go? >> we do have a long ways to go in engineers. but as you know, the appropriation just came out in december. it was vital that we had some ability to incentivize those engineers to work for the u.s. government instead of for the oil companies. they're paid very well by the oil companies, especially when the price of oil is what it is today. so we are in the process of implementing that pay incentive. and we also are doing some aggressive outreach to connect with new graduates from the engineering schools. we're also working with organizations to assist us with those people that may want to work for the government because

of some of the benefits and perhaps stability that we can provide that typically the industry doesn't. i'm optimistic. it will take a couple of years for us to reach our goal, but i think we will make a big stride this year. >> as you all know, the congressional intent was part of these fees be used to expand the capacity so that we could expedite the orderly development of offshore there. and i do appreciate the time lines and i recognize we can't just snap our fingers and have these folks in place. but you can count on me to inquire how we're doing. not only to get the bodies in this position, but again make sure that it's going towards the goal which is a more orderly and

expedited processing for these ocs permits. so it's not only getting the bodies in, but making sure that we're seeing greater movement there. my time has expired, mr. chairman. >> thank you very much, senator mikulski. >> i want to talk about fraking far little bit. there's too many cooks in the kitchen. the doe, epa are all in the process of studying fraking. i've heard there's as many as ten agencies involved in the process. i think the budget gives $13 million to usgs. i think it's about $45 million for fraking research in total in the different budgets. duplication is something that i'm always worried about, people doing the same work in different agencies. we can get a little better bang for the buck. i just want to get your

perspective on the research effort. is there coordination between agencies so there isn't overlapping research? >> again, duplication is always a concern for all of us, i believe as we go forward during these lean times. i'm aware of two studies we're assisting with. one study by epa, and then a second study being conducted by the usgs within the department of interior. our participation is fairly limited to providing statistics and data that they are then taken into account as part of their analysis. as it relates to the bureau of land management. we are proposing a new rule relative to fraking. the components of that rule is based upon the three primary recommendations that came to us from the department of energy task force. the three components we're focused on is public disclosures

of the chemicals that are being used. drilling operations on public lands. many states have such disclosure policies in place right now. and we want to make sure that the standards that are going to apply to public lands are similar to what's being applied on state lands. the second component of our proposed fraking rule will address well bore integrity. to make sure that the casings that are being used during the drilling operation are secured. they're going to protect ground water. and then the third component is water management. both looking at the source of the water being used, because there's a significant amount of water used in fraking operations in most circumstances. and then second, what occurs with the disposal of that waste water after a fraking operation ceases. making sure the disposal is consistent with local and state law, not federal law, but local and state law. so those are the three components we've incorporated into our proposed rule.

we anticipate releasing a draft rule pertaining to fraking as early as april. >> i want to take it one more direction. and that is, when i talk to the industry, the industry says fraking is going on so deep that it can't impact the potable water up above. when i talk to other folks, they say their water is being impacted by the fraking. i don't know which is the truth. usgs has estimated that some k auqifers are losing one to two feet per year due to energy production. i don't know why that is, if it's because of fraking or some other reason, but water is very, important. and i just wondered, can you give me any idea on what, if the

a auqifers are losing that kind of -- if they're being diminished by one to two feet a year. secondly, why is that? and thirdly, is there something we can do about it? >> well, i would refer you to usgs for the answer to your specific question relative to what's causing that depletion. i do know many fraking operations require an extensive am of water. that water has to come from somewhere. so energy companies are securing water rights wherever they're operating in order to have access to such water so they can continue with their fraking operation. but i will also give acknowledgment to the industry, for they understand the potential impact and certainly the long-term impacts of continuing the operations that are currently taking place with the amount of water. and they're proposing stood a better job of reusing water. and actually treating water on sites so it can be used there on additional or new fraking operations.

