Statement of Luke D. Johnson, Deputy Director Bureau of Land Management Before the Senate Energy & Natural Resources Committee Subcommittee on Public Lands and Forests S. 2229, Wyoming Range Legacy Act of 2007 February 27, 2008 Thank you for the opportunity to testify on S. 2229, the Wyoming Range Legacy Act of 2007. The bill provides for the legislative withdrawal of 1.2 million acres of land from mineral development, subject to valid existing rights, and offers existing lessees an opportunity for the voluntary retirement of their lease. The Administration supports this bill, and looks forward to working with the Congress to address issues such as the potential budgetary impact and necessary offsets. The Department does have concerns with the bill as drafted, and would like to work with our sister agency, the U.S. Forest Service, and the Committee to address those concerns. This area contains significant energy resources, and we are concerned that a withdrawal from mineral development that is too broad could significantly impact the Administration's efforts to ensure access to important energy resources. The Department is also concerned that it could leave these Federal resources vulnerable to drainage, without appropriate compensation to the Federal Treasury and the State, if development occurs on adjacent private lands. We would like to work with the Forest Service and the Committee to determine appropriate boundaries and acreage associated with the withdrawal. For example, one issue to consider is whether there could be restrictions on surface disturbance, while allowing the Federal resources to be extracted from adjacent BLM lands. There are currently 76 oil and gas leases held by production and 26 hardrock mining claims located within or adjacent to the proposed withdrawal area. We note that S. 2229 contains language in section 3(a) that preserves valid existing rights, a provision we support and consider very important for two reasons. First, those companies that have existing leases and mining claims should be able to rely upon the certainty of those underlying documents in making investment decisions critical to the development of the resources. Second, the resources at issue are potentially significant. BLM estimates that the 1.2 million acre area covered by the bill contains 8.8 trillion cubic feet of natural gas and 331 million barrels of oil that are technically recoverable using today's technology. The natural gas alone amounts to roughly one-third of a year's annual natural gas consumption for the entire nation. This production could have a substantial impact on royalty revenues that would otherwise be shared by the Federal Treasury and the State of Wyoming for the benefit of taxpayers. While the bill recognizes valid existing rights for issued leases, the bill does not recognize the importance of those oil and gas leases that have already been sold at competitive sale, but are awaiting a final decision. These leases were offered in accordance with the land use planning process. We believe the Federal Government needs to be a reliable partner when companies make major financial investments. With regard to the provisions in S. 2229 concerning the voluntary retirement of leases using non-federal funds, we do not object to the concept. However, we have concerns about the methods and processes set forth in the bill and suggest a number of amendments. We stand ready to work with the Forest Service, the bill sponsors, and the Committee to find a solution that will meet the needs of the American public and the citizens of Wyoming. S.2229 S. 2229 provides for the withdrawal of approximately 1.2 million acres of the Bridger-Teton National Forest (BTNF) from location, entry, leasing and patent under the mining law, mineral leasing laws, and public land laws, subject to valid existing rights. Also, the bill offers existing lessees the opportunity to voluntarily submit a written request for the retirement and repurchase of their lease and directs that the purchase price be based on the fair market value of the lease as determined by an agreed-upon appraisal. The bill authorizes the Secretary to accept donations of lease interests and to use non-Federal funds to pay for the purchase of the lease. It specifies that the Act is not meant to limit compensation from a private, State or other source in lieu of, or in addition to, receiving compensation under the Act. Presumably, these provisions were intended to allow lessees to receive monies directly from outside groups and then donate or waive their claim to compensation from the Secretary. The acquired leases would be cancelled and made subject to the withdrawal. Mineral Resources Within the Withdrawal Area The Forest Service is responsible for the surface management of National Forest System land; however, the Secretary of the Interior and BLM have a vital interest in mineral development as the agency responsible for administering the 700 million acres of subsurface estate under the Mining Law of 1872 and various mineral leasing acts. BLM issues mineral leases upon concurrence of the surface management agency and works cooperatively with the agency to ensure that management goals and objectives for mineral exploration and development activities are achieved, that operations are conducted to minimize effects on natural resources, and that the land affected by minerals operations is reclaimed. The Bridger-Teton National Forest issued the Record of Decision for their revised Forest Plan on March 2, 1990. The revised Forest Plan provided for leasing of the areas proposed for withdrawal under the bill. While the BLM has leases dating back to 1964 within the Wyoming Range, approximately 40 leases have been issued under the revised plan. Within the proposed withdrawal area, there are 143 issued or pending oil and gas leases covering more than 197,000 acres; 76 of these leases are currently under production. Bonus bids collected in 2006 on 12 competitive leases totaled almost $2.6 million. The withdrawal provisions in the bill preserve valid rights "in existence on the date of enactment." In 2006, twelve parcels were leased with bonus bids totaling nearly $2.6 million. Those leases are currently suspended, awaiting further NEPA analysis following an IBLA ruling. An additional 23 leases were sold in Fiscal Year 2006 with bonus bids totaling approximately $2.2 