going on out there, they just had no way of being confident that we were, that actual accurate reporting was going on. how is this going to change this? >> well, actually, we're doing a number of things. as i said in my opening statement, we just finished a comprehensive review of our organization, and we looked for a number of ways to improve our revenue collection capabilities. one thing in recent years and thanks to the support of this committee we've been able to improve our computer systems. a lot of the information that does come in comes in electronically, and our computer systems are upgraded so we can have more up-front edits. so when the companies submit their data to us, we can do a quick company check from the payer information and the oil and gas operator information. after the computer does its work and with those improvements, we

also have initiative for 12 additional employees to look at the exceptions. er time the computer system kicks -- every time the computer system kicks out information, we need somebody to look at what the crepety was. we'll be able to hire 12 new people. >> the discrepancy, you get your information that you count on, the royalties that are going to be paid, from the production records of the company, right? >> what the companies do, there's two pieces of information that comes in. we have information that comes in from the companies that pay the royalties so all of the payment information, and then we have information that comes in from the producers that includes the volumes and information related to the oil production. so those two pieces of information are compared to make sure we're getting all of the money that is due for the production that was made. and then as debbie just pointed out, we also have a third party process where we actually get the source information from the meters themselves.

>> okay. one of the things that was brought up, also, mr. bromwich, during the ig's report was the difficulty that the department is having with personnel because qualified, experienced personnel are being hired by the oil companies and so fort and that we're -- so forth, and that we're having a hard time retaining them. what are we doing about thatsome. >> we're doing a number of things. many of our employees are approaching retirement age, so they are, not surprisingly, headed for the exits. we're doing several things. number one, i have done, and i mentioned to both of you when i met with you, recruiting tours. so i went to some of our best engineering and petroleum engineering schools in the gulf, lsu, university of houston, texas a&m, university of texas, other schools, to try to recruit

some of the best and the brightest engineers who were in school telling them their country needs them working for us, regulating this terribly important industry offshore. and the result of that recruiting tour was a very narrow jobs announcement, narrow many terms of time, was overwhelming. and so that was very rewarding, be curious, how many people were you actually able to hire? because they, the process of actually hiring somebody in today's federal government seems impossible. all those people that tried to get hired, mr. chairman, would you mind my asking, how many did you actually hire? >> well, we brought on 70 new year. are net adds, but -- >> but they're new people. okay, that's good. excuse me for the interruption. >> no, not at all. and in addition to the engineering people we're

bringing on, we obviously have a great need for environmental scientists and people with environmental backgrounds. so we're going to be doing the same kind of thing in two weeks. we're starting to go out to various environmental studies programs in our universities across the country, again, trying to recruit them and make them aware of the important public service opportunities that are available for them in our organization. but, mr. chairman, you're quite right in identifying the problem of having our people recruited away either before we get them or after we have them by industry. because there is a significant salary disparity between -- >> do you have any idea what the disparity is? >> it's, it's -- i don't, but it's enormous, and it grows over time in terms of the seniority of the people. we have anecdotal information, but we can try to collect thatq for you. one of the things we're trying to do, and this mirrors whatqq other countries do, we're trying

to get exemptions from the normal federal salary scale in recognition that we're competinq with anq industry that can pay far more.qq so we have a package that's currently pending at the office of personnel management that would help to narrow the gap between what engineers and other specialists can make in private industry versus what they can make in long-term careers with us. i don't know the way that's going to turn out. i hope that the need is so dramatic that it will be granted, but it just gives you a sense for some of the levers we're trying to use, some of the tools that we're trying to use to get the best people and keep them. >> you mentioned during your testimony that at the end of this fiscal year your department will be split. >> that's right. >> given the lack of coordination in many agencies, are you concerned these two

agencies might not work well together and further reduce the efficiencies and delays in oil and gas development, and how will you prevent this? one of the things that i hear from industry is that what they need more than anything else is predictability. and while there was criticisms of the old mms, and you're right, there was sometimes too close a relationship between the regulators and the permit tees and etc., etc., that at least there was some predictability. and that's what they need. and can they're saying, you know, it used to be we would submit an application for a permit, and it might come back to us two tw or three times for additional information. now they're seeing permits come back to them 20 and 30 times for additional information, and it is just delaying the permitting process. how are we going to get these agencies to make sure they work together and that we, while we

do the proper oversight and environmental reviews and everything else, that it's not just a continual foot dragging? >> let me answer two parts to that question. one, how do we make the process efficient. i think as both you and mr. moran mentioned in your opening statements, deepwater horizon was a shocking event for everyone, and not surprisingly, it prompted a lot of activity within the agency in terms of developing new rules, new processes, new proceed writers. -- procedures. as those were rolled out to industry, they were complicated s and it took some time for industry to absorb them and, frankly, it took some time for our people to absorb them, understand 'em, explain them and understand how to evaluate new permit applications. i think that has dramatically improved over the last few weeks. i think if you asked industry as i do almost every day whether we're doing better now, the answer is yes. because we've settled into, i won't say a pattern, but more of a regular course of doing

