Welcome to The New Interior, a periodic update from Steptoe & Johnson LLP to keep you informed of coming changes at the Department of Interior, and for related matters on Capitol Hill and elsewhere with a new administration taking charge in Washington, DC.  We intend to bring you the very latest on anticipated moves by the Obama Administration and in the 111^th Congress over the next several months, as a new direction takes shape for Interior-related positions and policies.

If you would like to speak with a Steptoe attorney about our Interior practice, please reply to this email or contact Tom Collier (202.429.6242 or tcollier@steptoe.com) or Jody Cummings (202.429.8096 or jcummings@steptoe.com). 

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Waxman and Markey Release Draft Climate and Energy Bill

Earlier this week, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Energy and Environment Subcommittee Chairman Ed Markey (D-MA) released a much-anticipated discussion draft energy and climate bill, the American Clean Energy and Security Act. The draft is broken into four titles which purport to address (1) clean energy – promoting renewable energy sources, carbon capture and sequestration, low carbon fuels, electric vehicles, and smart grid electricity transmission; (2) increasing energy efficiency across various economic sectors; (3) global warming – setting emissions limits on certain pollutants; and (4) transitioning to a clean energy economy and promoting green jobs.

Notably, the draft does not address how a cap-and-trade program would be implemented, leaving open, among other issues, the question of how emission credits would be either given to businesses or sold to them via auction. Chairman Waxman has signaled that he wants more Member input on how credits will be allocated. He plans to get the bill through the committee by Memorial Day. Speaker Pelosi has pledged to have a floor vote on the legislation before the end of the year.

Considerable debate on the draft is already underway. House Republicans told Chairman Waxman on Wednesday, April 1 that he will get little or no Republican support for legislation that would impose mandatory caps on US greenhouse gas emissions. Energy and Commerce Ranking Member Joe Barton (R-TX) has indicated that the bill would devastate the coal industry and regions that are dependent on coal-generated electricity.

Steptoe has reviewed the legislation and has developed an analysis of the greenhouse gas regulation provisions of the draft bill. Please open the attached PDF or click here to read the analysis.

Department Publishes Survey on OCS Resources, Gears Up for Regional Meetings

In preparation for hosting four regional public meetings in April to discuss the future of offshore energy development on the nation’s Outer Continental Shelf (OCS), the Department released on Thursday, April 2 an executive summary of a report on conventional and renewable offshore energy resources. The report was prepared by the Minerals Management Service (MMS) in collaboration with the US Geological Survey. It results from a directive issued by Secretary Salazar in mid-February when he set out a four-part strategy for developing a new, comprehensive approach to OCS energy resources.

The summary indicates that the report surveys information that is currently available regarding the nature and scope of offshore oil and gas and renewable energy resources on the OCS. It also identifies information regarding sensitive environmental areas and resources in the OCS, as well as information gaps regarding available data on OCS conventional and renewable resources. MMS indicates that the report is intended to present a survey of available data on the OCS so that the public and interested stakeholders can more effectively participate in the upcoming public meetings on OCS development.

The report highlights three primary areas: (1) renewable energy resources, (2) oil and gas resources, and (3) sensitive environmental areas and resources. Key points from each include:

• Renewable Energy Resources
  
  
  • According to National Renewable Energy Laboratory (NREL) estimates, developing shallow water (typically 0-30 meters) wind resources (most likely to be technically and commercially feasible now) could provide at least 20 percent of the electricity needs of almost all coastal states.
    
    
  • The Atlantic OCS has the greatest renewable energy potential relative to other OCS Regions in the Gulf of Mexico, Pacific, and Alaska. In the short-term (5-7 years), this is most likely to be from offshore wind power.
    
  
  
• Oil and Gas Resources
  
  
  • In 2007, the OCS accounted for 14% of domestic natural gas production and 27 % of domestic oil production.
    
    
  • A 2006 MMS assessment (having a January 1, 2003 cut-off date) for mean estimates of the OCS total hydrocarbon endowment were 115.4 billion barrels of oil and 633.6 trillion cubic feet of gas. More than 18% of this total endowment has already been produced, and an additional 11% is contained within various reserves categories, the source of near and midterm production.
    
    
  • 70% of the mean barrels-of-oil equivalent total endowment is represented by undiscovered resources. More than half of this potential exists in areas of the OCS outside of the Central and Western Gulf of Mexico.
    
    
  • For the 2010-2015 OCS Draft Proposed Program, results indicate that 53% of the undiscovered technically recoverable resources are economically recoverable with an oil price of $60/barrel and corresponding gas price of $6.41/thousand cubic feet of gas (Mcf). This increases to about 78% with an oil price of $160/barrel and corresponding gas price of 17.08/Mcf.
     
• Sensitive Environmental Areas and Resources
  
  
  
  • An understanding of seafloor habitats is an important consideration in making leasing decisions. Some information is available on seafloor habitats for portions of the OCS, but there are significant data gaps for a number of areas.
    