>> well, it is a big issue. i mean, there was an amendment on the fwloor yesterday that i think failed because some people didn't want to encourage more fraking. we're getting natural gas because we have the ability to frak. we like to see it done, but by the same token, ten years from now, we don't want to look back and say oh, my god, what have we done? i would hope the research is that's being done is being done in a coordinated fashion and very timely. i want to talk about closure for blm wells. could you compare the procedure to what happens on state or private lands in a state like montana when it. co-s to well closure? >> well , we take plugging and abandonment quite seriously, because it's the last time we actually have opportunity to look down the hole before the cement is placed. we give that one of the highest priorities as part of our

inspection program. when there is going to be a well that's going to be closed and abandoned that we have our inspectors out there almost 100% of the times to make sure that the process is completed based upon the engineering that had gone into that design and approval process. >> can you give me any idea what goes on on state and private lands as far as well closures? >> i really don't. some states do a better job of prioritizing inspections than others. i won't cite any examples, but nonetheless, you know, we are responsible for managing these wells on federal lands and that's where our focus is right now. >> all right, thank you very much. >> i have a few more questions then an obviously recognize our colleagues for their questions. i understand that you're going to use a new auction process

format for offshore wind, alternate energy unlike what you do for oil and gas in the gulf, for example. raise the question of why the different auction procedures, first question. second, we've got to get that information out to potential applicants in a very expeditious way. otherwise, they might not be prepared when the auction occurs. and, you know, frankly, they also, i think, deserve the opportunity to sort of evaluate and comment on the procedures to ensure they are fair to all potential parties. so could you comment on the wherein reason for the new procedures and also commit to getting the proposal out quickly so that relevant parties can

participate? >> yes. the reason for the new procedures is that strictly speaking, offshore wind energy different than oil and gas. you have a finite area that is being made available. you want to make sure that you get as much efficiency out of that area as possible. unlike oil and gas where you purchase a parcel, you assume the risk for the parcel, you drill the well. if it's a dry well, you go some place else. here, we have a number of interested companies. we have a number of interests that we need to take into account in considering how to lease the finite area. that includes the efficiency of their project, the likelihood that that particular operator can actually bring a viable

project online. and the best configuration of multiple projects in a limited area. so that creates a little more complex process. that said, we are very actively evaluating alternatives for this leasing process. with the idea of while addressing those multiple factors that distinguish from oil and gas, keeping it as simple as possible. and there's a number of reasons for that. we have gone through an exextensive process to make this area available. we want to encourage the development of offshore wind. so we want to keep our auction process as simple as possible, while at the same time, getting the area into the hands of operators who will be able to stand is up real project with respect to the option fro sesz and similarity among operators with that process, you're absolutely right. that is essential. we put out a description

inspection request last fall and had a comment period provided that a for two operators and we got a lot of useful fedback from operators about the different factors and alternatives we could employ in the auction format. so we've been extensively engaged with operators through that process. and we are planning into the run-up of coordination with operators to make sure they understand exactly how a lease process will unfold, exactly what will be expected of them with we want an efficient lease sale and we want it to work and we want it to work right out of the box. >> do you have an idea of when you will be prepared to sort of publish your final for comment proposal? >> yeah. so we've done all of the comment. so now we're work on finalizing

what the auction format will be. now, each auction will have to be tailored a little bit to the region. but we hope to have all of that in place for competitive leasing later this year. >> very good. now, assuming you've got turb e turbines and transmission lines operating in the water, will employees conduct the inspections or will bessie step in and take over? >> in the fear term, part of what we're trying to do is hire structural engineers who can help us evaluate construction and operation plan, which ask a key component down the road. eventually when those operations are up, steel is in the water, bessie will have a role in conducting safety inspections and compliance with respect to those operations. >> and director watson, you're collaborating right now for the handoff, i presume? >> yes, sir. you know, this is just a recently created two bureaus,

but we have a lot of interdependcies, and there's still evolution going on. this is a perfect example of, i think, right now our priority is with the oil and gas safety and establishing our environmental enforcement division. but we'll be ready when it comes to take on the final wind work. >> you don't have the same danger with the oil rig explodi exploding et cetera, but you have the problems with hurricane damage, et cetera. have we clearly set out the responsibility for the leaseholders in terms of their obligation to repair and to remediate? there's no oil fund for this process, i presume. >> that's right. there's other mitigation factors around impacts on avian resources, marine mammals. that is why we're doing these environmental analyses so we can

