[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] ENERGY INDEPENDENCE: HOW BURDENSOME REGULATIONS ARE CRUSHING OFFSHORE SMALL ENERGY PRODUCERS ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON RURAL DEVELOPMENT, ENERGY, AND SUPPLY CHAINS OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ HEARING HELD SEPTEMBER 28, 2023 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 118-028 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 53-335 WASHINGTON : 2024 ----------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman BLAINE LUETKEMEYER, Missouri PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas MARIA SALAZAR, Florida TRACEY MANN, Kansas JAKE ELLZEY, Texas MARC MOLINARO, New York MARK ALFORD, Missouri ELI CRANE, Arizona AARON BEAN, Florida WESLEY HUNT, Texas NICK LALOTA, New York NYDIA VELAZQUEZ, New York, Ranking Member JARED GOLDEN, Maine KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota GREG LANDSMAN, Ohio MORGAN MCGARVEY, Kentucky MARIE GLUESENKAMP PEREZ, Washington HILLARY SCHOLTEN, Michigan SHRI THANEDAR, Michigan JUDY CHU, California SHARICE DAVIDS, Kansas CHRIS PAPPAS, New Hampshire Ben Johnson, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Wesley Hunt................................................. 1 Hon. Marie Gluesenkamp Perez..................................... 3 WITNESSES Mike Minarovic, Chief Executive Officer, Arena Energy, LLC....... 6 Paul Danos, Chairman of the Board, Owner & Chief Executive Officer, Danos, LLC, testifying on behalf of National Ocean Industries Association......................................... 8 Alex Epstein, President and Founder, Center for Industrial Progress....................................................... 10 Kathleen Nisbet Moncy, Chief Operating Officer, Goose Point Oyster......................................................... 12 APPENDIX Prepared Statements: Mike Minarovic, Chief Executive Officer, Arena Energy, LLC... 27 Paul Danos, Chairman of the Board, Owner & Chief Executive Officer, Danos, LLC, testifying on behalf of National Ocean Industries Association..................................... 39 Alex Epstein, President and Founder, Center for Industrial Progress................................................... 50 Kathleen Nisbet Moncy, Chief Operating Officer, Goose Point Oyster..................................................... 81 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: Amicus Brief on Lease Sale 261............................... 83 Judge Cain Order in Lease Sale 261 case...................... 102 Oceana Protecting the World's Oceans......................... 132 SFAA - The Surety & Fidelity Association of America.......... 136 State of Louisiana Financial Assurance....................... 146 U.S. Small Business Administration Office of Advocacy........ 239 ENERGY INDEPENDENCE: HOW BURDENSOME REGULATIONS ARE CRUSHING SMALL OFFSHORE ENERGY PRODUCERS ---------- THURSDAY, SEPTEMBER 28, 2023 House of Representatives, Committee on Small Business, Subcommittee on Rural Development, Energy, and Supply Chains, Washington, DC. The Subcommittee met, pursuant to call, at 10:04 a.m., in Room 2360, Rayburn House Office Building, Hon. Wesley Hunt [chairman of the Subcommittee] presiding. Present: Representatives Hunt, Luetkemeyer, Meuser, Stauber, Mann, Gluesenkamp Perez, and Golden. Also Present: Representative Williams. Chairman HUNT. Good morning, everyone. If you do not mind will you please stand for the Pledge of Allegiance? I pledge allegiance to the flag of the United States of America. And to the Republic for which it stands, one nation, under God, indivisible and justice for all. Good morning, everyone. I now call the Subcommittee on Rural Development, Energy, and Supply Chains to order. Without objection, the Chair is authorized to declare a recess of the Committee at any time. The Committee is here today to hear testimony about the role of small businesses in our domestic energy production and the regulatory hurdles drillers and service providers are facing today. I want to thank you all for being with us here today and I am looking forward to today's conversation. I now recognize myself for my opening statement. First, I want to thank all of our witnesses for being here today, this morning. I understand you traveled pretty far to be here and we appreciate your time. This is a very important issue. It is near and dear to my heart being in Houston, the energy capital of the world. Energy corridors in my district makes me the energy congressman of the entire world. I tell myself that every morning when I wake up. It makes myself feel better. We have had an issue with the oil and gas industry I think for the last couple of years. We are seeing gas prices soaring and I think it is time for us as a country to unleash American energy. I have spoken to many of you in person and no one has an issue with renewable energy. No one has an issue with the next abundant, affordable source for the future but I think we have an understanding that we cannot get there without us. Domestic oil and gas is the lifeblood of our economy. And when American energy production is strong our country is strong. Our allies are strong. American families are strong. The world is a stronger and a better place. Independent oil and gas producers are feeling the negative impacts of regulatory hurdles every single day. It is not just regulatory issues; it is also the higher tax rates that we are paying and I am sure you will discuss that here in a little bit. A recent example evolves around BOEM's institution of a new rule in June regarding the capital reserve requirements for Outer Continental Shelf oil and gas leases and grantees. Requirements such as having an investment grade credit rating, which are large, upfront expenses for any small business place additional burdens exclusively on smaller, offshore oil and gas companies. BOEM's rule further tips the scale in favor of large companies and small businesses lack the same luxury of access to capital and credit. Another rule we will focus on today is NOAA's Rice's whale rule--I am not going to have Nessie today. Do not worry about that--which places undue burdens on offshore operators. The National Oceanic and Atmospheric Administration's expansive rule about the Rice's whale limits oil exploration and dramatically increases cost for producers in the Gulf. This rule continues numerous anti-oil and gas provision which the sole aim of dismantling our country's offshore production. All over a possible sighting of a Rice's whale almost a decade ago. As a candidate for president, Joe Biden made a campaign promise to end fossil fuels. As president, his administration has worked every day to do just that. As I said earlier, it is not about ending our industry; it is about finding ways to unleash American energy. We need more electrons in the world, not fewer. I represent Congressional District 38 here in Texas. As I told you, and I will probably say it three more times, Energy Congressman of the World. That is something that is very important to me, and if you are looking at the international and the safety of the world, it is literally relying in the hands of energy production. Look at what is happening in Russia and the Ukraine. Look at what is happening all over the world. We have the opportunity to lift nations and countries out of poverty by just giving them American oil and gas. But these oppressive rules and regulations are being forced upon our domestic oil and gas producers and are crushing production, future investment, and the benefits that American consumers could enjoy if we were energy dominant once again. And I am confident that we will get there. It is my opinion that the word ``transition'' is a myth. There is no transition. It is only energy addition. Over the course of the next decade we are going to add 2 to 3 billion more people to this earth. Last year we had the highest demand on earth for oil and gas, and being from Houston and that Houston heat, I am not going back. I will continue to turn on my air conditioning; otherwise, I will not be very comfortable in Houston at all. We should be talking about energy addition, not transition. And again, this is an ``all hands on deck'' approach. I want to thank you all for being here this morning. Greatly appreciate it. Thank you for your time. I look forward to having a very spirited debate and discussion. I now recognize Ranking Member Ms. Gluesenkamp Perez for her opening statement. And thank you, ma'am, for being here. Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chairman. The success of our small businesses and the economic security of working families relies on abundant sources of affordable energy. As we all know, the high cost of oil and gas over the past 18 months has caused significant financial distress to many families, particularly those in rural communities like mine where we have to drive significant distances to access simple services. That is why I am supportive of efforts to make our nation more energy independent and take advantage of the wealth of natural resources available to power our economy long into the future. Unfortunately, many of the sources of energy that we rely on are vulnerable to foreign manipulation. Just 2 weeks ago we saw Russia and Saudi Arabia collude to continue production cuts through the end of the year. As a result, oil prices spiked. And despite the record amount of oil being produced in the U.S. right now, gas prices remain elevated for most of the consumers. This is because the price of oil is set on a global market as a global commodity. And no matter how much is produced at home, it will still be vulnerable to manipulation by dictators and despites abroad. But what is clear is that while we transition to more sustainable and cost-effective renewable energy, we still need oil and gas in the meantime. One potential source of oil and gas is found off our shores. Unfortunately, the process of extracting it comes with significant tradeoffs, particularly for coastal communities. We know that as offshore oil and gas infrastructure ages it can corrode and release harmful chemicals into the water. Idle and unplugged wells can leak oil that is toxic to fish, shellfish, and marine life, harming local fishermen and rural economies. In the event of large spills, oil can reach the shore, polluting beaches and threatening coastal tourism. One study found the Deep Water Horizon spill cost tourism and fishing industries in Alabama, Louisiana, Mississippi, and Florida between $15 and $30 billion. This is why I opposed offshore drilling off the coast of Washington, and my first amendment as a Member of Congress was to prohibit drilling off the shore of Oregon and Washington that would adversely affect our fisheries. We are here today to discuss new actions by the Bureau of Ocean Energy Management (BOEM) to better understand these tradeoffs to both protect coastal communities and shield taxpayers from incurring additional costs when oil companies that drill offshore go bust. New proposed financial insurance regulations would require oil and gas companies conducting business offshore to cover the costs of decommissioning upfront in the event their companies go bankrupt. While decommissioning wells is already required by law, companies often seek to shirk their duties to do so. As a result, it is taxpayers who are often left with the expense. According to the GAO, the Department of Interior held less than $3 billion in bonds to cover the estimated cost of $38.2 billion for decommissioning these wells in 2015. While I sincerely sympathize with the concerns of my colleagues that this could negatively impact independent oil producers, it is essential that our regulations address the real cost of offshore drilling and ensure those costs are borne by the companies that profit from the practice, not taxpayers and coastal communities. I hope this regulation will adequately protect coastal communities from any downstream consequences of offshore drilling. With that, I thank all of the witnesses for joining us and look forward to a productive conversation. Thank you. I yield back. Chairman HUNT. Thank you, ma'am. With that I would like to recognize our Full Committee Chair, Mr. Roger Williams from Texas for his opening statement. Mr. WILLIAMS. Thank you. And good morning to all our witnesses. We appreciate you being here today. I want to thank Chairman Hunt for holding today's hearing and we greatly appreciate all of your time. You know, it is no secret that the Biden administration has been at war with the oil and gas industry since day one. Countless regulations have created a burdensome environment for our nation's small oil and gas producers that are a critical component of our domestic energy supply. Some of the regulations that we will be discussing today are a continuation of this trend that is doing nothing but crippling and harming our independent oil and gas producers. Our small businesses across every industry are the engines of our economy and without them America will struggle and has struggled. Requirements like obtaining an investment grade credit rating are expensive and put small businesses at a competitive disadvantage. So as Americans are facing extremely high inflation and energy prices we need to be making it easier. I repeat, easier, not more difficult for domestic energy companies to succeed. I look forward to hearing from our witnesses today. And with that, Mr. Chairman Hunt, I want to thank you again, and I want to thank our witnesses for being with us. And I yield my time back. Chairman HUNT. Thank you, Chairman Williams. At this time I would like to introduce our witnesses that are with us today. Our first witness is Mr. Mike Minarovic. He is the CEO of Arena Energy, cofounded by Mr. Minarovic in 1999. Arena Energy focuses on pursuing the lower risk expiration and production opportunities that remain in the Gulf after 50 years of drilling by larger oil companies. Since the company startup in 1999, it has invested over $7 billion in the Gulf of Mexico and has paid production royalties of over $1.4 billion to the U.S. Treasury. Mr. Minarovic is a graduate of the University of Texas in Austin. They are having a pretty good football season this year, sir. And his Bachelor of Science in Petroleum Engineering. Mr. Minarovic, thank you so much for joining us today. We greatly appreciate it. We will look forward to your testimony, sir. Our second witness is Mr. Paul Danos, who serves as Chairman of the Board for NOIA, the National Ocean Industries Association. Founded in 1972, NOIA represents all facets of the domestic energy related industries. Mr. Danos was reelected as Chairman of the Board this past May. Mr. Danos is also the owner and CEO of Danos LLC, a family-owned and managed energy services provider. He joined the company in 2005 and has been the co-CEO through 2020. Mr. Danos graduated from Louisiana State University with a bachelor of science in finance and then went to Stanford University Graduate School of Business where he earned his MBA. Mr. Danos, thank you so much for being here today. Greatly appreciate it. Thank you so much for your time. Our third witness is Mr. Alex Epstein. He is a philosopher, journalist, and author that has covered the energy industry for over 2 decades and is the founder and president of the Center for Industrial Progress based on San Diego, California. The Center for Industrial Progress was founded by Mr. Epstein in 2011 to offer a positive, pro-human alternative to the Green Movement. He is the author of the Moral Case for Fossil Fuels and New York Times Best Seller arguing that human flourishing and progress requires the use of more fossil fuels, not less. Mr. Epstein has spoken to employees and leaders and dozens of Fortune 500 energy companies, including Exxon, Mobil, Chevron, and Phillips 66. He has also made his moral case for fossil fuels at dozens of campuses including Harvard, Yale, Stanford, and Duke. Mr. Epstein graduated from Duke University with a bachelor of arts in philosophy. Mr. Epstein, thank you, sir, for being here. Greatly appreciate your time. I now recognize the Ranking Member to introduce the minority witness for today's hearing. Ms. GLUESENKAMP PEREZ. I am pleased to introduce our final witness today, Ms. Kathleen Nisbet Moncy. Ms. Nisbet Moncy is a native of Willapa Bay in my district where she is a second generation oyster farmer. Working as chief organizing officer at her family's business Goose Point Oysters, she grew up in a family business farming oysters and working in the processing plant before attending college at the University of Hawaii at Hilo where she studied marine biology and Spanish. After college, she returned to her family business and has worked there for the past 15 years. Throughout her time working for Goose Point Oysters, she has worked with a variety of organizations such as serving on the board of the Pacific Coast Shellfish Growers Association and establishing the Willapa Bay Grays Harbor Ecosystem Collaborative. She is currently the president of the Willapa-Grays Harbor Growers Association with the mission to uphold the legacy of environmental stewardship and water quality through sustainable shellfish farming. Thank you, Ms. Nisbet Moncy for taking the time out of your schedule and traveling all the way to D.C. to testify today. We are truly honored to have somebody that really works for a living and represents their community in the best ways. Thank you so much. Chairman HUNT. Thank you for being here. Thank you, ma'am. Before recognizing the witnesses I would like to remind them that their oral testimony is restricted to 5 minutes in length. If you see the light turn red in front of you it means your 5 minutes have concluded and you should wrap up your testimony. I now recognize Mr. Minarovic for his 5 minute opening remarks. STATEMENTS OF MIKE MINAROVIC, CHIEF EXECUTIVE OFFICER, ARENA ENERGY, LLC; PAUL DANOS, CHAIRMAN OF THE BOARD, OWNER & CHIEF EXECUTIVE OFFICER, DANOS, LLC; ALEX EPSTEIN, PRESIDENT AND FOUNDER, CETER FOR INDUSTRIAL PROGRESS; KATHLEEN NISBET MONCY, CHIEF OPERATING OFFICER, GOOSE POINT OYSTER STATEMENT OF MIKE MINAROVIC, CHIEF EXECUTIVE OFFICER, ARENA ENERGY, LLC Mr. MINAROVIC. Thank you, Chairman Hunt, and Ranking Member Gluesenkamp Perez, for the opportunity to testify this morning. My name is Mike Minarovic, CEO of Arena Energy. We are an offshore exploration production company focused on the Gulf of Mexico, one of the most active drillers in the Gulf of Mexico. Over the past 24 years, as Chairman Hunt mentioned, we have invested $7 billion in the Gulf and paid the federal government over $1.4 billion in royalties. Last year alone we paid the federal government $230 million in combined royalties and corporate taxes. I also speak to you today on behalf of the Gulf Energy Alliance. It is a coalition of independent Gulf producers. Although we are not household names, independents are the backbone of the offshore industry, producing 35 percent of the oil and natural gas from this basin. I am here to discuss a new regulation recently proposed by the Department of Interior. This hearing is the appropriate place to discuss this issue as the Bureau of Ocean Energy Management, also known as BOEM, stated that 76 percent of the businesses operating offshore are defined as small businesses. This totals 407 businesses according to BOEM, and this rule poses an existential threat to those companies. Also, the SBA Office of Advocacy submitted a very strong letter denouncing BOEM's proposed rule. BOEM repeatedly states that the goal of this new rule is the protection of the American taxpayers from exposure to financial loss associated with offshore decommissioning. We firmly believe that it is the primary responsibility of