>> coming up next on c-span 2, the house hearing can there's new rules on oil pipeline safety >> a pipeline safety bill is the subject of the pipeline safety hearing. includes congressman jackie speier, the district at a gas explosion last year. and congressman danny rehberg of

montana, the site of an oil pipeline that leaked into the yellowstone river. this is 40 minute. >> i want to thank everyone for being here. today marks the 11th day in our american energy hearing. while the series has allowed us to examine a multitude of issues regarding energy production, regulation and consumption, today will focus on what can be done to improve safety and secure delivery of oil and natural gas via pipeline. several tragic pipeline accidents have occurred over the past year, which demonstrates the need to reauthorize and enhance current safety laws. despite this committee is berm frequently been cited many tense debates and discussions, pipelines they see as an issue i hope we can all work together to

produce meaningful and effective legislation to ensure the safety of our oil and gas pipeline infrastructure for the future buffer type in the american people and our environment. over the past several years, we've been able to pass bipartisan bill pipeline safety, sometimes under suspension on the floor. this is because our pipeline infrastructure touches every congressional district in accidents can happen anywhere, anytime. we have a democrat from california and republican from montana. both have dealt with major accidents recently and both understand congress must act to strengthen current pipeline bonds. it is critically important matter pipeline infrastructure infrastructure is both reliable and durable end to this in the discussion draft under examination state makes an important modifications to existing mod that will promote greater papacy standard. we are glad to have an opportunity today to hear from the x or it's how this discussion draft may be improved

or otherwise modified to ensure pipelines remain a safe and economical means of transporting energy supplies in how power our economy and create jobs. with that, yield the balance of my time to ranking member rash. >> thank you, mr. chairman. i want to thank all of you who have gathered here today with us. in the past, the issue of pipeline safety has been one that we have worked on in a bipartisan manner and it is nice and dear hope that we will continue to honor that tradition as we tackle reauthorization on this bill as well. i look forward to today's hearing was such a stunning lineup of acts for which assists and i commend you, ms. chairman for holding this hearing today

with such distinguished panelists. it would be remiss if i did not acknowledge representative at speier and representative rehberg, both of whom i have known on the subject of pipeline safety. representative rehberg represents montana, where they have an aftermath of the pipeline and the yellowstone river. and representative speier represents -- san bruno, the pipeline explosion that claimed the lives of the people. so while we have so far been pointing to my home state of illinois, we have recently been experienced in pipeline leaks to

the old and decrepit lines. just yesterday i had a conversation with the state attorney of will county, illinois, where he assigned me recently if there were pipeline seals through oil leaks and when you say make. and the leaks are the real possibility due to the aging rural infrastructure. mr. chairman, under the condition of aging pipelines, i would like to introduce into the record the dated july 14 in kind by state attorney james last

hour. i ask unanimous consent this letter be entered into the record. >> no objection. >> i look forward to hearing on the draft bill were discussing here. i am interested to hear representative speier's ideas on what elements of h.r. 22 of the community empowerment act for 2011 that we may be able to incorporate into the legislation or that we are considering in this subcommittee. as far as the discussion draft legislation, i am committed to working with you this legislation were necessary in order to ensure that we have the

shortest bipartisan bill possible as we move forward. and i understand many elements of this legislation draft in the senate bill, the person asked in areas where anything we could make some vital improvements so that we have a bill that can gain bipartisan support on this subcommittee, the full committee as well as when this bill reaches the floor. so before i believe this bill including regulation for gathering lines when appropriate , the management system requirements and ensuring that information regarding emergency response plans and industry developed safety standards are available to the public at large. mr. chairman, we will work on

this bill together and influence the most majority and minority from the subcommittee to appoint where it passed the senate and also the president will sign into law. the issue of pipeline safe the private various fields and explosion to the various pipeline proposals is one we must act on because this nation needs a dating and comprehensive pipe and safety. so once again, mr. chairman i applaud you. i look forward to hearing from all of our witnesses. thank you and i yelled back. >> thank you, ranking member

rash. i'd like to thank congressman dan in recognition for five minutes. the mac thank you very much. today the subcommittee will examine the discussion draft of the pipeline infrastructure protection act of 2011. pipeline safety is an issue that crosses regions, politics and parties coming as it does and affects all of us and our constituents in the same manner. the pipeline remains the safest means to transport oil and natural gas. over the past year we have witnessed a number of accidents that it destroyed property, ecosystems and most importantly lives of innocent people. last summer an oil pipeline ruptured and spilled into a streaming repair, which flows through my district. the still sent over 20,000 barrels of oil to kalamazoo river, different alarms sounded in the control room for nearly 10 hours before the leak was concerned and after that it took an hour and 20 minutes for the initial call to

the national response center to be placed. in september of last year come a gas pipeline inferno, california asked voted and killed eight people in addition to destroying 37 homes. it took over an hour for technicians to manually shut off the flow of gas, which continue to see the fireball. and of course last month come a pipeline. meet the riverbed riverbed of the yellowstone river near montana ruptured and spilled out to a thousand barrels of oil to the nation's largest undimmed river. i look very much forward to testimony from exxon mobil and congressman rehberg concerning the recent bill in montana. the discussion draft is not specifically address, some of the clinic issues raised by the incident, i hope what we learned today will provide better understanding on the adequacy or lack there of regarding current pipeline safety standards related to water crossing. with all of these incidents telesis pipeline safety laws must be enhanced to prevent tragedies like these in the

future and better prepare us for response and containment once they occur. the pipeline infrastructure and community protection act is the energy and commerce initial offering into this year's drive to reauthorize a plain safety laws. we are fully committed to working in a bipartisan, by committee bicameral fashion to get a pipeline safety bill signed this year into law. public demands it and so do our responsibilities as our elected leaders. among many provision leaders is wrapped under germination seeks to a one-hour time limit for operators to report incidents to the national response center, similar to legislation that the last congress passed on the house floor. to require the use of automatic or remote control shutoff valves that can stop leaks and spills in a fraction of the time needed for manual valves. three would require better the detection technologies for monitoring and assessment of

leaks. four, substantially increase civil penalty pipeline operators who has major accidents. five, require highly enhanced expansion techniques, which cover more pipeline mileage than before. and six, increase pipeline inspectors at the department of transportation. perhaps also the idea we will require pipelines to be. further underneath the waterways is probably was the cause in montana. this discussion draft is an important first step in getting the companion house bill out of the starting blocks and trajectory to merge the existing senate legislation. this tomb of the bill to the subcommittee over the next couple weeks and have full committee action upon our return from the august recess. i look forward to the conversation today and yet the balance of my time to the gentleman from nebraska.

>> thank you, mr. chairman. it is my hope about this committee and tni will report a large piece of legislation in the end of this year. when we hear of tragedies involving pipeline in san bruno or in montana, our hearts go out to those affected. as legislators, it is necessary and important that we quickly learned from his accidents and moved to write laws that protect human health and the environment, bearing in mind the pipelines remained the safest and most efficient means of carrying vital energy across great distances. pipelines are such an important part of our commerce and on involvement of the confidence that the system works well. i appreciate the outline that are chairman need of improvements that could be made to type in the tma guild back. >> thank you, mr. terry. inexorably to recognize mr. waxman. >> thank you very much, mr. chairman. today will examine the safety of

the nation's oil and natural gas pipelines and begin to consider legislation to update and strength in our pipeline safety laws. during the last 12 months from a litany of tragic failures has reinforced the need for stronger pipeline safety laws since last month's hearing on the topic, exxon mobil pipeline ruptured in montana, spilling an estimated 31,500 to 42,000 gallons of crude oil into the yellow stone river. it may have been carried as far as 240 miles downstream. pockets of oil have been confirmed at least 90 miles down the river. ranchers are struggling to prevent the contamination from destroying their livelihood. we don't yet know the cause of this bill, though much of the focus is on whether the pipeline. beneath the river was uncovered by a russian or exclusion from

degree. through may of this year, and spills occurred on the first keystone pipeline, which brings canadian tar sands to refineries in oklahoma. she is a brand-new pipeline. it was predicted to spilled no more than once every than one year of operation with 12 separate oil spills. he exploded killing and damaging more than 50 homes and businesses. this is a multistate pipeline. by september 8 ruptured and exploded in san bruno california. eight people died. many more were injured. the gas inferno sprang from house to house, chosen by the wind. 30 homes were destroyed in 70 more damaged. the explosion left behind a suburban street with a massive crater and burned-out vehicles.

the vice-chairman of the national transportation safety board described it as quote, an amazing scene of destruction. two months before the san bruno explosion, a crude oil pipeline ruptured narrow marshall michigan. over a hundred thousands of oil spilled into the talmage clique and then flowed into the kalamazoo river. the cleanup is ongoing. a year later it is expected to cost $550 million. these are just some of the catastrophic pipeline failures our country has experienced during the past 12 months. these failures have occurred all around the country from california and montana to michigan and pennsylvania. natural gas high plains have exploded. oil pipelines have ruptured. some fillers involve old outdated pay plans. others involve tranio supposedly state-of-the-art pipelines. well, we sat back and look at the last 12 months, i think it is impossible to conclude that

our pipeline safety laws are working as intended. we need to seize this opportunity to reauthorize and a deeper pipeline safety statute with the senate commerce committee has produced a moderate bipartisan bill. i think the senate bill is a good place to start and i hope we can work together to strengthen and improve the bill. the discussion draft will be examining today contains several of the same provision, but also weakens and other provisions. but the benefit of the testimony, letters used as discussion draft of the foundation to draft a strong bill together. i don't think there's any reason for this to be a partisan issue. we want to work in a cooperative fashion to produce a good bill that will meaningfully enhance pipelines ap. mr. chairman, i will now yield the remainder of my time. >> thank you. i think both the ranking member

for giving me time to speak urgent pleas for having this hearing today. i think if he is probably not most important issue in my constituents because many are employed in the oil and gas industry and thousands of in communities near pipelines in houston area district. the process is forward and look for to working with colleagues on both sides developed senses that the bill to update the regulations in a way that makes sense. so far am pleased with the senate bill, which is moving quickly over there and garnered bipartisan support and hope we can have the same success here. this hearing is a valuable step two in my strengths of both those and examine areas that need improvement. i appreciate everything is, particularly colleagues. and mr. chairman, we have to get this of pipeline safety, simply because the alternative is putting more trucks on the road, carrying the same chemicals are same products and that's why this is so important. i yield back my time.