business where most of the questions related to the new rules and guidance we put out have been answered and answered in a way that's clear to industry. so i think we're in a much better place now than we were in june or july or august or september, and i think things will continue to improve. getting to the core of your question, though, how do we make sure that operational efficiencies are not impaired by the split. we focused on that risk since day one, and, in fact, we have teams of personnel that are focusing on the interdependencies between the funks that will now be in the separate agencies -- functions that will now be in the separate agencies, and they're identifying ways to make sure that the operations remain efficient and whole and that the split into two separate agencies does not cause impairments of operational efficiency. it's a terribly important issue. we're focusing on it very intently, and i think we're going to solve of the problem. >> i hope so, because that is --

probably more than anything else, that's the primary complaint i hear from people. as you know, any business that plans, they need to have some predictability, and with these companies they need to be able to predict when they're going to be able to drill in order to keep their refineries going and etc. and that type of thing. >> that's absolutely right, and i think that we've come a long way. we now have since last june when new requirements first went into effect, we've granted 38 shallow water permits, and the pace has been pretty steady lately. and then we started, as you noted in your opening statement, to grant deepwater permits. now, it's not really accurate to say there were no deepwater permits that were eshooed because that suggests -- issued because that suggests that industry was ready. in fact, until february 17th there was no containment capability that existed for deepwater drilling. that's when the two containment

groups, the helix group and the marine well containment company which is composed of the majors, that's when they announced that they have the capacity ready, and they were able to provide the containment resources in the event of a subsea spill. so i think, and industry i think agrees with me on this, that that's the date from which to measure the issuance of deepwater permits. and we were able within 13 days of that readiness to issue the first deepwater permit. and then, as you know, we issued another one just last week, and there will be more to come. so in terms of predictability which i completely agree with you is so important, i think that with these first two deepwater permits that had haven approved and with mine and secretary salazar having said that there are more to come, we are providing the kind of predictability that industry craves and needs. >> thank you. mr. moran?

>> thank you very much, mr. chairman. i want to thank all the witnesses for their service. the chairman conducted a very good hearing a couple weeks ago with the gao on the interior department. and gao identified interior's onshore and offshore oil and gas management as being on the highest risk list for fraud, waste and abuse. i want to ask mr. gould, first of all, because in the bao -- gao testimony they said interior collected lower levels of revenue, in other words, you, your organization, collected lower levels of revenue from all but 11 of 104 oil and gas resource owners including states and other countries. do you agree with the gao's assessment of the u.s. government take of oil and bass

revenue -- gas revenue compared to other countries, and can you give us a feel for the kind of revenue loss that the taxpayers are bearing? and can we rectify that? >> very good question. and, actually, we are working very closely with blm on the government take issue. in fact, they have a study ongoing right now that we are a part of. i think when we get the results of that study, i think we'll all be ready to do what we need to do to implement it. but until that study is done, i don't think we're in a position to, uni, know -- you know, what type of revenue structure is the best. >> mr. gould, before you move it over to mr. bromwich -- >> [inaudible] >> how long have you been working in the area of natural resources revenue for the interior department, mr. gould? is. >> for 29 years. >> for 29 years. and so we get a gao assessment

that there are, that you're on the highest risk list for waste, fraud and abuse that our, the share of the taxpayers' revenue from oil and gas is at the very bottom in terms of what other oil and gas resource owners are getting, and your response is that you're going to commission a study. and then look at the issue after 29 years. of professional experience in this. so it's fair then, i think, after 29 years to ask you do you personally think that the taxpayers are getting a fair share of the revenue that's due them from these natural resources that belong to them, their children and grandchildren? >> congressman, respectfully, i'm a geologist, not an economist. [laughter] and we are running right now, and i'm in charge of the collection part of that process.

