The committee will come to order. The Oversight Committee exists to secure two fundamental principles: first, Americans have a right to know that the money Washington takes from them is well spent; and second, Americans deserve an efficient, effective government that works for them. Our duty on the Oversight and Government Reform Committee is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have a right to know what they get from their government. We work tirelessly in partnership with citizen watchdogs to deliver facts to the American people and bring genuine reform to the Federal bureaucracy. This is our mission. This morning we will review the enormous task confronted in the gulf as a result of the BP oil spill and the Obama administration's choices made then and to this day. It is clear that this was a manmade disaster that 11 people died in what should not have happened, but it is the choices after an initial event that we will focus on today. That is not to take away BP's ultimate responsibility, but this committee reviews government actions, both prospectively and retrospectively. We cannot expect to do a better job next time if we do not focus on what was done right and what was done wrong in this disaster. The government made several decisions under its authority. One of them was not to use the Stafford Act and, in fact, to leave the very entity that created this pollution in a position of authority and lead. There are many reasons this may have happened but we have to ask, Should it happen again? Congress has the clear power and authority to change the rules of the road. We should not have to choose between holding a polluter responsible and empowering leaders at the Federal, State and local level to do what they are responsible to do on behalf of their citizens. The reimbursement for actions, directly and indirectly, belongs to British Petroleum. They have said they will meet that challenge and we will hold them to it. But as the days and weeks went on after an initial spill 40some miles out at sea, it became obvious that we lacked the resources in place to do the job that was coming. The response was slow and chaotic. Additionally, we will hear from testimony today that the secondary damage turned out to be in many cases far worse than the little or no oil that came to the shores of communities. That is part of what we have to do deal with here today. Oil spills and other events are inevitable. In my hometown of Cleveland, more than 60 years ago, a liquefied natural gas container went bad and many died. It has not stopped us from resourcing and using natural gas in America. Three Mile Island is still in the memory of people my age. It has not stopped us from using nuclear fuel as a primary source for base load. Coal miners, to our dismay, continue to die trying to harvest that fuel around the world. That is a necessary part of our society, that dangerous jobs are done by people who choose to do them and have a right to be protected in that process. But this hearing is not about the riskiness of any of these fuel sources. It is in fact about whether the Federal Government knows better this time than they did before this event. Additionally, it is important for us to understand that just as Hurricane Katrina told us that FEMA had problems working with States, FEMA was not necessarily ready for a loss of vast areas of response. We now know that even when the response capabilities were in place, even when it was a single event of a company that did not do their job and did not play properly by the rule, we find secondary events throughout the area. We find oil coming ashore and not being responded to for a number of reasons. We additionally find a loss of revenue in unrelated areas. We will hear from our second panel and from our first that the loss of tourism was needless and extreme in areas in which the water was clean, the shore was pristine, and in fact people were scared away. We need to make sure that does not happen again. We need to make sure that Governors and local officials are empowered to do what is in the best interests of their people and that the American people get a fair understanding of the scope of any problem or spill. Lastly, we will hear today that as a result of one reckless action, we find countless billions of dollars of revenue lost, good hardworking Americans out of work, resources necessary to make us less oilreliant on countries that often are not friendly to us, leaving for the very countries that in fact will now produce the oil that we are forced to buy. In America today, both sides of the aisle talk about jobs. I for one am not an economist, but I can understand that if $400 billion worth of purchased oil were produced here in America, there would be countless millions of direct and indirect jobs available to Americans. There are many things that we are not competitive on here in America. Certainly one of them we are competitive on is natural resource extraction from our coastal waters and onshore locations. I look forward to hearing from my old friend and a considerably wellknown figure to all of us and a great Governor, Governor Barbour. And with that I recognize the gentleman from Maryland for his opening statement.
Thank you very much, Mr. Chairman, and good morning. Let me first welcome Governor Barbour, and I thank you very much for being with us today. I also want to take a moment to recognize Dick Gregory, who is a person who has fought hard for so many people for so long in our audience; and thank you, Mr. Gregory, for being part of this hearing today.
your State has been through a tremendous amount of difficulty, and I sincerely look forward to your testimony. Let me also welcome Michael Bromwich from the Department of Interior. Mr. Bromwich, you agreed to be here with incredibly short notice. So we thank you very much for your testimony and for your expertise. Finally, let me welcome the residents of the gulf who have traveled here today to share their views with the committee. Earlier this year, the National Commission on the BP Deepwater Horizon oil spill issued a comprehensive report on the causes of the spill. The report found that this disaster was avoidable and that it resulted from clear mistakes made in the first instance by BP, Halliburton and Transocean, and by government officials. These were extremely difficult lessons to learn. I am encouraged that now more than a year later, officials in both the oil industry and our government appear to be heeding these lessons and retooling the way they do business. First, we must never ever forget that 11 individuals lost their lives in an explosion on April 20. To address deficiencies that contributed to these deaths, the Interior Department issued an improved workplace safety rule that many, including industry, believe will significantly enhance worker safety. The Department also completely reorganized the Minerals Management Service. MMS had been criticized because it oversaw the safety of drilling, the environmental impacts caused by drilling and the revenue generated from drilling. According to the National Commission, MMS had a builtin incentive to promote offshore drilling in sharp tension with its mandate to ensure safe drilling and environmental protection. The Department also implemented a number of critical safety measures to ensure that a blowout like this would never happen again. For example, a new drilling safety rule strengthened standards for well control procedure, drilling equipment and well design, and it required independent and thirdparty inspections. Finally, the Department issued a notice to lessees to require all companies to demonstrate that they can actually cap a well, that they can actually cap a well and handle a deepwater blowout before any new drilling permits were issued. These were responsible steps taken after it became clear to the Nation after 87 days that BP simply did not have the technology available. In other words, the technology was far outdistancing our ability to control it. Mr. Chairman, I have to say that I am disappointed by your actions today. You stated that the committee investigations have interviewed investigators, have interviewed more than fifty government officials, scores of residents, business owners and whistleblowers as part of this administration. That is news to everyone on this side of the aisle, because you completely excluded us from that effort. And you have not explained why. Unfortunately, this is the definition of partisanship and it undermines the integrity of this committee. And by the way, this report that is being submitted this morning was submitted to the press before we even saw it. Nevertheless, moving forward, it is our obligation as members of the United States Congress to develop constructive ways to help people in the gulf rebuild their lives and their livelihoods. In my former capacity as chairman of the Subcommittee on Coast Guard and Maritime Transportation, I visited the gulf twice while oil was flowing from the Macondo well. I saw firsthand how this spill affected small businesses that rely on tourism, fishing, and other industries that were decimated by the spill. I have offered several measures to provide real solutions to gulf residents. Last Congress, I offered a provision in the legislation that cut in half from 90 days to 45 days the amount of time responsible parties had to settle claims arising from the spill. I also worked on provisions with Chairman Oberstar to strengthen the Coast Guard's oversight of an oil spill response plans. This year, just recently, I offered an amendment to H.R. 1229 to require all oil and gas exploration development and production activities in the gulf to be conducted by U.S.flagged vessels. Talking about jobs, that is jobs. This which would have immediately stimulated the gulf economy. Unfortunately, the Rules Committee did not allow a vote on my amendment. My basic point is this. We have a tremendous opportunity in this committee to really help people, people who have undergone extreme hardship. As the goal for today's hearing if we can focus our efforts on identifying even one positive proactive solution that we can all agree on, then I think today's hearing will be a success. And with that, Mr. Chairman, I thank you.
I thank you.
I ask for 1 minute unanimous consent to respond. Without objection. To my ranking member, just for your edification, this investigation began under your predecessor, Chairman Towns. We went down jointly and separately. He authorized minority trips when I was in the minority, in addition to the joint trips we did, including members of both parties. When I took the chair, we continued that investigation. We have had joint trips, in addition to we have authorized minority trips down there. As a matter of fact we have never turned down a request by the minority to go on staff factfinding. Every request has that has been asked for has been granted. It is true that both your side and my side, under both the majority and minority, have gone both together and independently, but I certainly think that I don't I will not belittle any effort that your side made to get at individual and independent facts. I hope you were not intending to do so by saying that you were surprised that we had made 50 trips when some of them were made together.
Mr. Chairman, may I have a minute?
Let my say this, Mr. Chairman. As I said from the very beginning, my number one concern is helping the American people, and it is about the integrity of this committee. I do not belittle for one second the findings and the things that the majority has done. What I am saying is that we want to be a true partner in all of that. I have said to you privately and openly that we, too, care about government operating properly. We, too, care about making sure that every agency of government does what it is supposed to do. We, too, want to make sure that there is no agency that is caught up in a culture of mediocrity. We refuse to have that and we have said that to this administration and we would say it to any administration. So I look forward going forward, like I said, I want to move on, but I want to make it clear we, too, are partners. We, too, were elected by 700,000 people per district, and so we want to make sure our voices are heard too, and I appreciate your comments.
I thank the gentleman. With that, we are prepared to introduce our first panel. I am going to deny myself the honor of introducing Governor Barbour and instead go to the newest member of the Mississippi delegation, Congressman Steven Palazzo for his introduction of his Governor. And I understand you were Governor when you were in the State house. The gentleman is recognized for an introduction.
