Public benefits of biomass power generation
    The biomass power industry has a number of unique characteristics 
that are germane to the subject of this hearing and are particularly 
relevant as our new President develops and introduces a national energy 
policy within the next few weeks.
    In late 1999, the U.S. Department of Energy published an 
independent research report entitled The Value of the Benefits of U.S. 
Biomass Power, which compared the impacts of biomass energy production 
with that of the most probable alternative fate of the residues we use 
as fuel. The report also attempted to quantify (monetize) the value of 
the nonelectric benefits of biomass power production in terms of 
criteria air pollutants, greenhouse gas emissions, landfill capacity 
use, forest and watershed improvement, rural employment and economic 
development, and energy diversity and security.
    The findings of this report are notable and important. In an 
industry where the average cost to deliver a kilowatt-hour of 
electricity is 6\1/2\ cents to 7 cents, the report concludes that 
``Based on a base-case, conservative analysis, the value of the 
environmental services (described above) associated with biomass energy 
production in the United States is 11.4 cents per kilowatt hour.'' In 
other words, the environmental benefits are 63 percent more valuable 
than the electricity itself or, alternatively, each unit of electricity 
produced delivers a substantial environmental bonus that is not 
reflected in the price of the electricity itself. This bonus reflects 
the public ``externality'' value of biomass power and forms the basis 
for its inclusion in a sensible national energy policy.
    Further, the report cites recent research which estimates the 
savings in ultimate cost, on a net-present value (NPV) basis, of using 
mechanical thinning for forest treatment versus a regime of prescribed 
burns that must be carried out over a number of years to achieve the 
same degree of forest improvement. The mechanical thinning, followed 
five years later by a prescribed burn, has a cost (NPV) of $432 per 
acre. The alternative of three prescribed fire treatments during a 20-
year period has a cost (NPV) of $560 per acre for a net savings of $128 
per acre using the mechanical thinning and fuel production alternative. 
These savings do not include the reduction in air emissions during the 
various burns, the reduction in residual stand damage, or the 
diminished risk of prescribed burns flaring out of control. Moreover, 
there is an immediate value of benefits realized from the mechanical 
thinning/fuel production option versus the delayed benefits from 
multiple prescribed burn testaments.
    The public benefits of the biomass power industry are derived from 
the gathering, processing, and delivery of its fuel supply rather than 
from its generation of electricity. This characteristic distinguishes 
the biomass sector from all other energy technologies. As mentioned 
earlier, the biomass power industry pays to acquire its fuel. 
Consequently, an entire infrastructure has been established to provide 
the services needed to obtain and deliver the fuel to us, and this 
infrastructure is funded and sustained by the substantial per-ton 
payments we make to acquire our fuel. Our purchases support contractors 
who undertake pre-fire thinning in the public and private forests, with 
appropriate permits, to reduce forest fire risk and to remove excess 
biomass that depresses forest health and productivity and degrades the 
functioning of watersheds. Our purchases also support similar services 
in the agricultural sector to chip and deliver orchard prunings and 
other materials that would otherwise be a major source of air pollution 
when they are burned in the open field.
    It is widely recognized that the level of direct and indirect rural 
employment is higher in the biomass power industry than in any other 
renewable energy technology.

Biomass power and public lands
    In those instances in which biomass power facilities are located in 
relative proximity to public lands, they have the capability to play an 
important role in generating electricity from wood waste derived from 
those lands. The biomass facilities provide a destination and a 
productive use for removed materials that otherwise would be an 
environmental liability. The facilities have the capacity to utilize a 
high volume of materials on a continuous basis, and the availability of 
fuel beyond current levels would optimize electricity output at a time 
when many states, particularly in the West, are faced with distressing 
shortages.
    It is fair to note, however, that the correlation between the 
location of biomass power facilities and the location of public lands 
is less than perfect. In some parts of the country--from northern 
California up through Oregon and Washington and into Idaho--there is 
excellent correlation. Elsewhere, in Maine, for example, there is none. 
In northern Michigan, there is a good match.
    Due to constraints on commercial timber harvesting and modest 
efforts so far to implement mechanical thinning of overly dense 
woodlands, our facilities--even when they are proximate to public 
lands--have obtained a diminishing percentage of their fuel from these 
lands in recent years. When possible, our operators have replaced 
public-lands fuel with materials from private lands and, increasingly, 
with fuel derived from the urban waste stream. This is an unfortunate 
economic necessity if we are to maintain our electricity generation 
levels.
    Perhaps a few examples can illuminate the difficulties our 
facilities have faced in obtaining fuels from public lands. You may be 
aware that the U.S. Forest Service imposed a moratorium on all 
commercial activities in California's Sierra Nevada, effective December 
11, 2000. Its intent was not focused on the biomass industry, but an 
inadvertent consequence of its action was to abort fuel supply 
contracts that were already in place. This action unexpectedly 
disrupted power production at our facilities and forced our managers to 
scramble for replacement fuel on the spot market where they had no 
choice but to pay top dollar. Sixteen of California's 28 operating 
biomass power facilities depend, to a greater or lesser degree, on 
fuels derived from public lands. These facilities generate over 250 
megawatts of electricity, a critical supply in an energy emergency. One 
of the California facilities--Honey Lake Power--terminated its 
operations due to a lack of fuel and will not reopen until this May at 
the earliest.
    Numerous other examples exist. The Boise-Cascade biomass power 
facility at Emmet, Idaho just announced permanent closure due to 
inadequate fuel supplies from Federal lands. Two of the other three 
biomass facilities in Idaho are also out of service at present. 
Additionally, the absence of activity on public lands in northern 
Michigan has limited fuel availability and constrained normal output.
    In sum, there is an unmet potential to use biomass from public 
lands for electricity production purposes. While some facilities 
proximate to public lands can maintain high output by using alternative 
fuels, others do not have that option. The point to be made is that 
Federal policy should encourage the biomass power facilities to use as 
fuel those materials that would otherwise present the highest level of 
environmental risk. Certainly the overly dense vegetation that 
increases forest fire risk on public lands meets this criterion. The 
opportunity to convert these undesirable materials into a productive 
use, however, is quite limited under current conditions.

