employment, and the vital need for environmental protection and responsible stewardship. these are priorities and values shared by everyone in this room. this budget request is designed to provide us with the resources necessary to advance our commitment to a comprehensive, all-of-the-above energy strategy that encourages safe and responsible domestic oil and gas exploration and development as well as pushes forward with the development of offshore wind and other clean, renewable energy resources. the resources we've requested will allow us to continue pursuing our problematic priorities which include, one, finalizing and implementing the next five-year offshore oil and gas leasing program which as proposed will include 15 potential lease sales and make available more than 75% of the undiscovered but recoverable oil and gas resources offshore of the united states.

two, conducting the rigorous scientific and environmental analysis necessary at all stages of the offshore energy development process. last december, we held the first lease sale following the spill which was one of the most successful in history in the western gulf of mexico. we'll hold a consolidated lease sale for the central coast of gulf of mexico june 20th. this included rigorous analysis of available information concerning the environmental affects of the deepwater horizon oil spill. three, we continue to conduct efficient and thorough reviews of offshore exploration and development plans under the new heightened standards, which include sight-specific environmental assessments on every deep water exploration and development plan. four, we've inimplemented innovative lease terms making sure the american taxpayer receiving fair return and strong incentives for industries to diligently develop offshore to

meet our energy needs. and finally, we're on the forefront of developing offshore development resources and over the next year we expect to issue a number of commercial leases for offshore wind development, particularly along the atlantic coast. we're focused on its mission to help the united states secure its energy future through responsible development of conventional and renewable offshore knowledge. thank you and this committee for its continuing support of mission and our efforts. >> thank you so much. director watson, please? >> good morning, chairman reed and ranking member mckau ski and senator tester. thank you. i'm pleased to appear to before you for the first time as director and discuss the tremendous strides we've made as well as our vision for the future of the agency. we have a critical mission, providing safety and environmental oversight of offshore oil and gas explorations on the outer continental shelf and leading positive changes in the safety culture of offshore operations.

our near-term goal is to restore america's confidence that offshore operation "be carried out safely and responsibly and without the tragic human and ecological costs that occurred as a result of the deepwater horizon tragedy. we want to build capacity for offshore safety assurance throughout the country and also, to be the world leader for shave i safe offshore operations. the keys to our success the employees. over the past through months i've met our employees from all of our offices. they've made it clear to me they believe in and are passionate in our mission. they're unmatched in their knowledge of the offshore industry and are making the best use of the resources at their disposal to advance the cause of safety and responsible offshore oil and gas operations. overseeing safety and environmental performance on the ocs includes drilling permits and managing the order ily development of the nation's offshore oil and gas resources. a lot of attention has been paid to our permitting and i

sympathize with the people who depend on the permits for jobs. the same people who were so negatively impacted by the deepwater horizon tragedy in many cases. permitting is an essential part of our safety mission and we issue permits only when companies have demonstrated that they can conduct their proposed operations safely and responsibly. they've met all the safety standards and they respond effectively in the case of worst-case discharge. we've significantly decreased the amounts of time it takes to approve a permit and have issued hundreds of deep water and shallow-water permits over the past year. but those that believe the pace of permitting should be automatically the same as before deepwater horizon are ignoring the lessons of that disaster. i will commit to rooting out inefficiencies and making the process as straight forward, predictable and understandable for the industry as possible but not at the expense of safety. when coupled with increasing hiring and training of engineers, scientists,

inspectors and other personnel these effort also further enhance the permitting process and improve safe and responsibility operations on the ocs. we've made a tremendous amount of progress and my written testimony provided examples of how we spent the time focused on hiring new personnel and enacting safety retomorrows and completing the reorganization of mms. thanks again for this opportunity to testify and i look forward to answering your questions. >> thank you very much, director watson. we'll initiate six-minute rounds. i'll give my colleagues a chance. i anticipate at least one or two rounds. we have a very many questions. i'll begin with director boudreau, by the way, thank you, gentlemen, all, for your excellent testimony. director boudreau, in rhode island, you mentioned the accelerating approval of offshore wind, particularly along the atlantic coast. we have made some significant investments both with federal dollars and local dollars in

terms of kan seth qwanset point and we have application for the project for offshore and in federal waters. we've also done a lot of planning. special area of management plan which is drawn nationwide attention as one of the best of the comprehensive approaches to evaluating offshore potential and areas of development and it's recognized nationally. but we seem to be falling behind other states in terms of approvals. the next big step for us is the release of the draft environment assessment -- can you give us an indication of when that environmental assessment will be completed? >> yes, sir. you're absolutely correct about the work that the state of rhode island has done to promote the development of offshore energy.

