Interior:

Secretary Kempthorne expresses support for sharing new offshore drilling lease revenue

With the Senate set to vote on offshore drilling legislation, several provisions including revenue sharing are still being debated. During today's E&ETV Event Coverage, Interior Secretary Dirk Kempthorne discusses U.S. energy policy at a U.S. Chamber of Commerce conference. He talks about increasing the number of offshore drilling lease areas and addresses the effect of high energy prices on small businesses in the United States.

Transcript

Dirk Kempthorne: I'm really delighted to be here at the U.S. Chamber. And in listening to that very nice introduction by Bruce, former businessman, former mayor, former U.S. senator, former governor, I'm afraid you're getting the impression that I can't hold a steady job. But it's a delight. I see many of you out there that I have worked with in the past and appreciate this opportunity to speak. I can say that the Chamber of Commerce has been steadfast in its support during my career, in a variety of positions which I have held.

As mayor, I saw the vital work of the Boise Chamber of Commerce in the building of our city, as Bruce mentioned. I worked with the Chamber of Commerce to build a new shopping mall, as well as a downtown that triggered business development. We utilized the principles of the marketplace and they worked. As Senator, I worked with Bruce in writing the Unfunded Mandates Reform Act. You can remember the efforts that went into that, where we were told we did not have a chance. And yet it became law.

My last years in the Senate, the Chamber of Commerce said that my votes agreed with their position 100 percent of the time. As governor, I worked with the Chamber of Commerce to pull Idaho from economic recession into one of the world's best places to work and to raise a family and to enjoy the great outdoors.

Working together we built highways and schools and parks and other infrastructure that is vital to a healthy community for our families. Now that I'm the Secretary of Interior we need to work closer than ever to help businesses all across America. The truth is that the Department of Interior's missions are crucial to the health and well-being of the nation's economy and its people. Now President Ronald Reagan said, "Only in Washington, D.C., would the department in charge of the great outdoors be called the Department of the Interior."

Now why is my new department called Interior? Our nation, born in revolution against overseas tyranny, first needed departments of State, War, Treasury and Justice to focus on issues that were exterior to this new fledgling country. Later a department was needed to handle all of the other issues that affected the interior of the United States. And thus, the Department of the Interior was born. As the nation grew, so did Interior's responsibilities.

Today Interior manages one-fifth of the land in the United States of America. The land and waters we manage produce one-third of domestic energy. We provide water to 31 million Americans, manage relations with 561 Indian tribes, and conduct science for a changing world. In our efforts to provide energy, water and public lands management, Interior helps American business men and women deal with the hard realities of competition in the business world.

American businessmen and women do what it takes to succeed, even if it means working 18 hours a day seven days a week. The challenges they face have increased as the world has grown smaller.

Their competitors are just as likely to be in Pakistan or China as they are in America. As a result, global events have a bigger impact today than ever before on small business. We saw that last week when Israel sent its army into Lebanon.

Oil prices jumped on world markets, and somewhere in Idaho or Ohio, a small businessman struggling to make his or her payroll saw their costs rise and the bottom line suffer.

This morning of want to talk to you about where we're headed as a nation on energy policy and to put a human face on this vital issue. I want to talk to you about businessmen and women who take huge financial risks and about the men and women who are on drilling rigs hundreds of miles offshore. And about policymakers in Washington and what they're doing in working together to provide America the energy that we need. You know the challenges that we face better than I do.

American manufacturers have lost 3 million jobs since 2001 because of high natural gas prices, according to the industrial energy consumers of America. Yesterday oil sold on world markets for $77 a barrel, a record high.

Gas prices are now so high that Americans get dizzy watching the dollar gauge at the pump spin faster than a one-armed bandit in Las Vegas. The good news is that we have at the helm of president and a vice president who understand what it takes to produce energy.

President Bush and Vice President Cheney were in the energy business when they worked in the private sector. This knowledge and experience led them to making writing a national energy plan the first order of business when they took office in 2001.

This national energy plan was the catalyst for Congress to write the Energy Policy Act of 2005. Both the national energy plan and the Energy Policy Act provide a framework for the nation to realistically address a serious energy situation.

The three pillars of this framework are conservation, diversification and increased production. The Interior Department plays a major role in implementing both the national energy plan and the Energy Policy Act. As a result, roughly one third of the energy produced in the United States, each year, comes from public lands and waters managed by Interior. This includes almost half of the nation's coal production, more than a third of domestic oil, 39 percent of natural gas, 17 percent of hydropower, and 50 percent of geothermal. The lands and waters we manage contain vast amounts of untapped energy. Federal lands in the Rocky Mountain area alone are estimated to contain 139 trillion cubic feet of gas. That's enough natural gas to heat 55 million homes for almost 30 years.