Good morning. Thank you, Chairman Issa, Ranking Member Cummings, and members for allowing me the privilege of introducing someone who I believe will provide your committee with the most credible testimony today. I have experienced his leadership firsthand after the devastation of Hurricane Katrina and, more recently, the Deepwater Horizon oil spill. Indeed, no other Governor has been as frequently challenged to rise to the occasion of leading a State during a time of crisis, whether manmade or natural, and each time Governor Barbour shouldered the burden of leadership in a manner that calmed tempers, mended broken hearts, and resulted in incredible efficient outcomes. To accomplish this, he met each event with a balanced regimen of compassion and order, allaying fears and the sense of loss with hope in the prospect of swift recovery. I vividly remember the many times the Governor and his beautiful wife Marsha walked hand in hand with the victims, and in the aftermath of it all, assured them that everything was going to be all right. More recently, he continues to guide our State through historical floods and a severe tornado season. He has not only led Mississippi through the country's worst natural and manmade disaster, but he challenged us to build back bigger and better. He is a great leader in every sense of the word and, of course, I am talking about Mississippi's 63rd Governor, Haley Barbour. Mr. Chairman, as someone who represents a district devastated by the oil spill, I appreciate you directing the committee to assess the recovery efforts of BP and the Obama administration. I would like to briefly mention that as someone who has worked offshore on drilling platforms, I have a particular concern on how the administration came to the decision to institute a moratorium without conducting a study of how it will impact the Gulf Coast economy. We know now that this thoughtless decision will decrease oil production by up to 250,000 barrels per day for the next 2 years. A loss of production of this magnitude will continue to have a negative impact on the Gulf Coast economy for years to come. Studies conducted by Louisiana State University put potential estimated job loss by the moratorium and subsequent permatorium on the Gulf Coast region at around 24,000. The ripple effect of these lost jobs and high energy prices hurts our national economy. The majority of the jobs lost in Mississippi are from the Fourth Congressional District of Mississippi, the district I represent. I have worked offshore. I know the value of the jobs that the offshore drilling industry provides. I look forward to further investigation into the economic impact of the administration's decisions and their motivations. I applaud the committee for the extensive work on this critical issue and I look forward to hearing the testimony by the witnesses and the outcome of this important hearing. And thank you again, Chairman Issa and the members, for allowing me the honor of introducing Governor Haley Barbour. I yield back.
I thank the gentleman.
Pursuant to the rules of the committee, Governor, would you rise to take the oath. Governor, do you solemnly swear or affirm that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth?
Let the record reflect that the Governor answered in the affirmative. Governor, you know this routine. You have seen it for years. Your entire statement will be placed in the record. We will not hold you to an exact 5 minutes, but come as close as you can.
Thank you, Mr. Chairman, and to the ranking member and all the members of the committee, thank you very much for having me here. I am going to not read my statement. Let me start off by saying that this disaster is very different from other disasters. When Representative Palazzo talks about Katrina, we had utter obliteration on the coast. We had places where it looked like the hand of God had just wiped away the Gulf Coast for blocks and some places for miles. We had hurricane force winds 240 miles inland, and to get people where they got confident that the coast was going to come back, where they had hope for their families and their communities, where they were willing to return home, was an enormous part of the job. In this case, keeping people calm, you know, you had an oil well to blow out a hundredplus miles away from our coast, and I should say at this point, this experience for us was a little different than for Louisiana. Louisiana was closer to the well. They got wet brown oil into some of their areas. We didn't. We were about 108 miles from the wellhead to the city of Gulfport, and by the time oil got to us, A, it had been a long time since the well blew out; B, what got to us you would not recognize as oil. There was this orange mixture of water and the remnant of oil that the oil people call mousse, and then there were what we call tar balls and tar patties. When I was a kid we used to go to the beach. We used to throw them at each other, tar balls, because the Gulf of Mexico seeps out somewhere as much as 1 million 400,000 barrels a year, according to the U.S. GIS, every year through the floor. So, you know, we were used to tar balls. But when this happened, people were obviously very, very concerned, and one of the big jobs was to keep people calm, to keep people understanding we are going to prepare, we are going to have a good plan, we are going to have the resources to execute the plan, we are going to protect the coast, particularly the habitat, particularly the coastal marshlands where the shrimp and other important wildlife actually are born and start to grow. And we had to do that with a different set of rules. And the first point I want to make is the Stafford Act. The decision was made that this disaster would be managed under the Oil Pollution Act, not the Stafford Act, as has been said to the committee by others. A disadvantage of that for us is we are used to the Stafford Act. Florida, Alabama, Mississippi, Louisiana, Texas, we have managed disasters under the Stafford Act because that's what hurricanes are managed under, that's what tornados are managed under, that's what floods like we have in Mississippi today. So, A, it was something we knew, but very important from a Governor's point of view, the Stafford Act expressly says that the Federal Government will supplement the work of the State, not supplant it. One of the problems we had under the Oil Pollution Act early on, and lasted for several weeks, the Coast Guard who headed the unified command, and we are accustomed to unified command, we have unified command under Stafford Act disasters, they took the position that the National Guard worked for them. And this became a real issue which I'll talk about in a minute. But under the Stafford Act it's very clear, the National Guard works for the Governor unless the President federalizes the National Guard. We are not mad at anybody about it, but it didn't work well when they tried to assume command over the National Guard. And I should say President Bush, after Katrina, talked about federalizing the response, and I very loudly and publicly said no, that we don't want the Army coming into Mississippi or the Marines coming into Mississippi. They're not trained for that. They don't know the terrain. They don't know the people. So Stafford Act, whether and the Stafford Act, by the way, has a lot of improvement that it needs, but the Oil Pollution Act ought to be changed to say flatly, like the Stafford Act, it's supplemental to the States and it doesn't usurp the States' authority. Where this came into play was in our plan to defend the State's shoreline against oil. We developed a layered defense plan, beginning outside the barrier islands, using the barrier islands to protect us, protecting the gaps between the barrier islands that oil had got through to the sound. That would be our principal place to try to pick it up, to keep it from getting to shore, steering it towards beaches, keep it out of marshlands. As it turned out the Coast Guard approved that plan, never understood how to execute it; and after the second time that oil got to our barrier islands completely undetected, much less contested, undetected, we demanded that we be put in charge of this, and the Coast Guard agreed and we worked out a system that worked. I will just tell you before that there was no command and control. In fact, unified command could not even speak to the hundreds of vessels of opportunity that we had gotten BP to hire, to form picket lines to spot the oil as far out where we could try to steer it and collect it. They didn't have any means of talking to them. So we had to set that up to get command and control as it should be. Two other points I want to make. And I'll be glad to I am trying not to get into too much detail. For us, this turned out to be primarily an economic disaster. Now, it may be that there is something slushing beneath the sea or that is going to develop that becomes ecologically dangerous, and we are all over that, and not just Mississippi, all of the States, the Federal Government, all kind of scientists. But thus far, environmental damage for us again we are different from Louisiana has been very manageable. We have on the coastline of Mississippi, we have 80 miles of coastline. We never closed 1 mile of beach except for one time in the whole experience. We had one 2mile section of beach that we closed overnight because we had a high tide after a hurricane where some oil got across the highway and we couldn't clean it all up. Otherwise, we cleaned up the oil that got to the beaches every day, the day it got there. So our environmental damage, unless there is something to come, is not our issue. Our issue is a gigantic economic loss. Talked about tourism. Our tourism industry was clobbered. Our season starts when our schools get out, which are earlier than in the North. Our schools get out the middle of May. So that is when the tourist season starts. Of course, this happened late April. So people saw on TV the same brown pelican coated with what looked like 3 inches of oil, I mean looked like a chocolate pelican, and they showed it every hour, every day, 24 hours a day, 7 days a week, for weeks and weeks and weeks and weeks. And the news media, particularly 24hour cable TV, gave citizens the impression the whole Gulf Coast was coated in oil. People deduced from that that it was unsafe, unpleasant, don't want to go there. They canceled their reservations. They canceled their contracts to buy condominia, and not just in Mississippi but all across the Gulf Coast. The President, to his credit actually, it got so bad that the President came to Mississippi, Alabama, and Florida, and held news conferences on the beach to say, Look, the beaches are clean, the water is clear, it's beautiful down here, come on down here. But that one news day can't compete with what was being seen every day, every hour for weeks. Huge economic problem and loss there. And of course in the fishing side on seafood, huge losses because they closed our waters; and I should say to you right now, we have not since this oil spill had one sample of seafood in Mississippi waters that was tested that did not pass the test to meet every standard. The same is true for the Federal Government. We haven't had one, one sample of seafood that failed. Yet we have people that won't buy seafood from the Gulf Coast in New York and San Francisco and Chicago because of what they saw on television. So the fishermen have some mitigation of their losses because they got hired to be vessels of opportunity. The processors were slammed. So seafood, a huge problem. The oil and gas industry, the moratorium for which there was no reason. In fact, the government appointed a panel to look at this and the panel disagreed with the announcement that was made, that you got the impression it was the panel's recommendation to have a moratorium; and the panel after said, Whoa, that wasn't in our recommendation, we are against that. That was added after the panel was through. We drilled more than 31,000 oil wells in the Gulf of Mexico in the last 50 years, and this is the first time anything vaguely like this had happened. The moratorium hurt us financially; more important, hurt the country. Thirty percent of all the oil domestically produced in the U.S. is in the Gulf of Mexico and about 80 percent of that is deepwater. Yet, in the last year, the number of new the number of permits for new deepwater drilling has decreased 85 percent. And that's a huge problem. Let me close by saying this. For those of y'all that want to help the States that were hurt, understanding that this is an economic problem for us and again, Louisiana's a little different from the rest of us this was an economic problem. Remember, the natural resources damage assessments and the payments that can be made under that are largely limited to environmental. And while there is some loss of use room there, largely these States cannot be compensated for their economic loss, except by getting part of the civil fines that are going to be assessed against BP and the responsible parties. And I would ask you to consider as Members of Congress, looking at this and understanding that this is, this is the best way to help these States recover, because it is economic recovery that they have to get, unless something really changes on the environment. I apologize I went over, Mr. Chairman.