and in terms of the collection part of that process and gao's criticisms, we did agree with gao in 2008 when they said that the data that we were getting needed to be cleaned up. and we've done a lot since 2008, as i said. right now, you know, we have the sophisticated accounting detection system to make scheuer collecting -- make sure we are collecting everything that is due. so i feel we're doing a lot right now, and i feel the budget request we have in front of us is going to help insure that we do collect every dollar due. in terms of the fair resent, i think we need -- receipt, i think we need to let the study go through and get the information. i honestly don't have an opinion on whether or not we're getting -- >> no opinion. you've been involved in the industry for 29 years. we, obviously, haven't. mr. simpson knows a lot more about it than i do, but, you know, we form some opinions

pretty readily when we see some of the numbers. the states get half of the royalties. you wonder if they wouldn't feel shortchanged. the, i want to continue to focus on mr. gould and ms. chutety because, mr. bromwich, you were doing other things for the public interest while this stuff was going on. what's the situation with regard to the royalty-free deepwater oil and gas leases in the gulf of mexico, and sure you must have had some opinion on the discussion that has taken place on the floor and in press conferences and mr. markey, certainly, he has a loud enough voice to reach your ears, i would think. that there's billions of dollars in revenue that is being foregone that should be going to the taxpayers because of what

can only be described, well, what has been described as a screw-up on the part of the professionals in this area when they put together the contract. you know, we try to delve into it, they say, well, it was one person's responsibility, that person says, well, it was their responsibility. the fact is that this is a situation where the contract that was made when oil was very cheap was supposed to yield appropriate revenues to the federal government when the price of oil went up. the price of oil went up, and they tried to collect, and kerr-mcgee said, well, wait a minute, the staff messed up, and we're not legally obligated to pay this money which amounts to billions of dollars, and the court upheld them saying that the staff messed up.

so what happened? >> well, actually -- >> i mean, it's a serious issue, isn't it? >> very serious. >> yep. billions of dollars of taxpayers -- >> and as of january 31st, it's 3.3 billion -- 7.2 billion is what we estimate, the foregone royalties. but it's important to note the supreme court did not hear that case, did not accept that case, and it was determined that the law itself actually prevents us from or prevents boehmer from putting a price cap or price limit on it. so right now the way the law is written it's a certain volume has to go royalty-free, and we have, actually, no control on that based on the supreme court ruling. >> so this is going to continue. and what would you say is the total cost to the federal taxpayer of this mess-up? >> the estimates that we are getting working closely with directer bromwich and his staff, we have estimates of 15.21

billion. >> $15.2 billion that should be going to the taxpayers in reimbursement for the oil and gas they own but instead is going to enhance the profit margin of the oil and gas companies. i'm not exaggerating, that's the case, isn't it? that's an expensive mistake. you would agree. >> well, i do want to make sure it's clear that it wasn't a mistake we made in our office. >> who made the mistake? i don't want to belabor this except for the fact we're talking about $15.2 billion of taxpayers' money. we cut a billion dollars out of head start programs, we're cutting here, we're cutting there to save a million here and there, and here's $15.2 billion we gave up in revenue. >> i truly understand your concern and, again, as a taxpayer, i agree with you. >> yeah. >> but we don't have any legal mechanism to put any type of price caps on this.

>> but didn't there used to be price caps? when the price of oil went up, then -- no? >> no, there was not. >> now, so how do we protect the government's interest in this oil and gas that they own? >> at this point i think -- these are leasing questions, and i'm sorry to say, but i am going to ask the leasing officer. [laughter] >> all right. earn your pay, such as it is, mr. bromwich. >> i am not thoroughly familiar with these issues, but hearing you describe it and hearing the magnitude of the dollars, it's a serious problem, and i will learn more about it and get back to you. with fuller answers. >> okay. well, you know, i don't really want to just give up at this point, but -- [laughter] okay. well, you need to get back to us. >> yep. >> this isn't going to go away. >> yeah, absolutely. we understand. >> [inaudible] >> wills no provision. -- there

is no provision. the law, when they put the law in effect, they put it that certain production levels wouldó go royalty-free, and that was the only thing the law said.wwww it didn't provide any otherñoño mechanism.no >> [inaudible] >> no. >> what prevents you from doing that? >> the law -- >> sounds like the legislation doesn't permit it. >> that's correct. >> so the legislation would have to be changed. >> so it's the congress' fault. well, the congress put it in with the clear impression this is low priced oil now. when it goes up higher, we will collect revenues, but we want to keep the industry going because the price of oil was $20, $30 a barrel. now that it's over $100, everyone assumes -- in fact, the head of chevron says, yeah, we ought to be paying this, but we're not. okay. i just have one last question. the -- and, mr. gould, 29 years, it's fair to keep asking you. over the past five years, your audit and compliance program has

collected 110 million from companies that underreported. gao told us in this excellent hearing that chairman simpson called that, really, they just -- you just take the numbers that the oil and gas companies give you, so you can deal with that with gao, but that's what we're being told. and, in fact, they get on-time reporting because they need to know what the value of their inventory is, but you are less interested was the implication. so you would think, though, that the federal government might invest in more careful auditing on the industry. and the irs, for every dollar we spend on program integrity, in other words, going after people who it looks like haven't paid their fair share, we collect $10. so one to ten is a good ratio. in other words, if we put more money into more careful auditing of the oil and gas industry, would it yield more revenue to the taxpayer? >> yes, it does.

