Statement of Gale Norton

Secretary of the Interior

before the House Resources Committee

U.S. House of Representatives

on the Administration's National Energy Policy

June 6, 2001

In my short tenure as Secretary, I have spent a substantial amount of time studying the issues surrounding our Nation's energy policy. I have been concerned by the seriousness of the long-term energy problems facing our country, and also amazed by the ingenuity of U.S. citizens and companies that allows us to produce energy with minimal impact on our environment and wildlife. What has become clear is that each of us is striving to attain the same goal--a secure energy supply while protecting the environment.

I believe the President's energy plan will increase energy production while we also improve our environment. Both goals can be achieved and sustained.

Background

The need for a national energy policy becomes clear when you look at the numbers. Over the next 20 years, U.S. oil consumption is projected to grow by over 6 million barrels per day. If U.S. oil production follows the same historical pattern of the last 10 years, it will decline by 1.5 million barrels per day. U.S. natural gas consumption has been projected to grow by over 50 percent in the same time period while production will grow by only 14 percent if it grows at the rate of the last 10 years. Our U.S. energy production is not keeping up with our growing consumption, creating an ever-increasing gap between domestic supply and demand.

A large portion of the United States' energy reserves are contained in the lands and offshore areas managed by Federal agencies. The Department of the Interior manages energy production on all Federal lands, both onshore and the Outer Continental Shelf (OCS). These Federal lands provide nearly 30 percent of annual national energy production. In the year 2000, 32 percent of oil and 35 percent of natural gas were produced from Federal lands. In addition, Federal lands produced 37 percent of coal and 48 percent of geothermal energy in 2000. Federal lands are also estimated to contain significant undiscovered domestic energy resources. Estimates suggest that these lands contain approximately 68 percent of all undiscovered U.S. oil resources and 74 percent of undiscovered natural gas resources.

The Department also owns and operates about 16 percent of all the hydropower capacity in the United States, all of which is located in 17 western states. Since a vital portion of our energy development occurs on Federal lands, I am going to tailor my remarks today to Interior's energy policy implementation plans on Federal lands.

Improving and Accelerating Environmental Protection

More than half of the domestic recommendations in the National Energy Policy report are targeted to conservation, environmental protection, renewable and alternative energy, and measures aimed at helping consumers deal with rising energy costs. The National Energy Policy promotes the use of new, 21^st century technologies to increase energy efficiency and conservation.

In the implementation of this energy plan, our Department will strive to focus efforts among the Interior agencies on priority setting, resource allocation, and jointly focusing on the recovery and restoration of particular species or habitat types to improve the environmental baseline.

There are also a number of existing federal programs that can assist in restoring habitat on private lands, such as the FWS Partners for Fish and Wildlife and Coastal Programs and various Department of Agriculture programs. These and other private landowner incentive programs could be used to contribute to the conservation of important environmental resource values. Actions on Federal lands could also be coordinated with activities undertaken on non-federal lands to increase their effectiveness. Another possibility is a federal/state coordinated effort using grants to stabilize the status of a listed species through the conservation of important habitat by acquisition or regulatory control.

Our Department has worked to develop new and innovative ways to manage our national treasures in our parks and on other Federal lands. To bolster funding for land conservation efforts, the National Energy Policy Development Group has recommended that the President direct Interior to work with Congress to create a "Royalties Conservation Fund." This fund would earmark potentially billions of dollars in royalties from new oil and gas production in ANWR to fund land conservation efforts. This fund would also be used to help eliminate the maintenance and improvements backlog on federal lands.

The Department of the Interior has reduced its energy consumption in buildings and facilities by about 10% since 1985. However, we need to do better. I am going to continue to push the Department to strive to become a more efficient energy consumer. This commitment extends to all of our facilities. For example, the Green Energy Parks Program, a successful partnership between the National Park Service and the Department of Energy, has fostered over 200 energy and water conservation projects saving the American taxpayers millions of dollars. We hope to use this effort as a model for establishing additional partnership efforts within Interior.