>> thank you him and mr. green. at this time will hear testimony from her first panel of witnesses. i would first like to recognize congressman denny rehberg for montana. >> thank you for recognizing me and i want to offer my sincere appreciation to you, chairman sullivan and mr. upton for calling the meeting, ranking member rash for your assistance today and your recognition of the panel that follows the two of us because the staff really put a lot of work into it and i think you'll hear a lot about the necessity and opportunity than pipeline safety. the committee must accomplish true critical things today. first company to share knowledge in regard to the exxon mobil spell so we can determine what can be done to prevent it from happening again. second as congress moves forward with authorization from the pipeline, infrastructure act of 2011, to be absolutely certain we are doing everything we can to prevent future environmental health economic impact from

pipeline failures. the pipeline breaking was just another news tory about an oil spill. but for montana, this is our home. water in rivers play a big role in the lives of many montanans. the mclean family ms. jamieson of the river ran through it, it was the big lack for further. for me and my family comments the yellowstone river. i grew up in billing 50 miles from the river banks of yellowstone herd as a boy, a salmon fish the river and spent time at a family and friends floating down in inner tubes and barbecuing on its banks. in fact, i lost a couple of high school and then drowning -- separate downy accidents that river. the thousands of other, the yellowstone is her family with her. the oil spill is a pretty big deal for us. we have questions. i find two buildings about every week and over the yellows are river. it provides so many good shots

to her community, just like the river is a part of montana's culture, so is the energy. montana is a warehouse of energy options. we've got it all, wind, solar, geothermal, biomass, cool, biofuels. exceptions help us provide energy this country needs to end our addiction to foreign oil and create good paying jobs. the reason i point this out is simple. other might be some people out there who think we should develop our resources without any regard for the environment, that's not me. there are others who think we should stop all human impact on the environment whatsoever. that i'm either. none of these options work. and a fifth montana. i hope to pass it off. i'll be a rancher after he leaves congress. ironically i have a pipeline that crisscrosses my branch. at the conoco pipeline and i can begin to tell you what good neighbors they have been.

they flag it, monitor, work it. i receive no financial benefit. make great grandfather and the stifling legislation matter a lot to me. i want to know the private rate service acted and the people i respect good, but the environment is respected as well because while they receive no financial benefit that crisscrosses my ranch, i would have the benefit or the failure of any problems of the failures of the pipeline that exists and occurs. this kind of legislation is to those of us that were the land governments demand a way to utilize our national resources while doing everything we can to protect the environment. it's a reasonable and responsible expectation. the united states leads way in preventing clean effective energy. we're not perfect, but when there's a spelling mistake you file finder more scrutiny to sponsor her in the world. this is another reason's the reasons domestic energy production is such a good idea. standard and expectations are so

much higher than the countries we import oil from. a kilowatt hour produced in the united states is going to be cleaner and safer than a kilowatt hour of energy reimport. in montana, one of our most viable resources of nature is self. we hunt, hike, don't just visit the outdoors or two that they are. that's why send montana's fire experts and we don't need bureaucrats telling us how to manage our land and wildlife. this is a failure and did not live up to this and are among want to know why and what is being done and we want to know how to prevent it in the future enough of this hearing is all about. in the meantime, maintenance of backgrounds come together in the yellowstone valley to clean up this mess. exxon mobil is hundreds of people on the ground working closely with local, state and federal officials and they are joined by scores of regular montanans who are volunteering personal time to help clean up the spill. maybe worth of any testimony

here, i think that speaks volumes about the urgency of this response in montana, where the chips are down and you don't wait for outside help. rutger sleeves and join your neighbor in the frontline. again, thank you for the hearing today and i'm ready to answer any questions from day one of july 1, working with exxon, epa and anyone else the work it does to see we find out what happened and we fixed the problem and three, it never happens again. thank you, mr. chairman. >> thank you, congressman rehberg. i'd like to announce that the third panel will be testifying next thursday as we expect a lot of those on the floor here varies in the next hour. so i apologize for that, but it is to work better if we do that and i apologize if it inconveniences anyone. i know it probably does. next time, please welcome congresswoman jackie speier to deliver her testimony. >> thank you, ranking member

rash or the opportunity to speak to you. let me say at the outset that i am thrilled that this committee is going to move swiftly to address this issue. i have a couple of concerns i will address this morning. but at the outset, let me say that before september 9, i knew very little about this issue. i now feel like i'm a phd in it. i hardly knew about the national transportation safety board geared i didn't know what a maximum operating pressure was. i didn't know what a psi is, but i know all about all of those things today. i also know that i went to funerals of eight people in my district. i visited the burn center in san francisco, 47 victims slapped, clung to life for four, five, six months.

this is a tragedy not just for the san francisco bay area. this is a national story, an international story. and for as much as we are talking about today, there are a couple of things not in the spill that need to be addressed. one is if you look in pipeline safety historically been the less we put on the books, we grandfathered in all of the pipes that were pre-970. so while the older pipes are not subject to the ind of scrutiny that newer pipes are. this is a pipe that was actually placed in service in 1956 it's got lots of problems the national transportation safety board will come out with a report at e e of august. it appears to be flaed, the operator didn't know what was unr the ground. asa seamless pipes, when it was the same pipe. didn't have the instrumentality to determine the wellswere

poor. had maximum allowable operating pressures that exceeded what probably should have been sed. but having said all of that, they followed the law. they followed the law because they were gndfathered in. now, i've introduce legislation that addresses a number of elements. the local operator in my community, civic gas and electc has implemented every single measu that fit my bill. now, they have done it for a lot of reasons, but the are looking at over a billion dollars in liability right now. an all the operators across the country me the kinds of steps are recommended are very important. one of the things not addressed in either bill is noticed to the sident. pg&e has noticed everyone in the region if they are 2000 feet from a transmission line.

now that is important and good, not ju fr the residents, but fte operator. if the homeowner doesn't kow they've got a transmission line in their backyard or front yard and are putting out document, they're not going to take the precautions necessary. we know in pipeline safety, most ruptures occur from third-party impact. so that's a very important feature. they did it swiftly. it was not an extradinary cost of them. it is noticed tonot only the residents, but also noticed at the local first responders. the fire chief in 10%idn't know there was a transmission line running through the middle of the street. now it took an hour and 30 minutes or more per pg&e to turn off the gas. now, i am passing out photographs. this photograph showsou the kind of fireball, 30 feet in the

air or higher. they thought it a the claim that it crashed at frst. but it took an hour and 30 minutes for them to turn off the gas because they had to go all the way to another community, get the key to open the gate to get to the files. if there are automatic and remote shutoff salves required in high consequence areas, these are areas where you have high population and or sesmic risk that has been turned off within 20 minutes at the very most. so the fire raged for an hour and a hlf, taking lives and extensive property. over at 37 homes were demolished. if you look at this, it looks like a war zone and many of these pictures. ..

to make sure the there's going to be safety first i'm willing to pay that price what to make sure lives aren't lost. i have a written statement that i am not going to spend much time on because i think it kind of speaks for itself, but i do want you to appreciate that there has to be disclosure of

the location of the pipelines to the first responders. if they don't know where they are located, if they are not trained, then they are sitting ducks when an explosion occurs. there has to be notice to the consumer that automatic shutoff valves need to be put in place in high consequence areas. the language in both bills is really pretty squishy. it's basically they use the best technology moving forward. i'm much more concerned about the older pipeline than i am the new pipeline would and for all those operators that have pipelines they do not have paperwork for 30% of pg&e's system they do not have paperwork. they do not know what is under the ground. in those situations, the pipeline needs to be hydro tested because there is no way of knowing whether or not it is safe. there's a whole new technology

around what's called start digging that if you saw the pipe diameter that ranges from 30 to 2440, you're not going to be able to use smart men digging so the only way to make sure that that is safe is to do the hydrostatic testing. none of that frankly is in the legislation today. so i urge my colleagues to recognize if these pictures don't speak a thousand words i don't know what does. this isn't anything you want to have in your district and if it does it consumes you of for years and it has been in a toll in my region and something that really needs to be addressed on the federal level. i yield back. >> i'd like to recognize myself for a question. can you briefly tell us about how the unified command is working in montana?

>> you may have seen the press where the governor pulled out the command but for the most part i think works extremely well together and so there's probably some politics over policy involved in the situation, but we are pleased with the epa has done a great job and we have the coast guard involvement and the fish and wildlife service, state department of wildlife and parks in the state of montana, and really they worked well together and that doesn't always happen. one of the reasons i think is because excellence of forward and said we are responsible. you have a lot of finger-pointing. in this particular case exxon stepped forward and said we're going to stay and hold up the environment and pay those that have a loss of use on their properties and so on to release some of the fears of the economics people because of the oil residue exxon has got people working to figure out a fair

settlement so that they can get in and fix it. so for the most part the coverage has been good, the comment has been as good as possible in a very emotional situation, but we just appreciate it delivered, the state effort, the local effort and the company effort to do the best they can. most of the company did not what we think the commanders worked very well it's been a good process to get the question. >> i'd like to recognize you for a question. >> congressman, [inaudible] an area where it is right here leaving comments [inaudible]

>> we have three refineries in the area so it's part of our economic -- >> i'm sorry. i misunderstood. i identified with your comments. [inaudible] and he is afraid we're we have not had the kind of [inaudible] as you've experienced they start to off small [inaudible] i concur with your attitude

about how we can strengthen this bill and i want to thank you for your kindness and comment santa i think you have helped us with your of rice and consideration and to strengthen this bill i speak to >> on the notice one to the citizens using to be disappointed. how can we reassured that those who live in the communities may

have somewhat prior knowledge as the anno before and and are more mindful of some of the things of the four warnings so can we address the issue or what of the constituents? >> thank you, ranking member. i would be happy to. it's important to note the industry has been driving the policy, not surprisingly in a free much the case as it relates to safety. most of the studies that are commissioned, 60% of them are funded by the trade association, and the trade association determines whether or not to do certain studies. the trade association is also deflect the, quote, educational

component, and and p.j.'s case, they paid an entity that was somehow related to the trade association to do, quote, education and they did a survey, and the survey was exposed at the national transportation safety board, a hearing this occurred in march on the explosion, and it was -- it was shameful that how much of your money was spent on the survey to the ratepayers, they got a response of 50 people. thousands of thousands of surveys and 15 people responded. pg&e has taken upon themselves to notify every resident. they did it swiftly if you are going to build people you can also send a separate notification to tell them that they are within 2,000 feet of a transmission line. now it's important to the residence but it's also

important to the operator because of the third party digs are the most likely occurrence of raptors. so the right to know should be important to everybody. to those living next to transmission lines and first responders, and that's why i think that is so critical. there's a lot of money spent on education that has been absolutely pointless, and i think we need to take the next step in terms of right to know. >> i'd like to thank the panelists. congresswoman speier and congressman rayburn, thank you. now we would like to move to the next panel. let's get them up here. thanks.

this is the member's role at the library of congress. a private room where senators and house members can have their personal records held here at the library. just how many congressional questions are there? you'll find the answer to that on c-span's original documentary

"the library of congress," earing this monday night. we will tour the jefferson building including the great hall and the reading room. we will show treasures found in the rare books collection including the original thomas jefferson library and presidential papers from george washington to calvin coolidge. and learn how the library is using technology to discover hidden secrets in the collection and to preserve its holdings for future generations. join us for the library of congress, this monday night at 8 p.m. eastern and pacific on c-span. about that question, the library holds the personal records of over 900 current and former members of congress. the senate special committee on aging and the senate health and pensions committee organized a discussion on 401k accounts and retirement savings, specifically the so-called linkage that occurs when individuals cash out their account for take out loans

against them. we will care about the two new studies, one that examines the increase in the amount of money being withdrawn from bob 401k accounts before the retirement, and another that explores the racial disparities in retirement savings accounts and early withdrawals. we will also hear about proposed legislation to revise current policy on the early withdrawal from retirement savings. this is 40 minutes. >> good morning. my name is john and ayman analyst on income security at the congressional research service. we provide nonpartisan policy analysis to members of congress and committees. ensuring that americans have adequate income in retirement is an interest of many members of congress and through the tax code, congress provides incentives to encourage retirement savings. about 50% of full-time workers save for retirement using a defined contribution plan at

which the 401(k) plan is very common. some of the tax incentives are designed to ensure that money is kept in these retirement accounts, and so there is concern about the pre-access retirement accounts before retirement. and these are what we refer to as leakages. and there are generally three areas of linkages taking out loans while working, making withdrawals while working in also cashing out when switching jobs allowing access to funds in a retirement account before retirement may undermine the saving for retirement. but at the same time, planned participants may tell you the access that they have to the fund is particularly in the emergency is. and allowing access may actually

increase contribution rates or participation. so the goal is to find the balance between the leakages while at the same time allowing access to those who might be in need. senators serve kohl of wisconsin and mike enzi of wyoming have introduced bipartisan legislation that would address some of these concerns that senate bill 1121, the savings enhancement by ev of the linkages in the 401(k) savings act in 2011 or the seals 401(k) savings act. and this bill would do three things colin coat one, it would extend the period for the loan amounts, so leaving a job when you have an outstanding loan can be problematic because if the loan can be considered a distribution and may be subject of tax or additional 10%

penalty, this savings that would give employees more time in which to pay back the loan if they lose their jobs. secondly, the bill would allow contributions during the six months following a hardship withdrawal. irs regulations currently prohibit elective contributions to a 401(k) plan during the six months following the hardship withdraw and this would eliminate the requirement. after commit with dan 401(k) debit cards. the bill would prohibit products that would allow individuals easier access to the 401(k) retirement account. the two reports will be presented today highlight some of the concerns with regards to the retirement income security. first, the survey of 110 large defined contribution plans and the hardship withdrawals and it

notes these increased in recent years particularly in light of the economic downturn and and it makes recommendations with regards to the leakages from the retirement accounts. the second report is the study of the racial and ethnic disparity within the 401(k) plan. the study finds that participation and contribution rates are lower among african-american and hispanic workers and that these workers are more likely to have outstanding loans against a 401(k) plan. we have alison borland and mark parikh. alison leads the strategy product development for the hewitt's outsourcing business. she uses her expertise and knowledge of the marketplace to develop and implement solutions to support their client's efforts -- clients efforts to help employees achieve retirement success. alison also underseas the aon hewitt research team leveraging

on the data on millions of retirement participants and hundreds of plan sponsors to identify and understand trends and opportunities in the retirement programs. she's co-authored some of the most respected surveys and studies such as hot topics in retirement and retirement income adequacy, the real deal, and contributed a study of the 401(k) plans in living color, the 401(k) disparities across racial and ethnic aon hewitt study. in 2008 she was recognized as one of 25 women to watch the insurance. prior to this commission was a principal with the associates and leader of the defined contribution consulting practice amar parikh is the vice president of corporate affairs for a real investment since institutional clients through separately managed accounts as well as individual investors and defined contribution plans through the mutual funds.