and, actually, our audit and compliance program historically averages about one to four. >> one to four. >> dollars. >> so for every dollar you put in, you get back about four dollars in collections. >> that's correct. >> okay. mr. chairman, thank you. it's a good hearing.z [laughter] >> [inaudible] very much so. >> thank you, mr. chairman. in wyoming's experience the auditing really does improve collections for a period of time. and then it declines for obvious reasons. compliance improves, and so the collection declines for -- because compliance has been ramped up. so we have that experience as well. couple questions. mr. bromwich, this goes pack to the marine -- this goes back to the marine well containment and

helix containment devices that have now been approved. is the word approves correct? >> no. i'm glad you asked the question. we do the evaluation as to whether containment resources are sufficient in the context of individual applications that are submitted by operators. and the operator has discretion which of these two containment groups to designate, or it doesn't have o designate either of -- to designate either of a these two groups. so these are resource alternatives available to individual operators that they can then include in their individual applications for permits. they can designate one, they can designate another, they can designate both, or if they have resources of their open, they don't have to designate any. and so we have resawed -- reviewed and reviewed the test results of the capping stacks, the devices that can actually be

put on top of runaway wells, and we're satisfied that those have the capabilities that the groups have said they would. but each assessment needs to bei done in the contex7at of an individual application which has its own water depth, it own pressure configuration and everything else. >> okay, great. thank you, that's informative. now, how many permits are ready and awaiting approval now that february 17th has passed and the containment devices that are -- i assume that they're included as part of the permit now? >> right. the individual operator designates the containment resources that they're designating as available to them, that they've contracted for -- >> gotcha. >> -- that are available in the case of a plowout. >> okay. how many permits are in that, fit that description? they're ready and awaiting approval now that february 17th is past? >> we've, we've granted two.

>> uh-huh. >> we have a relatively small number of permits that are pending. i have, my best estimate is that we will have additional permits that will be granted in the next few days. responsive to chairman simpson's comment about predictability, what we're seeing now now that we've granted the first two deepwater permits, is more coming in. so the number of pending permits now exceeds ten for the first time since deepwater horizon. and so i think that shows that industry says, okay, this agency is going to approve permits, containment capabilities are now available, so we're going to move forward. so the thing looking around the corner, the thing that i'm concerned about, frankly, given our lack of resources is whether we have sufficient permitting personnel who are going to be available to process what i anticipate will be a surge in

permit applications. we were, obviously, hopeful when the president's $100 million supplemental request for fiscal year 2011, that that kind of help would be on the way. but you know better than i that through the series of crs, that help has not been forth coming. so we are working on various alternatives to try to bridge that gap to make sure that we have the resources that we need. and one of the things that i've done recently is reach out and try to see whether we could get retired petroleum engineers from industry who would be willing to come this on a temporary basis -- come in on a temporary basis to help our permitting personnel. they would be under the control of our people, no retired people from industry would have the final authority to approve permits. but they would be manpower that would help us do that.

so that's just one alternative that we're considering, but it's our effort to act and to think about these issues before a crisis hits and before a bottle neck develops. and so we're working on that. i've talked to top executives of some companies asking them to reach into their ranks of retirees to see if we can get some help. >> good. now, i note that you, you're proposing a $4 per acre fee on nonproducing wells, so i have some questions about that. for example, what, what does an industry pay on average for a lease at auction? >> well, it can be millions or billions of dollars. i don't have a per-acre figure for you. >> okay. and those leases are usually ten years? >> generally. >> okay. and what is the annual rental on those leases? >> the annual rental, i guess, it would depend. a sliding scale. the rental, just to be clear -- i'm sure you know this -- is only paid until production

begins, and then a royalty rate is assessed. >> uh-huh. and the royalty rates are -- >> i don't have the percentages in front of me. i can get back to you on that. >> do you, when you issue a lease an auction, do the royalty rates vary? >> yes, they have. >> and do they vary based on seismic data? is. >> i'm not sure. let me get back to you on that. >> okay. i know in wyoming, you know, we usually put them out at, oh, 16%. if nobody picks them up, then we have a counterleasing process at a 12.5% royalty. but even that is subject to change, so i was just curious about what -- >> the turn the tables on mr. gould who does the collection. i think he probably has a better idea, and ms. schutte about the royalties we collect. >> 18 and three-quarters. >> okay. well, that's pretty generous. and in the private sector, in the leasing that's going on in

