sure the land is being leased responsibly and that the development is being done responsibly? >> let me start by saying that in 2009, when secretary salazar and i came into our new positions, we inherited an oil gas program that was on the verge of collapse. close to 50% of the possibilities being offered for lease were being protested or litigated. that is unacceptable. literally hundreds of leases that have been awarded by the department of interior -- specifically the bureau of land management -- were tied up in protest. the millions of dollars we had create -- collected from oil and gas companies were placed in suspense accounts until those protests and litigation could be resolved. the rules that were in place to govern the oil and gas operations and ensure production verification of the oil and gas that were being extracted were over 20 years old. technology has advanced significantly in that time, but no one was paying attention to updating those rules. we had epa and federal agencies criticizing the analysis that was being reformed by the bureau of land management, primarily as it related to air quality documents. we have other public land stakeholders criticizing the leasing everywhere and anywhere mentality that was going on at the time. there were concerns about the environmental damage that was occurring as a result of not doing a very good job of looking at these plans before we committed those lands through leasing. we took it upon ourselves not to ignore those challenges or problems but to address them. one of the ways we have been able to address them is to ensure there is a better opportunity to look at these prior to committing them through leasing. the primary purpose of our leasing reform is to make sure that the lands that we are going to be leasing are the right ones and they have the greatest chance to be developed in a timely manner. >> did you say that 50% of the leases when you took over were being either litigated or protested? >> close to 50% of the parcels we were offering will be in protest against. at this point in time, it is around 35%. >> ok. my time is up. we will save some for the next round. thank you very much, mr. chairman. >> thank you very much, senator. this is a very useful line of questioning. there are a significant number of leases that are capable of being drilled that are not being drilled. is that the same situation where you have a significant number of leases already approved and get, the drilling activities are not domestic? >> yes, that is correct. there is a significant percentage of the leases that have been issued by the interior department offshore that are not currently subject to an exploration or development plan. we try to develop both through our leasing process and post- leasing processes to try to encourage prompt and diligent development of those leases, to bring them into exploration, bring them into production. as the director indicated, there are a number of commercial factors that way into industry decisions about when and where to drill. we are trying to line up policing process and our incentives to influence those decisions so that we can have prompt development. thank you. >> director, in the present budget, we mentioned there's a request for additional fee is that will be comparable to the increases that we have provided. can you indicate how you improve your program? >> i would be happy to. thank you for the question. it is important that we are going to be leasing these parcels of public lands for oil and gas development that we have sufficient inspections to ensure that it is being done responsibly. it is our goal to inspect drilling operations, and those high risk operations are those with the most violations but also those producing the most volumes of gas or oil. we also test for plugging operations and will completion operations. the additional moneys we would get from the inspection fee would provide sufficient fundsto our work force that would allow us another opportunity or greater opportunity to be on site when the drilling is actually taking place. >> thank you. one of the other aspect is the fact that the new technology, the fracking technology, has raised issues, which are being evaluated by other agencies. it is i would think something you are looking at more closely now in terms of your inspection program. is that accurate? >> it is. fracking is not new by any means. our inspections have always included looking at the operations as they were occurring, but again, the additional at these would provide opportunities to be on- site more often than we are right now. >> the secretary also indicated recently that his intention to raise the royalty rate from 12.5% to 18 1/75% -- can you tell me how these rates, the present rate and the proposed rate -- compared to state rates? >> it varies somewhat. our primary goal is to make sure the american taxpayer is receiving a fair return for the assets being developed. that is the least that we can do. at the same time, as we go forward, and we have analyzed what many of the states are charging relative to royalty, the productions that are occurring within our own state lands -- we have also done some analysis of what some of the other countries are charging relative to royalties or similar types of fees that are assessed of oil and gas companies. even though our budget was based upon an assumption that an increase of royalties would go to 18.75% for both oil and natural gas, let me reassure the members of this committee that that decision has not been reached. we are continuing to look at the full range of statistics that we have been able to compile, the analysis that we are continuing to reform prior to making any decision to increase the royalties. >> thank you very much. a very important question was raised about the difference between production figures on private lands and public lands, and i think there are commercial reasons why, even though the lease is available, it is not being utilized. can you list the three or four basic number of rigs -- insufficient number of rigs? >> i do not have the rigs, but i do know that the availability is an equation that comes into consideration by the company's relative to where they will be developing or drilling. let me just say right up front that it is a lot cheaper to drill on private land than it is on public land. all they have to do is cut a deal with a private landowner. when you come before -- with a proposal to drill on public land, there's a lot of factors that we do evaluate, again, we have to look to the appropriateness of leasing certain parcels for