develop mitigation measures and requirements to ensure that one, the operations go up that can provide energy from renewable sources. but two, we're managing the potential impacts. >> thank you very much. >> i want to add a couple more questions from the inquiry from senator chester on fraking. one of the concerns i'm hearing from folks is that the concern that these will be overlapping or duplicative rigs that are coming out of blm on top of what they already face in the states. can you speak to that issue? give me some assurance that we're not just adding on additional federal regulation on top of what the states are doing, and how you will work to

eliminate any such redundancy. >> again, as i mentioned earlier, there's going to be three components of our fraking rule. disclosure of chemicals, well bore integrity, and water management. the similarities that exist would be in the disclosure of chemical mps many states are requiring as part of fraking operations for companies to disclose what chemicals are being used as part of their operations. we will be requiring that, but we also -- >> will that information be shared publicly, or will there be provisions for allowing protecting any trade secrets that might exist? >> the information would be available publicly unless there's some rational and justification the company would provide us to keep that trade secret from prosecute being made public? >> so that would be considered on a case by case basis? >> yes and we have a process in

place to make that type of determination. >> all right. let me ask about on shore inspection fees. currently, blmcollects $32 million for the apds and this budget proposes an inspection fee that total dl$48 million. how did you get these fees? inspection costs? where did they came from? >> basically they are based on actual costs or what our estimate of the actual costs would be. the fee itself would be implemented in accordance with the number of wells that are on a particular lease. and for example, if there's a leaseee with a lot of wells on that particular lease, they would pay more inspection fee than a smaller operator would be. >> so has there been any assessment on the impact to

small businesses that may be on the federal lands. when we're talking offshore, you don't worry about that. you don't have anybody there. but has there been any kind of assessment that looks at what the impact may be on the smaller businesses? >> we have done that analysis and assessment. and quite frankly, the highest risk we have sometimes are with smaller operators. they just do not have the capital to do everything that's required to ensure environmental protections for the drilling that's occurring, or the production that's occurring. so it's -- there's a necessity for us to get out there on the site to make sure that those operators are complying with all the laws and rules of governing their operations. so we can't ignore them, but we have taken into our analysis the economic affects or impacts to operators. >> as you have done the analy s analysis, have you looked at kind of the cumulative impact of

these additional fees that we're talking about? you've got the existing apd fees. you're talking about new inspection fees, increasing royalty rates perhaps. are you concerned what might result is lower bonus bids coming out, less production on federal lands, which then results in less revenue to the treasury, has that been factored into the analysis as well.? >> it is. we understand the cumulative effects on the industry itself based on everything we're doing to ensure environmentally responsible drilling on these lands, and to make sure that we're making appropriate parcels of public lands available for such extraction. but at the same time, as we go guard, well, tlast a factor that we've also taken into account as we review the royalty rate the options going forward us.

all of the actions that we're take on the industry. >> the department yesterday had announced its analysis of this merger, the proposed merger of osm and blm. it generated a fair amount of controversy with the energy committee when that was announced. i do appreciate what the interior has done to avoid the statutory responsibilities. but the analysis as i understand it fails to quantify how this merger is actually going to generate any savings or efficiencies. and we had asked for an assessment of the costs and the benefits of t s of the proposal. but from what i can tell, the department has failed to include any of that. i'm of the mind that the interior department needs to go

back and actually calculate whether the consolidation of administrative functions is really worth pursuing. i know that you evolved in this probably more so than most others out there. what can you tell us about this new proposal versus what was originally laid out there? and about f haven't been able to demonstrate that we're going to see any cost savings here? >> again, i think the jury is r savings there actually will be. >> you do agree that's an important part of what this was all about? >> it is. but we also believe that there will be efficiencies gained based upon the actions that the secretary approved yesterday. and by that, and what you read is that the bureau of land management will be providing administrative support the office of surface management, where they were required to hire similar skills and positions

that we already have in place right now. they would no longer need those types of positions because those services would be provided by the bureau of land management. some of the revenue collections functions would then be transferred to the office of natural resource revenue. the office of surface management for a while would remain an entity in the department of interior, forming their mandated functions. what we're trying to achieve is administrative efficiencieefficd to allow the office of surface management to focus their limited dollars on the important work that they doe perform on behalf of this nation. >> so are you suggesting then that the cost benefit analysis will still be coming to us? that, in fact, there is an ongoing assessment in terms of what cost savings might be achieved that we might be able to learn that later?