million. Those leases were not issued and have been placed in a pending status with the money in escrow until the additional NEPA work required by the IBLA decision is completed.: ]We recommend that the bill be amended to preserve the opportunity for the 23 leases in pending status to be issued and developed, and that the voluntary retirement provisions also apply. In addition to oil and gas leases, as noted earlier, there are 26 mining claims located within or adjacent to the proposed withdrawal area as well as one 160-acre sodium lease. While no activity is currently taking place on existing claims and the lease described above, the claimants are continuing to pay annual maintenance fees and the lessee is continuing to pay rental fees to preserve options for future development. Proposed Amendments We suggest a number of amendments to the provisions providing for the voluntary retirement of existing leases. Section 4 (b) of S. 2229 states, "The Secretary may use non-Federal funds to purchase any lease from a lessee who requests retirement and repurchase of the lease under subsection (a)." There is no clear indication that the Secretary has discretion in whether to purchase the lease if non-Federal funds are not available. Furthermore, the bill does not specify who would be responsible for funding the appraisals. It is our understanding that the intent of the bill is to provide a process by which outside groups could fund the voluntary retirement of the leases. We suggest that the bill be amended to allow the Secretary to accept the relinquishment by lessees of their lease interest and subsequently provide for their retirement. The bill should make clear that there is no duty for the Secretary to purchase any lease without a donation or other non-Federal funds being made available in advance. The Secretary should not be involved in the actual collection of donated funds or the repurchasing of leases. Compensating a lessee for the voluntary relinquishment of a lease should be handled using only private funding, and the Federal Government should not be involved in those transactions. We are also concerned about the advisability of retiring leases that have already been placed into production. We would like to point out that the retirement and repurchase provisions in the bill only apply to leased minerals. However, the bill provides for the withdrawal of this area from location, entry, and patent under the mining laws and mineral leasing laws. Thus, these mining claimants would not be provided the same option for purchase of their interest under the bill. Environmental Best Management Practices and the Technology of Mineral Development Today Our Nation faces a great challenge in meeting its energy needs. We consume much more than we produce; this is especially true for oil. We are importing about 60 percent of our oil from foreign sources – a percentage that is expected to increase to 68 percent by 2025. We need to protect our economic and national security by increasing our ability to produce more of our energy domestically in a prudent and environmentally sensitive way. In 2007, Federal production in Wyoming was 34.4 million barrels of oil and 1.36 TCF of natural gas. During this same time period, total Federal onshore production was 104.7 million barrels of oil and 2.8 TCF of natural gas. We appreciate the tremendous contribution the state of Wyoming makes to our Country's energy security. The BLM also appreciates the non-energy uses and values that our public lands provide to the American people, such as outstanding hunting and fishing opportunities, diverse recreational activities, and habitat to a wide array of wildlife. While one option of retaining habitat and recreational values in the Bridger-Teton National Forest is to withdraw the land from mineral development, other possibilities exist. Across the country, hunting and fishing and other recreational activities occur side by side with energy and other resource development activities. When properly planned, energy development activities and resource protection are not mutually exclusive concepts. To the contrary, our experience shows that sound stewardship can be achieved contemporaneously with energy development. To this end, we would like to take this opportunity to highlight the cooperative efforts by BLM, surface management agencies, the states, and industry to employ new technologies and environmental best management practices (BMPs), which have been successful in decreasing the footprint of energy development and mitigating the impact of operations on important natural resource values. For example, the energy industry's drilling technology has now evolved to the point where 22 or more deep gas wells can typically be drilled side-by-side, 7 feet apart, on a well pad that is no larger than the traditional single well pads of the past. This new practice significantly reduces the surface footprint of new development by eliminating, in this example, the other 21 well pads, roads, and sets of utilities. When combined with the use of centralized offsite production facilities, the need for roads, well pads, and truck traffic is greatly reduced. This is extremely important when it comes to protecting wildlife habitat and recreational resources. To further reduce the visual footprint of development, new facilities can also be screened, painted, and even camouflaged. Full interim reclamation of nearly all disturbed areas can help to ensure soils stay in place and habitat values are protected during the life of development. When further protection is needed, development can also be slowly phased, one site at a time, without moving to a new area until the first area is operational, gated, and has undergone successful interim reclamation. Today's practices are a major advancement from those of even three years ago, and we expect the trend to continue. Other tools are also available besides withdrawal to ensure non-surface occupancy of areas with significant environmental and recreation values. Moreover, we believe it is possible to consider withdrawals more selectively, rather than as a blanket approach. These examples of BMP's and the use of continuously evolving technology indicate that environmentally conscious development of energy resources can occur in a multiple use environment. Thank you for the opportunity to testify. I will be happy to answer any questions.