the current operators to abandon their platforms and wells and that taxpayers should never be responsible for abandonment obligations. Arena and GEA are willing to work with BOEM to find a solution to achieve that goal but this rule as currently drafted is a massive overreach to a limited problem. It is devastating for small businesses and it is completely unworkable in its current form. BOEM states that the cases where taxpayers have actually paid costs for decommissioning are rare and that since 2009, more than 30 corporate bankruptcies have occurred involving offshore oil and gas leases with unbonded decommissioning liability is $7.5 billion. Those are big numbers. So how much has been paid by the American taxpayer for their abandonment obligations in the Gulf? Well, that was not addressed in the rule. But in July of 2023, BOEM communicated to the House Subcommittee on Energy and Mineral Resources that U.S. taxpayers have incurred obligations totaling $58 million net of bonds. Fifty-eight million dollar total after more than 30 recent bankruptcies. Again, the American taxpayers should never pay for offshore abandonment obligations. But to put this in perspective, in the last 20 years, offshore oil and gas production has generated $124 billion in royalty and leased bonuses for the U.S. Treasury, $6 billion a year, $500 million a month on average. And how has the taxpayer been protected? By law, by regulation, and by practice. All current and previous owners stand in front of the taxpayer and remain collectively responsible for decommissioning obligations. Selling a property in no way relieves the previous owner of its continuing decommissioning obligations. To address the $58 million in taxpayer exposure BOEM now seeks an additional $9.2 billion in new bonding which would cost small businesses in the Gulf $5.7 billion over the next 20 years. Those are BOEM's own numbers. We feel they are much higher than that. That money could be used to invest in projects and actually decommission these platforms and wells. Overkill barely begins to describe BOEM's solution. But you do not need to believe an oil and gas guy. The comment letters have been submitted. This is what the State of Louisiana said. ``The proposed rule falls within the unpleasant category of a solution in search of a problem.'' In reality, there is no problem within taxpayer funded decommissioning. There is certainly no problem that would justify eviscerating the oil and gas industry. The SBA Office of Advocacy said that BOEM's analysis intentionally ignores joint and several liability as the way that the taxpayers are protected from these unfunded liabilities. It presumes that small businesses impose a significant risk to the taxpayer despite the full backing of companies that BOEM has already exempted. As a result, small businesses are not only disproportionately harmed by the proposal, but only small businesses are harmed by the proposal. And the Surety and Fidelity Association of America, which is a trade organization of more than 400 companies that writes 98 percent of the surety and fidelity bonds in the United States and are the group that BOEM is looking to to solve this problem, what do they say about it? They fear that the proposed regulations might have unforeseen and possible negative consequences leading to an uptick in bankruptcies among small independent operators ultimately worsening unfunded decommissioning liabilities. Such financial failures will have cascading negative impacts that undermine BOEM's stated purpose for increasing access to these bonds and alleviating the burden on the taxpayer. Given the increased risk in the market created by recent bankruptcy rulings, the proposed regulations could have an even stronger, chilling effect on the surety industry's appetite to participate. As is, players are already exiting the marketplace, further exacerbating capacity concerns. This rule is not workable. The group they are looking to for a solution says it will not work. Additionally, CAC Specialty, which is a surety bonding brokerage firm said, ``Like a Greek tragedy, the BOEM's actions could expediate the outcomes that it wished to avoid.'' And once again the State of Louisiana said, it is Louisiana's view that supplemental bonding is unnecessary. As long as a credit-worthy party exists in the chain of title there exists no meaningful decommissioning burden on the federal government. The solution resides in the BOEM's own analysis. The proposed rule states that if BOEM were to take into account the financial capacity of the predecessor lessees, the financial burden on small companies would be substantially reduced compared to that resulting from the proposed rule. And this would mitigate the impact of the proposed rule on small businesses. We remain optimistic that we can work together to create a sensible solution that truly protects the taxpayer and maintains a strong and viable small business community along the Gulf Coast. Thank you. Chairman HUNT. Thank you, Mr. Minarovic. I now recognize Mr. Danos for his 5 minutes. Thank you, sir. STATEMENT OF PAUL DANOS, CHAIRMAN OF THE BOARD, OWNER AND CHIEF EXECUTIVE OFFICER, DANOS LLC, TESTIFYING ON BEHALF OF NATIONAL OCEAN INDUSTRIES ASSOCIATION Mr. DANOS. Thank you, Chairman Hunt, Ranking Member Gluesenkamp Perez, and Members of the Subcommittee. Thank you for having me here today to testify. My name is Paul Danos. I am president and CEO of Danos, LLC. We are a 76-year-old family business headquartered in south Louisiana. I am also the Chair of the National Ocean Industries Association, which for more than 50 years has represented the all segments of the offshore industry, including oil and gas, offshore wind, offshore minerals, and offshore carbon sequestration. So in 1947, my grandfather started our company. He had one partner. So there were two of them. That is definitely a small business. And most of the work happened at my grandmother's kitchen table and a boat offshore. They sort of took turns between the table and the boat offshore. And we have done a pretty good job of preserving history. We put a book out kind of capturing some of our history last year on the 75th year anniversary. And there are some great stories about why the founders of our company started this business. And it was certainly like many entrepreneurs they wanted to better themselves. They had an opportunity to do that. But also for their extended family and their community. And that is the fabric of our economy and so many small businesses. People who take a risk. My grandfather borrowed $2,000 from his sister, bought a boat, and got started. And took that risk and provide jobs to people in an industry that provides just an amazingly valuable service, the innovation and quality of life that we enjoy because of the affordable and reliable energy that comes from oil and gas woven into that fabric of our small business and so many others. So today I am here, our footprint has grown in our company. I am representing my family and certainly our employees for our business but the employees for our industry which total about 370,000 direct and indirect employees for the offshore oil and gas. So I bring a message from the employees. I spend time at crew changes and offshore locations, some of our land locations talking to our folks. And kind of two things that I would like to convey on behalf of our people and our industry. First, I hope you realize the massive impact that the regulation that comes out of Washington has on the people on the frontlines; the frontline heroes who are providing that reliable and affordable energy for our country. And I know, sometimes we can get disconnected and it is words on paper and it is legislation and it is regulatory acts, but at the end of the day we are talking about real people on the front lines who are making this work happen. So I represent them and just want to just again, you know, make sure that we understand the impact that happens on families, on people. And then the second thing is just when we talk about any policy that limits the production of oil and gas here in the U.S., I would say that is bad for our country. We have some of the lowest carbon intensity barrels in the world produced in the Gulf of Mexico. An ICF study that came out recently said that the average carbon intensity of barrels produced in the Gulf of Mexico are 46 percent lower than the average of the rest of the world in terms of carbon intensity. So when we restrict supply here in the Gulf--and we have to understand something about oil and gas demand and the way it works--it is a fungible resource. It is abundant around the world. So if we restrict supply, sort of like squeezing a balloon, that supply will show up somewhere else and it will be produced somewhere else. And most often it is going to be places like Venezuela, Iran, Russia. So first what we are going to do is we are going to send those barrels there. And those are higher carbon barrels. So it is a negative impact on the world's environment. We also send those jobs somewhere else; right? Back to those guys, those people, men and women on the front lines. When we restrict supply here in the U.S., we are sending those jobs, we are sending the royalties that Mr. Minarovic talked about, $6 billion in royalties every year. We are sending those to other counties. And then we are giving up our energy security at the same time. So the idea of moving barrels outside of our country, producing them elsewhere is bad policy. Limiting production here in the U.S. is bad policy. So what do we need? We need good regulations. Part of why the barrels that we produce in the U.S. are low carbon barrels is because of the way we produce. The regulations that we have worked together within industry and regulators over the decades that are common sense, that protect our environment, protect our people, protect our costs. I am from a