    
  • Key challenges for oil and gas development that are common to all OCS areas include accidental oil spills, threats of space-use conflicts, habitat alteration, and seismic surveys. The threat of oil spills and their effects on fisheries is central to concerns about offshore oil and gas development.
    
    
  • Key challenges for renewable energy development common to all OCS areas include offshore space-use conflicts, artificial reef effects, habitat alteration, noise from pile driving, and effects from electromagnetic fields.

The summary also highlights several concerns from MMS about filling information gaps. For renewable resources, there is a high degree of uncertainty in estimating the actual extractable or developable amount of energy given the many uncertainties in societal preferences, technological developments, environmental sensitivities, transmission capacity, grid connection availability, and potential space-use conflicts in the ocean environment. For oil and gas resources, the summary notes that most of the seismic data acquired in the potential new lease areas are more than 25 years old and may not be adequate for detailed prospect mapping or for lease sale bid formulation and evaluation, especially in geologically complex areas.

A copy of the summary may be obtained at www.doi.gov/ocs/.

Mining Reform Bill Introduced in Senate

Senate Energy and Natural Resources Chairman Jeff Bingaman (D-NM) introduced on Thursday, April 2, S.796, the Hardrock Mining and Reclamation Act of 2009. The bill is cited as an effort to modernize the Mining Act of 1872. The Committee has indicated that it would take up the legislation after it finishes work on the energy bill that it is currently vetting.

Key provisions of the bill include:

• Patenting of Federal lands would be eliminated, although complete patent applications filed by September 30, 1994 would be grandfathered in.
  
  
• Production of all locatable minerals would be subject to a royalty rate that will be determined by the Interior Secretary by regulation, ranging 2%-5% of the value of production.
  
  
• Permits would be required for all mineral activities on Federal land except for “casual use” that ordinarily results in negligible disturbance.
  
  
• Financial assurances attributable to the cost of water treatment would not be released until the discharge had ceased for at least 5 years or the operator had met all applicable water quality standards for at least 5 years.

Congressional Members Ask Salazar to Reinstate Bush ESA Rule

A bipartisan group of members of the House of Representatives have written to Secretary Salazar asking that he reinstate regulatory modifications to sections 4(d) and 7 of the Endangered Species Act (ESA) made by the Bush Administration. One change altered an ESA requirement that federal agencies consult with experts at the US Fish and Wildlife Service and National Marine Fisheries Service if their actions could impact endangered species. Instead, agencies were permitted under the Bush rule change to decide on their own whether to consult. The other modification limited consideration of climate change issues and impacts of greenhouse gases in the polar bear’s habitat.

The recently passed FY 2009 omnibus spending legislation includes a provision that gives the Administration 60 days (until about mid-May) to pull the Bush rule changes. Opponents have criticized the provision as giving President Obama and Secretary Salazar rulemaking authority without a notice and comment period.

The group urging reinstatement includes Representatives Joe Baca (D-CA), Marion Berry (D-AR), Rob Bishop (R-UT), Dan Boren (D-OK), Paul Broun (R-GA), Dennis Cardoza (D-CA), Jason Chaffetz (R-UT), Mike Coffman (R-CO), Jim Costa (D-CA), Elton Gallegly (R-CA), Doc Hastings (R-WA), Dean Heller (R-NV), Wally Herger (R-CA), Stephanie Herseth Sandlin (D-SD), Ann Kirkpatrick (D-AZ), Betsy Markey (D-CO), Jim Matheson (D-UT), George Radanovich (R-CA), and John Salazar (D-CO).

Appointments Buzz

• President Obama announced this week the nomination of Anne Castle as Interior’s Assistant Secretary for Water and Science. Castle is currently a partner at Holland & Hart LLP, where her work focuses on water rights and water quality law.
  
  
• We hear from inside sources that Wilma Lewis will be tapped as nominee for Assistant Secretary for Land and Minerals Management. This would be a return visit to Interior for Lewis. She was an Associate Solicitor at the Department from 1993 to April 1995, and then served as Interior’s Inspector General from April 1995 to January 1998 after being contacted by Steptoe & Johnson LLP’s Tom Collier (then Chief of Staff to Secretary Babbitt) to take that job. She was later named US Attorney for the District of Columbia by President Clinton, serving in that role until April 2001. Prior to other government service earlier in her career, Lewis was an associate at Steptoe for five years. |
  
  
• Secretary Salazar’s Chief of Staff Tom Strickland was approved by voice vote of the Senate Energy and Natural Resources Committee this week for the position of Assistant Secretary for Fish and Wildlife and Parks. The approval clears the way for Strickland’s confirmation by the full Senate.
  
  
• Late last week, President Obama announced that Rhea S. Suh would be his nominee for Interior Assistant Secretary for Policy, Management and Budget. Suh is currently a program officer at the David and Lucile Packard Foundation, managing a $200 million, planned six-year initiative regarding key lands and watersheds in western North America. Prior to her current position, Suh was a program officer at The William and Flora Hewett Foundation. Her prior government service includes time as a staffer for former US Senator Ben Nighthorse Campbell.