U.S. House Appropriators Press Kempthorne on Oil and Gas Program

House appropriators grilled Interior Secretary Dirk Kempthorne yesterday over the department's handling of oil and gas development on federal lands, particularly with regards to royalties and oversight.

Members of the House Interior Appropriations Subcommittee also expressed their reservations yesterday over President Bush's proposed fiscal 2009 budget for the Interior Department, questioning the administration's priorities and charging that several agency activities would be grossly underfunded.

Lawmakers noted that Minerals Management Service's budget proposal requests just four additional audit staff positions while the Justice Department collects hundreds of millions of dollars in settlements from oil and natural gas companies found to be shortchanging the government's royalty program.

MMS is seeking a $2 million increase to help improve its royalty compliance and audit program in order to address recommendations by Interior's inspector general, who has flagged numerous problems with the royalty program.

Much of the funding would go toward development of a "risk-based compliance tool" that would revise MMS compliance reviews to consider "additional risk factors such as chronic erroneous reporting and the possibility of fraudulent reporting"

Several members also questioned how Interior would ensure the environment of leased federal lands was protected from development, especially when lands are leased for extended periods.

Kempthorne said the department's environmental controls include mandating best practices for oil and gas operations to minimize their impact on federal lands, including prevention techniques.

"We have world-class energy resources but on top of that we have world-class habitat," said Kempthorne. "I believe if we don't do a good job as stewards of managing the top part, then the public response is going to be 'no more.'"

The budget proposal includes $6.1 million for the National Oil Spill Response Test Facility. While that is $180,000 below 2008, the administration says recent operational efficiencies allow for the reduction.

Species, resources concerns follow Chukchi Sea sale

Kempthorne's testimony came a day after MMS announced there were $2.6 billion in winning bids to companies seeking to drill for oil and natural gas in Alaska's Chukchi Sea.

Overall, companies made 667 bids for 448 drilling tracts in the 29 million-acre area north of Point Barrow, including a record $105.3 million offer by Shell Oil for one nine-square-mile leasehold.

Environmentalists had wanted MMS to delay the sale even longer while the government considers whether to grant the polar bear protections under the Endangered Species Act. The Fish and Wildlife Service missed a court-ordered deadline last month for deciding whether to declare polar bears a threatened species.

MMS said it had already delayed the sale of the bids from an earlier leasing program to complete an environmental analysis. The agency subsequently reduced the size of the lease area to make way for a 25- to 50-mile corridor for migrating whales and other marine mammals and birds to pass through and for local communities to hunt.

Kempthorne told the subcommittee that the environmental analysis concluded that there was no connection between the lease sale and the polar bears' well-being.

"To defer the sale would be to now tie them together," Kempthorne said.

He told reporters after the hearing that the sales would probably not be affected if the polar bear is ultimately listed.

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