Regulatory and Legislative Tools

Improving the Implementation of the National Environmental Policy Act

The NEPA process is often perceived as lengthy and arduous. The fundamental premise of ensuring that public decision makers have good information that is scrutinized by the public before decisions are made must always be maintained. However, we can seek to improve the process in a variety of ways. For example, the process could be streamlined through better use of joint agency documents for environmental reviews for proposed energy developments. This may be especially applicable when projects, such as transmission lines and pipelines, cross jurisdictional boundaries and require approvals from more than one Federal agency, State, or Tribe.

Expedited Permitting

Permitting for energy-related projects is often a lengthy multi-agency process. The President has issued an Executive Order directing Federal agencies to expedite the review of permits and other federal actions necessary to accelerate the completion of energy-related project approvals on a national basis. The Administration will work to establish a task force to ensure that Federal agencies set up appropriate mechanisms to coordinate Federal, State, tribal, and local permitting activity in particular regions where increased activity is expected.

Improving the Endangered Species Act Consultation Process

The Endangered Species Act (ESA) Section 7 consultation process is also an important component of reviewing projects for their potential adverse effects. The FWS has recently implemented several initiatives to increase the efficiency and effectiveness of the Section 7 consultation process. Interior is also considering a number of other actions to improve the Section 7 consultation process.

Ensuring Diverse Domestic Energy Supplies

At the core of any long-term national energy policy are strategies to increase the Nation's energy supplies. The President's plan lays out a roadmap for meeting our future energy demands from diverse fuel sources through the use of 21^st century technologies. The United States has significant domestic energy resources, and remains a major energy producer. Between 1986 and 2000, production of coal, natural gas, nuclear energy, and renewable energy increased. However, these increases have been largely offset by declines in oil production. If we wish to maintain a large measure of energy independence, our Nation must rise to meet this challenge.

Federal Onshore Lands

The Congress, in the Energy Policy and Conservation Act, directed the Department to study the impediments to Federal onshore oil and gas exploration and development and then review the results with full public consultation. The Department will expedite completion of this study. As appropriate, Interior will consider making changes to land use plans based on the findings of the study.

The Outer Continental Shelf

The Outer Continental Shelf (OCS) encompasses 1.76 billion acres. As you know, Congress has designated about 610 million acres off-limits to leasing on the OCS, which has been extended by Presidential action through 2012. For available OCS areas, it is imperative that the variety of Federal and State statutes, regulations, and executive orders are clear to ensure effective and efficient environmentally sound development. For this reason, the President has directed the Departments of the Interior and Commerce to re-examine the current federal, legal and policy regime surrounding energy-related activities in the coastal zone and on the OCS to determine if any changes are needed.

Although significant technological breakthroughs have allowed for more deepwater production, substantial economic risks remain. The Deep Water Royalty Relief Act of 1995, which granted variable royalty reductions for new leases in deep water, contributed to much of the increase in deepwater leasing in the central and western Gulf of Mexico over the last five years. Similar incentives could help spur development in other technological frontiers, such as deep natural gas, or make possible continued production from both offshore and onshore fields near the end of their economic life. The President has directed us to continue to explore opportunities for royalty reductions, consistent with a fair return to the public, in areas where production might not otherwise occur.

The Alaskan North Slope

I had the opportunity to go to Alaska in March to visit the North Slope, talk to the local citizens and learn about current and potential future energy and environmental issues in the region. I would like to take a few minutes to discuss four Department of the Interior initiatives specific to the Alaskan North Slope.