No apology required.
I now ask unanimous consent that the staff report entitled "The BP Oil Spill Recovery Effort: The Legacy of Choices Made by the Obama Administration" be entered in the record. Without objection, so ordered.
I would also note for the minority that after the break, it's my intention to have a committee vote to make this a committee report. So during this intervening period, if the minority has comments, questions, anything to add, the final report will reflect comments by the minority so that it is in fact a bipartisan report. The gentleman is recognized.
It is my understanding that, according to the committee rules, we have to have 3 days before a committee vote.
That is correct. I am giving you more than 10 days' notice.
I thought you said today.
No, no. What I'm doing is I am I asked and got permission to enter this in the record. It's a staff report. I am going to elevate it to a committee report after the minority has entered their comments and any adjustments are made. Right now, it's the basis for a committee report. The intention is to make sure that your staff that has been working on the same set of facts edit, make changes suggest changes, make any other comments, so that it becomes a joint report. And I wanted it to reflect both majority and minority opinion and
So when will that vote be?
It will be after the break at the earliest, so more than 10 days.
Go ahead. I misunderstood you.
I am just noticing it for the future. And with that, I'd like to recognize the former chairman of the full committee, the gentleman from Indiana, Mr. Burton, for his 5minute opening or 5minute questions.
Welcome, Governor Barbour. It's great to see you again.
Looks like you elected a pretty goodlooking, articulate young man to serve in the Congress, so congratulations.
Won't take him long to get grey hair.
That will come in time if he sticks around this place. First of all, let me say I have been to the Gulf Coast not Mississippi, but I will come and I walked on the beaches down there and also on beaches I believe on the east coast of Florida, and I saw these tar balls. This was when there was no oil well problem, and so when you just said that 1.4 million barrel of oils leak out naturally each year, I hope everybody in the country knows that; because that amount coming out naturally doesn't cause any kind of a problem and that ought to be included in the discussion when we talk about deepwater drilling in the gulf. You also said that 85 percent, there has been 85 percent in loss in drilling permits. That is tragic, especially in view of the fact that we just sent $2 billion down to Brazil so that they can drill in deepwater; and we can't, and it really surprised me. I think you said there were 31,000 wells in the last 50 years down there? And it's been done drilled without any real big problems. And yet right now, this administration is stopping us from drilling here, and we are sending billions and billions and billions of dollars over to the Middle East to countries that don't like us very much, and that really really bothers me. And I hope that you are able to in effect go on a crusade to tell the story that you told us today, because I think the American people need to know that. We have the ability to move rapidly toward energy independence over the next decade if we use natural gas and oil and shale coal that can be converted into oil, and we are not doing any of that. And as a result, this country is really suffering. And I really sympathize with you on the impact, the fiscal impact that was going on that took place down there in the gulf during the terrible crisis. And I want to say one more thing about the media. I really sympathize with you in this drum beat that went on and on and on over a month or 2 months, showing the problems that were created down there, which obviously had a devastating impact on you and your economy. And I hope that in the future when these kinds of tragedies occur, the media will not sensationalize it to the degree that it hurts economies like that in the Gulf States. I just have a couple of questions. You said that the Stafford Act could have been handled or it could have been handled much better under the Stafford Act. Can you elaborate you may have mentioned this in your opening remarks, but what could have been done that would have been better in helping to manage the problem in the gulf if you as Governor, and the Governor of Louisiana, did have the control that you wanted?
The two big reasons of the Stafford Act being preferable to State and local governments, we're used to it. We deal with it all the time. I think when you have some of the local officials later today, we have all had to work under the Stafford Act because that's what we do, hurricanes, tornadoes, floods, et cetera. For me specifically as Governor, the Stafford Act expressly says that the efforts of the Federal Government under the Stafford Act are to supplement State efforts. Under the Oil Pollution Act, there was an impression that the Federal Government was in charge under the unified command and they told everybody what to do, and that not only is contrary to the U.S. Constitution and bad law, but it also didn't work. I mean, our people were much better able to do things than the Federal people were able to do. The Stafford Act isn't perfect, though, as I said.
I know. But had the Federal Government recognized your jurisdiction under the Stafford Act, tell me how that would have been more of a positive situation or solution for you.
Where it really became very apparent, we had a defense plan to defend our shores from oil different from Louisiana because we were 100 miles away. We recruited 1,100, quote, vessels of opportunity. Those were people who were willing to rent their boats, paid for by BP. BP never flinched at paying for this, put them out to essentially form picket lines to try to spot the oil south of the barrier islands, between the barrier islands, in the sound, okay, so we had actually a fivelayered defense. We found out weeks into that, the Coast Guard had no way of managing that. They had approved the plan; they had no way of managing that. We literally sent people to WalMart to buy radios. We had a situation where our Air National Guard, starting 4 o'clock every morning, flew and did infrared photography of the whole Sound and south of the Sound to find the oil. The Coast Guard had no way to tell the vessels of opportunity where to go. We had to set up a whole communications system and a commandandcontrol system, which we did not do for weeks because we thought the Coast Guard knew more about this than we did. But it turned out that we had to set up the communications system. We had to set up the commandandcontrol system; and frankly, they were cooperative when it got to it, but it should have never come to that. We were lucky that this disaster was manageable enough that you could make those kinds of mistakes and still clean them up.
Thank you, Mr. Chairman. Thank you, Governor.
Would the gentleman yield the remaining time?
Be happy to.
Oh, I am sorry, you were over it.
I was over it, but I will be glad to yield.
No, no. We do not yield the other side the remaining time. With that, I recognize the gentlelady from New York, Mrs. Maloney, for 5 minutes.
I thank the chairman for recognizing me. And welcome, Governor. Welcome, Representative. It's very good to see you again.
Thank you, ma'am.
Thank you for being here. Governor, the Government Accountability Office, the nonpartisan, bipartisan unit issued and I believe they are going to be testifying later on today on a panel they issued several reports warning that taxpayers are not receiving a just or fair return for oil and gas leases in the Gulf of Mexico. Specifically, the GAO report faulted these socalled royalty reliefs granted by Congress in the mid1990s when gas and oil companies were not doing as well as they are today, but they encouraged additional exploration at the time when oil and gas were lower. And under some of these leases, oil companies pay absolutely no royalties at all to the American people when they drill on Federal lands, and this is oil that is owned by the American people. It is on Federal lands. Usually there is a royalty paid back to the government, to the taxpayers, but here they are paid absolutely nothing back. And I would like to quote from their report. Special lower royalty rates, referred to as royalty relief, granted on leases issued in the deepwater areas of the Gulf of Mexico from 1996 to 2000, a period in which oil and gas prices and industry profits were much lower than they are today, could result in between $21 billion and $53 billion in lost revenues to the American people to the Federal Government compared with what it would have received without these provisions. End quote. Our chairman, in a rare expression of bipartisan support, I want to compliment you, Mr. Issa, for the significant work that you have done in this area and on this issue. And you had called for an end to these leases. On October 7th, 2009, Chairman Issa issued a staff report warning that actual shortfalls to U.S. taxpayers could be much much larger. And this is what his report said, and I quote: Depending upon the market price of oil and natural gas, the total cost of foregone royalties could total nearly $80 billion. Oil and gas royalty payments represent one of the country's largest, nontax sources of revenue. Taxpayers must get every cent that is owed to them. End quote. And I agree completely with Chairman Issa. And Governor, do you agree with Chairman Issa on this statement?
Ma'am, I can tell you that we are very familiar with this, in that for more than 50 years the rest of the country has been sucking the gulf dry and we get nothing. At the period of time you are talking about in the late nineties, all this production out of the Gulf of Mexico, and the States were paid nothing, zero, nothing. When you drill on government land in Wyoming, Wyoming gets some of the money. But fortunately, in the last administration, this was changed and we are going to start on a little stairstep basis, getting a little bit of the royalty and ultimately maybe about 2017 or something, the States will get a legitimate fair share of the royalties. So I am very sympathetic to the royalty owner because we feel like we are we should be considered royalty owners, too, and that the Federal taxpayer and the taxpayer in Mississippi both ought to be getting a fair royalty for the production of oil and gas, or if it's coal on land, or whatever, I think that is absolutely the case. But I hope y'all will please understand, when there are only five States in the country that allow offshore drilling, the other 45 ought to let us five who allow it, they ought to let us participate as royalty owners, too.