the formation in wyoming which is shale oil, royalties are running between, oh, 15 and 20%. the highest i've ever heard in the last few months is 20%. and almost no one's getting that. but that's, that's better than most people are getting onshore in wyoming on private land in the area. um, of the leases still held, have the lessees continued to pay their annual rent even on leases awaiting permits to drill? >> yes. >> okay. does your legislative proposal to charge a $4 per acre fee on nonproducing wells include wells that have been waiting on you over the last year? >> i'm not sure. i think it's one of the subjects of discussion. and we certainly recognize that interruptions in the process that have been caused by the need for regulatory changes and the subsequent slowdown in the permitting process should be recognized in this process. so i think those issues are in

the process of being worked through. >> okay, very good. regarding civil penalties, as i understand it the bureau levies a civil penalty of 35,000 per day, per incident. >> that's right. >> okay. >> which i think is terribly inadequate. >> too low. >> yes. >> and you might be right, but i'm curious to know what criteria for live i having civil penalties, what the criteria should be. so under what circumstances are civil penalties levied? >> there's a complicated system, frankly a too-complicated system within the agency for referring violations for consideration of civil penalties and then a decision on civil penalties. one of the things that we're doing in response to the various reviews and reports on us is to look at this whole structure of civil fine referrals and assessments. my own impression, my own view is that it's terribly inefficient, and it's quite ip

adequate. inadequate. so we have one of our implementation teams that was formed in response originally to the secretary of safety oversight board report looking at exactly that issue. that is, enforcement issues and civil fine issues. so my view that the $35,000 ceiling is inadequate is based on my intuitive sense that when we have serious violations for companies that are making large revenues, that $35,000 at it peak is completely inadequate to deter violations. >> okay. >> completely inadequate to deter serious violations. >> and are these subject to rulemaking, the criteria under which a civil penalty is issued? >> yes. they are subject to rulemaking, but the dealing -- although we can make cost of living adjustments within narrow limits, a broader raising of the ceiling requires legislation.

>> okay. um, what -- okay, what additional congressional authority would be required? >> i think legislation specifically raising the fines ceiling which -- >> okay, raising. >> uh-huh. >> all right. and be you have an up-to cry tier cra in your rules right now? >> we have criteria right now. again, those are subject to review, and my own view is that will probably substantially change over the next several months. >> do you have a right number in mind in terms of a per-day, per incident penalty? >> i don't. >> okay. and how does one -- i was on natural resources, you came in when you were new, and you talked about your background and it was, as i recall, forensic -- >> oh, i dabbled in forensic science, but only someone in running informations.

my background, as mr. moran noted, has been in law enforcement. >> okay. very good. my time's probably up, isn't it, mr. chairman? [laughter] >> [inaudible] >> very good. >> we'll come back. >> okay, thank you. >> thank you very much, mr. chairman. and i want to thank you very much. thanks for being here, thanks for everything that you do. t also want to applaud you, basically, for something that was very important that you did last year, of course, the deep water horizon management, how that spill last year was taken care of, how you managed it, how you did all of the necessary work dealing with it. it was an exemplary set of circumstances, and we applaud you and thank you very much for what you've done. a lot of progress has been made, but there are a lot of things that really need to be done. conflicts of interest, conflicting missions that plague the former minerals management service. all of these things that really need to be taken care of. just as a curiosity, in the

context of what mr. moran said a moment ago, he was asking something and you said you couldn't do it because there was a restriction in the rules, would you be kind enough to -- not now, i'm not asking you to do it now, but would you provide me with a play on that restriction, the details, how that's set up, when it got set up, what the restrictions are that you have to deal with? i think this is something that, you know, we should really be looking into and be trying to address. >> mr. chairman, for the record, we have -- [inaudible] >> yes, yes. we'll, we'll provide you with a detailed summary of -- >> thank you. thanks very much. i appreciate it. mr. bromwich, i wanted to ask you a specific question. as the price of oil continue to increase -- continues to increase, we are once again hearing the call for more drilling on public lands and in public water. yet before we go down that road,

it's important for us to understand just exactly what's being done, how much has been allocated for them, what is being done on the land they have in their control. oil and gas companies, as i understand it, currently hold 80 million acres under lease. yet the industry is only producing on 12 million, 12 million of the 80 million of those acres. for offshore, specifically, there are a total of 38 million acres under lease, but the industry is producing on only six and a half million of the 38 million acres. that means that less than 25 % of the acres leased on federal lands and water are actually being used, actually producing. all the rest is just staying aside. and, apparently, it's been aside for some time. before we rush to open up new tracts for oil and gas exploration and criticize the pace at which the department is issuing new deepwater drilling leases, i think -- and i think