Pricing and economic considerations
    Briefly, it is worth noting that biomass power facilities are 
increasingly sensitive to fuel costs. In order to compete in 
deregulated electricity markets, which reward the lowest-cost provider 
and give no value to external benefits such as those described earlier, 
the biomass power facilities must reduce their fuel costs to the lowest 
possible level.
    For example, many biomass power facilities pay in the range of $40 
per ton for wood chips delivered to their facilities as fuel. Each $10 
they pay for fuel equates to 1 cent per kilowatt hour on the cost of 
their electricity. At $40 per ton (an average price for a ton of 
forest-derived fuel) the facilities are paying out approximately \2/3\ 
of their income (4 cents out of 6\1/2\ cents) for fuel alone. Going 
forward, the remaining income of 2\1/2\ cents may be inadequate to 
cover the costs of operations and maintenance, labor, debt service, and 
administration. Many facilities now need to reduce fuel costs if they 
are to maintain full productivity and continue to provide the 
environmental and economic benefits that serve the public good.
    This issue is pertinent here because the cost of biomass fuels 
removed from public lands will have to be measured against the cost of 
all other available fuels. Just because public land fuels may be 
available, there is no certainty that they will be utilized unless they 
are competitively priced. An opportunity exists here to shape Federal 
policy, perhaps in the form of priority fuel use incentives, to ensure 
that biomass power facilities turn first to residuals from public 
lands.

Looking ahead
    There is a solid case that can be made for optimizing the 
electricity output of the nation's existing biomass power facilities, 
including those that are operating at present and those that are 
currently idle. They generate clean renewable electricity and, as an 
inherent bonus, remedy a range of environmental and economic problems. 
This industry could provide a worthwhile service--and a higher level of 
service--to Federal land managers if certain policies were enacted. 
Biomass power facilities can and should be integrated into the 
implementation of the National Fire Plan whenever possible. They can 
also help fulfill the promise of the Herger-Feinstein Quincy Library 
Group legislation which will test large-scale, progressive strategies 
for land management and fire risk reduction.
    Additionally, there is a demonstrable need for the construction of 
new biomass power facilities in many regions of the country that are 
currently unserved or under-served. In light of the millions of acres 
of public lands in states like Alaska, New Mexico, and Montana, it is 
surprising that no biomass power facilities exist there at all. Other 
states like Oregon, Washington, and New York have only a handful of 
facilities.
    In order to move ahead with new projects, developers need certainty 
about long-term fuel availability at affordable contract prices and 
they need to know that they will receive a reasonable price for their 
electricity over an extended period of time. The rest is mostly 
engineering. The Federal government could accelerate the construction 
of the next generation of biomass power facilities in those locations 
where they are most appropriate and needed by reaching out with 
encouragement and assistance to the private sector.
    Biomass materials from public lands can also be co-fired in 
existing power plants that use coal as a primary fuel. By substituting 
a certain percentage (5 percent-10 percent) of biomass materials for 
coal, certain criteria air pollutants can be reduced without 
diminishing electrical output. There may in some instances be a 
locational match between public lands and coal-fired power plants that 
make this an attractive option.
    Finally, there is an emerging opportunity to use biomass materials 
from Federal lands as a feedstock for ethanol production. While ethanol 
and its tax credit are not without controversy, evaluation of its 
merits in a scenario in which an ethanol distillation facility is co-
located with an existing biomass power facility is underway at a number 
of sites. Attractive engineering and fuel efficiencies appear to be 
within reach.

Recommendations
    To ensure the availability of the nation's existing biomass power 
facilities as a productive-use destination for materials removed from 
public lands for fire risk reduction or other commercial purposes, our 
primary recommendation is to provide the industry with a much-needed 
production tax credit similar to the one that has been provided to the 
wind energy industry since 1992. Our industry is in turmoil now as fuel 
supplies contract and electricity markets are radically reshaped. The 
production tax credit would increase the electricity generated by the 
industry and would stabilize its operations at a time when many fear 
reductions or closure in the near future. Legislation which includes 
this production tax credit is known as the Energy Security Act of 2001 
and has recently been introduced in the Senate.
    From a broader perspective, the nation also needs an articulated 
biomass management policy as a context for future decision-making. None 
exists now, even though we have an abundance of biomass waste materials 
that are a latent source of products, wealth, and environmental 
benefits. Intelligent utilization of our biomass resources is the 
cornerstone of self-reliance for electricity production and other 
desirable purposes.
                                 ______
                                 
    Mr. Calvert. [Presiding.] I thank the gentleman.
    Mr. McInnis, you are outnumbered. We have three Southern 
Californians here, and we like it, too.
    Our last panelist is Ms. Leslie James, Executive Director 
of the Colorado River Energy Distributors Association.
    You may begin.