The real royalty owner is the American taxpayer. So do you believe that the taxpayer has a right to every cent that is owed to them under these leases and that they should be completely corrected, as the chairman said?
And that I believe the Mississippi taxpayer should share in that when we are dealing in the waters that are Mississippi waters and are part of the Outer Continental Shelf that's recognized as Mississippi. So, ma'am, I am not arguing with your point about the Federal taxpayers; I just want to make sure the State taxpayers get treated as royalty owners in the five States that allow this. It's not fair for the other 45 States to burn the oil that we have taken out of the Outer Continental Shelf, and they get treated the same way we do.
Well, I must
That was a "yes."
I must state for the record, though, that Chairman Markey, or Ranking Member Markey, has a bill on this that would correct it. And when it came before Congress early this year as an amendment, and several other amendments, regretfully, Chairman Issa, you voted against it. And I feel the same as Governor Barbour, that this should be directed that the American taxpayer is entitled to the royalties for oil extracted from taxpayerowned Federal and Stateowned property, and I hope that you will join with us in a bipartisan way to correct this going forward, so that there is fair treatment to the States and to government and basically to the American taxpayer. So I hope you will join us in that.
I thank the gentlelady. We now recognize the gentleman from Oklahoma, Mr. Lankford.
Mr. Chairman, I'd like to yield my time back to the chairman.
I'd like to take it. I thank the gentleman. Congressman, you don't have to remain, since we didn't swear you in, but you are welcome to stay. You look good with the Governor. You always look good next to the Governor. That will look good. I thank you. Governor, Congresswoman Maloney did make a valid point but I think I want to follow up on your point, too. Today you are going to have an economic loss that will be unreimbursed as a result of the BP oil spill, correct?
There's no question of that as it currently stands.
And so for the foreseeable future, if there were to be another one, you would potentially have another oil loss in which the Federal Government was able to get fines. The Federal Government would I don't think we actually collect royalties on what's spilled into the gulf, but short of that we would continue from that particular rig; that's not a relief one, it's not covered by the Clintonera contract failures. The fact is you stand at risk without an ability to get any premium on that risk in the gulf
if it's outside the period.
We are not compensated for what we do.
So let me ask a straightforward question. Do you believe that from this side of the dais, that we should look at legislation that provides sooner and more specific revenuesharing based on the potential risk; in other words, effectively insurance policy, where you would have revenue not for current expenditure, but for contingent expenditure if you have another economic event like this.
Well, two things. There is legislation that was passed, I think in 2006, that is going to stairstep up, that's going to give the States a share and stairstep it up and maybe by 2017.
Gets 10 percent of the royalties or something.
And maybe go up to 35 percent or something. But until that goes into effect and I would urge y'all, put it in effect immediately, you know, that's what we would like to see, put it in effect immediately then we would have some compensation for the risk we take. Right now, the only way that I see that we can reasonably be compensated for the damage done to us is if you take the Clean Water Act fines and they are going to be Clean Water Act fines here potentially in the billions, and that the States that were affected be given a share of that, with enough flexibility that they can spend it to help their economy; that they not have to get the money and say, We are going to use all this money to clean up from the BP oil spill. BP's already paid the cleanup for the BP oil spill. Our damage is economic damage to tourism, to the seafood industry; not that the seafood was hurt, just that nobody would buy it. They wouldn't let us fish for it. And then to the people that work in the oil and gas industry. Somebody mentioned a very sad thing, that 11 people died on this oil rig. Four of them were from Mississippi. Now this well wasn't in Mississippi waters, but that gives you an idea, sort of reference, that we have a lot of people that work in this industry; and right now you know where they are? I went and visited the Leviathan oil rigs 80 miles west of Haifa, Israel. I met two guys from Mississippi who were working that oil well in Israel, who had been working in the Gulf of Mexico the year before, and they had to leave because of the moratorium.
Well, there you go. We certainly have seen a lot of those rigs sail off. Let me ask you a followup question. You mentioned the immediate following, the too much control by the Federal Government and BP. But, Governor, doesn't that continue till today? Isn't BP still in the driver's seat on a lot of things, including compensation? Aren't you sort of in a backend ability to help your people?
Regardless, you know, I am not I am a recovering lawyer, so I know that a judge has ruled that the Gulf Coast Compensation Facility, whatever it's called, that that is not truly independent of BP and that may legally, technically be right. I think they are trying to do a good job. We don't get many complaints in Mississippi. They are doing something that's complicated, and I will say this about it. It is sure better than having to litigate all this, where people wouldn't get their money for years and years and years, and the trial lawyers would get half the money. So it is a long way from perfect, just like what I do is a long way from perfect, but I think it is better than the alternative of litigation. And as I say, we have cases that are difficult cases where people are not satisfied, but we really don't get many complaints. And we have been paid. Mississippi companies, people have been paid about $340, $350 million.
And the gentlelady from New York has left, but I might note for the record that I still am trying to find a constitutional way to adjust for those flawed contracts that were signed. This committee held hearings much earlier on it, found that the oil companies thought they were going to be paying royalties and were actually surprised when they found out that the defect in the contract allowed them not to. With that, I recognize the gentleman from Maryland, the ranking member, for 5 minutes.
Thank you, Mr. Chairman.
in the Animal Kingdom down in Disney World, there's a saying over at Animal Kingdom that says this. It says, "We do not inherit our environment from our ancestors, we borrow it from our children." And in that light, you know, I was reading your written statement and it said, and I quote, "The other major economic impact resulted from the moratorium on drilling." And I want to shift away from broad generalities and focus on specific measures to prevent this kind of massive oil spill from ever happening again. Everyone remembers BP's repeated failures to cap the well. It became clear immediately that BP had no idea how to end this disaster. Every week they would try a new strategy, but it was a complete trialanderror fiasco. They tried the top hat. By the way, I was down there when they were trying to build the top hat, and I actually watched them do it. This was a massive steel containment dome lowered into the well. Of course, that failed. They also tried the junk shot. They injected golf balls and shredded tires and drilled floor into the blowout preventer, but that too failed. They tried several more times until finally they tried the static kill. They basically injected mud into the blowout preventer to start regulating the flow of oil. But that all took 87 days, and it was crystal clear to everyone watching that BP simply did not have the technology to handle a deepwater blowout, which I think is atrocious. Governor, I want to ask you about a specific requirement issued by the Department of the Interior to require all companies to prove that they can cap a well before receiving a drilling permit. It was called NTL 2010N10. Are you familiar with that requirement?
I am not familiar with that specific requirement, Congressman.
All right. Let me read exactly what it says. Each oil company must demonstrate and I quote this that it has access to and can deploy surface and subsea containment resources that would be adequate to promptly respond to a blowout, end of quote. Is that and so, Governor, here is my question. Do you think this specific safety measure should be repealed?
Congressman, superficially that's a reasonable statement that you have just made. How it's enforced and regulated is something of which I am ignorant, but what I do know is we have had more than 31,000 wells drilled in the Gulf of Mexico in my life. This is the only time anything like this, anything vaguely like this has ever happened. And when you consider the amount of our domestic oil production that comes out of the gulf and comes from offshore drilling elsewhere, when you consider the fact that we have an energy security, a military security, and a national security issue in this country because we import way too much foreign oil, including a lot from people who are not our friends, then I would not be in favor of anything that reduces the production of domestic oil. RPTS DEAN DCMN NORMAN [10:33 a.m.]
I think the risks are way too small compared to what you'd give up.
So in other words, if this were to happen again, if we had 87 days of oil spewing out into our waters, you're saying that the risk of that far outweighs the economic situation; is that I'm not trying to put words in your mouth, I'm trying to make sure I understand you. I will tell you, I saw a lot of what you're talking about. I saw the pelicans. I saw I talked to the fishermen. I talked to the tourism people. I even talked to the industry people, a lot of them. And you know what they said? They said, you know what this is before we knew the full impact of it they said, you know what, we agree we ought to have some kind we should have the ability, and it should be proven ability to cap something like this before we even continue.
I think beyond that, Congressman, it is very clear that this well blew out because normal, standard procedures and protocols weren't followed. I don't think there's any question that corners were cut. I don't know whose fault it was. I don't know who the specific responsible party is, but I don't think there's any question that that was the cause of all this. And this is why I say the risk, 1 out of 31,000, is worth taking when you're talking about something that is so important to the economy and the United States of America. That's why I have that view.
I understand. Thank you.
I thank the gentleman. The gentleman from Tennessee, Mr. DesJarlais, is recognized for 5 minutes.
Thank you, Mr. Chairman. Thank you, Governor Barbour, for being here. Along the lines of the negative effects of stricter drilling regulations on the offshore industry, why don't we take a minute and have you expound on the effects that the Bureau of Ocean Energy Management, Revenue and Enforcement has been issuing. Let me back up. The Bureau of Ocean Energy Management, Revenue and Enforcement has been issuing a great deal of new regulations affecting offshore drilling. Have your constituents been in touch with you about these new rules.