that that has been put out, that criticism has been put out which, to me, frankly, doesn't make any sense -- i think we need to make sure companies are taking advantage of the permits that they already have. so your budget proposes a $4 per acre fee on nonproducing oil and gas leases to incentivize current leaseholders to utilize existing permits. however, that's going to require legislation here, and it's very questionable. as to whether or not this operation here is going to be willing to do it. we'll see. we'll see how that goes. but in the meantime, what else can your department be doing to make sure these companies actually develop the leases that they have? >> well, as you probably know, the president addressed this in his press conference last friday. >> yes. >> and he directed the department of the interior to report back to him within two weeks on the potential policy alternatives that might be available to further incentivize

industry to develop the lands that are already under lease. so at the interior department we are busily at work trying to put together that report that will be delivered to the president. we're exploring a wide range of options, and we expect that report will be delivered on time at the end of next week. >> what do you think so far? >> well, i think that there are a variety of techniques that we might use. we've already tried to work with developing incentives through the lease process. for example, the notion of shorter leases so there is not as large a risk that companies will not work aggressively to develop the properties under lease, they have a shorter period of time, there's obviously an sniff for them to do -- incentive for them to do it fasterrer. another possibility we've talked about and experimented with is changing the royalty rate and charging a lower rate if property is developed very quickly. so that they pay a rental rate

for a shorter period, the royalty rate starts kicking in sooner because the development is sooner and to try to incentivize that, you could reduce the royalty rate in the first couple years of development. so that's just -- >> i wonder about that, but the $4 is not a very high rate for them. >> no, it's not. >> and i think reducing that is not going to be an incentive for them to do anything positive. i think there are other ways of doing that. >> well, there's no alternative that is beyond consideration. we're trying to look at the full menu of alternatives that are out there. >> [inaudible] that might go under alternative would be reduction of the price there because it's a very low price. and one of the things that we're seeing, of course, is a very high success of the drillers and the terms of the economic circumstances. so this is something that we need to be paying a lot of attention to. >> absolutely. >> because these are materials that are owned by the people of this country. >> absolutely. >> they're owned by the general public.

>> yes. >> and the general public is not really getting any advantage of the drilling process. in fact, they own it, somebody else comes in and drills it, takes it up and then spends it for them. >> right. >> you know, so there's something that really needs to be done here that is going to be much more effective on behalf of the general public of this, of this country not just for the oil companies, but for the people here who are now spending so much of their income on the price of gasoline. >> right. >> so i appreciate that. i'm looking forward to that, and i'm hoping that we get a copy of what you seasoned to the president -- send to the president as well. >> that'll be up to the president. >> all right then, we're asking you for the same thing. >> okay. >> we're asking you to provide for us the routine that you think and the circumstances that you understand and the context of the examination that you're engaged in now, and if you would be kind enough to provide us with that information that you come up with as a result of the investigation that you're

engaged in, we would deeply appreciate it. >> very good. thank you. >> when do you think we'll get it? >> i think you'll get it soon after the president gets it, is my guess. >> okay. [laughter] >> i don't usually say that, but that's a decision above my pay grade. >> okay. no, it's not, really, because you have an obligation to the president, but you have an obligation to the congress. >> it's not my report, let me just be clear. >> make it clear to the department wide that the interior -- that the department here has asked for this -- >> okay. >> -- and we would like to get it as soon as they have the information that they've been able to put together. >> i will definitely pass that along. >> thanks very much. >> you're very welcome. >> thank you. >> just out of curiosity, does every acre that is under lease contain resources, or are some of them actually dry? >> some of them are dry. >> ah. >> some of them are dry. >> that's shocking. ms. loomis, did you have questions? >> you know, i do. thank you, mr. chairman.

there's information, i don't understand this discrepancy, and i just want to ask you if you can account for it. doj filed in federal court in louisiana a claim that you have 270 shallow permits pending and 52 deepwater permits pending, and this information is, if i understand, current as of yesterday. difference? justice filing was in response, was in affidavit filed by one of

to demonstrate that focusing on those permits of sequence, as the judge from other capture the larger meaningful adjustments or the larger number are not drilling permits, they're adjustments or press release put out yesterday. and applications. modify, we've with granted thousands -- we've granted thousands of7$7$

those.7&7' thousands. but some of them can be for7%?" relatively minor things. and so we thought it was7%7' inappropriate and misleading to& cite those numbers because thos" are not the numbers that, mr. chairman, you and your yes, you would. and rightly so. and rightly so. >> and -- >> so to have this alleged turning to our web basis and identifies what categories they are, that rather than to blast it out and suggest that people are not being candid about numbers. >> okay. and so you did explain the 270 shallow permits because those -- now, what about these 52 deepwaters that this press release mentioned? >> same thing spl. so they're just -- >> so they're just requests to alter -- >> well, the 52, i don't have