NPR-A

Let me turn first to the National Petroleum Reserve-Alaska, or NPR-A. Leasing was reinitiated in NPR-A a few years ago. The President's National Energy Policy calls for the Department of the Interior to consider additional oil and gas development, based on the best available environmentally protective technology, through further lease sales in the NPR-A, including areas not currently leased in the Northeast sector of the Reserve. In support of the President's policy, Interior will take a number of steps, including: conducting additional leasing in the northeast sector of NPR-A on a biennial basis; preparing to hold lease sales in other NPR-A sectors; initiating environmental analysis for a full field development; completing and publishing updated estimates of the undiscovered oil and gas resources of the NPR-A; completing unitization, suspension, and extension regulations for NPR-A;and, if necessary, promulgating regulations to issue rights-of-way in NPR-A to cover potential NPR-A and OCS oil and gas development.

ANWR

Next, let me discuss the Administration's position on energy activities in the Arctic National Wildlife Refuge (ANWR). The President is proposing to open a small fraction of the 19 million acres in ANWR for oil exploration using the most high-tech, environmentally responsible methods. The President and I both believe that oil and gas development can successfully coexist with wildlife in Alaska's arctic region.

ANWR is located in the northeast corner of Alaska. The Refuge is about the size of South Carolina; however, the portion of the Refuge known as the 1002 Area is only about 6 percent of the total Refuge. We expect that no more than 2000 acres will be disturbed if the 1002 Area is developed. The 1002 Area was excluded from wilderness designation and Congress specified that it be studied further through a comprehensive inventory of its fish and wildlife resources, and the potential for oil and gas production. Estimates of substantial resources in the 1002 Area based on nearby drilling results and seismic data have made it one of the most promising prospects for oil and natural gas in the United States.

In 1998, a USGS assessment of petroleum resources of the 1002 Area estimated the expected volume of technically recoverable oil beneath the 1002 area to be 7.7 billion barrels, with a 95 percent chance of 4.2 billion barrels and a 5 percent chance of 11.8 billion barrels. For comparison, the U.S. currently consumes about 7 billion barrels per year. Of this, the U.S. imports about 4 billion barrels and produces about 3 billion barrels. Congressional action would also open up Native-owned lands. The overall mean estimate of technically recoverable oil for the 1002 region, including Native and state offshore areas is 10.4 billion barrels.

The Refuge provides a variety of arctic habitats supporting fish and wildlife species. The wildlife most associated with the 1002 Area is the Porcupine caribou herd, named after its wintering grounds along the Porcupine River of northwest Canada. Currently numbering nearly 130,000 caribou, the herd migrates each year across the Brooks Range to arrive in early summer on the North Slope's coastal plain in the 1002 Area and eastward into Canada.

Contrasting with the migratory nature of the Porcupine caribou herd, muskoxen are year-round residents on the 1002 Area. According to the Fish and Wildlife Service, to survive the long winter, approximately 250 animals in scattered groups carefully conserve their energy reserves by minimizing their activities until summer.

In the fall, polar bears from the Beaufort Sea region visit the area along the coast and barrier islands to forage, rest, and wait for the sea ice to form. Later toward winter, pregnant females enter dens either on the sea ice or on land and give birth to their young.

One hundred forty-six bird species are known to visit the 1002 Area. Approximately one-third of these nest and raise broods during the brief summer while the remainder use the refuge as a resting stopover during spring and fall migrations. The 1002 Area, including its lagoons, support 8 species of marine mammals, 62 species of coastal fish, and 7 species of freshwater fish of which the Arctic grayling and Arctic char are common. Several of these species are important as subsistence food resources.

The Inupiat Eskimo Village of Kaktovik is located on the northern border of the Arctic Refuge coastal plain. Their subsistence resources include marine mammals, fish, caribou and muskoxen. The Kaktovik Inupiat Corporation (KIC) owns 92,000 acres of private land within the Refuge boundary. This land cannot be developed for oil and gas unless Congress authorizes leasing of the 1002 Area. On the whole, Kaktovik residents support oil and gas development in the 1002 Area.

South of the 1002 Area and on the other side of the Brooks Range, the Gwich'in Athabascan people live in villages in Alaska and Canada. Gwich'in rely heavily on the Porcupine caribou herd for subsistence, and caribou figure prominently in their cultural heritage. Because of their concern over the potential impacts to the herd, the Gwich'in villages of this region oppose oil development in the 1002 Area.