that work will feed and has fed directly into the process in evaluating the wind energy area in the shared area between massachusetts and rhode island. what we call the area of mutual interest. one example is the sand that was a comprehensive environmental assessment relevant to our process under neba in evaluating area. that analysis and the good scientific work sponsored by the state of rhode island will feed directly into our environmental assessment. as will all of the work that the state task force has done. it helped us define what the potential conflicts might be, including the coccyx you're of ledge, an area of sensitivity both environmentally and for fishing interests. in light of the work already done by my agency and work done

by the state of rhode island, we anticipate issues a draft of the environmental assessment late this spring. >> one of the reasons critical of getting the ea out is that it looks like august of this year, 2012, we hope, the time for the final assessment will be issued. it should put us back on track with some of the other states along the atlantic coast. and if that's the case, would allow us to really begin a leasing process at the end of the calendar year 2012 or early in 2013. and again, the theory is that if we don't we just fall behind and that's not just a question of the where the towers go in the water it's also a question of sort of the land-side operations, where they might be situated.

you know. so i would urge you, again, to expedite secretary salazar has committed to expedite this draft and with similar speed, finalize the environmental assessment so we can begin the leasing process. >> this is absolutely a high priority for the secretary for my agency. >> let me turn and, again, i anticipate the second round to director watson. as we, last year, included for your agency, the inspection fee program. can you tell us what improvements you're making with these fees? i think director abby said it very well. it makes sense to basically help defray the costs of inspections and review that immediately were bound to the benefit of the drillers, because they're the ones who, presumably, get quicker approvals, better

inspections, better protection for their environment and less problems down the road. can you comment about how you're ensuring these fees are being used well and wisely? >> yes, sir. the fees are focused on our safety program, primarily our field operations and our permitting operations. the expense of these operations is mostly in the cost of our workfor workforce. we're increasing the size of the workforce at a pretty steep rate for a small agency. we have already increased the numbers of inspections -- inspectors by a significant number. we started at about 55 and i think we're up to 91 now. we're headed up over 100 into about the 150 range that we're

going to need for inspectors and as you increase your number of inspections, you also needs helicopters to get those inspectors offshore which are costly as well. and then turning to the permit side, we're adding, almost, 100 engineers. people who are plan reviewers for the information submitted to get a permit. and they are a combination of structural engineers, petroleum engineers and some geophysicists and geologists to review those permitting applications. so we're still challenged to bring those people into the work force but we have an aggressive outreach program. we did get some incentives for requiring these people in the 2012 appropriations which will be very valuable to seem optimistic about that program. >> a quick because my time has

expired. the initial feedback from the industry, sit positive in terms of the more expeditious permitting process? a better sense of the profession, skill of the inspections. is that what you're sensing? >> well, my experience is that the industry is looking at the bottom line. how quickly can they get a permit. but they are, also, focused on the competencies of our people. i haven't heard any disparaging remarks about our competencies. on the permitting side, i think there's been a combination of efforts on -- by the industry to provide more comprehensive, better-prepared applications than say a year ago. and in the besse side, we're also better at doing these new safety standards at reviewing it. and the numbers kind of bear this out. just between last march and

september, our average was about 97 days to get a permit processed. that was the argue average. and then between september and today, it's gone down to 62 days. so it's right around two months but as i said in my opening statement i'm not about the numberf i'm about safety and environmental protection. >> thank you very much. senator mckurkowsmurkowski. >> i want to better understand some statistics out there. yesterday the president released his -- or he discussed the one-year progress within the administration. he called it his blueprint for secure energy future and in that report, he notes that oil production is up overall. that's the statement that his certainly been made. he doesn't disclose where that increased production comes from. whether it's on federal lands,

private, state. i mentioned in my opening comments the department of interior's own numbers would seem to in onshore oil production, down 14% from last year, offshore production down 17%, and, yet, yesterday when secretary salazar commented on the president's blueprint, he stated the fact of the matter is we're producing more from public lands, both oil and gas and both yankee shore as well as offshore than any time in recent memory. so i'm trying to understand our data here. because i think that this is important. people really do want to understand what the situation here is in this country. so i guess we've got a situation where either the data from department of interior is wrong or it has not been communicated