amar is responsible for managing special projects for ariel president and more specifically focus is on of public policies championed by the firm including financial literacy and approving their rates at which minorities save and invest. he's also the chairman of the risk-management committee in the annals of corporate insurance matters for the firm of. additionally works closely with the president with the development of the financial statements for adc's good morning america, world news tonight, nightline and abc news dhaka. prior to joining the firm in 2006 he served as audit manager for the unitrin and insurance of the financial service provider and consultant for nearly two years at princeton beyond. he graduated from the university of illinois with a bachelors of science and finance management information, management information systems and additionally he earned his m.b.a. from the university of

chicago. >> good morning. [inaudible] there has been a lot of attention focused on the inadequacy accumulation of assets and defined contribution plans. another words the fact participants are not seeking enough. there hasn't been as much attention however on another significant problem, and that is after money goes into the plan is a lot of money is actually coming out. so as previously mentioned we decided to take a deeper look and collected data on 1.8 million planned participants across 110 large defined contribution plans to better understand and study where the real problems reside. we also surveyed about 200 plan sponsors last october to better

understand whether or not this was a concern and whether or not the plan sponsors on their own plan to take action about it. the study focused on those three areas as mentioned, loans, active withdraw so in other words taking money out of the plan while that is working and then finally to cash out on the job termination. let's start by talking about loans. loans are at an all-time high according to the data. 28% of active participants have an outstanding loan or have an outstanding loan at the end of 2010. during 2010, almost 14% of active participants initiated a new loan. the average balance of the outstanding loan was about $7,800 which represented on average 20% of the participants 401(k) plan balance. when we look at who's taking loans, it is primarily participants in their 40's in the middle of their career earning typical average pay between 40 to $60,000, so that's

what we see utilizing the feature the most. now the good news about the loans is that more than 80% of participants with loans continue to save at the pre-loan savings rate while they are repaying their loans so they run only repaying their loans, but also continuing to save. so for participants to keep working and folding the behavior, not necessarily result in leakage. however, there is a big problem when participants terminate employment. out of participants with loans to terminated employment, 70% defaulted on their loans. 70% during the 2010 it's harder to egregious of for participants in their 20s, 79% defaulted and purpose of the vendor 60s but whatever way you look at it, it's still very, very high. when we look at active workers, less than 3% of those stifel upon their loans and as mentioned earlier, we do think

and research has shown participants are more likely to participate if access is available upon need, so the focus -- we may want to focus on the devotee to repay loans after termination and helping to reduce the rate of default. when we went out to plan sponsors and asked about their perception of the concerns about the loans, the overwhelming majority, 94% of the plan sponsors said they were concerned about the high loan utilization. however, only 25% said they plan to take any action about it, so a lot of concern, not a lot of plan sponsors taking action. so that's the loans. now let's talk about the service withdraw. in the service withdrawals are available for certain hard ships. also available to participants who are age 59 and a half and some access may be provided to the end full-year funded dollars prior to the retirement as well. winstrol during 2010 were also close to an all-time high almost

7% of participants to the withdrawal. if we break down the types of withdrawal taken about 20% were due to hard ship say that is roughly 1.4% of the active participants and we will look at the reason for the hardship withdraw. the number one answer by far as the number-one reason was due to foreclosure or a fiction. so hardship withdrawals are taken by a small number of participants and the seem to be taken for very good reasons. it doesn't seem there is a lot of abuse. however six months' suspension after a heart should certainly a rose the security, some of the participants may be able to start saving sooner than that. there's no ability to ever be paid the parts shipped but able to do so. when when we asked the plan sponsors about their concerns over hardship withdrawals, again the overwhelming majority say they are concerned 85% are concerned about the withdrawal utilization that only 12% of

plan sponsors take action or plan to take action to curb usage so that's part of the winstrol. let's move to cash walz. they are a real savings killer. generally when a participant cashes out the cash out their entire balance, not just a portion as it is for a loan default or hardship default. when we look at participant behavior during the 2010, 42% of participants who terminated cashed out their balance will. the other 58% split evenly between rolling into another ira or qualified plan or keeping aspect in the plan. this is highly correlated to balance. some participants with a balance of less than $1,000, 75% cash doubt that much of that was a force to cash out. participants with the balance of more than 100,000 only 10% cash dhaka, still too high a number but you can see there's a high

correlation. if we cut the data to look at the amount of aspects of leaving the plan were being cashed out instead of the number of participants, we see a different picture with 55% of the assets remaining in the plan, 38% being rolled out of the plan and seven per cent being hashed out. so what we see our young your participants who change jobs or are at risk of cashing out multiple times potential to completely e routing their retirement savings by the time they leave and those with the largest balances are recognizing the facts of the big plants tend to have low fees. it's the participant with the balance is taking advantage and leaving their money in the plan her. so a few different observations but regardless of how you look at it the cash are a big problem. interestingly we have heard some noise in the marketplace of concern that automatic enrollment creates turned. in other words participants are

automatically enrolled a few years later they cash out anyway so automatic enrollment is increasing savings it's just creating terms so we decided to look at that and compared the cash out rate of participants who were automatically enrolled and participants who were not and we found they were the same. we didn't find an automatic enrollment significantly increase the rate. it was the participants balance that was driving with their or not they cashed out. so that was an interesting learning. in spite of the effect of that cash schulz are potentially a huge leakage issue, fewer plan sponsors are concerned about the greatest cash out. 74% are concerned and again, like with hardship withdrawals, 12% plan to take action. so we see different patterns with loans the biggest issue is the fact participant's default upon the determination. with partial patrols it doesn't appear there is a lot of abuse going on. however six months' suspension and in the devotee to repay

those is causing an erosion of retirement accumulations. and with cash routes, that simply is for participants who change jobs. adis a deal breaker for any sort of opportunity to accumulate sufficient retirement assets. that is a conclusive result and i am going to take us through some somewhat similar analysis using a very different lens. >> thank you for the opportunity. my comments will be focused on the analysis and recommendations from the aon hewitt in living color study of the 401(k) savings experienced across racial and ethnic groups. the last 12 years ariel conducted a survey that sought to examine savings and investing in the difference between black and white. in 2009 we decided to take an expensive approach and include african-americans from asian hispanics and whites and collect 401(k) data.

so, aon hewitt collected data as of december, 2007 for nearly 3 million participants. inside of 57 of the largest u.s. companies. the state included race, ethnicity, gender, salary, age, job tenure and other factors. we then analyzed the data by their race and ethnicity, something never done before on such a large scale. in the area of loans, the first thing i want to say is that we did not believe the ability to receive the loan should be eliminated. this is one of the factors that encourages people to participate in plans in the first place. unfortunately, the economic and fire at the high unemployment code some serious dangers for individuals with loans. when an employee is terminated and the most companies require prompt repayment of loans so alone cannot repeat of considered a distribution resulting in taxes and penalties. now, but more importantly, it becomes a permanent reduction in the employees retirement savings. african americans and hispanics were much more likely to have

spending loans according to our study. we found that two out of every five african-americans, and 29% hispanics of all outstanding 401(k) loans compared to just one out of five white and 16% of asians. for african-americans or hispanics, the percentage rates taking a loan would then be 30 to 90,000-dollar range. and then that diminishes the increase at both of the district is to in the different racial groups are still exactly the same across almost every single income level. with control for other factors such as age, john tener etc, we found african-americans were 86% more likely to have a loan than whites and hispanics were 53% more likely to be on the other side of the spectrum, asians or 6% white, less likely for these other factors. once again we do not believe they should be eliminated but there are from about all aspects that can be changed in order to make them less harmful to the participants which we will go into in detail later on. it now for the hardship we believe these can be

particularly devastating not only the investor charges penalties and applicable taxes, they'll lose out on the compound effect of their assets. unfortunately, the withdrawn money isn't paid back and african-americans are by far the most likely of the hardship withdraw. in the 2,070 a, we found 7.8% of african-americans today with strong compared to 3.4% hispanics, 2.1% of whites and asians respectively. the figures were even worse for african-americans in their 30's, african-american women. we found that 11% of african-americans in their 30s to the hardship withdraw and overall 9% of african-american women took a hardship withdrawal compared to 6% of african-american men. again, when we control of the factors of the job, celery, age got tenure with african-americans or 167% more likely to take a withdraw than whites and hispanics were 50% more likely to to withdraw to raise it now for the recommendation in the and we

believe that obviously the individuals ultimately responsible for their own retirement savings. however, there are actions employees and employees and the government can undertake to improve the situation. my first recommendation from the study was to encourage employers to voluntarily collect and report the 401(k) plan data by race and ethnicity. we believe it's important because it helps people understand what the solution is to e eliminating these disparities, and that not a one-size-fits-all approach would. the mere tracking of this information can help employers recognize potential disparities and act in the best interest of employees. the federal government plays an important role in the recommendation as they can encourage voluntary collecting reporting of data for the plans' participants. the important thing to notice we are asking for voluntary reporting. we are not asking for any type of wall to be put in place. the federal government should provide guidelines for the data collection process that is applicable measures and frequency of collection members

to work with employers and the states and districts on how to facilitate the tracking of this information this uniformity would allow better benchmarking and comparison between employers. our second recommendation is more tied to this particular bill which is modify loan requirements for the 401(k) plans decrease the likely default when they determine if the employment. we believe extending the amount of time you have to pay off a loan will improve overall savings for everybody but especially for african-americans and hispanics. the rules change which could require legislation change which is what we are talking about today which are the following triet providing ponder per carless retain mant. we've right now most employers require that the loans be repaid at least within 60 days and we believe that can be expanded further than that. second, allow the repayments after the termination to the unemployed individuals would be allowed to repay from their personal bank accounts according to the predetermined payment schedule they worked out with

their former employer. and finally got to make them affordable the balance or any loans can be easily rolled over to the next employ your employees can be encouraged with their 401(k) and continue payment which is preferable to cashing out as a alison talked about. and if the recommendation as provide financial the education has a mandated part of the public and private school curricula tall levels. we believe in the long run this is probably the most important solution to changing behavioral aspects of how people invest in their retirement and we understand the state level, so this is our -- curriculums that the state level, so it's something of a would have to come from that type of area. >> in the end, we applaud the 401(k) savings act in this step in the right direction and will lead to meaningful change by diminishing the 401(k) leakage. the bill will serve as a cornerstone for the initiatives and improve the 401(k) for all americans. in conclusion, ariel, aon hewitt and other participation in the disparities must be addressed

immediately. once we know and acknowledge the differences, we will be able to effectively implement tangible solutions. for a long-term commitment for employers and for the government we will be able to narrow the wealth gap and enable all americans to achieve the american dream. thank you. >> at this point we would like to open up to any questions. >> what is the potential for reducing the participation? >> i think that's a good question. i think with respect to the loans i think we recognize that it would if you restrict access to loans it would impact participants likelihood of joining the plan. so, we would not necessarily advocate restricting access certainly too least one loan for participants at need, but we do think that making of the loans easier to repay would create a

better solution. for hardship withdrawals it doesn't appear they are necessarily being abused, but we do think that there can be work done to help educate participants and ensure they are taking it for reasons, held encourage the use of the safe harbor so some plans have a much more liberal definition of the parts ship meat, but not necessarily eliminate them more access for those participants who are in fact a need and we have spoken of some of the things that can be done to help reduce the negative impact to the participants of taking a hard should withdraw. cash shouts are another story. in the defined benefit plan participants can access their money when they change jobs necessarily, so maybe some thoughts could be given to the things that could be done there. rather than voluntarily by plan sponsors and plan designed or encouragement from the federal government i think there is some opportunity there but may be some additional analysis could

be done to understand the impact on the participation. of any of those actions since it's not a problem us too much money comes out if there's not enough to start with. anything else to add? >> i think you've covered it pretty much. >> can you talk about the effect of these provisions on the participation, but there's also the aspect of the effect of these provisions on a the decision to have a plan, and the more provisions mandate as by law such as requiring an employer to maintain a relationship with an employee after they've left could affect the employer's decision to sponsor a plan, right? is there in the analysis done on that side of the equation?