me, do you? >> i do. >> okay. >> it just says because there are actually 270 shallow water permit applications pending and -- >> yeah. of it's the same principle. they are thing like applications to modify as opposed to applications for new wells or meaningful substantive reviews that our agency does and takes so much time. >> okay. so it is around ten when you look at brand new permits to drill. >> that are pending, correct. >> pending. okay. >> are does that help you? >> yeah, it does. clears that up. mr. chairman, do i have time for one more question? thank you. the iru. i want to ask a question about how that differs from the inspector general. and i know you're requesting 5.8

million and 20 full-time equivalents for the iru, so i'm trying to understand what the iru will do that is different as you know and as the chairman knows, there has been a history of allegations of corruption and misconduct within the agency as well as mismanagement of certain issues. lot of to handle certain kinds of allegations and investigations yourself. the inspector general and interior, the inspector general in any department doesn't have adequate resources to do all of that. when i was at the justice department and i was the inspector general, all of the different components of the justice department -- bureau of prisons, immigration service, dea, fbi -- all had their own internal affair units. so the inspector general would

get allegations, and then those that it didn't have the resources or for some other reason didn't want to handle would be flipped back to internal affairs. that's exactly the principle that we're talking about here. >> okay. >> to create an internal affairs-type capability which will also have the ability to do aggressive enforcement actions of oil and gas companies that are violating our rules and have been cited for violations of rules. >> okay. >> so we work in close coordination with the ig. we do not go out on our own without checking with the ig. the ig welcomed my creating this entity, and i think it's serving the intended function already. mr. and i, i'm not going to disagree with that at all because, you know, i know two former mms directors that asked for ig investigations when ethical lapses at mms arose, and it took three years to complete. >> and that's exactly the sort of problem this is designed to address. >> okay, great. now, would the iru have

authority to halt production on a well based on allegations if it was a investigation for a specific episode of misconduct? >> the iru itself would have no authority to stop production, no. >> okay. okay, great. and one more question, mr. chairman? switching gears? you're so kind of. [laughter] on to state partnerships for audit programs. the, that program relies on states to perform compliance activities on an estimated 3.3 billion in royalty payments, i know the state of wyoming has been doing that for years with federal mineral royalties in the state. i know you have agreements with ten states and eight tribes. and generally speaking, when i was in state government in wyoming, you know, i felt like the states were doing a really good job, especially the state of wyoming, on some of these compliance audits. and my question about this is

since we've got such tight budgets and we're not going to be able to fund everything here at the federal level that is being requested, do you think it would make sense to rely on states with which you have currently have agreements to collect revenue as well? obviously, states like wyoming are collecting a tremendous amount of state royalty, ad valorem royalty, severance tax royalty based on a lot of the same production from the same companies on the same formulas, and it, it might be a cost-saving measure. >> and, actually, the partnership we do have with the states is excellent, and it's something that we're working on on our strategic review. and, actually, we're including the state and tribal auditors with all of our reviews that we're doing within our program right now and the creation of our new office. so we have an excellent relationship with your auditors. something that i think is a win

for both sides. and we have the federal system, and we have all of these computer systems in place that can handle all of the revenue coming in, and it is a situation where the revenue comes in and goes into the treasury and then is dispersed. so i don't see that there's any immediate efficiencies gained by turning that part of it over to the state, but i do see in the partnerships that we've had a lot of efficiencies by using the state auditors. >> final question, and i think i know the answer to this, i hope i do. did interior finally get tribal royalties on the same mineral valuation formula as nontribal royalties? >> actually, right now we are looking at all of our valuation regulations, and we actually are just starting the process on valuation for indian gas or indian oil. we completed indian gas, and now we're on indian oil. >> so they're not on the same

formula. >> we are working that right now. >> oh, my gosh. i cannot believe it's taken this long. >> debbie shcutte one of the reasons they're not the same the leases are different. we are still continuing to work on revising the indian oil valuation regulations, and we're convening an indian-negotiated rule -- >> and the navajos in arizona, are they pretty deeply involved? >> very much. >> they seemed pretty sophisticated back when i was on that committee. thanks. >> yeah. we're working very, very closely with them, actually, on that particular issue. >> great, thank you. mr. chairman, thank you for patience. >> [inaudible] >> thanks, mr. chairman. when you provide that information to the president and a copy of it to us -- [laughter] would you kindly include the number of acres that are not likely or that you know do not have any value in them?