 STATEMENT OF LESLIE JAMES, EXECUTIVE DIRECTOR, COLORADO RIVER 
                ENERGY DISTRIBUTORS ASSOCIATION

    Ms. James. Mr. Chairman, members of the Committee, I am 
Leslie James. I am honored to have been asked to speak with you 
today regarding environmental and market impacts on the Federal 
Colorado River Storage Project and its customers.
    CREDA is a non-profit organization representing consumer-
owned utilities in the six Western States of Arizona, New 
Mexico, Nevada, Utah, Colorado, and Wyoming. For Mr. McInnis, 
our members include Tri-State GNT, Platte River Power 
Authority, and Colorado Springs Utilities.
    Formed in 1978, our organization members serve nearly 3 
million electric consumers in these States. They have all 
entered into long-term, cost-based contracts with the Western 
Area Power Administration, or WAPA, for purchase of Federal 
hydropower produced by the Colorado River Storage Project, or 
CRSP.
    CRSP contractors have been ensuring repayment of the 
Federal investment in that project for 30 years. The rates 
charged under these contracts are subject to frequent 
adjustment in order to repay all of the Federal investment, 
with interest, in the CRSP, including generation, transmission, 
operation and maintenance, and environmental costs. In 
addition, the contractors are paying over 95 percent of the 
cost of the irrigation features of the CRSP.
    CRSP generating resource capability has been severely 
restricted. Let's start with Glen Canyon Dam. Glen Canyon is 
the largest feature of the CRSP, located near Page, Arizona. In 
1996, after many years of study and a $104 million EIS, which 
was also paid for by CRSP power revenues, Glen Canyon 
operations were changed. Approximately one-third of the 
generating capability has been lost.
    The EIS identified the annual financial cost to CRSP 
customers at about $89.1 million per year, but that was in 1991 
dollars. Today, it is probably 3 to 4 times that cost. To date, 
over $134 million has been spent on Glen Canyon studies and 
paid for by CRSP power revenues. This figure does not include 
the nearly $8 million a year spent for the adaptive management 
program.
    Just last summer, due to the requirements of a 1994 Fish 
and Wildlife Service biological opinion, a low-flow experiment 
was undertaken. The experiment includes low flat flows all 
summer, which meant reduced generation and no ability to follow 
load. The low flat flows and dry hydrology, along with the 
increase in energy market prices in the West, had a severe 
impact on costs. It required WAPA to purchase $55 million worth 
of replacement power during that period last summer. The cost 
of the experiment alone for research and manpower was over $3.5 
million, also paid by CRSP power revenues.
    Let's move up to the upper basin, Flaming Gorge Dam. 
Flaming Gorge is on the Green River, located near Vernal, Utah. 
A 1992 Fish and Wildlife Service opinion has reduced Flaming 
Gorge generation by about 17 percent. Two years ago, the 
estimated impact of that reduction was about $2.87 million per 
year. There is also a current new potential for impacts to 
Flaming Gorge due to an ongoing EIS on Flaming Gorge flows. The 
cost of this EIS is estimated to be about $3 million, and it 
should be completed within the next 18 months.
    Let's move to the Aspinall Unit. The Aspinall Unit includes 
three dams and generating plants along the Gunnison River near 
Gunnison, Colorado. Since 1988, the Upper Colorado Endangered 
Fish Recovery Program has been performing studies and 
installing capital features to benefit four endangered species 
of fish, but no studies have been completed to address the 
impacts on power generation.
    The Fish and Wildlife Service has drafted a flow 
recommendations report which has yet to be finalized. Our 
concern is, once again, there will be efforts to re-operate 
these dams in favor of endangered fish and to the detriment of 
power generation. These facilities are basically the last 
remaining peaking units in the CRSP.
    Another impact to these facilities comes with the filing on 
January 17th of this year by the National Park Service of a 
proposal to quantify reserved water rights for the Black Canyon 
of the Gunnison National Monument.
    Now, I will talk briefly about the Western energy market 
and the effects on the CRSP and our members. This energy market 
crisis you have heard a lot about today is affecting all CRSP 
contractors and WAPA. Reduced generation at CRSP facilities has 
required our members and WAPA to be out in the market buying 
power to replace lost generation. This is the same energy 
market from which California entities are buying.
    Our members are potentially facing a rate increase from 
WAPA. As originally proposed, it could have increased the CRSP 
rate 67 to 187 percent. WAPA is considering alternatives to 
this rate adjustment, however. But just to give you an idea of 
the market impact, in a normal operating year WAPA would spend 
$6 million during the whole year on purchased power. Just this 
last winter, they spent $71 million.
    Additionally, the CRSP resources marketed by WAPA are 
pursuant to law and marketing plans. They are within a legally 
defined marketing area and on a long-term contractual basis. 
However, on September 18th and February 15th this year, WAPA 
was directed to ramp up Glen Canyon to help California avoid 
blackouts. Although sympathetic to the energy issues in 
California, CREDA has serious operational, legal, and financial 
concerns with the requirement that CRSP resources be made 
available to California.
    In summary, our view is that in any self-reliant, 
comprehensive energy policy the unique roles, obligations, and 
contracts of the Federal power marketing agencies must be 
recognized and maintained.
    Secondly, Federal generating facility agencies should be 
encouraged to maximum production from those facilities, 
recognizing existing legal constraints.
    Third, Fish and Wildlife flow recommendations for Federal 
hydropower facilities must be based on peer-reviewed, sound 
science, in consultation with all relevant stakeholders, and 
should take into account elements of Federal energy policy and 
economic impact. There must be a balance between costs and 
impacts.
    Lastly, CRSP contractors must not be held responsible for 
operational, legal, or financial impacts associated with the 
Federal Government's assistance to California during this time 
of crisis.
    Thank you for the opportunity of appearing before you 
today.
    [The prepared statement of Ms. James follows:]