>> in our conversations with employers, some of them to allow participants to repay their loans over a period of time and fortunately it's the minorities. none of the clients with whom we have worked have questioned whether or not they want to offer a plan at all. so there has been nothing other than the extreme ideas that have been discussed over the past few years so when it comes to the changing provisions as we cited they are in fact concerned about these ideas. so we don't anticipate especially voluntary encouragement or allowing the sponsors more flexibility to cause them to question whether or not to offer a plan as opposed if you took this down to an extreme half and added a significant number of mandates and administrative burdens perhaps it could have that effect but that isn't something we've seen in the marketplace to

date. >> they have the option to allow these people to pay back after they leave, which i think the tsp does. it seems like requiring them to do that will put enough of a burden so that people on the margin, the employers at the margin it may affect their decision to either offer the loan facility or the plan to begin with. >> the one thing i will plan of this some of the burden isn't necessarily a plan sponsors on the providers, so as a result of the study we discussed and other analysis we've actually made it in the past year sycophant the easier for the sponsors to allow their participants to repay the loans after terminations of the private sector can do more to support that as well. so we are starting to have conversations with clients to do that much easier at a lower cost than they could in the past. i don't necessarily know the plan sponsors viewed it as we don't want to do that because we

want to end the relationship and we don't care about loans, it may have just been difficult with their provider or there may have been other reasons to be a sudden, we are not being plan sponsors considering the viability of offering a plan for reasons like this, and we are seeing concerns from plan sponsors and improving the results so i'm not terribly concerned something like changing the loan provision would put the plans at risk overall. i disagree. >> the other thing i would add is you have to remember the 401(k) employee benefit some people see that as an attractive thing to come to employers. so in order to be competitive you want to offer the best 401(k) possible. what we have heard from people that they don't necessarily think they would eliminate the 401(k) because of certain issues with the loan leakage or getting certain provisions but it's something that might add more to the administrative burden they are willing to take on to strengthen the 401(k).

i don't know if you have anything to add to that. >> i wonder if you all collected any data about the different types of companies? i'm wondering if the relationships with the 401(k) withdrawals or determinations' varied any depending on how long the company had been in business, you know or younger new emerging companies included or were there a lot more of the new companies surveyed? >> 54 of the 57 were fortune 500 companies, so these are very large and well established companies, so that's sort of the data that was examined. so there wasn't a comparison of any brand new emerging companies because they don't tend to be quite as large. >> and i think the company's span across industries, so there was no segregating factor to say companies and ex industry are

more likely to have a withdrawal and other industries. >> the companies surveyed actively engaged in the process of giving the 401(k) didn't were checking cards to other employees. >> none of the sponsors with whom we worked considered that option and the work with larger companies. the plan sponsors we work would tend to be potentially create the opportunity for abuse. so it's not something that they have seriously considered. i do understand that at one point was made available in the marketplace and i think the same perspective it could potentially create over utilization. >> other questions? yes.

islamic short answer, no. >> yes? >> the move jobs often in the first ten years of the life and can offer on the education component right at the end of your opening. getting into the job market and your detailed scenario of how someone moves from job to job without seeing the 401(k) leakage. >> there's a lot sponsors can do in the industry can do when the government can do more broadly to educate. what i always say is if you give someone a dollar and they give you $2 back, how many times are you going to do it? you will keep doing it forever, right? so why is it the participants

attended dollar for dollar were to descend match it's a basic concept and even more that immediately and 25 or 50-dollar for dollar on your money so that's a very basic concept that i think can be when you call the 401(k) match, it is a lot more complicated than free money from your employer. it's like a raise. senator they're using more of that kind of education. i think from a job transfer it's easy if you are changing jobs have to have $400 or $800 to say it's no big deal. i can go out and after taxes and penalties it will be cut in half, but that's not much money any way. compound interest. so that's part of the financial literacy is the compound interest. that is going to be a lot of money in their retirement. and so providing education to encourage that perspective, and no matter how small the amount, rolling it over the land trust

cash out, keep in the system in one way or another. it's incredibly important. so whether it's modeling tools, using different forms of education our research has shown with the diversity and the population not to the paper but also not eliminating it to the mobile devices, you need to use paper on mobile devices company to use the internet and a whole variety of media so that you're interacting with the different types of employees within the population whether you're talking about participants in their 20s, their 40's or the 60's across all the different sort of demographics you want to engage them in one way or another. unfortunately too many people when they start their first job and they don't know what a 401(k) is to be a health care is incredibly complicated that if we can do more to encourage the concept before the participants come to the first job whether it's an elementary school, high school and education that would be a starting point. but then there's more that can

be done upon higher to encourage that utilization and encourage that knowledge. i'm not sure but indirectly answering your question. but i think there's a lot of opportunity there and it's incredibly important as the cash out data shows. stat one thing i want to add is its effect to the african-american and hispanic working groups and in the affinity groups so you might have a blog engineer group or you might even go on the churches. so when people think the financial literacy they think of the h.r. person gives them a one hour lecture when the start but these are powerful groups that really inform these minority groups, and they truly trust them more probably in the company h.r. person. so once people can start leveraging those different groups or churches or, you know, youth groups or whatever it may be the look for for the of our information, that's where the power is willing to come from and when it comes to getting to

the different ethnicities or racial groups we have to remember that people's retirement goals are different so we always say when usda caucasian people about their retirement, the first answer is usually beach or second house. ask an african-american, they are going to continue working. it's they're going to start a business or whatever the case may be. siloed goals are always different. it's not clear to be one standard pamphlet. that's important for a leverage in the education process as well. >> one other point i will mention though is that one-third, only a third of large companies have an open pension plan now, and many government employees don't have social security. so the 401(k) is what is your retirement? 401(k). what is your medical plan? it's also your 401(k). it's incredibly important to start young. so i know it is preaching to the choir, but it's -- >> [inaudible] -- mabey areas or groups that

are doing this type of training and it's working. is their anyone that you can sort of point to as a model? >> the one company we always planned to is mcdonald's. it's an extremely great job working with their employees and their different -- the aveda interesting model because they have to go to so many different points. so the two great job of teaching employees and had a great matching program. a few years ago they actually made sure that everybody come all the restaurant managers were enrolled in the 401(k) and to insure they were not losing out with automatic enrollment the boosted their income by 1%. just to kind of alleviate any pain they might feel from having been automatically enrolled, and i think that dramatically -- i can't remember the number but like 50 to 90% participation, something like that. so that's one of the gold standard companies that goes with it. >> i think what we see most successful is a combination of education and communication with

plan designed and effective delivery. automatic enrollment is a robust the fault escalation over time the appropriate help, advice, managed account and delivered without bias, no conflicts of interest. that's where we tend to see the greatest success when it is attacking it from all angles verses a single angle and that happens to the largest companies that have done this successfully with high participation rates and high savings rates and a well diversified employees but it takes a lot of focus and work and it is not easy. and i think all of our -- to clients with whom we have worked spend a lot of time and energy and money on these initiatives. greg? >> i want a clarification you discussed earlier how you would encourage employees to maintain that relationship with their employees, employers and employees when they leave the company to pay back the loan. but just to clarify, isn't it

correct senator kohl and enzi's bill would not mandate or force the relationship? just add flexibility to allow the company to extend and allow the employee to pay back a loan over an extended period of time? >> i say with the bill does very creatively. the sponsors have the option to extend the relationship today many of them don't. what the bill does is allows the extension and participants to have more time without creating any continued relationship between the employees and the impleader so it's sort of up to the employees to repay it into another qualified vehicle on their own. so it sort of gets the same objective without that relationship so excellent point. thank you. >> other questions? >> yes, in the back. >> i want your thoughts on how people offering investment education can be clearly

distinguished, separate from those who have a financial interest and those of pfizer's. >> that is a great point. i think that's an incredibly important. and when you say how come i think that can be done through disclosure and appropriate conversations. i think the plan sponsor when they are offering are providing investment advisers to their employees need to be keen on working on the compensation, the types of revenues, how that revenue will be very based on the advice given. i think all of those are very important as something we are focused on and others in the industry are. does that answer your question? >> i think again it's all about communication. you have to be very clear when you have a vested interest and when they don't. that's what it comes down to in the end of it and on the fortunately it sits on the responsibility of the employees to ask if there are any

interesting relationships with the person advising them and what they are recommending. estimate that is one of the agenda is of the plan that there is that fiduciary protection. so that someone is helping to participants to get the transparency they need. so it's all about transparency, i think. anything else? thank you so much for your time. [applause] [inaudible conversations]

today republican members of the house financial services committee talked about the effect of the dodd-frank financial regulations at which was signed into law a year ago.

this news conference is a half-hour and begins with committee chairman spencer bachus. and although conversations [inaudible conversations] >> good morning. rino many of you are waiting on the press conference on the debt and we will start as soon as the press conference is over. >> we are good. >> [inaudible] >> a year ago president obama and house and senate democrats

promised the increased government control over the economy that by increasing government control over the economy to an unprecedented degree, the american people can count on many wonderful things to happen. among the three major agendas was dodd-frank specifically on dodd-frank, they made five promises. a year after dodd-frank has been passed this was the one year anniversary. we would like to talk about five of those promises. the promises are strengthen the economy in a two big to fail, leveled the playing field between american financial institutions and those overseas, stabilize the housing market, and finally, streamline and simplify the regulatory

framework. as we've reached the anniversary of its enactment, we can now issue a report card integrated the dodd-frank act in the lofty promises. when we look back over the past year it is clear that dodd-frank has failed to live up to any of these promises. the dodd-frank act burdens the private-sector with 400 new federal regulations over the next several years. the vast majority of these rules has created an atmosphere of uncertainty and reached innovators and job creators and lenders and put their ideas and capital to work because they don't know the rules with which they must comply. this is not how you simplify and streamline rules it's how you kill jobs. as the report notes, it is beyond dispute that the burden of these hundreds of new mandates will fall

disproportionately on our small financial institution. our credit unions and community banks have said the cost of compliance with dodd-frank is taking enormous resources and money as well as time. our smaller institutions do not have the luxury that the banks have with hundreds of employees analyst in the compliance with this blizzard of new regulations and red tape. it is equally undeniable the cost of compliance can reduce the ability of the smaller institutions to meet the lending needs of the families and job creators in their communities. and i think any of you who followed the event of 2008 to date will say that it was not our small-town banks and credit

unions that we witnessed in 2008. one a small-town banker is quoted in the report as saying and we are going to issue a detailed report the dodd-frank act will add an additional enormous burden and has added new high-risk that will inevitably translate into fewer loans to small businesses. let me close by saying that smaller banks being audited two to three times a year on the average about the different regulators. what we have basically done is just added double the amount of regulators, regulation and examination in the small banks and credit unions have to go through. i think anyone that thinks it's just putting another 12 or 14

regulators in a small bank is going to lead the bank act is calling themselves. the first grade we are going to issue is the promise of dodd-frank to streamline and simplify rules and for that -- >> [inaudible] [laughter]