now, that's not what i'm implying. we're going to learn how much cost savings there are going forward and implementing the actions that were approved. >> i'm going to be inquiring with the secretary of the air force where they're going to achieve certain cost savings. our social security count me a bit of a skeptic if we're waiting to see where efficiencies are going to be gained. there's a lot of consternation about this specific merger. so i would hope that we would be focussing on how we see those savings, how we gain those efficiencies. >> again, i think there will be some savings.

i just could not give you the exact amount of savings at this point in time. there will be less people that would be employed. the systems would be consistent, or at least the systems that we would have in place in the bureau of land management that would allow us to provide the support that osm would require are already in place that wouldn't require us to do much adjustments or to increase that type of capacity. and again, we would be benchmarking against what osm is currently doing and improving our own performance and operations within the blm. >> mr. chairman, thank you. >> thank you, senator. >> and thank you, gentlemen, for your testimony. >> just a very quick follow-up on what senator murkowski was talking about. there will be less duplication?

>> there will be. >> and where does the box sto-- buck stops? >> you have my phone number. >> i'm not talking about your department necessarily. but there's duplication of work being done and when it comes to a problem that arises, there's, well, too many cooks in the kitchen. so you can't nail anybody down. would this from your perspective, would this help with accountability? >> i do. again, there's a lot of opportunities for us to improve our performance. in these lean times that we're all in, we need to be looking at every opportunity we have to improve our performance, create the efficiencies that the american tax pair are demanding a tone reduce costs because there is no new dollars coming our way. >> all right. well, thank you. that was just brought up and i'm glad senator murkowski brought it up because i think ultimately

in the end, i think money is important but for us, what's equally important in my opinion, is if something goes upside down and there's more than one agency dealing with it, people slip through the cracks. that's not what i want to talk about. in your budget, the agency has a goal of 10,000 mega watts at the end oof the year. the department sent a request for leasing on public lands. a proposal similar to a bill that i have. 1775 which directs the agency to pilot competitive leasing. the blm request is a bit different. it does not include revenue sharing for states or communities or ekro systems. which are most impacted by the development and has minimal side boards for mitigation avoid dance.

and doesn't streamline the process as 1775 does. i believe it's because blm does not have the authority to do so today. i am optimistic to see the agency move forward, but leasing is only part of the equation. you would like to have you expand on how your agency plans to address the broader issue of impact to communities and natural resource if the permitting is expanded. >> first and foremost, we're quite intrigued by your legislation. the return some of the revenues to mitigate some of the development. we look forward to working with you, started in, and otherings in this congress to pass common sense legislation that would allow us to meet our common goals. as we go forward with using public lands to achieve that

goal we are quite confident that by 2013, we will have approved 11,000 megawatts of renewable energy generated from public lands that would include wind, solar, and geothermal primarily. we are also moving forward with our land use process and the nepa process to designate solar energy zones where we would steer development to areas that have already been screened, analyzed, cleared for such development. in the near future we would steer the development to the best place where is the development can go forward and actually achieve our mutual goal of diversifying our nation's energy portfolio. at the same time, we understand that these are large scale projects. they're large footprints on

these public lands. therefore, we need to make sure there's appropriate mitigation to offset the lands that are being dedicated for that particular type of use. we work very closely with the communities, with we're working very closely with all public land stakeholders, with the industry itself, as well as environmental groups to come up with an appropriate mitigation for such a large scale commercial development. and i think we're seeing some successes. >> power is very costly at this point in time. senator murkowski and i have a bill which would expand our knowledge about geothermal energy and its potential. can you speak on your efforts to expand geothermal production and the barriers you ear facing at this point in time to employing this