 Statement of Leslie James, Executive Director, Colorado River Energy 
                    Distributors Association (CREDA)

    Mr. Chairman, members of the Committee, I am Leslie James, 
Executive Director of the Colorado River Energy Distributors 
Association (CREDA). I am pleased to have been asked to talk with you 
today regarding the Colorado River Storage Project, its role in the 
development of a self-reliant U.S. energy policy, and recent impacts on 
this Federal project.
    CREDA members (contractors) have entered into long-term, cost-based 
contracts with the Western Area Power Administration (WAPA), a power 
marketing administration of the Department of Energy, for purchase of 
Federal hydropower resources of the Colorado River Storage Project 
(CRSP). These contracts provide for frequent rate adjustments in order 
to ensure repayment of the Federal investment in the CRSP. Our purpose 
today is to provide some background on the facilities of the CRSP, to 
discuss the costs included in the CRSP rate, and to describe 
environmental and energy market impacts on both the Federal government 
and CRSP contractors. First, a description of CREDA and its membership.
    CREDA is a non-profit organization representing consumer-owned 
electric systems that purchase Federal hydropower and resources of the 
CRSP. CREDA was established in 1978, and serves as the ``voice'' of 
CRSP contractor members in dealing with resource availability and 
affordability issues. CREDA represents its members in dealing with the 
Bureau of Reclamation (as the generating agency of the CRSP) and WAPA 
(as the marketing agency of the CRSP). CREDA members are all non-profit 
organizations, serving nearly 3 million electric consumers in the six 
western states of Arizona, Colorado, Nevada, New Mexico, Utah and 
Wyoming. CREDA members purchase over 85 percent of the CRSP power 
resource. Attached is a listing of current CREDA members. At the time 
CREDA was formed, the key issue for its members was the continuing 
increase in CRSP rates. CREDA members felt it would be more effective 
and efficient to have a single organizational ``voice'' for them in 
regard to rate, Federal legislative and environmental issues impacting 
the CRSP.
    CRSP contractors have been ensuring repayment of the Federal 
investment for 30 years, by entering into long-term contracts to 
purchase the CRSP resource and by paying all of the Federal investment 
in generation and transmission facilities (with interest), all power-
related operation and maintenance costs, and environmental costs. In 
addition, the CRSP contractors are paying over 95 percent of the cost 
of the irrigation features of the CRSP (beyond the ability of the 
irrigators to pay). In fact in the current CRSP rate, 35 percent of the 
total annual revenue requirement is due to irrigation assistance! It is 
important to note that the cost-based nature of the CRSP rate includes 
costs beyond simply those associated with generation of the hydropower 
resource. A further example is the cost of the Glen Canyon Adaptive 
Management Program (AMP) and the Upper Basin Endangered Fish Recovery 
Implementation Program (RIP). More, detail on these costs will be 
provided below. Next, a description of the CRSP.
    The Colorado River Storage Project (CRSP) was authorized in the 
Colorado River Storage Project Act of 1956 (P.L. 485, 84th Cong., 70 
Stat. 50), as a multi-purpose Federal project that provides flood 
control; water storage for irrigation, municipal and industrial 
purposes; recreation and environmental mitigation and protection, in 
addition to the generation of electricity. This testimony will focus on 
the major generation features of the CRSP, although there are several 
irrigation projects included in the Project. The CRSP power features 
include five dams and associated generators, substations, and 
transmission lines.