>> at this time, bob dole the new freshman representative from illinois. >> i want to thank the chairman for calling a press conference and being here. about strengthening the economy that is one of the promises that the dodd-frank legislation was supposed to do, and yet i would argue that we have got unemployment at 9.2 per cent, unemployment at 8% for 29 consecutive months, which is the longest streak since the depression. entrepreneurship and small business i would argue is paralyzed. there's a tremendous amount of uncertainty, and i talk to people back in my district and the job creators are literally paralyzed. they are not sure what to margolis going to bring and when i talk to financial institutions, they are spending

hundreds of thousands of not millions of dollars simply trying to comply with the rules and regulations of dodd-frank many of which have yet to be written. one year ago before the bill was even passed, the democrats promised the american people dodd-frank with increased investment and entrepreneurship and fostered competitiveness and confidence in our financial sector and robust growth in our economy koppel. i can tell you we are not seeing that today. in fact quite the opposite. more than 40 million americans on food stamps and people are looking for jobs. we've had long term unemployment. it's absolutely skyrocketed. and just this past winter, one democratic leader explained the timely implementation of the dodd-frank act will help strengthen the economy of like reading certainty for the business community and consumers and investors. certainty is what we don't have in this dodd-frank legislation. and if you talk to any of the

financial institutions and local community banks, talk to those that are looking to deal with the designation, there is a tremendous amount of uncertainty because just a massive amounts of rules yet to be written haven't been written, and therefore they are paralyzing the financial the institutions. businesses are not getting loans so with that i would like to get a second great over here in terms of strengthening the economy. >> [inaudible] [laughter] >> i would like to turn over to shelley moore capito. 64 and thank the chairman and as well. the area i would like to talk about is the end of today to fail and those of you that followed dodd-frank, you know we are you very vociferously on our site for an enhanced bankruptcy for the failing institutions for large institutions, acknowledges the bankruptcy code as is presently written was not

written for these large systemically important institutions. we really thought in order to make sure that the tax payers or not going to be and could never be on the hook for another bailout we really felt the bankruptcy brought that and would bring about isolation and judicial overview that would ensure the taxpayer is not on the hook. but what we have as a resolution authority created through the fdic, and i think it is very questionable. we have had hearings that have set number one, can the fdic really handle this if there's more than one institution and the presidents of a meeting that he had a month ago several questions were raised actually with the process be able to go forward and what the fdic really be able to handle this? ..

supposed to be one of the primary reasons that dodd-frank was created. so i think what we have here is a situation where tax characters on the hook with a larger institutions getting larger, where the significance of financial and duchenne arp put in a category that has given them that aura of a federal backstop. and so, for that, i've never heard of and asked minas, so i'm

going to get the grade on ending too big to fail in terms of faleomavaega. as a mother, i can hardly even write in f. and i'd like to turn it over to judy biggert from illinois, who is their housing expert on the financial service. >> thank you, shelley. and i am judy biggert initiate insurance housing and community opportunity subcommittee and i thank the chairman for this press conference. he now, that dodd-frank villa server 2000 pages in the bill itself was too vague and failed

to address the root cause of the financial crisis of housing and there wasn't much in that bill for housing. because dodd-frank failed to address the gs these who are now enjoying at least a $150 billion taxpayer bailout and dodd-frank sailed to rate or fha, which represents over 30% of new mortgages origination combining freddie, fannie and fha monopolized the mortgage market. the dog trained to establish a billion dollars federal program. cap comes to mind that did intervene in the marketplace and prevented the market around hitting the spot them. we haven't hit the batting average is a lot more foreclosures coming out as the years go by each of these years. and it is prolonging our housing market recovery.

dodd-frank did set aside housing against the private market regulators propose new dodd-frank the ability to repay and risk retention rules that distort petition in the market place and limit the ability -- the availability and raise the costs for consumers and not an urgency. we talked about in urgency. mr. doled talked about that, but there is so much uncertainty and the cost for consumers and in a fragile economy, it just doesn't work. consumers are not able to get anything which the rules not final, the marketplace has not

had a chance to recover. a new massive regulator under dodd-frank come in the consumer financial protection bureau for consumers and businesses and potential for market market distorting accosting rose remains a top concern. the bottom line is that the government needs to get out of the housing business, let the private sector return and let the free market work. housing typically leaves us out of recession. so we have to get this straight as the new majority, republicans do just that. but i have clearly failed to address the central and defining to address the central and defining to address the central and defining to address the central and defining it so that is why i am going to put another great appear. if my match some of the others.

[inaudible conversations] and with that, i would like to turn the podium over to scott garrett. >> good morning, everyone. it was a year ago that the congressional democrats passed trains them in. what a difference a year makes. setting the course of the united states in a collision course with economic mediocrity and not be a period of high unemployment. during the original time of dodd-frank going through, they claim that they as democrats knew what they were doing. trust us they said. they said would know how to regulate wall street. trust us they said. they said we know what is best for the economy. trust us they said.

they said we know how to level the playing field. trust us. we now know after a care of dodd-frank that they have absolutely no idea. aside from the negative is that dodd-frank has on the american economy the president talked about your, and also threatens the level of american competitiveness around the world or in the short-term and long-term as well. so despite secretary geithner's assurances that the so-called level playing fields and other countries which is online with the new regulation regime. and we find more countries are deliberating the effects.frank would have on the u.s. economy and they are more rethinking their role in the international coordination of reform because they basically don't want to make the same mistakes are making right here. in fact, significant differences are beginning to emerge right now included and dodd-frank and

those are with their international competitors. so when you think about it, despite the new gao report for nothing to do and hedge funds and equity funds not being involved in a significant way with the recent crisis, we now have the vocal role, but competitors do not. new regulations would require multi-dealer exchange trading of shops when competitors don't have that. we know what to require pension funds to tie up funds and retire money as collateral for trades were competitors don't have that. and the list goes on and on as the things we now have here because of dodd-frank and the united states in our competitors globally to not. so the house republicans could put forth a proposal that would align our interest here and around the world with a timetable for implementing them

to derivatives reforms that with the rest of the g20. recently whipping this is a common sense approach dealing with it, so we would be on the proverbial level playing field. as you probably saw, democrats to join us. one caller proposal reckless to do such. but what is reckless as continuing the path we're on right now, not coordinating with other financial centers around the world and advancing rules that put our firms, our company, our areas of job creation at a competitive disadvantage with countries around the world. so putting our faith in democrats to regulate wall street, we had severely impaired the global competitiveness of our u.s. financial market place and we have literally push companies to capital and jobs more for me through friendlier terrains around the world. and for that reason, i joined my colleagues for leveling the playing field.

>> i will now yield to the gentleman from texas. >> well, i thank the gentleman in my category may be like the young man that went off to his first year of college and was going to bring home this report card and he is thinking i need an ad chernenko home and tell my parents and flunking almost every course i am taking. and no, he goes to his professor and said, to you think we can put a category on my report card that says party because i know i got ana and pottery. but i got to cut up the numbers. 1.25 -- 2849 -- 2.2 million,

27 billion, 2 trillion, 58.2%. what do those numbers mean? well, thanks to dodd-frank, we have between now and next year it will cost the american taxpayer $1.25 billion. 2849 more government employees. 2.2 -- the same -- i want you to listen carefully. and the thirst for the roles that come out to 2.2 hours to comply and that is just the first 30. if you take that and say that's 10% of the rules, that means we're headed to 22 million man-hours just for compliance. $2 trillion of margin is one of the estimates that some of these derivatives and depending on what the final rule is like taking true trillion of capital out of our economy. $27 billion of cost to the

economy and taking additional capital out of our economy. the last one is kind of an interesting number. it's 58.2% of our population is working. that is the lowest since 1984 -- 83 i believe. and so what we have seen is where we need more jobs, what we are getting this work government and this administration doesn't understand and unfortunately our colleagues on the other side of the aisle do not understand that government -- the more big government is not the way we'll get our government going again. i'll let this administration take on this report card where we say more big guns -- we're

going to get them in a period like the fraternity boy that went home with a failing grade from this administration opponents that you know what, we have made it filled the economy, the we agree with the economy. >> thank you. mr. chairman, let instead of the press, paintings keiko canseco may represent the 23rd district of texas. i doubt, from the courthouse. i don't come from the state house. i come from main street. i come from the private sector. i come from small business small business. and for years, my business partners and night group companies from the ground up, creating jobs and enhancing the quality of life in small towns and communities throughout texas.

and i can tell you from my experience in the private vector that the authors of dodd-frank didn't have a clue about the american economy or about the american financial done and how it works. create a new government bureaucracies imposing price controls and restricting the choices for consumers may appease the believers in big government, that they are the complete opposite of what has made our economy the greatest in the history of the world. the air understands this and my colleagues here on the podium today understand this, but the authors of dodd-frank did not. they told us the bill would create jobs and provide certainty to the economy and one year after its passage, the employment situation hasn't improved. it said 9.2% and climbing and those are the numbers that are

being treated or calculated. the sector is frozen, waiting for washington to do something along a dream it doesn't take an economist to realize by any measure of dodd-frank bill is an abject failure. sometimes your sheer someone get an a for effort, but enough for result. well, the final result here is an f- for effort and an f- for results. >> thank you. any questions?

>> when you think back to 2008 annecy were working through dodd-frank, there is a lot of handwringing about the lack of roles that the industry recess and what they please and basically turn the market into a mass. so what is the happy medium by allowing freer market and roles that turned those into an area? >> let's go back to 2008. i think that's an excellent question. we need to start a saying what about 2008 because i think that is what happened in 2008 as well as 9/11 is something i'll remember the rest of my life. and i think many of us had consequences for all of us. it changed our life. i think the american people have probably less confidence than

their economic system as a result of the lead up to and what happened in 2008. and the prospect that our financial system was failing and it was a very scary time. i must admit to you that the debate -- and i think the question to find that period was the issue that we didn't have enough rules were that we didn't have enough regulators? eyelet submit to you that that was not what happened. i must admit there were two other causes. one is that the rules weren't enforced. the rules weren't enforced. and number two, there were gaps in the regulation. they were unregulated institutions. your companies that failed -- let's take aig. the failure occurred in britain.

it was no accident happened in europe. there is a regulator assigned to aig have not audited their british operations, so we have no idea what is going on in britain. and the 300 man operation for 300 employee operation in britain brought them into total chaos. now, let's for instance take bear stearns and laymen, two of the most famous examples. they had regulators on site while lehman was transferring money offshore a day before the reports of measuring and the money -- they were bringing identity before they report. they were taking it back -- barring it enlisting in this

capital the day after their quarterly reports, moving it off short. you had regulators on site should have picked that up. if you have 20 regulators in an institution and there were between 12 and 20 regulators inside that institution when they were violating the rule, what good does it do to bring claymore regulators and if they violated the rules that exist had they not done that. we are now withers said prime lending that those are unregulated institutions. all your institutions to get around the law and that included wells fargo. that included -- they haven't unregulated subprime operation. what brought waconia or bank of america to the edge where they purchased sub prime lenders, countrywide, great western or

golden western. so those are unregulated institutions. and very quickly in 2008, we propose to bring all those under regulation. you know, if a federally insured in to tuition plan out and bought a subsidiary that's unregulated coming in now, they were getting around the regulations they are. if we close the gap -- so when my mind and i'm going to say the two problems -- there was a third problem and that is the too big to fail. what was the response then and really the response now? let's go back to aig, which is the most -- the largest most costly bailout other than fannie and freddie. who built the now? it was the american taxpayer. their creditors didn't suffer. their shoulder shareholders --

at least the american taxpayer. well, did you and i have anything to do with their failure? no. but dodd-frank and what happened? to belt out with aig, build up their creditors and counterparties. they paid them off dollar on the dollar. the majority were foreign banks. but the treasury and this was not good congress. the treasury came in and put over 100 lan dollars of taxpayer money and paid off their creditors and counterparties a dollar for a dollar. that should've never have been. in fact, secretary baker says cne and freddie were nothing more than moral hazard on top of moral hazard. there is nothing in here -- in fact, if you look at provisions by dodd-frank, they specifically

say in the too big to fail institution that the treasury -- when the treasury, that's another word that uni can assume those allegations. uni can pay their counterpart. >> i'm sorry, everyone. we've got to go. the leadership is making to stay at their press conference. i'm sorry we didn't get more questions. thank you all for being here. [inaudible conversations] >> part of the dodd-frank regulation created a new agency, financial stability oversight

council. the next minimal look into the one-year anniversary of the dodd-frank act and you can watch live coverage of the skin to, beginning at 11:30 a.m. eastern time on monday. tonight on c-span two come a house hearing with that of the federal agency that oversees offshore oil drilling