The outer continental shelf contains huge amounts of natural gas and oil waiting to be produced. The Energy Policy Act gave us 80 tasks to get done and we're going to get them done.

We welcome the opportunity to work with Congress and states to increase domestic energy production, to lower high energy costs, and strengthen our national security.

We've taken many steps in the past five years to increase our energy production, including doubling the number of permits to drill for oil and gas when compared to the previous five years. This increase permitting has led to a 17 percent increase in onshore and natural gas production on federal lands. We have a lot more work to do. We'll be issuing the five-year plan for offshore energy leases, doing research and development, oil, shale, pilot projects.

We will issue land management plans to allow for access to energy development that has done it in an environmentally responsible fashion. And we'll continue to expedite permitting of renewable and geothermal energy. And we'll conduct research on methane gas hydrates.

Right now our most promising source of near-term domestic energy is in the outer continental shelf, our offshore areas. Production from onshore energy wells is beginning to slow down while deepwater oil production has increased more than 840 percent.

Yesterday I returned from the Gulf Coast, where I spent time with men and women hard at work on an oil platform, on an oil drilling ship in an energy operation center. I wish every American can have the opportunity to see the professionalism of these individuals and their mastery of technology, engineering, and science to bring America the energy that it too often takes for granted.

Men and women operate drilling platforms and drilling ships costing hundreds of millions of dollars to explore for oil and gas hundreds of miles from shore in heavy seas, in the face of summer hurricanes and winter storms. There's no guarantee that oil and gas will be found. Only 32 percent of offshore exploratory wells find energy that can be produced. It's simply mind-boggling to think that 185 miles from New Orleans oil rigs are drilling more than 30,000 feet below the surface of the water.

These rigs are drilling through 5 to 10,000 feet of water and then 10 to 20,000 feet of ocean floor to get oil. Thirty years ago 600 feet was considered deepwater drilling. When we see the space shuttle come in for a landing it takes our breath away. It's magnificent, the technology. Drilling six miles beneath the surface of the gulf in search of oil is also incredible in its technology.

I was on a drill ship in the gulf that was 830 feet long, a vast array of computers, global positioning devices that are connected to the ship's six propellers to ensure that the ship never moves more than a half a foot from its ocean position, without any use of anchors, so that there's no disruption to the drilling operation.

The industry also has advanced the technology of multidirectional drilling to the point where, theoretically, if a rig were on the side of the Washington Monument it could produce oil from an area the size of the entire city of Washington, D.C.

If I'd known about that technology when I was governor of Idaho I may have tapped some of Wyoming's oil and gas. The offshore energy industry has a good record of environmental safety.

Tremendous advances in new technology have made oil spills from production platforms exceedingly rare. In fact, the amount of oil that seeps into the ocean from natural cracks in the seabed is 150 times greater than the amount of oil spilled from offshore platforms. To illustrate this in a different way, since 1985 more than 7 billion barrels of oil have been produced in federal waters with less than 0.001 percent spilled. Last fall two powerful hurricanes cut a swath through the Gulf of Mexico.

Of more than 4,000 platforms in the gulf, 3,000 were in the direct path of these storms. Although the impacts of last year's hurricanes devastated the coast, there was no loss of life associated with offshore energy production.

Carefully designed offshore safety devices were a success story. They held. There were no well spills. All of the shutoff valves that are below the ocean floor worked exactly as designed. Offshore energy production is a huge source of revenue for the Treasury. It also helps fund environmental protection. Since 1982, Interior has collected more than $110 billion in offshore revenues. Last year alone, we collected more than $6.3 billion from offshore revenue. This revenue helps pay for federal government operations. It is invested in the National Historic Preservation Fund for the purchase and maintenance of historic sites. It invested in the Land and Water Conservation Fund for the purchase and maintenance of recreation lands.

So when people ask, do you favor opening more of the offshore areas for oil and gas? My answer is yes. We're in the middle of a legislative debate in Congress over whether we'll be able to tap into more of the vast oil and gas reserves off the coast in the eastern Gulf of Mexico.

President Bush has made it clear that he will not support lifting the moratoria on oil and gas production off the coast of any state unless the state supports such a move. But what about states that do support oil and gas exploration off their coasts? Shouldn't they receive some of the revenue from new leases in new areas to help pay the onshore infrastructure costs they incur in providing this energy to the nation? Yes. And I look forward to working with members of Congress and others in the nation in fashioning thoughtful and fiscally responsible legislation that addresses this issue.

