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For Immediate Release
July 30, 2010

The Independent Petroleum Association of America (IPAA) is strongly opposed to HR 3534 - the CLEAR Act, which the House of Representatives will be voting on today.  IPAA represents more than 5,000 independent oil and natural gas production companies who hold the majority of the leases in the Gulf of Mexico.  These companies also drill 90 percent of the oil and natural gas wells in the United States.

"Since the Macondo well accident in the Gulf of Mexico, IPAA has encouraged Congress to take a measured, deliberate approach to any legislative proposals offered in light of this tragedy. It is the duty of Congress to seek a full understanding of the current laws, and the imminent economic impacts that would be caused by any dramatic changes. That simply cannot be achieved until full information on what caused the accident is available, and a full investigation has been completed," said Barry Russell, president and CEO of IPAA.  "Congress has not taken the steps to understand not only the causes of the oil spill, but also the full impact of this legislation on the economic and national security of our nation."

"While trying to punish 'Big Oil,' Congress is actually harming small, independent companies who produce the majority of America's natural gas and oil.  Members of Congress who vote for this bill will have a lot to explain when they leave Washington this weekend for the congressional August recess - this bill risks thousands of jobs, jeopardizes billions in government revenues and increases our reliance on foreign oil," Russell said.

According to a recent study by IHS, an energy research firm, independent oil and natural gas producers in the Gulf of Mexico, during 2009, accounted for more than 200,000 jobs, $38 billion in economic benefits and more than $10 billion in federal and state revenue and royalty payments.  Details of that study can be found here.

Numerous provisions included in HR 3534 would have harmful impacts on independent producers, and America's oil and natural gas industry overall. Outlined below are those provisions included in the bill that are of greatest concern to IPAA.

Section 702 Includes unlimited liability caps for offshore operators, which would effectively eliminate independent producers from operating offshore, if they cannot obtain insurance policies to cover their operations. According to recent IHS study, independents account for more than half of offshore jobs.

Section 728 Subjects oil and gas construction activities to storm water discharge permits - a regulatory requirement inappropriate for oil and gas operations, which could place entire projects and significant capital at risk. This provision mischaracterizes the issue, placing preparatory steps for oil and gas production in the same category as building construction. DOE estimates that such regulation could result in the loss of future production up to ten percent of both current U.S. oil production and current U.S. natural gas production.

Section 208 Eliminates current 30-day approval requirement for exploration plans, increasing to 90-day limit while allowing the Secretary to indefinitely delay approval if he/she deems necessary; which amounts to a de-facto moratorium on permit approval and eventual production.

Section 802 Imposes a conservation fee of $2 per barrel of oil, or 20 cents per million British thermal units of natural gas, for production from all new and existing federal onshore and offshore leases, a cost that will eventually be passed on to consumers.

Section 809 Eliminates "categorical exclusion" provision of EPAct 2005 designed to limit duplicative environmental analyses and enable energy development on existing well sites where the environmental impact is minor, in developed fields, and where drilling was analyzed in a NEPA document as a reasonably foreseeable activity.

Section 241 Breaches contract sanctity by compelling companies to renegotiate their 1996-2000 deepwater royalty relief leases or else be ineligible to bid on new leases, attempting to correct a mistake made by the Clinton Administration.

Section 219 Repeals other royalty relief provisions from the 2005 Energy Policy Act, increasing costs on producing in deep water where the majority of discoveries are now made.

Sections 601 - 603 Adds layers of bureaucracy by creating Regional OCS Planning Councils to implement Marine Spatial Planning; discounting that offshore energy production is already guided by laws rich with stakeholder input, including the Outer Continental Shelf Lands Act and the Coastal Zone Management Act.

Section 205 Encroaches on state offshore programs, highly prescriptive by dictating the type of blowout preventers to be used on state offshore wells. Language would seemingly disallow companies from utilizing other technologies, even in the event of improved and better technology.

Section 205 Reduces incentives for generational advances in oil field technology that has marked the industry as leaders in international engineering innovation by requiring federal approval and overly-prescriptive requirements of well design and cementing procedures.

Section 206 Denies new leases to certain companies based on safety and environmental records, while relying on arbitrary and unfair requirements, and a vague definition that would be open to interpretation.

Section 725 Requires offshore rigs be U.S. made, flagged, and crewed; presenting difficulties for products or companies from outside of the U.S., which could drive production out of the Gulf of Mexico.