Do they find them problematic?
Well, the people that talk to us don't know all the details of the rules. All they know is that the regulatory efforts of the government are shutting down the gulf, have shutdown the gulf. I mentioned earlier I was in Israel this winter, like in February; went on an offshore drilling rig and two of the guys working on the rig were from Mississippi. Almost every American on that rig had been working in the Gulf of Mexico the year before. They had got run out of the gulf because of the moratorium and because of the belief, the perception, that it was going to be a long time before there was going to be drilling again in the Gulf of Mexico. That's what we get, people who've lost their jobs, whose kids have lost their jobs, who are worried about who are worried about this. The service we have people who work offshore, but we also have significant service industries in our State that repair rigs, that build service boats, that work on boats and that, so it's a big industry in the gulf South.
Okay. How about let's talk a little bit about BP's actions during the spill and recovery. There were many officials and citizens that felt BP played too large a role in the spill response and the Federal Government should not have let them play this large of a role, and that was a common criticism we heard in the media at the time of the spill as well. At any point, either during the disaster or during the recovery phase, did BP have too much of a say in the response?
No question, BP had a big say in the response and they were paying for it. But I have to tell you, Congressman, sometimes BP was easier to deal with than the government. That's just a fact of life that we learn that sometimes the Federal Government is not the easiest group to do business with. In fairness to BP, for us, everything that we asked them to do and of course everything we were asking for they had to pay for everything that we asked them to do they considered, and almost every time they did it; where many times we would ask the Federal Government for something like skimmers when we were trying to get skimmers, we thought the Federal Government was supposed to have skimmers for us when the oil got close enough. Turns out we had to go get BP to give us the money to get some shipyards in Mississippi to build the skimmers so we'd have enough skimmers. So I'm not going berate that part of the Oil Pollution Act. What we didn't like was the usurpation of State sovereignty by the Federal Government.
If you want to put on your teacher's hat for a moment and grade response efforts of BP, the Coast Guard and the Obama administration, what grade would you give each of them?
You know, when you have been through the worst natural disaster in American history as Governor of Mississippi, its you learn not to criticize people too harshly for unprecedented, unforeseen disasters, natural disasters or otherwise. They had a hard time, they seemed slow to try to get in charge. We had the problems I'm talking about with command and control, but I don't want to be overly critical, because when stuff like this happens you make mistakes. And so that's why I try not to assess blame. Let's just figure out how to do it better.
I think that's very diplomatic and reasonable. No one can fully prepare for this. We always learn and we try to make improvements. And I think that I agree with your statement. One last thing on the seafood, you said in your opening statement the seafood is safe to eat. What about the reproduction, and are the seafood stocks where they should be, or is it too early to tell?
Well, we have had no evidence whatsoever or finding of anything from the oil spill that got into the reproductive chain. We're not seeing fish with four eyes or anything like that. But for a variety of reasons we had a really great fall, but with the fresh water that's being allowed into the Mississippi Sound because of flood control on the river and the opening of the Bonnet Carre floodway through Lake Pontchartrain, we're getting an enormous amount of fresh water in the Sound that is going to kill all the oysters. It's got nothing to do with BP, literally, but it is going to kill all our oysters. We'll have to rebuild. The oysters can get away. The shrimp and fin fish, they all run away from the fresh water. It shouldn't affect them. We have had some losses in dolphins, sea turtles, that are more than normal. The peculiar thing about it is we started seeing it before the oil spill. Just a little bit before the oil spill this started happening. So nobody has been able to tie it. But that is something we got an antenna up about is that we have seen mortality rates among sea mammals and sea turtles for some reason have been rising since last March or so.
Thank you, Governor.
Thank you, sir.
The gentleman's time has expired. We now go to the gentlelady from the District of Columbia, Ms. Norton, for 5 minutes.
Thank you very much, Mr. Chairman. Governor, I appreciate your coming. I've listened to what you had to say; much of it is reasonable. For example, you say it is a lot better than having to litigate. If you litigate, that means everybody is messed up. You have to have some impartial person. I also agree that you have blessings and curses in your part of the economy. The United States depends on much of your economy with the oil advocacy through there and they are sometimes at odds with one another. So there are certain of risks that have to be taken. I take it you would agree, therefore, that the best way to handle those risks is to prevent them.
Well, ma'am, if you mean
I mean preventing oil spills.
No, ma'am, I don't think that's the best way.
Well, obviously, Governor, I mean preventing an oil spill.
I mean preventing an oil spill.
That's right. Follow the right protocols and procedures, because you don't have one to start with.
Yes, sir, that's what this hearing is about is the oil spill. Now the administration has focused on how to prevent it from happening again. But it has been severely criticized for regulations that would apparently accomplish that. It's been criticized for these regulations; it's too burdensome. It has been criticized because these regulations would cost jobs. Therefore, I was intrigued by what some of the from the very top of the oil industry is saying, and I'd like your view on this. Let's take John Watson who is the Chairman and CEO of Chevron. He indicates that he himself they themselves have a burden here. But he says, and I'm quoting now, "Far from resisting those rules" he means the regulations that are coming out "our industry is helping to strengthen them. The proactive, uncompromising approach to safety is the test we should all apply to any company, starting with our own. In an industry that is always edging up against the frontiers of geology and engineering" here goes your risk point "the best practices should be the only practices. Corporate responsibility does not end with meeting market demand." Would you agree with Mr. Watson, the Chairman, the CEO, with his statement?
As I understand the statement I would, because I think what he's saying is as the Chairman of a big oil company, his incentive, among others, is he doesn't want his stockholders to be out $20 billion like the BP stockholders are, and that he's going to make sure they do it right the first time.
And he is saying, and what is what is what is really interesting in what he's saying is that the company not only supports the administration's new safety measures, but they are working with the administration to make them stronger. He does not appear to be fighting the regulations for which the administration has been criticized. I want to give you another example from the top of the industry, the President of Shell, Marvin Odum, again shouldering his own responsibility, but he says additional safeguards, beyond what he himself would do, must be strengthened across the industry to develop the capacity to quickly respond and resolve a deepwater well blowout in the Gulf of Mexico regardless of how unlikely it is that this situation will occur. That doesn't come from Members of Congress or from environmentalists; that comes from the top of the oil industry. I just want to know if you would agree with Mr. Odum as well?
Well, I certainly don't take any issue with what you said.
Because I agree with you about the importance of preventing, rather than litigating, as you said. The only way to do that is to hold the industry accountable. Here you have another oil executive arguing for more robust requirements to demonstrate the capacity to cap a well if there's a blowout. I just think it's important to bring out how the industry, instead of fighting regulations, now is working with the administration for tougher regulations. I think their concern, Governor, is that these regulations be across the board, so some of them are not engaged in spending more money to be more safe than others. So if there are regulations saying, all of you are held now to the highest standard given this blowout, then everybody, it seems to me, in the marketplace will be on an even playing field.
The gentlelady's time has expired.
I would simply say, ma'am, these companies have huge incentives to selfregulate. We went from 50 years with one no occasions in 31,000 wells before BP. It's the only time it's ever happened. And I think what the CEO of Chevron is saying and the CEO of Shell are saying, is yes, we want to work with the government, we want to make sure there's rational regulation. That's not saying every regulation everybody can think of is something that we're for. In fact, Mr. Watson has been very, very public in saying that the moratorium was terrible and was a huge mistake.
There is a difference between a moratorium and new regulations.
Well, it is a form of regulation; we're going to shut you down while we write new regulations. So while everything that you said I am very comfortable with, there are connotations there that I don't think we should take too far. If the idea is that no risk is too small and no cost is too high, I don't think any of in any company in any industry would agree with that. Balance risk with costs
Of course, Governor, that's a straw man.
The gentleman from Pennsylvania is recognized, Mr. Kelly.
Thank you, Mr. Chairman. I would like to yield my time back to the chair.
I thank the gentleman. Governor, that means he's given me the time.
I couldn't see him, I'm sorry.
I have no shortage of questions and responses. Governor, are you familiar with the Marine Well Containment Company?
No, ma'am no, sir. Sorry, I was thinking about Ms. Norton.
A different line of questioning. They are the group basically overseeing a billion dollars' worth of funds that were put together by the various oil companies so that if this happens again, that 1 in 31,000 times, they would have a whole different category of response. Does that refresh your memory?
I didn't know it by that name. But it is the industry effort for post oil spill. Yeah, I'm familiar with the program, not with the name.
And wasn't that billion dollars spent by the companies who had never had a significant spill in the gulf?
I think exclusively.
Right. Exxon, Mobil, Shell, Chevron, and Conoco. Another thing I want to get into the record. As you know, Governor, when you and I first met, I was a businessman and you were a recovering lawyer then, too. That was a long time ago.
A long time.
It takes a long time to recover. But the number you gave earlier was meaningful enough to repeat it; 1.4 million barrels per year seep into the gulf approximately, automatically. Right?
Yes, sir. That is what the U.S. GIS says.