>> versus the members room here at the library of congress come a private room for senators and house members that can also have their personal records held here at the library. just how many congressional collections are there? well, you'll find answers about this unique library c-span's original documentary, the library of congress hearing this monday night while two including the great hall and the reading room. we'll show treasury, found in the book a show collection, including the original thomas jefferson library. and presidential papers of george washington to learn how the labor is using technology to discover hidden secret or

preserve its holdings for future generation. this monday night at the eastern and pacific. about that question come in the library holds the personal records of over 900 current and former members of congress. >> that offshore drilling regulator told the house natural resources committee that the government will consider regulating contractors and operators in some instances. bureau of ocean energy management michael bromwich gave testimony and rare organization at risk in the future of oil and gas drilling and changes being made in the agency. the reorganization of the agency is scheduled to be completed by october 1st. this is just under two hours. >> the committee will come to order. the chair notes the presence of a quorum, which under rule three

c. is two numbers in fact we've exceeded the climb by 50%. appreciate that. the committee on natural resources is here to test an oversight hearing on not sure energy coming through departments for usher energy revenue and safety we organization. under committee rule 14, opening statements are limited to the chairmen and ranking member. however, i ask unanimous consent that any member who wants to submit an opening record can admit that by the close of business today. without objection so ordered. i recognize myself for five minutes. the former minerals management service, mms has become known as an agency or had become known as an agency with controversy and had been repeatedly investigated by congress, inspector general and the governmental accountability office. relaxed oversight, ethical

problems and the inability to hold employees accountable and conflicts of interest appear to plate the agency and there is bipartisan consent is that changes needed to be made. established originally by secretary of order, the authority we organized mms was and still is in the hands of the interior secretary. after the tragic deepwater horizon asked to make him a series of fundamental organizational route runs commentary department involves mms and funky bureau of ocean energy management regulations and enforcement. later this fall, will formally be separated into three distinct offices for enforced and energy development and revenue collection. this hearing is an opportunity to examine how the re-organization efforts are going and how these changes will foster improved safety and efficiency of offshore energy production. aside from the very beginning we needed to take the thoughtful approach to any type of reform because we must get it right.

mms had been the agency directly responsible for overseeing safe landing, reduction of our nation's energy and minimal resources as well as the collection of the related revenues that go with that. our economy, millions of jobs, billions of dollars in our national security are operating effectively. any effort to reform and we recognize the usher energy must achieve four main goals. first and foremost, you must improve safety. we must ensure that americans energy is the safest in the world. the agency is always responsible to conduct thorough oversight is a necessary resource to operate effectively and that its employees receive the best training possible. as with any government agency or program, there is always a question regarding funding. during these tough economic

times, it's worth noting that the house republicans have provided significant funding in both the 2011th cr and the fy 2012 interior appropriations bill that will have on the floor here in the next week or so. it must many believe the missions within the agency in the past have been difficult to manage, considering the offers of contrasting goals. the goal is more revenue and more energy production often appear to be pitted against safe he. i believe it makes sense to separate these roles as suggested by the agency. however in doing so, we must be careful to ensure these changes will result in increased accountability of respective missions and simply more bureaucracy isn't being created. despite each offices different missions, they should share the

same larger goal of helping to ensure safe energy development. to do this, there should be some level of coordination within the upper level of the interior department. third, it must run efficiently. members from the golf can testify to the real economic pain inflicted on people and businesses in their hometowns due to the obama administration inability to issue both deepwater and shallow water drilling permits in a timely manner. millions of jobs are tied to usher energy production and they should not be held or threatens by government regulations and rockers v. danforth, which should be self-evident, and thus ensure the highest ethical standard for being that. i want to thank director training for being here and i appreciate his willingness to bring within testimony from direct her gould at the offices revenue and i look forward to hearing your testimony.

and with that, i'll recognize the distinguished ranking member , mr. marquis. >> thank you, mr. chaiman very much. later this year, the obama administration will complete the task and go splitting off the regulation of offshore oil and gas trying into three different and distinct agencies. safety, permitting. gone will be the days when these three functions were combined in the mms, the minerals management service, which came to his dad for misconduct, malfeasance and spills. gone will be the days spent this agency was supposed to be a watchdog of the oil and gas industry was nothing more than an industry that god. and there is still much that needs to be done. more than one year after the bp disaster, this congress has not passed a single legislative reform to an her the safety of

offshore drilling. legislation that i've offered to implement recommendations of the blue-ribbon bp oil spill has been blocked by this committee and mr. holton i will continue to press our consideration of that legislation the republican majority passed and interior appropriations bill that underfunds by roughly $35 million. all year, the majority has been complaining that the department is not approving drilling permits weekly mass, yet they are now underfunding the agency charged with issuing these permits. and for my colleagues who are concerned about cutting federal spending, i have good news. he increased the administration requested was administration requested was to come from increased inspections fees paid by the oil and gas industry, not by taxpayers. one of the key recommendations

of the independent pc so conditioned increase the if i do i'll guess history as a way to fund the budget of these new agencies outside of the appropriations process. in the family fees charged to the telecommunications industry pay for the budget of the federal communications commission. when we get our cars inspected come we pay a fee. when oil and gas company what certifications that they consider josefa musculus surface of the oceans affairs another government handout and we must change that. when we're in the middle of the christ is over the budget deficit and the debt ceiling, it should for the american people to learn the republican majority is giving this kind of a handout to the oil and gas industry. they have rejected this common sense in section three. there is not going to be less money available for the agent b. to hire more inspectors, more paycheck varies and mark

drilling royalty revenue collect theirs. that is why mr. holton i are going to introduce legislation today that will allow the interior department to increase inspection fees than the oil and gas industries that the taxpayers and footing the bill for yet another republican giveaway to big oil. we likely won't hear much about eesti today from the majority over the need for more years. i suspect we will hear the departments efforts to implement one of the commission's recommendations and separate the functions of mms might in some way or that any permits for new chilling. or perhaps they will say that the quoter for -- they will begin to continue to talk about a de facto moratorium. secretary salazar, director bromwich and others at the department of interior are attempting to thoughtfully we organize this agency while allowing new chilling to have

been that additional safeguards and shallow and deepwater. coupon administration is working to improve the state the above should drilling to protect the american people, but the republican majority seems more intent on protect the interests of the american petroleum institute. thank you a magellan and i appreciate the time. >> i think the ranking member for south statements and i'm very pleased to have the director of the prayer of energy management regulation in person. have you decided -- is it boomer? sometime you have these new ones. we have director michael bromwich with us today. and i'm very pleased and thank you for being here she is your beef. you know how it goes. or for britain soon it will be part of the record. it's a five-minute wait. in the l.a. cosign you may have

one that will put a question. so without i'm very pleased to recognize the director. >> thank you free much, mr. chairman, ranking member marky. i am very pleased to be here today to discuss the reorganization and reform of the minerals management service and the profound changes we are implementing in the regulation of oil and gas drilling development on the outer continental shelf. over a year ago on may 19, 2010, secretary of the interior, ken salazar announced his intention to rear recognize the former mms emplace its principal missions into three separate entities. since its creation in 1882 by secretary porter, mms have been responsible for three distinct missions, overseeing usher resource development, collecting royalties and revenues from offshore oil and gas exploration production and enforcing safety and environmental regulations. and yet, a single underresourced agency continued to be responsible for those three quite different and sometimes

conflict emissions over the course of 28 years. a month after the secretary's announcement, and became director vigor of ocean energy management. the agency director to replace the mms while the reorganization was being implemented. for the past 13 months we've been working hard on a number of friends to restore the public's confidence in regulation and oversight of offshore drilling to raise the standard and workplace safety and to reorganize the agencies os to allow for proper focus on the three separate important missions of the former mms. the reorganization has confronted center for a year the logic of the reorganization and broad outlines have been supported by various identities that is studied the agent they come including the president's commission. the president's commission found that mms because of a competing and sometimes conflicting missions of promoting resource development and enforces safety regulations and maximizing

revenues from usher operations and future chronic lack of research is simply could not keep pace with the challenges of overseeing off shore operations. the re-organization is designed to remove those conflicts is segregating missions across the agencies and providing each of the new agencies with the clarity of missions and the resources necessary to fulfill its regulatory responsibilities. we are lamented his organizational changes on respecting the crucial need for information sharing and the other links among the functions of the former mms to keep operations moving smoothly. the first step of her organization was completed on october 1 of last year in the revenue collection around the former mms is the three different part of interior department. the creation of the agency revenue was the first step to address one of the fundamental column clicks retrieve the usher regulators responsibilities. by the end of the current fiscal year, we intend to complete the separation of the former mms

research management and research functions from his safety and environmental responsibilities. we believe the separation is essential to reforming the government's oversight of usher energy development. these two agencies they've announced at the bureau of ocean energy management or boemre in the bureau of environmental enforcement. transaxle responsible for management of the usher resources. this mission involves ensuring that nations have sure resources are made available for sound development with appropriate protections for the environment. the structure we are implementing insurers the views of the environmental impacts in our ocean are closely analyzed, given appropriate weight in making decisions and the appropriate balance is struck. bessie will be responsible for safety and environmental regulatory compliance of offshore oil and gas in renewable energy operations.

the functions include oil and gas permitting, facility inspections, regulations and standards development, field operations command permits a compliance and enforcement and avoid plans as well as others. the mission would be to independently and rigorously enforce safety and environmental regulations. our goal is to create a tough-minded regulator that can effectively keep pace with offshore drilling and promote the development of the safety culture are not sure operators. we are working now to establish within bessie knew a compliance and enforcement function which never stayed in the former mms the most devilish review in force and the response plans in the area of national level focus. the structure of boemre is sara nelson are taken since last summer. government transformations on the progress is in large part to the teeth continuing problem of boemre personnel.

we discuss rationale and organization within employees throughout the ages these unemployed and we developed a number of alternative models and options in which we discussed internally. finally, we've also considered recommendations of the president's commission, which conducted a thorough analysis of issues and recommended a structure that is in journal land into it transfix. sure, pull up her organization is to remove organizational and structural obstacles that stood in the way of the agencies achieving such as goals. the reorganization we've undertaken is designed to find agencies to achieve goals without being burdened with a structure that gets in the way. we are determined to succeed in creating a system that allows continued off shore development while ensuring safety and environmental protection. that is the goal will continue to pursue with focus and determination. i thank you for your time and happy to take any questions you may have. >> thank you very much for your testimony. let me start.

you want to have this done this fall and up and running by the next fiscal year. as i heard your testimony is mostly focused on the internal part of how this is getting done. my question to you that those agencies that those outside agencies state individuals working with you. has that been, from your experience now a relatively seamless train haitian. in other words, does the hughes served, is that transition seamless enough from your good? i just want to hear your perspective on that. >> i think it is. you are quite right the bulk of the work has been done internally and we are working extremely hard to make sure that the internal transition goes

smoothly. i've spoken on a number of occasions by both the structure and more specifically where the different functions will reside. and so i think we've certainly begun to socialized the idea of which functions eyewear. but we fully intend as we approach october 1 to reach out to industries, to reach out to the states, to reach out to other stakeholders so that they will barely know the difference when october 1 hits and turned south of beit talked to about specific issues. the leadership will be separate. the structure will be separate, but i don't think there's interact with these two agencies will see much difference in terms of the day to day interaction. and that is very important to us because we want to make sure that we ensure operational continuity and efficiency. we are very determined that happens in that way. >> anytime that you have a chance, there's always bound to

be some sort of problem. i just wonder if you can tell me some of the problems you may have run into on the way you've been separating myth. just give me a rough example of that. >> well, we have focused on what those potential hitches and problems will be. among those not surprisingly are iced tea type problems. so we've been working very hard with a specific set of teams devoted to attacking i.t. infrastructure issues to make sure that our databases, which wrote that the new agencies will need to use and rely on, that there are no structural and pediment to moving forward. one of the things we did early on in the heads west to focus on a set of what we call interdependencies or links between the two agencies. and so we have been working to racket as interdependent views. we be separate interdependent the team that is looking to solve those problems and address

them now so they don't become major problems post october 1. send some support and mistreated issues and some specific units, where it didn't make complete sense to send it all into boemre. and so, some of the complexities of splitting existing units according to the logic of the new agencies. so those are just off the top of my head, mr. chairman, some of the issues have been focusing on, but i'm very pleased with the effort we've been seeing from our people and have a high level of confidence will be quite successful at it. >> began, that is more of the internal process that the agency and there's always your customers so to speak on the outside. as this transition has gone forward, what mechanisms do have in place that is their problem with customers that those i responded to in a timely manner? >> well again, they haven't seen the change in a visible way.

we have ongoing outreach with individual operators and groups of operators and trade associations. once again can tell you with their not shy about sharing with those issues or problems that they have. we have a very good working relationship with those groups and we've solved a lot of problems together. so as the october 1 data approaches than immediately after the sober one day, we expect the level of communication and contact to step up and for us to have even more engagement with those groups and those individual operators. >> when you have people not shy about asking -- and that's good, part of the responsibility was to get back in a timely manner. i hope as that moves forward, that can become accomplished awaited gadgets that reach while salaries. >> absolutely. >> i appreciate the gentleman responding in all recognize the gentleman.