Our support for enactment of authority to lease oil and gas resources in ANWR is a prime example of the Department's dual commitment to energy development and environmental conservation. We recognize that the ecological resources of the Refuge are unique and precious. We must respect and conserve this wealth for future generations of Americans. However, because of advances in technology and in our enhanced understanding of the ecology, we are now able to proceed with exploratory work with very little long-term effect.

If this exploration discovers as much oil and gas as we hope, we will proceed cautiously with development and production. To achieve this goal under our proposal, lessees will be required to use directional drilling and ice road technologies to reduce the extent of surface alteration. We will require lessees to operate in a no discharge, no litter mode. All materials and fluids brought into the Refuge will be taken out or injected into deep wells. We will require monitoring of wildlife populations and habitat conditions so that unexpected degradation is identified early and actions are taken to prevent and restore. We will require restoration, both as activities proceed and when production is shut down at the end. Our goal must be to have no significant alterations in wildlife populations or the environment after oil and gas production are finished.

The President and I know that there is a long history of debate surrounding opening ANWR to energy development. However, we believe that new technologies enable us to conduct environmentally safe oil and gas exploration and production. Any legislation must contain adequate safeguards to protect wildlife and other environmental values.

Arctic Outer Continental Shelf

The third part of a comprehensive North Slope package involves the Arctic Outer Continental Shelf. The Beaufort Sea Planning Area encompasses approximately 65 million acres. Active leases in this area represent only 0.4 percent of the total acreage, and only 5 percent of the leased acreage is being actively pursued for development and production. The Northstar project, scheduled to come on-line later this year, will yield the first federal OCS production from offshore Alaska. The Chukchi Sea Planning Area encompasses approximately 63.7 million acres, none of which is currently leased. Both of these areas are under active consideration for the next 5-Year Plan for 2002-2007.

Infrastructure

The fourth component of the North Slope strategy concerns infrastructure. The right-of-way permit for the Trans-Alaska Pipeline System (TAPS) must be renewed by January of 2004. The President has directed our Department to work with Alaska to ensure an expeditious process for the renewal of the lease and right-of-way for TAPS.

One of the largest known reserves of natural gas in the United States has been found in the Arctic. The existing production areas of the North Slope contain large amounts of gas that have been reinjected rather than marketed. The President has asked Departments of Energy and State, along with the Department of the Interior, to work with Canada, the State of Alaska, and other interested parties to expedite the permitting process for construction of a pipeline to deliver natural gas to the lower 48 states once an application is filed. In addition, the Department will continue participating in interagency efforts to improve pipeline safety and expedite permitting in an environmentally sound manner.

Enhanced Oil and Gas Recovery from Existing Wells

From 30 to 70 percent of oil and 10 to 20 percent of natural gas, is not recovered in normal field development. It is estimated that enhanced oil recovery techniques, through new technologies, could add about 60 billion barrels of oil nationwide through increased use of existing, not new, oil fields. This translates into more energy supply with fewer environmental effects because enhanced recovery does not require drilling in new areas. For this reason, the President has directed both the Departments of Energy and the Interior to promote enhanced oil and gas recovery from existing wells through new technology.

Coal

Coal is one of our country's most abundant resources. The United States possesses one-fourth of the world's coal resources. Part of the National Energy Policy is to maintain and improve the Department's coal leasing activities to assure that coal supplies are adequate for electricity generation.

Renewable and Alternative Energy Supply

At the heart of any national energy policy are strategies to augment the Nation's energy supplies. Renewable and alternative energy sources such as wind, hydropower, biomass, solar, and geothermal are critical components of this plan. Renewable and alternative energy supplies not only help diversify our energy portfolio, but they are sources of clean energy for current and future generations. While the current contribution of renewable and alternative energy resources to America's total electricity supply is small--less than 10 percent--the renewables and alternative energy sectors are integral to U.S. energy security.