And for eons, the gulf has absorbed that. It defuses it, things eat it eventually. It ultimately is part of the ecosystem. Well, let's go through the numbers here. As a businessman, one always wants to figure out the P&L as quickly as possible. The Federal Government estimates that approximately 25 percent of that 4. or the Federal Government estimates 4.9 million barrels seeped in, or came out of the well into the gulf. Approximately 25 percent, or a little over 1.2 million, were recovered. That leaves us about 3.7 million barrels that got into the gulf in this disaster. I'm not reducing this for a minute, but let's just do the numbers. So of that, approximately another 25 percent was burned off, and another 25 percent was estimated to be dispersed, using dispersement. And we all understand there is some controversy about whether to use dispersement. So if you take the amount that was evaporated and burned off, you're now down to about half; you're down into the 2.some million, nearly 3 million barrels. No matter how you look at it, whether you take the whole amount or the reduced amounts, you've got less than 3 years of oil in one short quarter of a year period. You have got about 2 years if you would give credit for these efforts to mitigate. Is it any surprise to you that the gulf fish, shellfish and so on, are doing just fine when in fact this is essentially, including the natural amount that's still coming into the gulf this about 3 year's worth, maybe total, that went into the gulf in 1 year that this is not such a big thing, even though it is a big thing to us individually and a big thing when it gets to your shores?
Congressman, right after the oil spill happened when I say right after, the first month or so we had professors and experts who told us that the gulf would over a period of time, for lack of a better term, digest this; that there are microorganisms in the Gulf of Mexico, and I think in other places where you have oil seeps, that eat the oil
Including Santa Barbara, California, where it has come ashore for years.
I think probably the first place in the country that it was ever talked about was Santa Barbara, that they have oil that seeps through the floor there. But there were signs that predicted that the gulf would essentially eat this up, that these little organisms, that's what they do, and that there are a lot of them and that they would multiply. Now if you're in the job of disaster management, you don't assume that's true. So we never assumed it was true. But it looks like to the laymen from afar, that that is in fact what happened; that the microorganisms were able to manage this, and maybe that wasn't totally unforeseeable because they do eat up so much oil every year. Two or things I would mention. Unlike Exxon Valdez, this was light oil. And secondly, the water was warm. Exxon Valdez, the water was very, very cold. Here the water was pretty dang warm, and the light cuts, the benzenes, the toluene, the xylenes, they all evaporate faster in that warm water.
I thank the gentleman. The time has expired. I recognize Mr. Clay for 5 minutes.
Thank you, Mr. Chairman. And thank you, Governor, for coming today to the hearing.
Thank you, sir.
The National Commission Report noted something that may seem obvious, which is that the offshore oil and gas industry is inherently dangerous. But the Commission also reported that accidents are surprisingly common that involve loss of well control. Here is what the report said: Drilling rigs are themselves dangerous places to work, dense with heavy equipment, hazardous chemicals, and flammable oil and gas, all surrounded by the open sea environment, far from shore, where weather and water conditions can change rapidly and dramatically. The seriousness of these risks to worker safety and the environment are underscored by the sheer number of accidents. Governor, the Commission report then says that there have been 76 accidents in the gulf, between 1996 and 2009, that involve loss of well control accidents. And many of these accidents occur very close to your Sate. Were you aware of these figures, 76 accidents?
Of course. My State is an oil and gas State, not just offshore. And a drilling rig is dangerous. I mean, you see a lot of people who worked in the oil fields that have lost fingers, got hurt, got hurt one way or another, got burned. It's it's a dangerous thing. The accidents you're talking about, though, all turned out to be were managed; they were manageable and managed. This, the BP Macon well spill is unique. But yes, sir, it's a dangerous industry, and there are accidents that happen on shore and off.
Do you think these numbers indicate that new safety measures were long overdue well before the deepwater oil spills?
I think the industry tries very hard to protect their people, because it is very expensive when they don't. So rational regulation is something we ought to all be for. We need to be careful of the excessive, unnecessary, harmful regulation is my point.
Okay, fair enough. Governor, some have suggested that new safety measures should apply only to deepwater wells because that's where BP's rig was when it exploded. Do you believe that shallow water drilling should be exempt from new safety measures the administration is implementing?
Well, again, if you're talking about safety measures to try to prevent injuries I don't think that's what you're talking about I think you're talking about treating shallow water wells the same as my only view is I would treat deepwater wells in the Gulf of Mexico the same way as deepwater wells off the shore of Brazil.
Thank you for that answer. Governor, Dr. Harriet Perry of the University of Southern Mississippi Gulf Coast research lab, identified oil droplets in blue crab larvae last summer. This was the first time she had seen anything like that in 42 years of studying the species. Do you think those oil droplets were due to the moratorium or the BP disaster?
If they had showed up in any samples that we ever took out of the gulf, I would have been concerned about it, seafood samples. We're very proud of the Gulf Coast laboratory of UM, but that finding was never replicated, or we didn't have any similar findings in any samples that came out of the catch. And that's why it hasn't that hasn't bothered me. We just have had no seafood sample neither has the Federal Government, according to what they reported to us that had any kind of evidence or oil pollution on it.
Well, Governor, there are a number of reports of red snapper showing up with lesions in the gulf. A Louisiana State University professor is fairly confident that these lesions are consistent with the toxic oil exposure. I can share it with you, but here is a photo of the lesion on the red snapper. Do you think that that was a result of the spill?
Again, Congressman, if this were showing up in any samples of seafood taken by the government, Federal Government or State government, I would be more concerned about it than when a college professor finds it in some anomalous place.
But would you be concerned about digesting this?
If it was showing up in seafood samples that we're sampling by the thousands between the Federal Government and State government, then that would give me real pause. But we're not. The fact that we're not finding it means that I'm really not I don't know what the professors are finding or purporting to the news media.
The gentleman's time has expired. The question has been asked and answered. We go to the gentleman from Texas. And please, Mr. Foretold, do not get into this Texas versus Mississippi oil. You are recognized for 5 minutes.
Absolutely not. Texas and Mississippi share a common bond. Both border the Gulf of Mexico and are both deeply affected by what happens in the Gulf of Mexico, both environmentally and economically. I think you alluded in the answer to one of your answers to the previous questions, Governor, there are other countries that are drilling in the Gulf of Mexico, and whose oil and gas rigs, if there were to be an accident similar to BP or even smaller, would affect our coast; is that not correct?
Particularly Florida. Texas too, sure. Sorry.
You have Brazilians looking at drilling, Cuba offering leases, just immediately nearby to Florida. Mexico for a long time has been exploring the Gulf of Mexico. I realize you're only a recovering attorney. I'm a recovering attorney, too. Your recollection of lawsuit U.S. doesn't have any jurisdiction over any of those drilling operations. We can enact every imaginable regulation. Cuba or Mexico or Brazil can say, eh, no.
That's correct as I understand.
So don't you think it might be a better use of our resources, rather than crippling our domestic companies and our domestic exploration and 25 percent of our domestic oil supply, that we might be focusing on how to respond in the event one of these accidents or any sort of accident occurs again?
I do think it's more I think it is appropriate that the oil industry is doing it itself, paying for it. They know more about it than anybody else. It looks to me we ought to be using our resources to have more American energy, that we need to get ourselves off of foreign energy. And the best way to do that is it to increase supply and production of American energy. This has hurt that, because this is a big source of domestic oil and the number of permits for new deepwater wells which produce 80 percent of the 30 percent, about a fourth of all our oil, is down 85 percent the first year. And whether its coal or oil or gas or hydraulic fracturing, we need to produce more American energy.
And in your opinion, no amount of government regulation can protect us from what other countries
If we have rational regulation, that is good. But to have excessive regulation, unnecessary regulation, that's bad.
And regulations like and slowdowns in issuing permits I think you would consider to be falling under to be a problem, too.
Of course it is.
And like Texas, I assume Mississippi has seen significant job loss as a result of this.
We have. Most of the guys have just left.
Are y'all seeing assets that have been based in your State moving into other areas of the world, drilling platforms?
What we saw happen after the moratorium, some of the big rigs came in for maintenance. Good time for maintenance because you can't work. But after the maintenance was done, they left. And, you know, the way the industry works, those big rigs, they work on big jobs. They are very expensive to move, not only in cost of moving, but opportunity costs. They get paid huge amounts of money a day to operate them. Whether they will come back, how soon they will come back, is a very serious issues. So we saw not only the jobs move, but we saw the drilling rigs that produce the jobs go to Australia, go to Angola, Brazil. So that's a big damage to us, not just in jobs on the platforms, but jobs in the service industry.
I appreciate your coming up and taking time to share your experiences with us. I know your time is valuable so I'll yield back.
Would the gentleman yield?
Thank you, sir.
Governor, 250,000 barrels a day less are going to be taken out of the gulf. If more than a quarter of that is Mississippi related economic related, what does that do to your economy relative to oil in the foreseeable future? That's the estimate. It is undenied for the next 2 years.
We get so little of it
I'm not talking about the royalty revenues, I'm talking about the jobs.
Well, it does have an effect on jobs. We have a lot of people who work offshore. As I said, I don't mean this as precision, but 4 of the 11 people killed on the rig were from Mississippi, which gives you a sense of the number of people that we have working in the industry on rigs, in the service industries. We have companies in my State that manufacture drilling rigs, that build service boats. So it ripples all through the economy.