adequately or appropriately to the secretary. so the question that i have is -- who's right here? are we -- when you peel this back, are we seeing an increased production on federal lands and offshore as well? or not? >> let me take a stab at this, senator murkowskmurkowski. no doubt the statistics show u.s. oil and gas production is up. last year, more oil was produced in this country than at any time since 2003, according to -- >> do we dissect that as to state, federal. >> i can. no doubt, the aggressive dwomgt of shale gas and oil has led to a shift to private lands in the east and to the south where there is less amount of federal mineral estate in those sections of the country. as far as natural gas, last year

there was more natural gas produced from blm-managed mineral estate than in decades. oil production was down somewhat last year. but we're moving forward, again, offering up additional parcels for leasing. we're processing more applications for permits to drill than in the past several years. and so we should see an increase in production of both oil on public lands as well as natural gas. but again -- the products was up. >> right. so i'll grant you that and i also recognize that where that natural gas production is primarily coming from is in the state on the private side. is it an accurate statement, then, to state that 14% onshore -- 14% decrease onshore from last year and offshore down 17% for oil? >> again, the statistics speaks

for itself. >> this is where the confusion is. the statistics are being used to suggest that there's this incredible increase in oil and gas production. but we all know you have oil production and you have gas production. and we're seeing remarkable, remarkable opportunities with natural gas within our shale formations and that's good. i support that absolutely. what i'm trying to understand is whether or not our oil production offshore and onshore, up or down? >> the oil production for i don't know shore federal minerals was down last year from previous years. where the industry decides to produce or where they decide to develop is up to them. for example, we have approved 7,000 applications for permits to drill that are not being drilled. we have over 25 million acres of

lands that we've leased that are not being developed. so it's a decision that's being based by the market. >> i understand that and in my next round here, i'll ask about some of those incentives or disincentives we impose that kind of pushes the -- those in the exploration and production business to go from federal lands to state lands. i want to ask, very quickly, and this is to you, director abby. i mentioned it to the secretary last week. a couple different times. this relates to the legacy well situation alaska. for members of the committee, it's an interesting situation. back in about 40 years ago, there was exploration by the government by the navy, primarily, in the national petroleum reserve. they drilled some 137 different

wells looking and. and then moved on. the problem that we face is they moved on without properly abandoning and 'caring for those wells. now decades afterwards, we're having some of the casings collapse. we've got erosion issues coming in. and it's not only unsightsly, but it's an environmental scar and it's something that has been difficult for alaskans to accept because on the one hand, the standards for the environmental standards are exceptionally high and i think, appropriately so. we want to make sure we're taking care of the land there. but on the federal government side, they can come in. they can explore. they can leave. and their environmental responsibility is not attended to. if you were on the private side you would be fined, i think the fines that we're talking about could be in the realm of $40

million. the revenues that have been received from the national petroleum reserve, alaska, are certainly sufficient to help clean this up. but we're on track for cleaning up these at about the rate of one per you're. it's going to take us another 135 years to clean it up which is certainly not acceptable, so i ask the secretary and i would ask you, director abby, whether or not we can get a commitment to be coordinating between the blm and the alaska oil and gas conservation commission, to not only provide the commission with an inventory of the exact number, the associated cost force plugging them, and then, a plan. an action plan so that we can have a reasonable level of assurance that we'll move

forward, that the government will move forward in keeping their commitment to alaska and to the land up there. >> my response would be similar to what the secretary shared with you. we're committed to working with the state of alaska to identify where the highest priority needs are for cleanup. we've spent millions of dollars to date in cleaning up some of those legacy wells. >> and they're expensive, we acknowledge. >> very much so. this year we're -- we have sufficient funds to clean up an additional three, but as you suggest. and i will admit, that's a pretty slow progress toward dealing with the challenge that we face. >> we need to be working on the together so i appreciate that. thank you, mr. chairman. senator tester? >> thank you, mr. chairman and thank you all for being here. as i mentioned in my opening statement, the number of rigs operating in the u.s. this year is the highest number in probably eight or ten years. the u.s. has more rigs operating right now and correct me if i'm

wrong, than the rest of the world combined. our domestic production is at an all-time high. and you know, maybe the public lands is down some. and i want to get into that a little bit. but the fact is, if it's up on state and private, we got more rigs operating in the u.s. than the whole rest of the world combined and i talked to a person in montana today where they have a bunch of permits and can't get any rigs because they're all tied up. i don't know, you know, i want to get your perspective on all this because there's about 32 million acres of federal land leased right now and as you pointed out, i think there's 7,000 applications for permits to drill that have been issued and not drilled. can you give me some insight into why that is?