place called Cut Off, Louisiana. It is a coastal south Louisiana community. I grew up fishing and enjoying the coast. Some of the best places to fish are around platforms and old platforms. I had my daughter and my wife in the Gulf of Mexico fishing on an old platform early this summer. We had a fantastic experience. So we can co-exist environmentally but we need common sense policy. We need a regulatory environment that promotes good, common sense regulations and policy to protect our environment but encourage domestic production. So I look forward to the conversation that we will have today and any questions that we have going forward. Thanks again. Chairman HUNT. Thank you, Mr. Danos. I now recognize Mr. Epstein for his 5 minutes for your opening remarks. Thank you, sir. STATEMENT OF ALEX EPSTEIN, PRESIDENT, CENTER FOR INDUSTRIAL PROGRESS Mr. EPSTEIN. Thank you. So my name is Alex Epstein. I am a philosopher and energy expert representing only myself, and everything I say today is my own independent conclusion, not influenced by anyone from any industry including the fossil fuel industry but which I am a very big admirer of that industry for reasons you will see. Because energy is a major input in every business, the lower cost and more reliable energy is, the lower cost and more reliable everything is. The higher cost and less reliable energy is, the higher cost and less reliable everything is, and the less efficient and less competitive U.S. businesses are, including small businesses. Today we are hearing how irrational policies are crippling one area of the energy business: offshore oil production, which provides almost one-sixth of our domestic oil production, production without which gasoline would be far more expensive. And I am from California where we are around $7 right now, and it would be far, far less secure. So it is really crucial to have this production. But today I would like to put the irrational attack on offshore drilling in its broader context, which is that it is just a tiny piece of today's rabidly irrational global anti- fossil fuel agenda, an agenda that poses as rational and scientific but is actually the exact opposite. So the dozens of discrete attacks of the Biden administration on the fossil fuel industry, they are not isolated incidents. They are all attempts to impose an agenda that says fossil fuel use must be essentially eliminated by the year 2050, which is now very, very close. At the beginning of his administration, President Biden announced a U.S. ``whole of government'' approach to climate change, which in practice means an overarching commitment to rapidly eliminate fossil fuels. Every agency was told figure out new ways to attack fossil fuels. And that is what they have done. The Biden administration is systematically committed to attacking fossil fuels on four fronts. So the first front of attack is fossil fuel investment. Fossil fuel investments are long-term commitments that require confidence in a payoff. Our government, often colluding with activists, incessantly discourages fossil fuel investments, directly and by threatening the industry's future, like running on ``I guarantee you we are going to end fossil fuel'' and then being elected president. The federal government has been a major driver of ESG anti-fossil fuel climate policies with regulators pressuring financial institutions to declare their commitment to getting off fossil fuels. The SEC's recent ``climate disclosure rules'' so called are taking the damage to the next level. Now, front two of the attack is on fossil fuel production are common. So punishing restrictions and onerous taxes specifically on fossil fuel production are common across developed countries, unfortunately. And these suppress supply from the freest nations on the globe. And unfortunately, we are leading this right now. One of the many punishments President Biden has inflicted on the supposedly preferred fossil fuel industry, which the opposite is true, was his early moratorium on issuing oil and gas leases on federal lands. And the Biden administration continues to delay and decline holding lease sales. Now, the third front of the attack on fossil fuels is fossil fuel transport. One of the most effective ways of punishing the fossil fuel industry has been attacking critical transport infrastructure, including pipelines and export/import facilities with delays, regulations, and lawsuits. Now, we all know about Keystone XL, which has been hugely destructive, but perhaps the most destructive way of singling out fossil fuel transport for punishment has been killing natural gas pipelines. We have a virtually limitless supply of natural gas in this country, particularly in Appalachia, and we have an incredible ability to ramp up production quickly. But we are blocking pipeline after pipeline. Now, the final front of the attack on fossil fuels is punishing fossil fuel use. So our government's ``whole of government attack'' on fossil fuels seeks out every way it can to punish fossil fuel use. Perhaps the most destructive and underdiscussed form of this is punishing reliable fossil fueled electricity generation and thereby destroying our grid. So as a Californian, I am well aware of the costs of punishing fossil fuel electricity generation. Gavin Newsom and others prematurely shutting down vital fossil fuel plants led to devastating statewide blackouts in 2020. And 5 days after pledging to all EVs by 2035, Newsom told us there was not enough power to charge or EVs. From his administration, ``avoid using major appliances and charging electric vehicles.'' Nationally, we are in an electricity crisis with reliable power plants shutting down far faster than they are being built. And the Biden EPA insanely plans to make things much worse with seven policies that gravely threaten 10 to 20 percent of our reliable capacity in the next 7 years. So every one of these hundreds of actions the Biden administration is taking in terms of its ``whole of government'' approach is harmful to American businesses, including small businesses who have to struggle with higher energy costs and lower reliability. Now, the final thing I want to address quickly is just the lie that solar and wind can rapidly replace fossil fuels. If this were true they would not need massive government preferences of their own and they would not need massive government punishments of fossil fuels. And if solar and wind could actually replace fossil fuels, China, which dominates the production of solar and wind components, would not be using coal to produce these components and they would not have 300 planned new coal plants--new coal plants--more than all we have in the United States right now to last over 40 years. So if you are thinking we are going to have more security with this stuff, we are not going to have much energy and it is all going to be dependent on China. So what I want to encourage everyone here to do, particularly small businesses and politicians, pro-freedom politicians, is use your powerful voices to advocate for liberating all forms of energy, including fossil fuels, not limited to fossil fuels, so that America and the world can be a better place. Thank you very much. Chairman HUNT. Thank you, Mr. Epstein. I now recognize Ms. Nisbet Moncy for her 5 minute opening remarks. Thank you for being here. STATEMENT OF KATHLEEN NISBET MONCY, CHIEF OPERATING OFFICER, GOOSE POINT OYSTERS Ms. NISBET MONCY. Thank you, Chairman Hunt, Ranking Member Gluesenkamp Perez, and Members of the Subcommittee for this opportunity to testify today. My name is Kathleen Nisbet Moncy. I am the COO of Goose Point Oysters. I am a second-generation shellfish farmer and a mother to five children. Our company is located in the heart of Willapa Bay, Washington, where we own 2,000 acres of tidelands. Willapa Bay is one of two coastal estuaries in Washington that produce over 25 percent of the nation's oysters. The shellfish industry in Willapa Bay and the surrounding areas generates a tremendous economic impact. As the largest private employer in Pacific County, local shellfish farmers in Pacific County and Grays Harbor are responsible for nearly 2,000 family-wage jobs, and contribute to over $102 million in economic impact. Shellfish farmers, while they are the largest private employer in our county, our tidelands are the backbone of our area. We are locally owned and our tidelands are passed down from generation to generation. We have a family farm that has been farming there for over 150 years. Shellfish farming in Washington State predates statehood. We are the backbone of our community in supporting local schools, providing employment and, participating in community programs. Shellfish farming is a way of life in our community. The ecosystem in which we farm is of upmost importance to us, as shellfish farmers we depend on clean water and a healthy habitat. A single submerged oyster will filter up to 7 gallons of water an hour, our responsibility is to protect that clean water. We are dedicated to managing the health of our ecosystem, and as a result are regarded as one of the healthiest working estuaries in the U.S. I would promote stricter regulations on offshore energy no matter what the company size is. Our oceans are extremely fragile environments, and shellfish farmers feel even the slightest changes in our ocean conditions. The most recent one we have been struggling with is ocean acidification. It came up in 2008, and according to NOAA, we are going to continue to see shifts in ocean acidification into the future. Some of the negative impacts of ocean acidification on farmers have been pH shifts, lack of calcium in the water, and harmful algal blooms. We must continue to fight for our waters and learn how to evolve with the changes instead of adding more complications with offshore energy. Along with more stringent regulations for offshore energy, there also