While Congress continues to debate exploration in the gulf, the Interior Department is moving ahead with its 2007-2012 leasing plan for the outer continental shelf. Our draft proposal program includes 21 lease sales in 26 OCS areas. We'll issue our proposed program and draft an environmental impact statement for public comment later this summer. To help America obtain a secure energy future we must tap into our greatest asset and that is the ingenuity and inventiveness of the American people. In fact, if you look back at the history of energy use in America you see that we have risen to the challenge of finding new energy sources in every generation. In the mid-19th century America depended almost exclusively on firewood for energy.

The first great change in America's energy usage came with the rise of coal as a major energy source in the mid-1880s. And then, starting in the 1920s, we turned increasingly to petroleum until, by 1950, oil became what some call the nation's most important energy source.

We've seen other sources of energy arise, including natural gas, hydroelectric, and nuclear power. But as President Bush noted in his State of the Union earlier this year, we have a dependence, an addiction, with regard to oil. We must now turn to the ingenuity of the American people to find new sources of energy.

And some of the solutions are literally right under our feet. Oil shale, for example, holds tremendous energy potential for our future. The Green River formation in Colorado and Utah and Wyoming contains an estimated 800 billion barrels of potentially recoverable oil from shale. This is enough to meet the current U.S. demand for oil for 110 years. By contrast, Saudi Arabia has 260 billion barrels of proven reserves. To promote development of this resource Interior initiated an oil shale research, development and demonstration project on public lands.

In addition, we've begun a programmatic environmental impact study for commercial leasing of oil shale and tar sands resources on public lands. The federal government cannot do this alone. If we are to succeed we need to work hand-in-hand with states and tribes and universities and industry and conservation groups. We can produce energy in an environmentally responsible fashion. We're seeking the right energy development plans that use best management practices that protect the environment. Our land management programs are open for public comment.

We work with hunting and fishing and conservation groups to protect wildlife migration corridors, habitats for threatened and endangered species, view sheds, and water quality.

We extend cooperating agency status to state and local officials to be sure that we've taken into account the views of those who live closest to the land that we seek to develop. Last year many of you worked with the administration to open ANWR for oil development. The administration came within three votes of opening ANWR for development. ANWR should remain a policy option because we can develop this resource in ways that can protect the environment.

Exploration would occur only in winter when the landscape is covered with ice and snow. The footprint would be 2000 acres on federal land, an area the size of a regional airport, in an area the size of the entire state of South Carolina. Advanced technology would limit the impact on the environment and its wildlife. Of course, we have other forms of alternative energy, such as wind and biomass and geothermal, that can produce and reduce our dependence on foreign oil. The Interior Department is working to promote these especially on federal lands.

For example, over the past five years Interior has expedited the processing of pending geothermal lease applications on public lands. Since 2001 more than 200 leases have been issued, compared to 25 leases from 1996 to 2001. Incidentally, I'm proud to say that Boise is not only the capital of Idaho, but some would say the capital of geothermal energy. Idaho also has the only state capitol building in the United States is heated by direct use of geothermal energy, as is much of downtown Boise. Other possibilities for the future resemble things out of science fiction.

Methane hydrates are frozen pockets of natural gas found deep in the ocean and in Alaska and other Arctic areas. United States has vast amounts of gas hydrates that dwarf known amounts of conventional natural gas. Scientists are at work finding ways to develop this vast source.

I'm convinced that given a chance, American ingenuity, perseverance, competitiveness, will find solutions to our current energy crisis. The role of the government is to both provide support when needed and to get out of the way when needed and warranted. We've watched, in the past year, how quickly market forces can bring about innovation.

It used to be, for example, that it was rare to see a hybrid car on the road. And now with energy prices climbing, just about every automaker is offering a hybrid and Americans are buying them. Last week I was in a national park in San Francisco. They have a building there where they conduct major operations, where the public comes and goes. That building is insulated with recycled pulverized denim that comes from previously worn jeans from prisoners. The Statue of Liberty, with its beacon of hope, is lit by wind energy.

Wind farms across America will generate enough electricity this year to light up more than 2700 Statues of Liberty. The Department of Interior is second only to the Defense Department in the use of solar energy. I say all of this to make the point that Interior is not just talking about conservation, but we're living it. I'm sure that all across America innovative companies are thinking of new ways to meet our energy needs. This administration is determined to help them succeed and, with your support, will take the steps necessary in Washington to make it possible.

Interior will do its part in managing public resources to continue to supply more than a third of the nation's energy. Let's hope that America is finally waking up from energy denial. Let's hope that we'll do what is sensible and necessary to ensure we do have the energy to run our businesses, to heat our homes and to preserve our way of life. I'm confident that we will accomplish all of that. Thank you very much.