Governor, last question. Isn't it really a question of do we get it in America or do we get it somewhere else? Isn't that really the gulf question today?
Well, if you look at when has the United States had reduced use of oil, it is every time there's been a recession. And so I don't want a recession. If we're going to keep a strong economy, we've got to produce more energy in the United States, including oil. And to go shoot the best goose we've got laying golden eggs, the Gulf of Mexico where we're getting 30 percent of our oil or we were and that production is going down now, and it's going to keep going down. Remember, oil production today is based on decisions that were made in the past, normally several years in the past. A moratorium is one of the few things that has an immediate impact. When we see what we're seeing right now with high energy prices, the speculators are speculating the U.S. is going to be producing less and less oil, because they think the administration's policies will result in that. So they are betting the price of oil is going to go up. And then you take that with the value of a dollar, which oil prices are denominated in dollars, since the value of a dollar goes down, then that's a doublewhammy for the people who are paying $4 for gasoline. And for the people who think you're going to deal with that by raising taxes on oil companies, forget that; they won't pay those taxes. They are just going to pass it along to the guy who pumps gas and his pickup truck. The best thing is produce more oil, and at the end of the day not next week or next month that's the best thing to keep oil prices reasonable.
Thank you, Governor. Mr. Davis is recognized for 5 minutes.
Thank you very much, Mr. Chairman. And thank you, Governor, for being here.
Thank you, sir.
I've listened intently to your testimony. Of course, I grew up in the Mississippi Delta on the other side of the river, near Greenville, Mississippi, just a few miles. And as Dick Gregory knows, in Chicago we fondly say that the only place where you will find more African Americans from Mississippi is in Mississippi than in Chicago.
And so we have a tremendous relationship with the State itself, and we watch very closely what takes place and what goes on. I know we're talking about the worst environmental disaster in the history of our country, but as you indicated in your testimony it also had a massive economic impact, particularly the fishing and tourism industries. And I want to focus a little bit there. According to the NOAA, the total amount of shrimp caught commercially in the gulf decreased 27 percent from 2009 to 2010. The amount of shrimp caught commercially in Mississippi was down 60 percent last year from the year before. Could you share and you've done it eloquently a bit more of the economic impact that has occurred in the State as a result of the oil spill?
The fishing industry hurts very badly because waters were closed. Federal waters were closed first.. Mississippi waters were closed once we had encroachment. Louisiana, because they were closer to the well, their waters were closed very early as well. And this is fisheries for us for shrimp. We have big shrimp boats that will go all the way down to Texas coast and come all the way back around the Florida coast, but there are not that many of them that are that big that go that far. So we have a lot of fishermen in the shrimp industry whose waters were closed to them. Their losses were mitigated by the fact BP was willing to hire their boats to be part of this Vessels of Opportunity program. About 1,100 boats participated, and most days we would have 5, 6, 700 boats out there. And they would be getting paid, some of them more than they made fishing. But the processors got clobbered. And so the fishermen are nowhere if they don't have processors. And so while they were getting a chance to be helped, there was nobody who was helping the processors. And without the processors, there's no fishermen. And so fishing was hurt that way. Recreational fishing, which is a real industry in my State. There are people from Chicago who come down there and pay boat captains to take them out fishing. Shut out, shut down. Again they got some relief from the VOO, but hurt very badly, just in that little small segment. If we ever talk about motels, restaurants Louisiana, to their great credit, they have New Orleans. And if there is oil on the beach in Venice, tourists will come to New Orleans.
Are you confident that our Food & Drug Administration and Environmental Protection Agency, that the agencies that we rely upon to determine the safety in many instances of especially the things we consume, that they are equipped to really give us the information that we need to know to feel comfortable and secure?
I have no reason not to be, Congressman, so I am. It's a team, State and Federal. But yes, sir.
Let me ask you, other than perhaps the listing of any moratorium, what else can the Federal Government do that might assist with the economy? We know that the economy obviously was hurt badly. We know what the economy was even before the spill. What can the Federal Government do to add further assistance?
The Federal Government is able to collect enormous fines under the Clean Water Act. The Federal Government can assess through fines and through whatever process, either through agreement or by litigation say BP's going to pay X billions the Federal Government could take that and just put it in a general Treasury and move on, use it to reduce the debt. It might cover a day or 2 worth of deficit. But we think the best thing the Federal Government can do is let some of the fine money and there's legislation in the Senate, I believe, to let most of the fine money go to the States. Let the States use the money with flexibility for economic growth there. Maybe it has to be related to the gulf and the gulf economy. We are going to have people who were fishermen 2 years ago, who are not fishermen today, and they will never be fishermen because because of the capital investment and the cost. We need to create jobs for them on the coast, maybe at the port; maybe in Alabama they've got something totally different; or maybe in Florida there is a whole different concept. But we would like to see a significant part of the fine money be given to the States and the States allow the flexibility to use the money to produce the maximum economic growth in the coastal areas for that state.
Thank you very much.
Thank you, Congressman, for asking.
I thank the gentleman. We now go to the gentleman from Idaho, Mr. Labrador, for 5 minutes.
Hello, Governor. In Idaho, obviously, we don't have an oil industry, so I don't spend a lot of time thinking about this, but I think about common sense. It seems like there is a lot of common sense just lacking here. And I'm going to just give you an example. You've had a colloquy with several people here on the panel, I mean on this side, and sometimes common sense just seems to lack in Washington, D.C. A couple weeks ago, or maybe a month ago, the First Lady, her plane was close to they claim that there was close to an accident. And apparently she was within 3 miles of another plane. And the regulations said that all planes should be within 5 miles of each other, and apparently the First Lady was within 3 miles. I'll get to my point, and I think you'll get it in just a second. So the response in Washington, D.C. was not hey, geez, somebody screwed up and they failed to comply with the regulation; it should have been 5 miles instead of 3 miles. The response in Washington was, we need new regulations. It seems like that's all I ever hear about in Washington, D.C. When somebody screws up, when somebody makes a mistake, we don't say, hey, that idiot didn't follow the regulations. What we say is, we need new regulations. And it's just to me incomprehensible that all we can ever think about is adding regulation upon regulation when the regulators are not doing their job. They already have regulations that should actually be enforced. And instead, all we ever talk about is making it more difficult for industries, for private enterprise, and for individuals to live to survive. So can you explain to me, and I think you mentioned this earlier, I think you mentioned that the Macondo incident occurred because regulations were not followed. In fact, I think your word was that some corners were cut. Can you explain that a little more to me, what you meant by that?
I can't slight the regulatory regime, but in the normal standards and protocols of shutting in a well, it was clear from the reports at the time, and nobody has denied it, that they didn't follow the standards and protocols that the industry had been using, settled on, and had worked with great results for a long, long, long, long time. This was widely reported. And so it always seemed to me pretty clear why the well blew out. And this was reportedly, again with nobody arguing, this was a pretty tough well. They had trouble with this well. It had hiccups, it had belches of natural gas that they had trouble with. They had to shut the well down at least once during this. So this wasn't a well to cut corners on. This was a big elephant well, but they did cut corners. And you're right when you say the issue is following the regulations we got now. I can't improve on your statement.
So why is it that here in Washington we don't seem to understand this? Why is it that we can't understand that we have regulations? I think you used the number, we've done this in the gulf over 30,000 times and this is the first time something like this happened. Can you repeat that again? You said
Yeah. There have been more than 31,000 oil wells drilled in the Gulf of Mexico in the last 50 years or since they opened the gulf in our four States and there has never been anything vaguely like this to happen.
I think I will yield the rest of my time to the chairman. For the life of me, I cannot understand why we cannot in Washington, D.C. just understand that if we enforce the regulations that are in place, we will actually be able to have a good environment, we will be able to have good water, and we will be able to have jobs and the economy will improve. Thank you very much.
I'm going to follow up on the gentleman's line of questioning because I think it was excellent. Governor, on the day that the oil well blew 100 miles off your shore, there were two MMS officials, a father and son team. They came on, reviewed, passed and left; isn't that so, as far as you know?
I don't know that, but I
It wouldn't surprise you.
I assume it is true.
We're going to have the administrator of the successor organization, MMS, next. That's going to be one of our questions, is why is it that what failed before won't fail again? And that's going to be a line of questioning is not just other new regulations, but an agency that failed to ensure safety; what has changed there? So hopefully they will be as candid as you've been.
Well, I have to say to you, I accept that because the 31,000 wells I actually go from Janet Napolitano, so I accept people in authority's statement of fact. So I accept the fact that those two guys were there.
I thank you, Governor. The gentleman from Virginia, Mr. Connolly. And by the way I didn't have to look up what chutzpah was in your opening statement, but it was interesting to see you using imported words.
Thank you. Where I come from, chutzpah is a very common word. I want to welcome Governor Haley Barbour to this committee. And I was just thinking to myself, I regret very much you're not running for President. I think you would have added some good, common, political sense and a lot of good humor, and would have humanized the process. It desperately needs it, so we're sorry we are not going to see your candidacy.
Thank you very much, Congressman, that is very gracious.