Glen Canyon Dam
    Glen Canyon Dam is located near Page, Arizona and is by far the 
largest of the CRSP projects. Glen Canyon Dam began operation in 1964. 
The water stored behind the dam is the key to full development by the 
Upper Colorado River Basin states of their Colorado River Compact share 
of Colorado River water. The Glen Canyon power plant consists of eight 
generators for a total of about 1,300 MW, which is more than 70 percent 
of total CRSP generation. The ability of the Bureau to generate, and 
WAPA to market, the total generating capability of Glen Canyon Dam has 
been impacted over a period of many years, by various processes and 
laws. In 1978 the Bureau began evaluating the possibility of upgrading 
the eight generating units at Glen Canyon. This was possible primarily 
due to design characteristics of the generators and improved insulating 
materials. This upgrade was completed, and the generation was increased 
from about 1,000 MW to 1,300 MW. To fully utilize the unit upgrades 
would require the maximum release of water from Glen Canyon to be 
increased from 31,500 cubic feet per second (cfs) to about 33,200 cfs. 
The Bureau also studied the possibility of adding new units on the 
outlet works to provide additional peaking capacity. The possibility of 
increasing maximum releases from Glen Canyon raised concerns with 
downstream users. After discussion with stakeholders, the Secretary of 
the Interior initiated the first phase of the Glen Canyon Environmental 
Studies.
    In 1982, the Bureau began Phase I of the Glen Canyon Environmental 
Studies. These studies were primarily to analyze the impacts of raising 
the maximum release from 31,500 cfs to 33,200 cfs on the transport of 
sediment downstream from the dam, recreation (including fishing and 
rafting), endangered species (including the humpback chub in the Lower 
Colorado River), and the riparian habitat along the river banks. The 
studies proceeded during the early 1980's and were concluded in 1987. 
The general conclusion of the Glen Canyon Environmental Studies Phase I 
was that the dam had blocked much of the sediment coming down the 
Colorado River and therefore beaches were not being replenished with 
sand. Many questioned the results of the Glen Canyon Environmental 
Studies Phase I because the process did not in all cases follow good 
scientific practice. For instance, the impact on power and water 
economics was not fully explored.
    After reviewing the Glen Canyon Environmental Studies Phase I and a 
review by the National Academy of Science, the Secretary of the 
Interior determined that the Glen Canyon Environmental Studies should 
be continued to address the economic impacts, particularly as they 
relate to power, and also to collect additional data to substantiate 
some of the conclusions in the Phase I report. Flooding during 1983-85 
exposed Native American cultural sites in the canyon, so an inventory 
was necessary to identify these sites and recommend appropriate 
protection.
    The Glen Canyon Environmental Studies Phase 2 was initiated in 
1989. The Bureau of Reclamation decided to hire a Senior Scientist to 
assist with the development of the Phase 2 studies to assure an 
appropriate scientific process. The Bureau and the Senior Scientist 
developed Phase 2 studies, which included a series of test flows to 
evaluate the impact of different operating conditions and to develop 
response curves for various conditions. Many interested parties, 
including water, power, recreation, environment, and Native American 
interests participated in the process.
    In July 1989, the Secretary of the Interior announced the start of 
an environmental impact statement (EIS) on the operation of the Glen 
Canyon Dam. No specific Federal action was identified for study. 
Meetings were held during 1990 to seek input into alternatives that 
should be considered, and the Bureau determined the nine alternatives 
(including a ``no action'' alternative) to be studied. Meanwhile, in 
1992, the Grand Canyon Protection Act (106 Stat. 4672) was signed into 
law. Section 1804 of the Act required completion of the EIS within two 
years. The EIS was completed and the Record of Decision (ROD) signed in 
October 1996. The result was that Glen Canyon operations were changed 
to reflect a revised flow regime; approximately one-third of the 
generating capacity was lost (456 MW). The EIS identifies the annual 
financial cost to CRSP power contractors at $89.1 million per year. But 
this figure is in 1991 dollars and is probably 3-4 times greater today, 
given energy market conditions. The cost of the Glen Canyon EIS was 
approximately $104 million, and was funded by power revenues collected 
from the CRSP contractors. To date, over $134 million has been spent on 
Glen studies, and paid by CRSP power revenues. This figure does NOT 
include the nearly $8 million per year spent for the Adaptive 
Management Program.
    The Act also recognized that with the changes in operation that 
resulted from the EIS, there ought to be a new look at how the costs of 
the Dam are assigned for repayment. Section 204(e) of the Act requires 
the Secretary of the Interior to implement a new allocation of costs, 
which would relieve power from some of those obligations commensurate 
with the loss of generating capacity. The new operating criteria were 
implemented in 1996, but the Secretary has yet to produce a cost study 
or to reallocate the costs as required by law.
    In April of 2000, it was determined that, due to hydrologic 
conditions and requirements of a 1994 Fish & Wildlife Service 
biological opinion, a low flow summer experiment would be undertaken. 
The experiment included high spike flows in May and September, with low 
flat flows (8,000 cfs) all summer. The purpose was to gain information 
regarding endangered humpback chub conditions. The low, flat flows and 
hydrology, along with western energy market prices, had a severe impact 
on power generation, requiring CRSP customers, and WAPA, to purchase 
replacement power to meet their resource needs. The cost incurred by 
WAPA (and to be recovered from CRSP contractors) for this replacement 
power was $55 million, just for the summer. Twenty-four million dollars 
of this total is attributed to the low steady flow environmental 
experiment; the remainder is attributed to wholesale energy market 
prices. The cost of the experiment alone was over $3.5 million, funded 
by CRSP power revenues. These figures do not include additional costs 
to CRSP contractors who had to purchase or supplement their CRSP 
resource with purchases from the energy market.