must be adequate funds set aside for any disasters or even small leaks that would arise. The Gulf was not prepared for the oil spill it endured years ago and the shellfish industry is still impaired due to it. We should learn from the mistakes and ensure that they do not happen again. As an example we have been working with the State of Mississippi to assist them in creating hatchery systems so they can rebuild their reefs because the industry down there is still struggling today. We have sustainable farming mechanism in Willapa Bay and they are trying to mimic that down in the Gulf States. Knowing how to sustainably farm shellfish will provide a consistent food source for the future and water quality is a key part of that. An oil spill off of our coast would destroy our estuaries and the communities that are supported by them. Based on the way the waters flow, we get two full tidal fluctuations of water a day, anything that happens off of our coastline would enter into our estuaries and have a significant impact on shellfish, crab, eel grass, and other species that live there. Besides some of the local issues that would arise with offshore energy, our location does not have adequate services to respond to a spill. The Willapa Bay entrance and channels have not been properly managed for decades by the Department of Army Corps and would pose a danger for any type of response team. There is no positive scenario for our fragile ecosystems if there were to be any sort of spill off of our coastline. Along with the impacts to shellfish in our coastal estuaries, we must also consider the Dungeness crab and salmon fishing communities. Shellfish tidelands are the rearing habitat for Dungeness crab. Dungeness crab fishing grounds are directly located off the Washington and Oregon Coast. Access to these fishing grounds is currently limited and further limitations would risk the livelihood of the fleet and the communities that process and sell the seafood. The cumulative impacts to the fishing grounds would make it near impossible for future generations to be successful in the fishing industry. We should be focused on increasing seafood production in the U.S. instead of polluting the very waters that provide it. In conclusion, I would not support reduced regulations to offshore energy at the risk of the livelihoods of our rural communities. Shellfish is a sustainable seafood that has a huge benefit by providing many ecosystem services, including purifying the water, reducing carbon and many other essential services in the areas we farm. Our fishing communities must be able to retain the available fishing grounds for the success of their industry so we must stand up and protect the waters from contamination and be responsible stewards of the ecosystems in which we work in. Thank you for your time. Chairman HUNT. Thank you, so much for being here. And again, I want to thank the witnesses. We now move to the Member questions for the under 5 minute rule. I recognize myself for 5 minutes. The first question is for you, Mr. Minarovic. The Financial Assurance Rule is said to be put in place to protect the taxpayers. Is there currently a real risk to the taxpayer to be held accountable for these costs? And if so, what would you propose as a solution? Mr. MINAROVIC. Thank you, Chairman Hunt. You know, I think this is really important. And I have got a graphic that I think is in front of each of you that helps explain this complicated issue. As Ranking Member Gluesenkamp Perez mentioned, the BOEM estimates that current abandonment obligations are from the Rule $42.9 billion. I think her estimate was in the high 30s from a 2015 study. What you need to understand in order to understand the exposure to the taxpayer is it is broken up into these three buckets here. The dark green is investment grade companies. The government is exempting that. Their numbers suggest that is $22.6 billion of the abandonment. The bottom number in red is noninvestment grade companies, both current and prior owners. No investment grade company in the chain of title totals $750 million. That is where we really need to focus our efforts here, and the GEA and Arena Energy support additional bonding associated with properties with no investment grade companies in the chain of title. The thing that is really critical is the box in between, $19.5 billion. This is where a previous owner has an investment grade rating. And thing is that the government has stated that under this proposed rule the government retains the authority to pursue predecessor lessees for the performance of decommissioning obligation. When a company sells an asset they remain in the chain of title. That is what protects the taxpayer. Any company that owns or previously owned leases is responsible. If Arena sold its assets to another company, we would stay in the chain of title and be responsible for that abandonment. That is what protects the taxpayer. So none of these dark green boxes or light green boxes should be considered for bonding. The only risk to the taxpayer is this red box and that is what has really resulted in such a small loss relative to the exposure in the Gulf. Chairman HUNT. Thank you, sir. This question is for you, Mr. Danos. America energy companies are leaders in innovation and produce the cleanest oil and gas in the entire world. And I know. I have been on these rigs and I have seen them actually personally. How would the rule on the Rice's whale and others like it affect the industry's ability to operate at its full capacity and reach its full potential? Mr. DANOS. Thank you, Chairman. It is a great question. Any new regulation needs to make sense. It needs to be balanced across all stakeholders and in terms of what it is trying to do. And it needs to be effective. And I think the Rice's whale, for instance, a couple of notes about that. There is very little data that exists that we have the Rice's whale in the area that was originally pulled out of the last lease sale. So the balance, the effective components of that regulation just really did not add up. And one thing related to marine operations that I think is really important to point out when we think about balancing the different stakeholders, oftentimes in the Gulf of Mexico what we do is we operate vessels at night so that we can do the higher risk work that we do on the platforms during the day. So with the Rice's whale regulation prohibiting vessels from moving at night what you are doing is you are flipping that on its head. And the unintended consequence of that is that the people who work for my company and other small businesses and large businesses in the Gulf of Mexico, we are increasing the risk to those people with the work that they are doing because they would have to move more of that work at night as opposed to doing it during the daylight hours. And there is plenty of work that goes on at night but again, we are increasing that exposure. So that is something that needs to be thoroughly examined and thought out as we proceed. Chairman HUNT. Thank you so much. Mr. Epstein, my last question is for you. What do you think of Biden's energy policy, and is it good for the country? You are allowed to take a little bit more time here if you would like. I am not going to need 45 seconds. Mr. EPSTEIN. I addressed a lot of it. I mean, the thing people need to get is the danger of this whole of government approach because it really has a terrorizing effect on industry because industry knows that it is not just any given individual restriction that is a problem; it is that the government is literally trying to shut them down. You see this happening with coal right now where the government is trying to shut down all of our coal plants which are preventing us from the abyss right now. We have catastrophic reliability problems and now we have Mike Bloomberg who I offered to publicly debate so far has not stood up yet. Jordan Peterson offered to host. So Mike, let's do it. But he is spending $500 million on top of billions of other dollars to shut down our coal plants and he is not willing to publicly defend it. One other thing. Since the UAW is in the news right now, how are you going to get higher wages if you have Joe Biden pressuring companies to sell vehicles where they are losing billions of dollars? Companies do not give higher wages when they are losing billions of dollars due to forced policies by the government. So those are just two specific examples but the ``whole of government'' approach is the overall disaster. Chairman HUNT. Thank you very much. I now recognize the Ranking Member for 5 minutes for questions. Thank you, ma'am. Ms. GLUESENKAMP PEREZ. Ms. Nisbet Moncy, you highlighted in your testimony the vital role oysters play in filtering water in Willapa Bay. Can you explain the fragility in the system and the outcome to even minor changes in water quality? Ms. NISBET MONCY. Yes, I would love to do so. Shellfish are filter feeders and as a result are a product of their environment which make them very susceptible to environmental changes. Most recently, due to climate change and ocean acidification, we are seeing an increase in harmful algal blooms or HABs in our estuaries which are having a direct impact on the productivity of our shellfish beds. We are noticing that after a harmful algal bloom event the oysters and other shellfish will perish within 2 to 6 weeks. Therefore if we have pollution coming into our water ways, our shellfish, eelgrass, Dungeness crab, salmon and other species will be negatively impacted. For many decades we have been the continued stewards of the estuaries collaborating with upland timber companies, private home owners and mills to mitigate impacts and protect our clean water. Ms. GLUESENKAMP PEREZ. So any minor spill would have a negative impact? Ms. NISBET MONCY. Any minor spill would have a significant negative impact. Ms. GLUESENKAMP