>> director bromwich, this morning bp announced it will impose a set of voluntary safety standards and reforms or offshore drilling. that announced that could mean that bp will soon ask the department to assume offshore drilling. they have announced that they will implement reforms such as requiring double-blind share brands and preventers and having a third party professional engineer review 17. as the net worth considering these additional standards, which reflect in the safety legislation out was recommended by the bp spill commission to be applied to the entire offshore oil and gas industry, given that bp commissioned found that the problems were so fat to the

entire industry. so what bp is now adapting is what the bp spill commission recommended. should the rest of the industry also happened to comply with that same standard. >> mr. markey, we welcome any efforts by con days to voluntarily enhance the standard they impose on themselves. as you know, we put a lot of effort immediately after deepwater horizon into raising the bar for the industry through a new drilling safety regulations and three safety management regulation. and i've said since then that we are going to further add to those regulations are a normal notice and comment rulemaking process that will take some time generally does and we are continued to make that god and far-reaching, but not at the emergency lickety-split pays that we impose the initial

rules. now certainly, specifics that bp is voluntarily signed up to may be among the additional to the embrace. it is to early to know. but i do want to emphasize the standards are not in lieu of our overall standards that were heightened last fall that will impose on bp. >> are the standards higher than your post? >> another not a substitute. as you look at what they're recommending, would you -- do you welcome this additional safety? >> yes, absolutely. is it the safety and should be implemented? >> we want to consider that carefully. they heard the voice of industry that if we change the voice of regulations too much and too often that creates an unsettled

environment. these are definitely on the table for consideration down the road. we are not considering imposing than immediately across the board. we don't think that the appropriate. as i said before -- with these voluntary information or others. >> bp is voluntarily adopt them. i know what to get into drilling, but does it tell you something about what this date of the art is and where these technologies are the fact that bp is adopting them? does that not tell you something about how an industry leader -- should an industry leader be let back in great weight in terms of the rest of the industry? >> it should also have to impose it an effective part of the commission recommendation. >> bp has clearly been through a lot. they understand they have went back not only regulators confident, but the public's confidence as well. so i certainly applaud what they are doing here and the specific

reforms that they are imposing on themselves as a senator certainly worth examining and we are very pleased that they are -- does that suggest the standards they are adopting our technologically feasible and economically viable as part of a drilling plan for offshore americans? >> technologically possible, absolutely. economically feasible, clearly ford bp, for others i can't say. >> for exxon mobil you can't say whether it's economic? how about for the biggest fight can't companies? >> i suspect he would be. >> you suspect -- you know they are. bp is smaller in some level. >> yes, smaller than exxon mobil. the majors would be able to do it. so that's very helpful for us,

you know, just as a standard come especially the largest companies out there, given the fact that we have the technology. if they are in that think it could be that they says for an agreement between and republicans and liberals than conservatives across the board if we agree on the technology in the economic feasibility as well. in the economic feasibility as well. >> the gentleman has expired. the chair recognizes mr. >> the gentleman has expired. the chair recognizes mr. with pain. >> thank you, mr. chairman for joining us today. i want to look at virginia. virginia is very interested in developing not sure energy, whether wind or fossil fuels. can you tell us where the process is, what the plans i was going to the lease sale, is there any future elements you can divulge to us, which may be

hope of far less unlucky not the offshore energy developments along the east coast, specifically to 20. >> as they think you know, secretary salazar announced a plan to do geophysical work offshore in the atlantic. potentially unsafe are set to oil and gas development down the road, but not at this point a part of the 2012 to 2017 oil and gas leasing program. it's a different situation with respect to watch urban. we have a very aggressive program and we've been working with this data is virginia nhra federal state task force to accelerate movement and progress in that area. so that is essentially where it thinks dan in the atlantic, specifically with respect to virginia. >> very good.

i want to point a recent "new york times" article that spoke about the bureaus efforts and the folks who have employed for either make your decisions, qualifications, training. there was in that article they reference to issues where employees were asking questions about applications are actually the answers were in the applications. also another employee had asked about location of a blowup or banner, above or below the water, cert and the things that make you question the qualifications the next. working at boemre. can you give us a little insight into how do you choose folks to come work for you and what are the qualifications? is very specific set of x. that folks need to come and work for the bureau? obviously, this is a fairly tech that folks need to come and work for the bureau? obviously, this is a fairly tech that folks need to come and work for the bureau? obviously, this is a fairly tech and maybe someone asking us questions doesn't give folks

comfort in a position to make some pretty sound decisions we believe are needed to make sure that permit ibm but that and they are actually being issued with proper due diligence. >> we have probably one of the broadest range of categories of employees of any government agency, ranging from archaeologists to biologists to economists to drilling engineers, to structural engineers, to environmental specialists and those words. so, it is hard to generalize about how we recruit because we have so many different categories. but we have focused very carefully on how to recruit the best and the brightest because we, like every government agency company that. and so last fall, i did a recruitment trip to some of our

finest petroleum engineering schools in the southwest in texas and louisiana, trying to persuade graduate students and undergraduates to the two come work for us, that what were doing is extraordinarily important and in the wake of deep water horizon, it was clear the government had a profound need for expertise and knowledge and smart and creative people to do that work. in the spring, we did the same kind of trip, but this time focused on environment of scientists. as you know come a tremendous amount of the word for these sales and plan approvals requires expertise in oceanography and biology and so forth. we went to a number is close, primarily on the west coast, but also on the country. the response was amazing in terms of the number of venture is and the numbers of job applications that we've got. i think we're very much on upward to drag. and it was well worth my time to do it personally.

a separate and apart from that, on the training issue, the agency, largely because of budgetary issues did not have its own training center. it relied on on-the-job training and it relied on our inspect yours, for example going to industry courses. that was unacceptable. and so we are creating -- we have created in the last three months a national training center that will train our people initially, inspect yours later on engineers, later on others in the specific skills they need to do the jobs we are asking them to do. they're already two groups of inspectors who have gone through that initial course. were very proud of that. that's the first ever for this agency and i think that's direct responses to some of the terms you raised. ..

quickly how these cuts would affect the ability to oversee the resources and the outer continental shelf. >> a couple quick points. we got an increase over fiscal year 11 and are certainly grateful for that. but we are digging ourselves out of a very deep and historical

whole and so you are quite right what we received and we are grateful for what we received is approximately $35 million less than always in the president's budget, and we strongly believe what was in the president's budget was necessary to continue climbing out of whole and provide the kind of manpower and inspections area where do they cover and the of environmental science area that we need. so the result of the shortfall quite simply is that we are not to going to be able to hire nearly as many inspectors for processing permits. we will not be able to process permits as expeditiously as we would have if we had been given the full amount of money. i don't have the exact numbers but a minimum of 20 permitting relating personnel will not be hired because we didn't get the

president's -- >> that's important. a director from which, the top five wheel and gas companies need $35 billion in profits in the first three months of this year. we don't have the numbers for the second three months, but we can presume that it's comparable , yet the industry as a whole pays just $10 million a year in inspection fees for offshore drilling. so that's less than 300 the percent that they are spending for the fees for inspection. the bp commission recommended increasing the $10 million per year that is currently paid for inspection fees significantly. that was their third. the administration request to increase in inspection fees paid by the industry to 65 million, which would be more than a sixfold increase.

mr. markey and i are introducing legislation today based on legislation already introduced in the senate. the good of the interior department for inspection fees to fund your inspection operations. while i know you haven't seen the specific legislation and we can't comment on that, but would you welcome authority to increase the inspection fees paid for by the oil and gas industries? >> yes, we would. as you noted, the administration proposed significantly raising the inspection fees from the current figure of $10 million to $65 million. that was rejected. so the irony of our budget situation is we are getting more money, but the taxpayers paying for it rather than industry. so we would certainly welcome the ability to impose higher

fees. dow's you know, the industry can afford it. i've heard many companies and trade associations say they are strongly in favor of a strong regulator. well, if that's the case i would hope that they would be willing to see those inspection fees increase. >> it is the taxpayer that is paying that. in the less than a minute remaining, can you give us an update on of renewable energy activities specifically offshore wind? >> yes, as we talked about before, we are pushing ahead quite aggressively with that with our smart from the start program. earlier this week only was in virginia at the atlantic wind energy workshop, which brought together a range of governmental people, developers, stakeholders from other federal agencies, again, to get together to talk

about what the specific challenges are in moving forward promptly with offshore wind. as you know, as part of smart from the start, we put out for comment earlier this week the regionwide environmental assessment, which is designed to capture the potential environmental impact of not construction, but characterization and leasing, and the draft suggested there were no significant impact to the environment of doing that. that's a draft we welcome comment but if that stands we can move forward and be in the position of issuing leases in the very near future. so we are all quite pleased that the step pace we're seeing in offshore wind, and we hope three much it will continue. estimate the time of the gentleman has expired. digital is from louisiana.

>> thank you, mr. chairman. i know that the possible loss of the future production is not much of a concern to the department of interior, and i've been looking to try to find something i can take my passion and be productive and help you do your job, and so i found of to the both you and stick to resell those are in september of last year you specifically made a comment that says as infrastructure continues to age the risk of damaging increases, the risk the risk increases substantially during the storm season and this was particularly about the vital arm. and psychiatry cells are at a time seemed to be very passionate about making sure the wheel and gas industry, quote, cleaned up their idol. d.c. that same way today? >> yes.

>> okay, great. well, we have a problem, because in march of this year, i expressed to secretary salazar that the permitting process was dragging its feet, and it assured me we were going to do something about that. well, i'm going to tell you it continues to drag its feet. and the problem is -- and i would not vote for mr. markey simply because i believe that there is a mismanagement when it comes to this permitting process. so i would like to talk about a couple of ideas. number one, it seems like you have district laid out across the gulf coast, and those districts must only operate those permits in this particular sphere of influence. is that correct?