Adaptive Management Program
    CREDA participates on the Federal Advisory Committee charged with 
making recommendations to the Secretary of the Interior as to 
operations of Glen Canyon Dam pursuant to the Record of Decision and 
underlying laws. Funding for the program (Adaptive Management Program) 
is through CRSP power revenues. Proposed funding for next year's 
program will exceed $10 million. On October 27, 2000, President Clinton 
signed the FY 2001 Energy and Water Development Appropriations Act 
which includes language (section 204) capping the amount of CRSP power 
revenues that can be used for the Adaptive Management Program at 
$7,850,000, subject to inflation. Without this cap, the annual program 
costs would have continued to increase, with power revenues being the 
sole funding source. Now, the program will need to seek appropriated 
dollars in order to maintain increased funding levels. CREDA supports 
seeking other sources of funding for this program. CREDA also 
participates on the Technical Work Group through our consultants, to 
ensure that good science and efforts to increase power production are 
considered.
    CRSP contractors have paid, and continue to pay, the majority of 
costs at Glen Canyon, even while the Glen capacity has been depleted by 
about one-third, and there are significant operating constraints on the 
remaining available capability, as required by the 1996 ROD. CREDA is 
optimistic, however, that additional capability may become available to 
the CRSP contractors while still in compliance with the operating 
restrictions.

Flaming Gorge Dam
    Flaming Gorge Dam is on the Green River, a major tributary of the 
Colorado River, and is located near Vernal, Utah. Flaming Gorge has 
three units producing about 152 MW of generation. In 1992, the Fish & 
Wildlife Service issued a Biological Opinion on the operation of 
Flaming Gorge Dam. Two years ago, the estimated impacts to power 
generation since implementation of the Biological Opinion was $2.87 
million per year. Approximately 26 MW have been lost to date due to 
changed operations to benefit endangered fish. During summer of 2000, 
the Bureau began the process of completing an EIS on proposed flow 
recommendations for endangered fish. The Bureau is attempting to keep a 
narrow scope on the recommendations, but some environmental groups are 
advocating the inclusion of an alternative to tear down the dam Two 
CREDA members from Utah are ``cooperating agencies'' and, thus, are 
able to participate in the meetings with the Federal agencies. The cost 
of the Flaming Gorge Dam EIS is expected to be $3 million, and could be 
completed within the next 18 months.

Aspinall Unit
    The Aspinall Unit includes three dams and generating plants along 
the Gunnison River near Gunnison, Colorado. Blue Mesa is the first darn 
on the river and has two units producing about 97 MW. Morrow Point is 
the second dam in the series and consists of two generators producing a 
total of 146 MW. Crystal is the final dam and has one 32 MW generator. 
Morrow Point and Crystal Reservoirs allow some regulation of the river 
flow so that releases from Crystal can be used to regulate downstream 
flows as necessary. Since the early 1990's as part of the Upper 
Colorado River Endangered Fish Recovery Implementation Program, or RIP, 
studies have been undertaken to determine fish needs in this region. 
But NO studies have been completed to determine impacts on power 
generation! CREDA's interpretation of the Fish & Wildlife Service's 
flow recommendations is that they advocate a return to ``natural'', or 
almost pre-dam flow patterns. In our view, this goal is unattainable 
and unrealistic. The dams are there, the environment has changed, and 
efforts to recover fish should recognize those facts. The Fish & 
Wildlife Service's draft flow recommendations report has yet to be 
finalized.
    Another looming impact on power generation on the Gunnison River 
comes with the filing by the National Park Service of a proposal to 
quantify reserved water rights for the Black Canyon of the Gunnison 
National Monument This filing was made in Colorado Water Court on 
January 17, 2001. (Case No. W-437, District Court, Water Division No. 
4, Colorado.) CREDA has not yet completed its analysis of the impacts 
to power generation, but our preliminary indications are that the 
proposed flows associated with the water right quantification are 
unachievable and will have a severe impact on power generation and 
existing water rights within the State of Colorado. Statements of 
opposition in this matter must be filed by March 30, 2001 in Colorado 
Water Court.

Upper Colorado River Endangered Fish Recovery Implementation Program 
        (RIP)
    The RIP was established through cooperative agreements among States 
and Federal agencies in 1988 for a 15-year period to help recover four 
endangered fish in the Upper Colorado Basin. Power revenues currently 
fund about 60 percent of the base research/study program, which until 
recently required about $2. 1 million per year. Authorizing legislation 
was passed in October 2000, which authorized a $100 million capital 
improvements program. CREDA testified in support of this legislation in 
both House and Senate hearings. The legislation provides matching funds 
for the capital program so that, in the event State funding for the 
program ceases, so too does power revenue funding. The legislation had 
the support of the Upper Basin States, CREDA, Federal agencies and some 
environmental groups. Why did CREDA support it? (1) It caps CRSP cost 
exposure; (2) unlike in the Grand Canyon, the States are contributing 
funding; and (3) also unlike in the Grand Canyon, the authorization 
expires in 2011 and the program will have to be reauthorized by 
Congress.
    The legislation requires CRSP power revenue funding for monitoring 
and research of up to $6 million per year, with credits toward 
repayment. In addition, the Upper Basin States and CRSP power revenues 
will each contribute $17 million toward capital features. The 
legislation recognized that changes in operation of Flaming Gorge and 
Aspinall generation as a result of Biological Opinions cost CRSP 
contractors $2 to $5 million per year. Notwithstanding the passage of 
authorizing legislation for the RIP, CREDA still has concerns regarding 
ongoing impacts to operation of the Federal facilities. In addition, 
CREDA is concerned that there should be specific recovery goals 
established as soon as possible. Recovery should be achieved through 
the capital features of the RIP, not rely solely on dam operation 
adjustments.