development or any particular use. we have to adhere to consultation to insure that the proposals that are afforded can be adequately mitigated. there are an awful lot of rules and regulations that the company's would have to adhere to, but each of those rules and regulations are intended to make sure that the production goes forward to the degree that it can be allowed as appropriate, but also, the leasing reforms that we have applied is to provide greater certainty that if they lease a parcel of land that they will be able to develop the parcel of land. i can tell you in 2009, that was not the case. >> thank you. i will follow on because you have given me a little bit of assurance by saying that the decision has not been made on this issue of increasing the rates on shore. you have stated, and rightly so, that it is more costly to develop on public land. so as we look to a royalty rate increase, as has been suggested, that, too, adds to that cost, and again to my earlier point, i think it causes developers to look to develop on state and in private before they would turn to our public lands. i do think it is important to recognize the study that was commissioned by the department to look at the royalty rate structures on our federal lands and compared them to other states, as you have noted, to other countries. there is a consensus coming out of the report that says that a rate increase is not warranted. they compare wyoming to other on-shore areas, conclude that wyoming's competitive edge is on shaky ground. alberta and british columbia are aggressively seeking to attract investment by offering incentives through lower royalty rates that encourage development. i really hope that the department is looking very critically at your own analysis and working to ensure, again, that we are not putting additional hurdles in place for development on federal lands, additional costs on top of the cost already in place. i am glad to hear you make the statement that it has not been -- a conclusion has not been reached. do you have any idea when you might make that determination, where you are going with that? >> senator, we really do not, or at least i do not. we had conversations as recently as yesterday with the office of management and budget regarding proposed rules as it relates to royalty increases. wyoming is doing quite well. he cited the study that says they are losing their competitive edge -- >> your study, not mine. >> nonetheless, there are factors we have taken into consideration relative to what we will ultimately propose for any royalty rate increase. the royalty rate in place now for both natural gas and oil has been in place for decades. i do think it was prudent that we conducted the study, that we are doing the analysis to determine what is a fair return to the american taxpayer. >> let me ask you about the timeliness of where we are with ocs permitting. can you tell us how the department is doing with respect to hiring the additional personnel that you need to conduct the inspections and process the permits? as i mentioned in my statement, in the last interior bill, we move forward the new fees to help with this effort, provide authority to not only increase the level of competition but really, to try to get additional funds for those personnel responsibilities. where are we with that? i am still hearing from folks that they feel that the agency is still understaffed, and that is causing what they consider to be ongoing delays. where are we? >> we began with about 60 inspectors and a modest number of engineers that do the permitting. we have a target that is based on where the industry is projected to go in terms of the number of applications we would expect to get with all the new standards we have implemented and the work load that is required. it comes out to you need about a total of 150 inspectors, and you need about 230 engineers. we are on a process of hiring inspectors and engineers. in the area of inspectors, we have gone up from about 60 last year to 91 this year, and on the engineers, we have added about 10%. we are needing to add more engineers -- >> you have a long way to go. >> we do have a long way to go, but as you know, the appropriation just came out in december. it was vital that we had some ability to incentivize those engineers to work for the u.s. government instead of for the oil companies. they are paid very well by the oil companies, especially when the price of oil is what it is today. we are in the process of implementing that hate incentive, and we also are doing some aggressive outreach to connect with new graduates from the engineering schools. we are even working with the american petroleum institute and other industry organizations to assist us with those people that may want to work for the government because of some of the benefits and perhaps some of the stability that we can provide that the industry does not. i am optimistic. it will take a couple of years for us to reach our goal, but i think we will make a big stride this year. >> as you all know, the congressional intent was that part of these new fees be used to extend the capacity so that we could expedite the orderly development of offshore there. i do appreciate the timelines, and i also recognize that we cannot just snap our fingers and have these folks in place, but you will be able to count on me to keep inquiring with you on a regular basis to see how we are doing, not only in getting the bayous in these positions, but again, making sure that it is going towards the goal, which is a more orderly and expedited processing for these ocs permits. not only getting the bodies in, but making sure we are seeing greater movement there. my time is expired, mr. chairman. >> thank you very much. >> i want to talk about fracking for a minute. current complaint from the industry is there are just too many cooks in the kitchen. we are all in the process of studying it, and i've heard there's as much as 10 agencies involved in the process. i think the budget gives $13 million -- i think there's about $45 million for tracking research in total in the different budgets. duplication is something i'm always worried about, people doing the same work in different agencies when we could get a little better bank with about. i just want to get your perspective on what is going on with the research effort, and is there coordination between the agencies so there is not overlapping research? >> duplication is always a concern for all of us, i believe, as we go forward during these lean times. i am aware of two studies we are assisting with, only with data. one