And thank you for your service. Governor, I was listening to your exchange with Congressman Burton and complaining about the negative media attention. As somebody who ran a very large county with 1.1 million people, I can sympathize. But on the other hand, was it the bad media that caused a hit to the Mississippi economy, or was it the devastation of the oil spill itself?
Congressman, we didn't have devastation. The problem was, the news media took the very, very, very worst areas in Louisiana and they repeatedly showed that over and over and over. And it gave people the impression that's the way it was all the way over the Gulf Coast. They would actually have stories about Mississippi and pictures from Louisiana.
And you may not have been in here literally, on our 80mile shoreline, we never closed 1 foot of beach for 1 day except on one occasion. We had a high tide either right before or right after a hurricane missed us, and it pushed some water over the highway and through a culvert, and it pushed some oil patties up there. And we closed that beach for more than we actually closed that beach overnight. That is the only time. But if you watched TV in Virginia, you saw Louisiana and you thought Mississippi and Florida and Alabama, for that matter, and Texas were all the same way. And that's what killed our tourist season.
Yes. Common problem with the media sometimes.
Amen. That's a bipartisan.
Absolutely. When you look back now, and if someone gave you a truth serum, do you think in retrospect that the process for permitting and improving the Deepwater Horizon oil rig was flawed? For example, it got a categorical exclusion under the process because the process allowed for that. In retrospect was that a mistake? The NEPA and then one other aspect, Governor, and then please respond the NEPA process predicted under the NEPA review, which was truncated, that under the worstcase scenario we were looking at 4,300 barrels of oil spilled and it would never reach the shore.
Congressman, in answer to your question, I think that what we have done for 50 years, with more than 31,000 oil wells, with very positive results in fact, nothing like this ever having happened I would not take issue with that. I mean regardless of what we do, occasionally you're going to have the bad outcome. But we're not going to make people quit taking lefthand turns, we're not going to outlaw lefthand turns because they are a little bit more dangerous than regular driving. And I really see this, that rational regulation of this had resulted in 31,000 times, nothing like this now this has happened one time. Does that mean we have to turn the world upside down? And I think the answer is no.
Governor, I would agree with you. I don't think we have to turn the world upside down. But really my question, isn't that that's not our only choice. The question is: Could we in retrospect have tightened up regulation and been more rigorous in the review process, such that and the enforcement, for example get the blowout protection equipment that might have stemmed the spill or contained it? I mean, I take your point that the devastation wasn't what was presented visually on television. I fully respect and understand that. But on the other hand, at one point the extent of the spill on the surface of the water would have gone from my district in Northern Virginia, Dale City, all the way to New York City, if it were superimposed on the map here. That's eyepopping and that's of deep concern to all of us. All I'm asking, don't turn the world upside down, but could we not on a bipartisan basis agree that in light of that experience, it only requires one to create such environmental havoc. This isn't the category it seems to me of a nuclear disaster, it only requires one. Turning left hand and having an accident, God forbid, is a terrible thing if someone is hurt, but it is a very contained thing.
If the chairman is correct that there were two government regulators on the rig that day, and if the reports that have been written over and over and over, without contradiction, they did not follow the normal protocols and they did not follow the standards, and these two regulators were on the well that day, I think the Congressman from Idaho's point is the right point. It's not that we need more regulation, it's that we need to actually enforce the regulations in real life, if, that is factually accurate. I have no reason to think it's not.
Mr. Chairman, will you indulge me just one
The gentleman is recognized for one more question.
Just a clarification, Mr. Chairman, thank you. Do you mean by that, let's have the full regulatory process that's on the books right now, no more exclusions?
I couldn't go that far because of my lack of information. There may be some exclusions that are wellfounded, that are like we see in many, many other processes, regulatory and otherwise. You fill out the form, if the answer to C is no, skip down to F. I just don't know if those exclusions are of that type.
Thank you, Governor.
I thank the gentleman. Governor, this may come as a surprise to you, but I haven't had my round of questioning yet, and I'm going last. There may be another minority member coming, but I'm going now and recognizing myself for 5 minutes. Governor, I'm going to put up on the board a quote from Secretary Salazar for your comment. I'll read it. "There is no question that the suspension of deepwater drilling will have a significant, negative, economic impact on direct and indirect employment in the oil and gas industry, as well as other secondary economic consequences.
But he did it anyway.
Can you explain why somebody would know that it was going to hurt economically and by the way, he follows that up, which isn't on this quote he follows this up by noting that there's an extremely good history of safety in the oil and gas industry. RPTS WALKER DCMN MAGMER [11:25 a.m.]
Mr. Chairman, my own view is that the policy of the administration is to increase the cost of energy so that people will use less of it and, therefore, there will be less pollution and alternative forms of energy will become more economically competitive. I have said that publicly a thousand times. I might as well say it here. When they did the moratorium, that was my assumption, that this was consistent with that policy. And, look, it's one policy that works. I mean, we have got $4 gasoline; and gasoline in January of 2009 was a dollar eighty something. But that's what I took to be the rationale for that is. To make these other alternatives economically competitive, you had to increase the price of oil and other traditional.
Well, it's certainly done that. By the way, the quote that wasn't on the screen is, I am also aware that, as a general matter, the safety record for deepwater drilling has been good. I am going to go to one more very interesting quote, because the next panel's going to be dealing with this. Last week or 2 weeks ago, I guess it was, Secretary Hayes was here and told us there was no connection between high oil prices and domestic production, meaning he was quite sure that if we drilled more here it wouldn't change the global price. I'm going to take you to page 23 of an MMS report, titled MMS Economic Impact Assessment. At the time, they were assessing and I will just read it because it's a little hard to read that one they were assessing that at $75 a barrel which is where we were, not where we are, unfortunately that if production went down by 84,000 barrels a day, .84 million barrels a day, that we would have an increase of about 47 cents a barrel. Now, it went down by three times that. Now, you're not an oil speculator, neither am I, but it would not surprise you that if you got a half dollar increase for such a minor one and if you decrease by three times that amount, wouldn't you guess it would go up a whole lot more than that? Ten, fifteen dollars a barrel could certainly happen if you took that much out of the limited economy?
And potentially, if the market believes that this is going to be policy for a while, that you are going to have a moratorium in the Gulf, that you're going to reduce production in the Gulf, that you're going to issue 85 percent fewer new deepwater drilling permits, that the market sees that as there's going to be less U.S. oil production. And while whoever said you can't affect the price of oil overnight, well, of course, that is absolutely true, but if there is a belief that the U.S. is going to produce less and less oil going forward, particularly because of government policy, then the price of oil is going to go up.
One more thing I wanted to get into the record. Governor, you are one of the many States that are Right to Work States, aren't you?
In fact, every State in the Gulf of Mexico every oil State is a Right to Work State.
I think all the States in the Gulf of Mexico. I don't know if every oil State
I'm sorry. California is an oil State. We're not Right to Work. But every Gulf oil State is, in fact, a right to work State.
Does it surprise you that the policies of this administration seem to be targeting the economic wellbeing of your area and I'm not trying to say it's a big plot or anything else but it does seem like if 9/11 aircraft fly into the Pentagon, fly into the Twin Towers, the next day we are figuring out how to get airplanes back in the air. And yet the economy, the seafood economy, the tourism economy, and the oil economy of your State, when you're suffering, it seems like there's no limit to how long this administration will take to have a moratorium to think about whether or not they can let you do something that's so vital to your economy.
Well, the moratorium was a mistake. It was very harmful not only to our State but I think, more importantly, very harmful to the country. And I can't read what's in people's hearts or what's inside their heads, but I have noted and I hadn't said it here, but I think it is appropriate to say there has been an effort to raise taxes on the oil industry because it's a very profitable industry.
Every day here, Governor.
It's interesting, in the Senate bill to raise taxes on the oil industry, the idea was deficit reduction to raise the taxes $2 billion a day I mean, $2 billion in a year. The problem is that's half of 1 day's deficit. You know, you would have to raise the taxes on the oil industry by a factor of 700 times more than that, because a $2 billion tax increase on the oil industry is equal to onehalf of 1 day's deficit. I mention that because it says to me that can't be the real reason. I mean, the real reason can't be to touch the deficit, because it doesn't even touch the deficit. And of course, as we know, the guy who's going to pay it is the one who pumps gas in his truck. So do I think there are some people who don't like the oil industry or think it's a good whipping boy politically, I suspect that. But I can't say what's inside people's hearts or minds and don't pretend to, but I do know it wouldn't do anything about the deficit.
Well, Governor, I couldn't agree with you more that we can't be sure of somebody's motives. Although, I can be sure that if Wall Street were to cause an economic meltdown that this administration would allow it to be up and running the next day. Because they did. The last administration did. This administration did. We have had great disasters and great impacts in other areas of the economy, but, amazingly, the reforms came after everyone was back up and running, not before they were allowed to go back up and run. Governor, you have been very kind with your time. We appreciate your being here. You're probably the most welcome relief to us in Congress, to see somebody who's doing the right things, who's making the right decisions, who's steering a course for your State, and we appreciate you taking your valuable time to be up here today.
Thank you, Mr. Chairman. Thank you, Congressman Cummings.
We will now take a 5minute recess to set up the next panel.