as you said, there are some. >> i said there are some. i, we will do our best to collect that data. it's, obviously, relevant data. >> yes. >> i think -- i don't know whether we currently have access to it, but i will make sure that's focused on as something -- >> whatever extent that you know. >> absolutely. yep. >> just don't have any oil this them. >> yes. >> let us know what percentage that might be. >> yep, okay. >> it would be interesting. >> okay. >> um, i just wanted to ask another question, mr. bromwich, if i may -- >> sure. arctic. as i understand it, shell recently announced it would not be drilling and they wouldn't be drilling there this summer anyway, but they're going to be planning on drilling there plans that they have include up to three wells, as i understand it which is a pretty large expansion of activities

there. the operation there is concerning because of the whole set of circumstances that they're going to have to deal with and the experience that we've seen from other activities up there. p -- so there's been a number of tragedies. we saw this gulf last year and more -- we saw in the gulf last year and more recently with an icelandic oil tanker that ran aground, i think, off of norway, off the coast sometime just recently, last month. so despite the bad things that have been going on up there and the context of those circumstances, shell intends to rely a on spill response plans that were written before the bp oil spill and the norway spill for the arctic operations. and that seems a little ridiculous looking at operations that they plan to take to be

preventive, but based upon not the most recent things that took place which were much more tragic and much more damaging and dangerous. and i think that they should be at least upgraded in the context of what the present set of circumstances knowingly are. so in addition to all we have learned since those two incidents, shell's spill response plans for the arctic can completely, seemingly, inadequate. and in some cases not at all based on the reel set of -- real set of circumstances that they're going to have to deal with there. shell's plans assume it will remove upwards of 90% of an oil spill in the open water, a number which has never come close to being achieved in practice anytime. offshore mechanical containment and recovery rates for the deepwater horizon spill were 3% and somewhere between 8 and 9% for the exxon valdez spill. shell's plan even fails to consider a potential

uncontrolled blowout under their worst case scenario despite what happened in the gulf, and there are many more examples like these. so i'm just hoping that given this information and all we've learned we should even -- whether or not we should even allow shell and drilling in the arctic on the basis of this set of circumstances. but at the very least, shouldn't the company be required to develop a new oil spill response and be prepared to deal with this in a much more reasonable, much more effective and rational way? >> thanks for asking the question. the arctic is, obviously, one of the most significant set of issues that we have to deal with. it's a frontier area, as people describe it. it contains various kinds of challenges because of the temperatures, because of the ice, because of the relative absence of infrastructure, because coast guard is not right there. they are unique. we were working with shell to understand the plan that they

had submitted for 2011 for just the beaufort. at that time the proposal was just to drill one exploratory well, and before we were too far down the road in doing that evaluation assessment -- and they had provided quite a bit of additional spill response-related information to us -- because of problems with getting an epa permit, they changed their plans and announced that they would not be looking to move forward in 2011. we obviously heard the same things that you have about their intentions to move forward in 2012. i think they are going to have to, obviously, satisfy us that all elements of their plan and their individual permit applications are adequate including with respect to containing a subsea blowout and dealing with other spill response issues. now, as i said, the application for 2011 that's now off the table was just for the beaufort. if, in fact, they go forward

with plans for the chuck g., that's, obviously, another set of issues for us to address. to anticipate that and to help us with that, we're doing a supplemental environmental impact statement that goes beyond what the court had directed us to do precisely to look at spill response-related issues in the wake of deepwater horizon. so we agree with you that there are lots of important and significant issues that need to be addressed and that we will address if we get exploration plans filed as shell says they will be and applications to drill along with those plans. we will not rubber stamp them, we will give them close scrutiny, and we will look at every aspect of their proposals. >> well, thank you very much. i deeply appreciate what you've just said and the way you're looking into this, and i think it's very appropriate and just exactly what needs to be done, so thank you very much. >> you're welcome. >> these are shallow water

permits, right? >> i think they're all shall row water. i know the ones in the beaufort were. i don't know exactly what shallow's going to propose in the chuck g., be but there's not a lot of deep water, so i assume that they're shallow water. >> so far shell's done everything that's been asked of them, hasn't it, except for the epa and their review panel? >> shell has been, has donering we've asked of them, has been very cooperative with us in supplying the information that we've requested. i've got no complaints or criticisms about shell. >> just out of curiosity, sometimes to find out whether an acre has, that you've leased actually has oil in this it or not, you actually have to drill. so it would be kind of hard to say how many acres -- i mean, why would you lease something if you knew there wasn't oil town there? numbers that i have is probably one out of four acres that are leased probably show no resources there. >> i've been told as recently as yesterday that if companies pat

one out of three -- bat one out of three, they're doing well. >> okay. well, i appreciate it. i appreciate all you've done. we look forward to working with you to make sure that boehmer and pest si and -- betsy and honor -- [laughter] i'll get used to those eventually. that they come into existence and do the job that i think all of us want them to do, and we look forward to working with you on this year's budget. >> thank you very much for your support, mr. chairman, i appreciate it. >> thank you. [inaudible conversations]

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