insight into what you're seeing as trends on the federal lands. >> well, senator, i'll be happy to. again, there's a lot of factors that come into play relative to a decision made by the industry on where they choose to drill. as it relates to the number of applications for permits to drill, we issued 4200 last year. that was above what the number that were submitted by the industry. we had a little backlog from the previous year and we were able to address the backlog. but we issued 4200 applications for permits to drill. at the end of the year we had over 7,000 not being drilled. as i mentioned there are several factors for that. sometimes it's financing. another factor that comes into play is that the industry, the sales have chosen to drill elsewhere where it's more economical but it's a choice they have to make and a choice that they make every day. we're moving forward as

expeditiously as possible to streamline our review processes without foresaking the need to ensure safety as e as well as environmental diligence on the drilling operations. we're increasing our inspections. much of the easy plays are located right now the private mineral estate. >> and this goes to i think, senator murkowski's last question. that is, as we push to open up lands in responsible way, not sacrificing one resource for another, we also have to consider things like the casing. how it's cemented in. and i hope we're thinking about what happens when the wells usefulness is gone. i hope we're thinking about that

up front. so, can you give me some sort of trouble on o idea of the thought process to make sure the land is being leased responsibly and the development is being done in a responsible way so we don't have a bunch of wrecks like senator murkowski was talking about? >> let me start by saying in 2009 when secretary salazar and i both came into our new positions and the program was on the virge of collapse. i say that because over 50% or close to 50% of all the parcels being leased were being protested or litigated. that's unacceptable. literally, hundreds of leases had been awarded by the department of interior specifically the bureau of land management, were tied up in protests in litigation. the millions of dollars we collected from the oil and gas companies for their leases that they purchase were placed in suspend add counts until this could be resolved and again,

that was unaccepted. the rules in place to govern the oil gan oil and gas operations and to insure them being exf extracted from the public assets were over 20 years old. technology had advanced significantly in that 20-year period but no one was paying attention to updating the rules. we had epa and other federal agencies criticizing the analysis being eperformed by the bureau of land management as it related to air quality documents. we had sportsmen and other public land stakeholders criticizing the leasing everywhere and anywhere mentality going on at the time and certainly, very much a part of the blm's culture. there were concerned about the environmental damage that was occurring as a result of not doing a good job of looking at the lands before we committed those lands through leasing. so we took it upon ourself to ignore the problem but to

address them. one of the ways we've been able to address them is to insure that there's a better opportunity to look at these lands prior to committing them through leasing. we've done that lieu our leasing refo reforms. the primary purpose for our leasing reform is to make sure that the lands that we're going to be leasing are the right ones to lease. and they have the greatest chance to be developed in a timely manner. >> did you say that 50% of the leases when you took over were being either litigated or protested? is that what i heard you say? >> close to 50%. >> where are you now? >> close to 50% of the parcels we were offering were being protested or litigated. at this point in time it's around 35%. >> my time is up. we'll save some for the next round. >> thanks very much. >>

>> there were a significant number of leases capable of being drilled or not being drilled and those are decisions of private entrepreneurs and the companies onshore. offshore, is it the same situation where you have a significant number of leases already approved and, yet, the drilling activities are not commencing? >> yes. that's correct. there were by the interior department offshore that are not currentry subject to an exploration or development plan. and we tried to develop boat through our leasing process and post leasing processes to try to encourage prompt and diligent development in those leases. to bring them into exploration and bring them into production. as director abby indicated, there's a number of commercial factors that weigh into

industry's decision about when and where to drill. we're trying to line up our leasing process and our incentives to influence those decisions so that we can have prompt development. >> thank you. and director abby, in the present budget we mentioned there is a request for additional onshore fees that will be comparable to the increases that we've provided to besse and director issues and watson is improving his program. can you indicate how you can improve your program with these fees? >> i'd be happy to. it's a -- thank you for the question. it is senator tester alluded to, it's important if we're going to be leasing these parcels of public lands for oil and gas development that we have sufficient inspections to insure that it's being done responsibly. it is our goal to inspect drilling operations that are considered a high risk and those high-risk operations are those with tos