The western wholesale market
    The power systems throughout the western United States are all 
interconnected and thus operate as one large integrated system. 
Electricity is the ultimate in ``just in time delivery, but this 
delivery creates a problem because large quantities of electricity 
cannot be stored for later use. Any time the load increases or 
decreases, a regulating generator must sense that change and 
immediately respond appropriately. The system has been designed to 
allow certain units to be ``base'' loaded, while a few of the units are 
allowed to ``follow load'' or regulate. This system has provided a very 
stable and reliable electric system. To enable reliable moment-by-
moment system control, it is necessary to have contractual arrangements 
to address how the various entities will interrelate and account for 
the power and energy. These contractual arrangements can be very 
complex, but they provide a means of reconciling the system after the 
fact. Therefore, contractual arrangements may not necessarily follow 
the actual operation on a moment-by-moment basis, but the contracts 
allow the entities to operate within agreed upon guidelines so business 
can continue.
    Hydro projects are ideal for ``load following'' and meeting peak 
demand because they can be easily and quickly adjusted to meet changing 
load. The Federal hydro system historically has been used to follow the 
load within the region, while the larger, less flexible nuclear and 
coal-fired plants provide the base load requirements. It has also been 
possible for the output of the hydro projects to be reduced to a 
minimum at night to ``save'' the water in the reservoir for use the 
following day when peak loads require it. This integration of hydro and 
thermal resources provides the most efficient operation of the electric 
power system. Historically, WAPA has been able to reduce its hydro 
resources to the minimum level in the middle of the night (when most 
users are asleep and industrial loads are low) and use thermal 
resources, and then increase the hydro generation in the daytime to 
provide the peaking requirement and defer the addition by the customer 
of additional peaking or less efficient coal-burning resources. If the 
hydro resource is constrained by maximum and minimum flow and ramp rate 
releases, this flexibility and diversity is reduced. This also reduces 
the value of the hydropower, necessitates additional coal burning, 
possibly requires additional resources to be built, and raises the cost 
to consumers due to the need to replace unavailable resources.