>> well, we have districts that are assigned in general territories but the personnel is shared. >> i don't want to dispute your promise there is a slowdown or a problem with plugging in an abandonment because miti does it just does no such problem. >> your data continues to not match reality. on was on the phone with 25 both operators and service companies. i've got attempt to hide out the dhaka today. everywhere i go, every day -- if you'd like to give me your personal sell the call me every day. and we get it about the permitting drilling, but it's at a call and of course right now, it is the opportune time to do that work. there are 90 applications going into new orleans and only 25 coming out. i don't care what the paper work --

>> the numbers are up from last year, congressman, about four bills and 169 applications involving 3,528 unique wells have received approval for plugging in the abandoned or temporary abandonment operations. that's a fact. >> welcome i'm going to tell you that based upon the amount of work that needs to go on held in the gulf of mexico, and if that is the case it is not enough, and i am trying to help you here. but i think the problem is, and i believe that your statement prior to that was disingenuous because i've spoken to people down there and -- this is my time. when someone sends a permit application to new orleans, only those engineers and the orleans can review those applications. they can't share engineers from lake charles r. lafayette or lake jackson, and i think the

problem is the new orleans office, which is where the permit came for the macondo is a bit on the edge, and a bit overloaded. i'm telling you that the facts that you have are for all the because people are not hiding their boats up because you are issuing permits. come down and see the boats. all i'm saying is i think that while you are doing this year should be looking at allowing some shared responsibility or if it is important, important to you as you all claim and have been since last year, then why not do this? you all know which platforms need to be pla. division it out. you know, say we are just going to take a division and we know where all of those are and what needs to be cleaned up and assigned engineers strictly to

that type of permitting. it will help create jobs. that's all i'm saying. but don't come here and tell me that everything's okay. >> what i told you was the numbers were up. >> willing telling you is i've got both sides. >> the time of the gentleman has expired. the chair recognizes the gentleman from arizona. >> thank you, mr. chairman, and welcome, mr. director, good to see you again. let me ask with regards to the bureau of the agency what are the plans, what plans do you have for the agency have to extend oversight to contractors operating on behalf of the leases? >> congressman, i said over the last few months on a number of occasions that there is no reason in all or the logic but the limit of the regulatory

authority to the operators, that has historically been the practice in the agency most for reasons of clarity and simplicity. but i raise the question of why we have not historically exercised that regulatory authority with respect to contractors, and the answer was rooted in history and tradition rather than have the law. and so that's what caused me to say that we are not going to declare a unilateral disarmament with respect to contractors who believe that lee but we are in certain circumstances going to be able to extend the authority to contractors. that will not be in every case because there is something to the administrative simplicity and clarity of going against the operator and holding them responsible for any and all problems and falls and violations including those that may have been committed by the contractors. but i feel quite strongly that

it makes no sense to say that under no circumstances will we regulate the conduct of the contractors and refused to apply our authority to those contractors. so we will do it in limited circumstances in those egregious cases i feel quite strongly there's no good reason now to. >> the contractors have an impact on that oversight has been, from light understand, you say to the committee based on history and tradition is the law. >> that's absolutely correct. >> what is the agency's oversight let's say of the foreign flag groups? >> we traditionally have again been regulated operators, and we are going to extend that to contractors. the fact that we may have a foreign flag vessels would not

impair our authority if there were contractors on the raid from imposing the regulatory power on those contractors. so we don't exercise authority with respect to the rigs. it's with respect to the entities relating to the developing lease. historic the operators and now we are going to extend that to contractors. >> to follow quickly, the tax structure for a foreign flag of rigs operating in the u.s. territory. is that different, are their losses that the u.s. faces because they are foreign flag briggs? >> not that i'm aware of, no. >> i yield back. >> the gentleman yields that his time and we recognize the gentleman from texas. >> thank you mr. chairman.

there was a recent study on the impact of the mexico offshore gas development, and the u.s. economy that documents the costs to curtail activity in the gulf and the importance of getting offshore oil and gas -- getting the offshore oil and gas industry up to speed. for example, it indicates an hundred 90,000 new jobs could be created by 2013 if we return to the pace of the development we experienced prior to the macondo incident. the same report suggests the department of interior and specifically have been in suit to the economic impact of its actions on economy and most importantly on the citizens that depend on the offshore oil and gas industry for employment. i am personally aware of this situation as my colleague from louisianan indicate as well. the support this conclusion. as a result, to one former associate with the gulf of mexico oil and gas industry activity and investments reaching historic levels in

2010. in addition, offshore oil and production is declined to the pre-macondo forecast, and as a result, royalty income is down as well to the united states treasury. i will try to get through questions quickly if i can. what do you say to the people affected by the actions to believe the government is in different to their economic well-being? i would like to get you to keep that to about 20 seconds if we can. >> it's not true. people are not adel in different. in fact, our largest office by far is in the gulf of mexico. and so they feel acutely every day through their neighbors and their families the economic impact that you are talking about. it's not people here in washington, d.c. who are making these decisions and to the additional safety checks over and above what used to be required. it's people who live in the gulf and so it's their neighbors it is affecting.

as to suggest that there is any inference is completely in my judgment inaccurate. >> i would point you to your testimony and the section immediately in front of 2,012th on the discussions your hiring scientists to work in fields including environmental studies, review and environmental compliance all of which are critical to the development offshore resources. we receive more than 2,000 applications during and six deacons since the chairmanship. i didn't read anything in this about anybody to study economic analysis, financial impact, impact to the taxpayer, the treasury, i saw nothing about that. i saw the regulations compliance and so forth. >> genser mittal scientists are not just used for the regulation they are critical to doing the kind of leasing work and plan approval that is a predicate to operators getting permits. so, if you're interested in expedite the development, you should want us to have those

people. >> okay. how will the proposed utilization of the management of the ocs serve to ensure the interest or required to be balanced for safety and environmental concerns instead of simply being disregarded? >> well, what we're aiming for this reorganization is to have agencies that can focus with clarity of vision on what they are supposed to do. so we have an energy resource development agency whose mission is to worry about issues like that and make sure that the resources to adequately and properly developed, and we have the other agency that is focused on safety and environmental regulation and can focus on that. so it's just a much more logical economical structure if you have agencies focused more singularly on those missions rather than having any blurring of what the mission should be. >> looking to fiscal 2012, what is the department's projection

of the income from the offshore? >> i don't have a projection of the royalty income. it exceeds $55 million the, doesn't it? >> yes. >> and its bid for white you whittle and gas industry? >> yes. >> to suggest the industry is getting off free i think is just not a good fact. >> i did suggest they were getting off free tv i asked a specific question with a rifle oil companies could afford it and could use the extra money and the answer to both of those questions is yes. >> it was more for my absent colleague. [laughter] so don't take offense to that if you would. let me see, i have 24 seconds. i have another question. how about this, will the department of interior -- >> the most significant thing we can do is get the personnel that will expedite the process.

i know that when i've been here on prior occasions in front of other committees, the concern is to push the permits out as quickly as possible. now, we have to do more with respect to those permits than we ever did before to reach with the chairman says was the first priority, which is to improve safety. i completely agree with that. so that takes more time. it takes more resources. so in order to pick up the pace, which i know everyone including me wants to do, we need to get additional resources who will be devoted to permitting. we are getting some of those because we did get more money, and i know we are unusual in government agencies and getting that. we are grateful for it, but the shortfall between the president's request and with the house appropriations committee has approved will mean that we will not be able to hide your 20 plus people who would have been devoted to permitting. >> i sure don't like those answers. the suggestion is we get more to the government agency that everything gets better. i'm not sure that's necessarily

true. >> the time of the gentleman has expired. the gentleman from utah, mr. bishop. >> mr. bromwich, if i could ask one quick question. when you're talking to the gentleman from louisiana about the situation getting better, what was the base year of the numbers that you were using to make that comparison? >> it was may, 2009-april, 2010. so we did not include the period after the deepwater horizon. -- of the two periods were -- the base of your permitting process was from 09-10. >> yes. >> mr. chairman, if mr. landrieu of louisiana has other questions i would be happy to yield to him. >> it's perfectly -- the gentleman from louisiana is recognized. >> thank you, mr. bishop. let's do it this way, mr. bromwich. bdy you have the backlog numbers for each district? >> to hit the backlog districts

for plugging in abandonment? no, i don't. >> do you know where the backlog is? >> i don't, no. >> if you could, i would like you to submit to this -- this committee specifically the backlog number by district. do you know what the average time frame for permitting a job is? >> i don't. we could do the math. 400 -- we've got 4,000 that have been approved in a one year period. we would have to know how many engineers are devoted to that. so it's a large number. the process a lot of these. >> you know why the process a lot of them? a lot of districts depending on the workload is easy permits. it's a tooby permit. this is not a difficult permit. this is a permit that you like and ken salazar should like.

both of you commented. it's a two week permit and is a tube-3 month permit and new orleans. again, what i'm telling you is that you've got a problem in a new orleans district with work. a lot of the peony that needs to be done in the gulf mexico happens to be in that district, in that region. it is not functioning down there. i'm asking you to please go down there and ask, did these guys some hope. of the engineers in lake charles and houston -- jackson or some of the other regions do that work. that's why we don't want to give you any more money. >> well, congressman, i will look into that and this has been a festering problem for some time it would have been great if you had advised me of that because i could have looked into it. >> i personally spoke to the end of the last hearing when you were here, king to the table and said look we have a problem with tnt down in new orleans.

i mentioned it to ken salazar march, 2011, and nothing is getting done. in fact -- >> you didn't mention it was limited to the district. now i have something to go back with and talk to my people about. you said you had a general issue. i said fine. i hadn't heard anything from you since then. now i will get the district based on what you're telling me today. >> let me ask how much input have you taken from the industry on this organization? >> from the industry, not a lot. although they have known about it since it was announced by secretary salazar, and i meet with them on average, individual operators probably on average one per week and groups of operators one every two or three weeks. and i've spoken to large groups, industry personnel on more occasions than i can count on which i have laid out the fundamentals of the reorganization. >> have you requested input from them to make sure that it may be

-- i know that the government isn't just the answer to everything, that we all make mistakes up here, but i'm just wondering do you have -- have you map to the work between the two bureaus? >> yes. >> okay, and what have you done to ensure that the efficiencies are going to work together not from a bureaucratic standpoint but from a practical private industry standpoint? >> we want to have these agencies operate in the most efficient way we possibly can. so our planning has been all about making these processes work as efficiently as possible, and making sure that we respect the interdependency between the two agencies that are going to exist. for your average industry operator, congressman, from september 30 if, when there is one agency to october 21 where there are two you're not going to see the difference because

you will be dealing with us sima people on the same issues they've dealt with historic lee. >> let me offer some advice. i would like more input from the industry in case they see any pitfalls and weaken it seamlessly. if you are going to create two agencies to work together for the industry. >> you were not here. i specifically asked what we were going to do about that and i said as october 1 approaches and as we are in the final phases of completing this, we are going to have a very aggressive outreach program with industry we are going to hold workshops, public workshops that operators were invited to attend so they know exactly where the different functions are going to be located. they can ask questions about that, they can get things clarified from themselves so october 1 it will in fact be quite seamless for them. >> the time of the gentleman has

expired and recognizes the gentleman from louisiana. >> thank you, mr. chairman. great to see you again. appreciate you coming before us. i'm going to sort of pick up where we left off with your last visit with us. there has been no new sales conducted since the deepwater horizon instance as of july 12, 2011, and only in revenue deepwater jorling permits have been issued. meanwhile, the nation imports nearly half of the petroleum as you know. a recent study by the epi and cno y a site it permitting returns to the 2010 levels, it would lead to 190,000 new direct and indirect jobs by 2013. i remain concerned about the policies of the and administration. this administration has shown, and i would agree with my colleague is a callous indifference to the price

american families pay for energy whether at the pump or turning on the light switch, and also to the job laws that we have in an environment with unemployment right now at 9.2%. and we are talking about a lot of jobs lost or not being created because of the leases and permits in louisiana. so we still are in what i call a slow torian. we start out with a moratorium, a defacto moratorium, lawsuits, etc., the permit torian and now i would say we are in a slowatorium. and of course the agency wants to be larger, do more things, have more involvement with permitting the trend boen which seems to actually slowed things

down. and as we want to show you -- bring you up-to-date on the chart. >> [inaudible] we discussed before and as you can see -- i'm going to need to be able to get a better set of glasses or walk me through. >> i will outline it. we peaked at second quarter, 20009 at 1.73 million barrels a day of oil, and that's second quarter, to doesn't mind. it was kind of flat and then it's dropped off. last time i spoke with you we were down to 1.59 coming and now we are on to this point here. we are still at 1.5 now. so we are not going back up, and in fact if you look