The President has directed the Departments of the Interior and Energy to reevaluate access limitations to Federal lands in order to increase renewable energy production, such as biomass, wind, geothermal, and solar. The identification of potential locations for renewable energy production on Federal lands will assist in the planning and development of alternative energy resources. A review of administrative impediments and access limitations will aid in the development of these resources.

The Department will look for ways to reduce delays in geothermal lease processing to encourage more geothermal energy production. Most geothermal plants are located in the West, in California, Nevada, Utah, and Oregon. An expeditious leasing process could be an important source to help meet the energy needs of California and the West.

Finally, per the President's request, Interior will seek to work with Congress on legislation to use an estimated $1.2 billion of ANWR bonuses for funding research into alternative and renewable energy resources, including wind, solar, geothermal, and biomass.

Hydropower

Although the majority of the Nation's electricity is generated using fossil fuels, hydropower also plays an important role. Western states, such as Idaho, Washington, Oregon, Montana and California, rely on hydropower for a significant portion of their electricity supply. Other states, such as South Dakota and New York, also depend to some substantial extent on hydropower for their electricity. Hydropower is a clean, domestic, and renewable source of electricity. The Administration seeks to increase electricity generation from hydropower plants. The Department is committed to accomplishing these gains in an environmentally sound manner.

Bureau of Reclamation Efficiency Improvements

The Bureau of Reclamation has undertaken an aggressive uprating and efficiency improvement program, which has significantly expanded the capacity of our hydropower system. For example, Bureau of Reclamation has ongoing turbine runner work at Grand Coulee Dam in eastern Washington, which is ultimately expected to result in 45 - 50 MW of additional capacity. Replacements are also underway at Yellowtail Dam in Montana, and turbine runner replacements at the Shasta Powerplant in California are planned. These three programs will result in an equivalent of 250 new megawatts of capacity over the next nine years.

With an average age of 43 years, Interior's generation capacity is old. While two-thirds of the facilities have been uprated and/or rewound, one-third have not been modified. The efficiency of the existing generators could be increased by replacing aging windings inside the generator. In fact, there often can be substantial increases in capacity by installing windings using modern insulation technology. Reclamation presently has rewinding projects ongoing on units at Alcova and Davis Powerplants which could result in the equivalent of an additional 10 megawatts.

Using Market-Oriented Incentives

Another potential source of additional power is leasing water that could then be used to generate power. Such leasing arrangements would be between willing non-federal buyers and sellers. Reclamation will work to facilitate such arrangements and will shortly initiate an internal effort to identify potential opportunities in this area.

Reclamation continues to work on flexible power generation schedules to support the needs of the western power grid. In many cases, Reclamation has asked its project pumping customers to shift the timing of their deliveries to off-peak times to make more peaking power available to the market. At Grand Coulee Dam in eastern Washington, we have been able to shift more than 300 megawatts of pumping load to off-peak times - making it available to the Bonneville Power Administration for peaking purposes. There are likely to be additional opportunities in this area, especially if power marketers are willing to provide financial incentives to project water users to shift the timing of their use.

Infrastructure

Our energy infrastructure includes many components, such as the physical network of pipelines for oil and natural gas, electricity transmission lines and other means for transporting energy to consumers. Unfortunately, the Nation's energy infrastructure has not kept up with the changing requirements of our energy system. The demand for additional energy and electricity is expected to increase the need for rights-of-way across federal lands. To help with this process, we have identified a number of opportunities to expedite the processing of energy rights-of-way applications by streamlining the application process.

Conclusion

Mr. Chairman, while the challenge facing us is significant, it is not insurmountable. By building on new 21^st century technologies, this country can produce ample domestic resources while enhancing and protecting the environment. I look forward to working with this Committee and others in Congress to implement Interior's pieces of the President's National Energy Policy.

Mr. Chairman, this concludes my statement. I would be pleased to answer any questions that you or members of your Committee might have.