PEREZ. So fishing off the coast is an important implication of our economy alongside oyster fishing in the bay. Could you explain any form of offshore energy production that Washington endangers commercial fishing industry? Ms. NISBET MONCY. Currently, there is a limited amount of area that our commercial fishermen can fish, with the introduction of offshore energy you reduce the areas even further. So whether it is a platform, wind energy, or even cables underground, you are disrupting the Dungeness fishing grounds. Any infrastructure impacts fishing off our coastline. The fisheries are very strictly managed and cannot withstand any further reduction in the available area to fish. Ms. GLUESENKAMP PEREZ. Yeah. We were talking in the elevator on the way here and we have talked out in the bay. People from more urban communities or other parts, they assume nothing is going on. There is this arrogance of like there is nothing going on out there. Like, we will just like move it somewhere where it is not in my view shed. Or it is somebody else's problem. And I think this loss of a sense of agency and determination in our rural communities, what happens here, how we prefer to make our livelihoods. So I am deeply grateful for your advocacy of a way of life that I think is critical to our culture as Americans and as Washingtonians. So farming oysters is one of the most sustainable sources of seafood. Not only purifying the water but also absorbing and sequestering carbon emissions. Can you talk about the importance of sustainability broadly? Because this is not just about dollars and cents but to your business and to your philosophy as a business owner? Ms. NISBET MONCY. Yes, for us it is our way of life. We have always had the mentality that if you take care of the estuaries in which you work, that they will take care of you. We sustainably farm our products. We have hatcheries that produce our own seed which we plant and cultivate to be harvested. We are considered a sustainable seafood not a wild fishery. Our perspective is not just that of a shellfish farmer but as a community member with everyone else who works in and around the estuary, if we all collaborate our ecosystems will flourish. We want to retain the rights to be able to continue what we are doing for generations to come. While it has been very difficult with climate change and OA (ocean acidification), we continue to figure out how to evolve. We are huge proponents of finding solutions and must have a voice at the table when rules are being made, especially here in DC. I recognize, I am a small fish in a big pond but the pond has ripple effects and those can cripple our industry and the communities we support. Making sure that we are being smart with our regulations and understanding the impacts they will have down the road is key. Ms. GLUESENKAMP PEREZ. It feels like a lot of industries you can sort of take the money and run. But it feels like, what I really value about our shellfish growers is when you talk about the generational wealth, you are talking about the health of the estuary. That is where the money is. That is where the culture and the community is is in the actual rootedness and health of your ecosystem. So I cannot say how grateful I am to all the smart, hardworking people who have chosen to make and continue to make their family livelihoods in these rural communities. And thank you. Sincerely, thank you for taking time away from your family and your business to be here today. Ms. NISBET MONCY. Thank you. Chairman HUNT. Thank you, Ranking Member. I now recognize Representative Meuser from the great state of Pennsylvania for 5 minutes. Mr. MEUSER. Thanks. Thank you, Chairman, very much. Thank you very much to our witnesses for your work, your business, and for taking the trip being here with us. So Mr. Minarovic--how do we pronounce that? Mr. MINAROVIC. Minarovic. Mr. MEUSER. Minarovic, thank you. You have got a business. You have got perhaps family members and you have a small business. And that business is important to you? Mr. MINAROVIC. Yes, sir. Mr. MEUSER. Okay. So we have small businesses here. Some in the energy sector. Some in other industries. I do not think it is up to this Committee to decide who is more important. You know, that is just me. So this BOEM rule, when it perhaps goes into effect, you called it existential to you and to, you know, I am just reading here, the billions of dollars and other small businesses that will be wiped out. Existential means wiped out. Mr. MINAROVIC. Absolutely. Mr. MEUSER. Okay. You are a highly regulated business obviously; right? Mr. MINAROVIC. Absolutely. Mr. MEUSER. Yeah. And have there been any problems lately? I mean, I come from the Marcellus shale region, a new part of my district. You can go to a rig site, the level of regulation which is great. That is how it should be in the United States. And even outdoor rig sites, it is like walking into a clean room. Mr. MINAROVIC. Right. Mr. MEUSER. It is perfect; right? There have not been issues. So, and that is a good thing. There should not be. And so that is the way it should be. So in your business, I expect, not abiding by some of the pollutant control requirements which I am all for because this is the United States. We want to do things better than every other country. But if you were to cross those regulations that would also be existential to your business, would it not? Mr. MINAROVIC. Absolutely. Yes, sir. Mr. MEUSER. Okay. so this BOEM, we will work on this because once again these sort of government actions hurt those that supposedly it is trying to help. By increasing the level of bonds that you need to secure, you expressed it in your opening testimony, but is it completely impossible under the current rules? Mr. MINAROVIC. Yes, sir. Let me respond to your first statement. It is absolutely the case that we are a heavily regulated industry. The Gulf of Mexico has been heavily regulated for 75 years. The federal waters of the Gulf of Mexico. And there is no better place to get our oil than the Gulf of Mexico. Mr. MEUSER. Not Venezuela? Not Russia? Mr. MINAROVIC. It is going to be a lot cleaner coming from the Gulf of Mexico. Mr. MEUSER. Do you think the Middle East, do you think they have got the same pollutant controls as the United States of America? Mr. MINAROVIC. Lets get our barrels from the place where the states that surround it--Mississippi, Alabama, Texas, and Louisiana support it. Lets get our barrels from the place that the federal government gets a royalty check. Mr. MEUSER. How about Venezuela? Do you think Venezuela's standards---- Mr. MINAROVIC. Absolutely not. Mr. MEUSER. We live in a round world; right? Mr. MINAROVIC. Absolutely. Mr. MEUSER. So those pollutants cause problems everywhere? Mr. MINAROVIC. Ranking Member Gluesenkamp Perez said that, you know, people do not realize if you do not do it here it is going to be done somewhere else. Things move around. If we are going to get our oil from somewhere--Iran, Venezuela, Russia, Iraq---- Mr. MEUSER. And what about the costs associated with all this? By losing our energy independence, forget about energy dominance. Mr. MINAROVIC. Yes, sir. Mr. MEUSER. Okay, with gasoline 5 bucks a gallon, $4 a gallon, $7 a gallon out in Pennsylvania making us highly vulnerable to world events. I mean, man, we should have learned that when you and I were kids in the `70s. Right? World events. I mean, Ukraine, you name is. OPEC decides to cut back, leaves us, completely wrecks our economy, causes inflation. Mr. MINAROVIC. Absolutely. Mr. MEUSER. Or partially causes inflation. That and wildly excessive spending. Hurts small business. Hurts the oyster business. Right? As your costs go way up you just cannot pass all that along. So, yes. So I would say we are in a devolving initiative. What we should be focused on is energy dominance with the highest levels of pollutant controls. You could probably handle that. Right? Mr. MINAROVIC. Absolutely. Mr. MEUSER. I mean, as opposed to having to follow this BOEM rule? Mr. MINAROVIC. Absolutely. We need to do that. I mean, oil prices are being driven by supply and demand imbalances. Anything we do to restrict domestic production is going to have an impact on the world oil price ultimately. And that is going to be a regressive tax on the lower income people of this country. We need to move to alternatives. We need to move to all the above. The best of the above is the right answer. And we need to pursue everything. But we cannot limit fossil fuels. We are going to impair our country and our economy. Mr. MEUSER. We are going to go to work for you. Mr. Danos and then Mr. Epstein and then, I am sorry, Ms.