Moderator: Thank you Mr. Secretary. I don't think anybody thinks you can't keep a job. I think the deal's pretty simple, you get things done. So everybody's looking for the next thing and now you've got 80 of them in front of you and we're glad you're here. We have time for a few quick questions from the audience. Anybody? Would you go to the microphone, please, and state your name and organization?

Sue Cosell: Hi, Mr. Secretary. My name is Sue Cosell and I'm a member of this chamber. My business is SK Visions. I'd just like you to communicate to the president and to your staff that not every business owner supports opening ANWR. I am completely against it. And I feel very, very strongly that the Bush administration is hurting itself and the congressional Republicans by putting them in jeopardy on this issue all the time. And as I hike around the nation in national parks, from Yellowstone to Grand Tetons, I haven't been up to ANWR yet, I'm just concerned that you're compromising a national treasure, a significant ecological center and the way of life that involves whaling. And I don't know what is the obsession about ANWR when you could be talking about putting money into other areas.

Moderator: You've got to tighten up the question please.

Sue Cosell: Well I wanted to make a statement, because I can't seem to ...

Moderator: Well, yeah, but we're here for questions. I'm sorry. You're going to have to tighten it up.

Sue Cosell: Well, what is the obsession with ANWR? And why can't you let go of it? That's my question.

Dirk Kempthorne: I think it was better when you were making the comment. Sue, let me just say, I appreciate your point of view. And I hope, from the comments I've made today, you've seen that it's a vast array of energy opportunities. The administration believes that ANWR is one of those options, but are our efforts offshore, our efforts onshore, our efforts with alternative energy sources, our efforts with the nontraditional, I really believe that with a diversified portfolio. And also I will say that all of these must be done, will be done with absolute adherence to the highest standards with regard to our environment. Later this year I intend to go up to ANWR and to see it personally. I also appreciate your comments about the National Park Service, which in the Department of Interior. And we do have tremendous treasures throughout this country, which we will continue to insure are there for the well-being of generations to come.

Moderator: Tom?

Tom Kune: Mr. Secretary, Tom Kune with Edison Electric Institute. And I am also on the Park Service Board. And as somebody that has been to ANWR I would say if, and as you talk about the ways that drilling is done and how safely it's done, if you can't go there, where would you want to drill? Do you want to drill more in the Rocky Mountains or elsewhere, other places? But I think that those - the organization that's cosponsoring this, the Alliance for Energy and Economic Growth, 1200 organizations, strongly supports opening up ANWR and moving forward on it. But on another subject that you touched on, the outer continental shelf, you talked about perhaps if you were in Idaho you might have been drilling into Wyoming. You know, in the outer continental shelf, lease 181, there's such a treasure of oil and natural gas out there. And as is pointed out by the chamber recently, Cuba and China can drill within 50 miles of the coast and yet we are prohibited. And I think that we appreciate your comments and your leadership, I think, in saying that something needs to be done to change that and that Congress really needs to move forward on that.

Dirk Kempthorne: Tom, I appreciate what you've said. I believe that the fact that we are seeing the possibility of China being allowed the opportunity to drill off the Cuban coast, which therefore is off the Floridian coast, has added to this whole debate. And I believe it's brought reality to this whole equation. It's important that we do find these resources. I have great confidence in the capabilities of our energy companies, that given that opportunity they can do it safely. They will use the most advance technology. As I say, I was very impressed to see that with one drill coming down, but then once below the surface, they can go in a variety of directions. This is true also onshore, so that that footprint of what used to be required for oil platforms or operations has now been reduced significantly and can then go and tap the different resources. So, again, part of the responsibility of Interior is to, in an appropriate fashion, work with regard to access, so that the companies can bring this about. Why do we want to do this? For the well-being of this country, for our national security and for the well-being of our economy.

Moderator: Time for one more question. Over here.

Bill Bell: Yeah, Bill Bell with Mitsui USA. Could you elaborate a bit on the oil shale opportunities and the timeframe for some of the R&D projects and such?

Dirk Kempthorne: Yes. This we're moving on the R&D, moving through the process now. Brian, what's our timeline that we're…? We're looking at having proposals out in the next three to four months for those companies. The technology, I believe, we're looking at by the end of the decade. We believe that we can see this technology brought to bear and can actually derive the resource from there. If so, and I think it's a tremendous promise, no, let me say that differently. It holds tremendous promise. What this could mean for the United States is just incredible.

Moderator: Mr. Secretary, thank you, very much.

Dirk Kempthorne: Bruce, thank you.

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