study by epa and a second study being conducted by the usgs within the department of interior. our for dissipation is fairly limited to providing data that are then taken into account. as it relates to the bureau of land management, we are proposing a new rule relative to fracking. the full components of the rule are based on recommendations that came to us from the department of energy task force on fracturing energy technology. the three components we are focused on our public disclosure of the chemicals being used on drilling operations on public lands. many states have such disclosure policies in place right now, and we want to make sure that the standards that will apply to public lands are similar to what is being applied on state lands. the second component will address well integrity to make sure the casing is being used during the operation are secured, and they will protect ground water. the third component is water management. both looking at the source of the water that is being used -- because there is a significant amount of water being used in drafting operations in most circumstances -- and then, second, what occurs with the disposal of that waste water after the operations ceases, making sure that the disposal is consistent with local and state law, not federal law. so those are the three components we have incorporated into our proposed rule. we anticipate releasing a draft rule as early as april. >> i want to take it one more direction, and that is when i talk to the industry, the industry says fracking is going on so deep that it cannot impact the potable water. when i talk to other folks, they say that their water is being impacted. i do not know which is the truth. usgs has estimated that some of were first are losing about one or two feet per year due to increased energy production. i do not know why that is, but water is very, very important, and i just wondered -- can you give me any idea on its the top golfers are indeed losing that kind of -- being diminished by one or to a wheel feet a year, and secondly, why is that? third, is there something we can do about it? >> i would refer you to usgs for answers to your specific question. i do know that many tracking operations require an extensive amount of water. that water has to come from somewhere. energy companies are securing water rights wherever they are operating in order to have access to such water so they can continue with the operation, but i will also give acknowledgment to the industry. they understand the potential impact and certainly the long- term impact of continuing operations that are currently taking place with the amount of water, and they are doing or at least proposing to do a better job of reducing water and actually treating water on site so it can be used there on an additional four new operations. >> it is a big issue. there was an amendment on the floor yesterday that i think failed because some people did not want to encourage more fracking. we would like to see it done, but by the same token, 10 years for now, we do not want to look back and say, "my god, what have we done? i hope the research is being done in a coordinated fashion and very timely. i want to talk about well closure. could you compare the procedure to what happens on state or private lands in a state like montana when it comes to well closure? >> again, we take plugging an abandonment quite seriously because it is the last time we have an opportunity to look down the hole before the cement is place. one of our highest priorities as part of the inspection program is that when there is going to be a well that is going to be closed and abandoned that we have our inspectors out there almost 100% of the time to make sure that the process is completed based upon the engineering that has gone into the design and approval process. >> can you give me any idea -- you may not have knowledge of what goes on on the state of private lands as far as well closure. >> i really do not. i know there should be some similarities, but some states do a better job. i will not cite any examples relative to does that better than others, but nonetheless, we are responsible for managing these wells on federal lands, and that is where our focus is right now. >> thank you very much. >> thank you. i have a few more questions, and then i recognized my colleagues for their additional questions. i understand you are going to use a new auction process format for offshore wind alternate energy, unlike what you do for oil and gas in the gulf, for example. it raises the question of why the different procedures? first question. second, we have got to get that information out to potential applicants in a very expeditious way. otherwise, they might not be prepared when the auction occurs. you know, frankly, they also, i think, deserve the opportunity to evaluate and comment on the procedures to insure that they are fair to all potential parties. could you comment on the reasons for the new procedures, and also commit to getting the proposed -- the proposal out quickly so that relative parties can participate? >> the reason for the new procedures is that, strictly speaking, offshore wind energy development is fundamentally different than oil and gas. you had a finite area that is being made available. you want to make sure that you get as much efficiency out of that area as possible, unlike oil and gas where you purchase a parcel, assume the risk, drill a well. it is a dry well, you go someplace else. here, we have a number of interested companies. we have a number of interests that we need to take into account in considering how to lease the finite area. that includes the efficiency of their project, the likelihood that that particular operator can actually bring a viable project online, and the best configuration of multiple projects within a limited area. that creates a little bit more complex process. that said, we are very actively evaluating alternatives for this leasing process, with the idea of while addressing those multiple factors that distinguish from oil and gas, keeping it as simple as possible. there's a number of reasons for that -- we have gone through an extensive process to make the area available. we want to encourage the development of offshore wind, so we want to keep our option process as simple as possible while at the same time getting the area into the hands of operators who will be able to stand up real projects. with respect to the auction process and familiarity among operators with the process, you are absolutely right. that is essential. we put out a description, an information