--I should know--Ms. Moncy. I am running out of time but I was just going to ask what came out of Washington that harmed you the most and what has come out of Washington that has helped you the most? And maybe we could follow up with that afterwards if we have a second round. I yield back, Mr. Chairman. Chairman HUNT. Thank you so much. I now recognize Representative Golden from Maine for 5 minutes. Mr. GOLDEN. Thank you. Ms. Nisbet Moncy, I know most of the hearing is focused on oil and gas and I wanted to talk a little bit about BOEM and offshore wind development. As an oyster farmer specifically, do you have any concerns about offshore wind development and how could it impact local aquaculture operations? Ms. NISBET MONCY. Yes, I do. The proposals that they are working on in Oregon and off the Washington coast, we are not proponents of those. Our current cost of power that we have from hydro in the northwest is about 4 cents per kilowatt-hour that goes into our PUDs. The cost for wind would be about a dollar. You are looking at a significant increase across the board for power to those of us who live in the Northwest, and it has been shown that there is zero net gain of wind energy off of our coastline. By the time you install it, run it, and decommission it, there is really no added benefit for our region to have offshore power based on the cost of all those components. Our PUDs provide power to other areas such as California and profit significantly. As for the fishing grounds, you are looking at limiting the area available to fish in our region. The infrastructure required for the windmills such as cables, diesel/oil tanks and increased boat traffic all elevate the risk to our fishing grounds and estuaries. Mr. GOLDEN. Do you have any concerns that it could also be potentially harmful to the ecosystem? Ms. NISBET MONCY. Any sort of offshore spill without a proper response would have a negative impact on our communities. Mr. GOLDEN. Offshore wind that is. Ms. NISBET MONCY. Offshore windmills still have diesel on them and must be serviced so you will increase the boat traffic in our area. There have been several ships that have run aground on the Columbia River bar so if you increase boat traffic to be more than what it currently is, you increase the risk of a spill. We currently do not have an adequate response team to the Willapa Bay entrance if there were to be any sort of spill. Mr. GOLDEN. For aquaculture communities and also fisheries in your region, do you feel like BOEM has been a good partner in hearing your concerns? Is there any evidence that they are working to address those concerns? Ms. NISBET MONCY. In our region specifically there has not been a direct nexus. No. Down in southern Oregon with the Crab Fisherman Association there has been a nexus with BOEM. Mr. GOLDEN. Okay. Thank you. That is helpful. I guess I will try, Mr. Epstein, but anyone else is welcome to try and answer this. And this comes from a genuine place. I am not contesting that some of the policies you see coming out of the White House are concerning on oil and gas production here domestically. You see some good things like approval of Willow up in Alaska and then at the same time you see the cancellation of permits for leases up in Alaska. Sometimes going in the right direction; other times, not. So at the same time I have seen no shortage of reports that oil and gas production in the United States is up rather than down currently compared to let's say 2020. Is that true or is that not true? Mr. EPSTEIN. I mean, 2020 is very misleading selected time. Mr. GOLDEN. Sure. I said general. Mr. EPSTEIN. So in general---- Mr. GOLDEN. You pick your years. Is oil/gas production in the United States up or down? Mr. EPSTEIN. It is lower. Well, it just depends on your starting date but it is up lower than it should be if we were free. So all of these things are, you have to look at it, what is the opportunity cost. Mr. GOLDEN. Sure. I agree. Mr. EPSTEIN. So in this case we have a global anti-fossil fuel movement that is trying to bring us to net zero, which essentially means the elimination of fossil fuel. Mr. GOLDEN. Have we ever produced more oil and gas in the United States than we are today? Mr. EPSTEIN. I am not exactly sure year to year but the point is if you look at what has happened, by slowing the growth of oil and gas in a world that needs far more energy, we have caused a global energy crisis. And yet this administration and this global movement is trying to eliminate it. So the net zero movement has not even succeeded at reducing fossil fuels. They have only succeeded at slowing the growth. And already, we have this huge vulnerability to the Russia-Ukraine situation. Already, we have these cost increases. So that should be a wakeup call that this whole agenda is ill conceived and if you want to address emissions you should instead do so with energy freedom. Mr. GOLDEN. We are running out of time. I just want to be clear just that--I am on your side, buddy. Like I want all of the above, I want America to be an energy---- Mr. EPSTEIN. So will you condemn the Biden energy agenda? Mr. GOLDEN. I just told you--wow, you are asking me questions now. It is like you came here with an agenda yourself, my friend. Mr. EPSTEIN. I am just a curious guy. Mr. GOLDEN. What I would say is that I think that this administration is governing over an increase in oil and gas production while simultaneously seemingly unwilling to celebrate that which they should be celebrating. And I would agree with you that some of their policies as I stated earlier as an example up in Alaska are the wrong calls. And I would condemn that. Mr. EPSTEIN. Thank you. Mr. GOLDEN. Thank you. Chairman HUNT. Thank you so much. I now recognize Representative Stauber from Minnesota for 5 minutes. Thank you, sir. Mr. STAUBER. Thank you very much for holding this hearing. You know, since taking office, President Biden has sought to shut down the oil and gas industry at every turn putting our economy and energy security at risk. The week President Biden took office, gas on average was $1.87 a gallon in my home district in Minnesota. Today, it is nearing $4 a gallon and President Biden did that. Rather than develop our abundant resources here safely where we have the greatest environmental labor standards, this administration would rather beg OPEC, Saudi Arabia, and others for more oil. This administration's model on energy and mining is clear. Anywhere but America, any worker but American. The Biden administration has completely neglected its duty to support oil and gas development and has failed to properly carry out an offshore leasing plan. Even to the point that my democratic colleagues had to force the Biden administration to do so in the Inflation Reduction Act last year. And still, this administration is failing to follow along. Rather than offering a robust lease sale, this administration tried to subvert the law and pull millions of acres from the proposal for lease sale 261 due to unfounded concerns over the Rice's whale. Luckily, the Western District of Louisiana has intervened in which Judge James Cain stated was ``a weaponization of the Endangered Species Act.'' After litigation and delay form this administration and the environmental activists, they teamed up with the courts and have directed the lease sale to move forward without the administration's ridiculous conditions by early November. I was proud to join Chairman Hunt and several of my republican colleagues in filing an Amicus brief in this case. Mr. Chair, I ask unanimous consent to enter into the record a copy of this brief, as well as a copy of the District Judge Cain's September 21 order. Chairman HUNT. Without objection. Mr. STAUBER. Mr. Minarovic, can you share with the Committee the history of transactions for offshore properties and how smaller producers like Arena Energy came to own properties they are developing in the Gulf of Mexico today? Mr. MINAROVIC. Thank you, sir. I appreciate the question. It is very important to this rule. As major oil companies develop this basin in the `60s, `70s, and `80s, they installed thousands of platforms, 7,000 in total, drilled 50,000 wells in the Gulf of Mexico. At some point those assets deplete to a point that they are not important to those big companies. And they have a choice to produce them and develop them or to abandon themselves. Most of them chose to sell them in the marketplace. When a company decides to sell, it knows that it stays in the chain of title. There is no question about that, so it is well-established in regs and law and in practice. No one is fighting that by the companies that sold. And so when they do that, they sell to a private company like ours or a small public company, they put in a certain amount of protection, some bonding, a total of about $3 billion of additional private bonds are in place. For instance, Arena has about 600 million of abandonment obligations and we have 400 million of private bonds. The rule that BOEM is proposing does not even account for that 400 million of bonds. And then additionally, the reason those bonds are put in place is because the seller, the bigger company, recognizes that they have an ongoing chain of title liability for abandoning those assets. So there is a negotiation that takes place. The selling company decides do they want more insurance? Do they want more purchase price? Because the more insurance they want, the lower the purchase price. It goes back and forth. Ultimately, they decide what risk they want to take. The first thing they need to do is make sure they have a good buyer that is going to carry through on their obligations but that is how it happens. Mr. STAUBER. So what is a workable solution in your eyes? One that protects the American taxpayers from decommissioning liabilities without putting an undue burden on offshore operators? What is your---- Mr. MINAROVIC. Well, it really falls out of what I just said on these transactions. And it goes back to that red box that I presented earlier. These are the properties that are really the taxpayer risk. We need to address those. We need to bond those. We need to make sure that the government is protected. We should not have taxpayer losses associated with those assets. The SBA recognized this. And again, this is a Small Business Subcommittee meeting and SBA said the BOEM should narrowly tailor this rule to cover only those liabilities for which there is no predecessor leaseholders that BOEM considers creditworthy. That is it. That fixes the problem right there. Mr. STAUBER. Thank you. Mr. Danos, real quick. If lease sale 261 moved forward as the Biden administration and the environmental activists had hoped, what kind of impact would the conditions around the Rice's whale have on oil and gas companies' ability to operate in the Gulf of Mexico? Mr. DANOS. It would be significant. There is a significant portion of the lease sale that was carved out. And again, the question is we are making policy related to one sighting of one whale. So let me say this about the Rice's whale. The oil and gas industry is in favor of protecting