CRSP rates and marketing program
    When the Federal reclamation projects were begun, they were 
designed, constructed, operated, and maintained by the Bureau. The 
Bureau also owned the transmission system and marketed the power from 
the projects. When WAPA was formed under the Department of Energy 
Organization Act in 1977, the design, construction, operation, and 
maintenance functions remained with the Bureau, and the transmission 
system and marketing responsibilities were moved to WAPA. Construction 
and capital projects are funded through the Federal Treasury at the 
interest rate determined by Congress or at the time construction 
starts. These projects go through a budgeting process associated with 
the Federal budget, and money is appropriated for these projects with 
congressional approval. As revenues are collected for the sale of 
Federal power, there is a priority assigned to payment of obligations. 
The priority of repayment of the projects is that O&M expenses for WAPA 
and the Bureau are paid first and then repayment of the highest 
interest loans is made to the Federal Treasury. The components 
associated with the power features are paid first, including the 
appropriate interest, and then the power revenues are used to pay the 
irrigation projects at no interest.
    Each year WAPA compiles a ``power repayment study'' which estimates 
expenses of both the Bureau and WAPA, and is the basis for the CRSP 
rate. After WAPA has completed the power repayment study and if a rate 
adjustment is necessary, a public process is begun. This process 
includes a notice in the Federal Register that a rate adjustment is 
necessary, public information and comment meetings, and then the 
proposed rate is filed with the Federal Energy Regulatory Commission 
(FERC) for review. The rate can be put into effect on an interim basis 
while FERC reviews the rate, and if FERC concurs, the rate becomes 
final. FERC may also choose to remand (or send back) the rate.
    In July 2000, CREDA was pleased to learn that through our 1992 Work 
Program Review process (a contractual arrangement among CREDA, the 
Bureau and WAPA), WAPA would defer a rate increase until 2001. However, 
as indicated in a November 8, 2000 Federal Register notice (65 FR 
66995) due to low hydrology, high purchased power costs and the impacts 
of the Glen Canyon low flow experiment, WAPA announced it is in a 
severe cash flow situation and would have to consider a rate ``adder''. 
CRSP financial obligations are paid from the CRSP Basin Fund, a 
revolving fund in the United States Treasury, which is greatly impacted 
by high purchased power prices. The replacement and firming power 
purchased by WAPA on behalf of the CRSP contractors is paid for from 
this Fund. Clearly, the significant increase in energy prices over the 
past 9 months has had a severe impact on the Basin Fund cash flow. The 
proposed ``adder'' would have amounted to a 62 percent increase in the 
CRSP rate. Under other, ``worst case'' hydrologic scenarios, this 
increase could have been as high as a 187 percent increase in the first 
year. As proposed, the increase would have translated to an 
approximately $57 million impact to CREDA members in the first year 
alone. WAPA is currently exploring alternatives to the ``adder''. The 
effects on the CRSP rate from the western energy market are staggering. 
For instance, in a ``normal'' operating year, WAPA purchases 
approximately $6 million worth of purchased power to firm up the CRSP 
resource commitments. This winter season, however, WAPA's purchased 
power requirements for CRSP are $71 million!
    The original CRSP contracts expired on September 1, 1989. WAPA 
completed an Environmental Impact Statement (EIS) on the Post-89 
Marketing Criteria. Contract amendments were executed which reflected 
changes in the operation of the CRSP facilities, and provided options 
for the CRSP contractors in terms of whether they desire to make up the 
``shortfall'' themselves, or whether they desire to have WAPA purchase 
on their behalf and pass through the associated costs.
    Changes to the amount of CRSP resources available to CRSP 
contractors began again in April 1998. The changes were made in the 
contracts to reflect the changed operating conditions at Glen Canyon 
Dam. In addition, in late 1998, the Department of Energy (DOE) was 
asked to begin the process to extend the CRSP and Central Valley 
contracts beyond 2004. Following this process, at the direction of 
newly appointed DOE Secretary Bill Richardson, a public process began 
to determine how much of the existing CRSP resource should be ``set 
aside'', primarily for Native American allocations. In June, 1999, WAPA 
published a Federal Register notice (64 FR 34414, June 25, 1999) 
indicating that in the post-2004 CRSP contract extensions, CRSP 
allocations would be reduced up to 7 percent to create a pool of power 
to be allocated to Native American and new customers. Preceding this 
decision, departing DOE Secretary Elizabeth Moler posed a series of 
questions for public comment regarding allocation of and use of Federal 
hydropower resources by preference entities in a deregulated 
environment (63 FR 66166, December 1, 1998). Ultimately, DOE found no 
change was required of WAPA's marketing criteria, which to CREDA 
reaffirmed the concept that the cost-based rates and marketing criteria 
associated with the CRSP are still relevant, possibly even more so, in 
a deregulated environment. WAPA is currently negotiating the ``post-
2004'' contracts with new applicants for the CRSP resource. In essence, 
CRSP contractors have experienced a reduction in the amount of CRSP 
resource available to them through both operational and administrative 
processes. They are now facing significant rate impacts due to the 
effects of hydrology and energy market conditions in the west.

The ``California'' crisis and CRSP
    The western energy market ``price crisis'' is affecting all CRSP 
contractors and WAPA. Reduced operational levels at CRSP facilities, 
due to environmental constraints, have caused WAPA and the contractors 
to be out ``in the market'' having to purchase resources to meet 
contractual obligations and to serve load. This is the same energy 
market from which California entities are buying.
    The CRSP resources are marketed by WAPA pursuant to law and 
marketing plans within a legally defined marketing area, on a firm 
basis to preference entities. And yet, by Presidential and DOE 
directives issued during 2000, WAPA was called upon on September 18, 
2000 and again on February 15, 2001, to ``ramp up'' Glen Canyon to 
assist the California Independent System Operator avoid blackouts. 
Although sympathetic to the energy situation in California, CREDA has 
some serious concerns with a requirement that CRSP resources be made 
available to California. CREDA's concerns are operational, legal and 
financial. Current hydrologic conditions in the Colorado Basin indicate 
the potential for another dry summer. Water released this spring may 
not be recoverable when so desperately needed to meet summer peak 
demands. CRSP resources are committed under long-term, cost-based 
contracts with a legally defined group of contractors, who are located 
within a legally established geographic marketing area. From a 
financial standpoint, the CRSP contractors are the ``guarantors'' of 
Federal repayment investment in the CRSP. Given the current financial 
situation of California power purchasers, CREDA believes the CRSP 
contractors must be provided protection from financial impacts which 
may result from Presidential or Administration directives which require 
WAPA to sell into the California market.

Conclusions and recommendations
    1. In any self-reliant, comprehensive Energy Policy, the unique 
roles and responsibilities of the Federal power marketing 
administrations must be recognized and maintained. CRSP resources are 
marketed under long-term, cost based contracts and guarantee repayment 
of the Federal investment in power facilities as well as its very 
sizable investment in irrigation projects.
    2. CRSP contractors must not be responsible for operational, legal 
or financial impacts associated with the Federal government's 
assistance to California.
    3. The Fish & Wildlife Service recommendations for flows to Federal 
hydropower operations in order to benefit endangered fishes must be 
based on peer-reviewed, sound science, in consultation with all 
relevant stakeholders, and should take into account elements of Federal 
energy policy and economic impacts. There must be a balance between 
costs and impacts.
    4. Federal hydropower facility operating agencies should be 
encouraged to maximize production from those facilities, recognizing 
existing legal constraints.
    CREDA thanks the Committ