the Rice's whale. There is a known habitat area for the Rice's whale that has protection and we should maintain that. But the area that we are carving our or it is being carved out by the administration is an area where there is not good science that the whale is there and it is a huge impact. Mr. STAUBER. Thank you very much, Mr. Chairman. My time is up and I yield. Chairman HUNT. Thank you so much. I now recognize Chairman Williams from Texas for 5 minutes. Mr. WILLIAMS. Thank you, Mr. Chair. And I want to thank again the witnesses for being here today. Full disclosure, I am a car dealer in Texas so I guess I can say I deal with oil and gas quite a bit. The Gulf of Mexico produces the cleanest barrels of oil on the planet. Instead of acknowledging that, this administration, the Biden administration is more interested in virtual signaling and has placed burdensome regulations and attempted to restrict the sale of oil and gas leases in the Gulf. Mr. Minarovic, you highlight the irony that the compliance costs, the administration rules, and the BOEM rule in particular has required your company's capital to be used for compliance as opposed to decommissioning efforts. The question is, if regulation and compliance costs were eliminated could you elaborate on how your company would use this additional capital? Because we see this government regulating, regulating, regulating, taking capital away from what we can do to create jobs. So could you talk about that? Mr. MINAROVIC. Yes, sir. Thank you, Chairman Williams. It is an important issue. Obviously, every extra dollar that we spend on regulations--and there needs to be a level of regulations--but every extra dollar we spend on that is a dollar that we cannot invest in these properties, continue their life, and also, investment that we can make in decommissioning of these assets over time. And some of the issues that we got into over the last decade with 30 bankruptcies related to overregulation of those companies and their inability to perform in that environment. Mr. WILLIAMS. One of the things that my colleague, Mr. Stauber likes to talk about is the Biden administration has come in and brought $75 billion worth of regulations. This is a real problem. This administration's attempts to rapidly do away with and punish the use of fossil fuel is harming Americans. Mr. Epstein, you highlight the anti-fossil fuel agenda-- reliable fossil fuels in states like California which is often under threat of rolling blackouts. So should the federal government adopt these policies at large? And what do you think will happen to the U.S. energy supply and our electric grid? Mr. EPSTEIN. So should they adopt California energy policies? Oh, man. It is rough. I mean, you saw part of what happened in 2020 was we saw that other neighboring states were starting to import our policies but they did not realize we have a parasitical policy. So we shut down reliable power plants and then we depend on our neighbors. But the neighbors said, hey, we want to look good and we are going to do that, too. But then we had a heat wave, the wind died down, of course, and then we did not have enough power from our neighbors. So, no, it is a parasitical thing. And in general, anyone who claims to be net zero or anything like that is lying. And these are not things that can scale at all. So we need to recognize that fossil fuels are essential for decades to come, and if you want alternatives you need to do things like liberate nuclear. Liberate mining. I think Representative Stauber know, I mean, look at the Biden administration saying, hey, we have got an amazing mining property in Minnesota. Let's ban mining on that for 20 years and become even more dependent on China for crucial minerals. So we need energy freedom, not net zero. Mr. WILLIAMS. All right. The Biden administration has prioritized regulations that hurt the United States energy security. That is what we are talking about. Mr. Danos, in your testimony you highlight that the environmental stewardship and energy process are not mutually exclusive. So can you quickly elaborate on how you believe the Biden administration has missed the nark on this balancing act? Mr. DANOS. Yes. Thank you, Mr. Williams. Again, we have a long history in the Gulf of Mexico of regulations that are common sense and support good production of affordable, low cost energy, reliable energy. And we have worked that way together for a long time. And today what we are seeing is the president getting up and saying that he wants to end production on federal lands; right? And this maybe goes back to why production is higher today, and Mr. Golden, it was a great question. Much of the increase in production is coming from state lands. A lot of that is coming from the Permian Basis in Texas. So those are not federal lands. And a lot of these investment decisions were years back. Right? So what we need going forward is predictability and reliability so that those multimillion, even billion dollar investments that will create a higher production in the future and we have that certainty going forward and the regulatory environment is a big part of that. Mr. WILLIAMS. In the time I have got left, Ms. Moncy, I am from Texas so I listened to your testimony. You have got quite an industry. Do you also in your industry run into the regulations, this massive amount of regulations the Biden administration is putting on Main Street America? I am in the car business. We see it in the oil industry. Do you see it, too, in your industry, the regulations? Ms. NISBET MONCY. We have seen regulations change in our industry as well. Yes. Mr. WILLIAMS. And it probably affects the cost of goods sold for you, too? Ms. NISBET MONCY. We do have impacts associated with that. Mr. WILLIAMS. Okay. Mr. Chairman, I yield my time back. Thank you. Chairman HUNT. Thank you so much. I think we are good here. We are not going to do another round if I am not mistaken. And I want to thank you all so much for being here. I want to say this, Ms. Moncy, thank you so much for being here. I have learned a lot about your industry. I actually had no idea. This is why I love this job. And I have been on Mr. Minarovic's rigs. I have spoken to you, sir. We have done interviews together in the past, and I would love to come see your operation as well to learn more about it and to see exactly how we can all coincide and live together. What is really important to us, and what is really important to me is, as you have heard from these gentlemen, it is an ``all hands on deck'' approach is what is necessary. We cannot restrict any electrons in the discussion. This is not up to the government to pick winners and losers. This is about supplying, not just the United States, not just Texas where I am from, not just California, but supplying the entire world with affordable, clean, and abundant energy from our country that does it better than anywhere else in the entire world. From somebody that spent 2 years in Saudi Arabia when I was deployed there, and they have an abundance of resources there, let me tell you. But I was also told that the Marcellus shale is actually known as the Saudi Arabia of natural gas. To put that in perspective, there is no such thing as an endless amount of fossil fuels but Saudi Arabia is pretty doggone close to it. And the fact that we are sitting on the Marcellus shale, part of it runs into New York, and we cannot drill for any of it is actually ridiculous. We as a country have got to get out of our own echo chamber and we forget sometimes and in this country we have champagne problems. I can tell you that China and India, Taylor Swift is pretty popular right now. Oh, Tay Tay. I feel sorry for Travis right now. But we do. And if you look at what is happening in China, India, and Russia, a lot of these countries of the Middle East, OPEC countries, Iran, they really do not care about the world's climate at all. I am a military guy. I have seen it. This country cares immensely. And while we should continue to lead from the front in this, we also have got to realize that we are the bridge. Oil and gas, natural gas, energy, we are the bridge and it is everything. I visited almost every single energy company in my district, and there are a lot of them. And I can tell you I have never heard a single executive say anything disparaging about renewable energy. I have heard nothing but actually I want to reinvest in it. Let's talk more about nuclear. Let's talk more about hydrogen. I have heard nothing but those things. And I can attest to that. It is genuine. It is real. It is not just corporate, big oil trying to spin off their ideas for world dominance because they really want to keep this going forward. These companies are actually literally investing in these renewable energy sources because I have seen their books. And I have seen what they are trying to actively do. I just want to make sure that we are smart about it, that we are savvy about it, and we do it in a way where I can continue to eat oysters because I love oysters. I had some last night and I am not going to stop eating them. And no, I do not want to ruin your business and your ecosystem for your small business. And also, sir, I want you to continue to strive to provide reliable and clean energy for our country. So with that said, thank you all so much for being here. Greatly appreciate it. I think at some point we will have you back. To me this is the most important issue that we are facing in our world today. And without objection, Members have 5 days to submit additional materials and written questions for the witnesses to the Chair which will be forwarded to the witness. I ask the witness to please respond promptly. If there is no further business, without objection the Committee is adjourned. And thank you so much. [Whereupon, at 11:18 a.m., the subcommittee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]