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Proposed $11.7B Interior Budget Shifts More Burden Onto Industry Through Fees

President Obama's proposed budget for fiscal 2015 calls for $11.7 billion to fund the Department of Interior (DOI) and includes millions to help facilitate oil and gas development on federal lands both onshore and offshore. It funds the continued study of hydraulic fracturing (fracking) while shifting some of the funding burden onto industry in the form of fees.

The proposed DOI budget, a 4.2% increase over the $11.3 billion enacted in 2012, includes additional funding for the Bureau of Land Management (BLM), the Bureau of Ocean Energy Management (BOEM) and the U.S. Geological Survey (USGS).

Under the proposed budget, BLM would receive $1.2 billion, a 2.8% ($32.6 million) increase over the 2012 budget allocation. The increase includes $13 million for oil and gas leasing, oversight and environmental studies that DOI says will "strengthen management of the oil and gas program." Meanwhile, BLM will subtract $38 million from requested appropriations and levy $48 million in inspection fees on the industry, resulting in a net $10 million increase to its inspection and enforcement capability.

"We have an interesting situation at the BLM," DOI Secretary Sally Jewell said during a press conference to discuss the proposed budget on Tuesday. "Our regular budget supports basically everything. Offshore, we're able to match supply and demand by charging fees to industry that cover the cost of things like safety and inspections, drilling permits and so on. Onshore, we don't have that, so as our budgets have been challenged in places like the BLM with increased demand for oil and gas exploration and permits. We haven't been able to match that demand with our personnel.

"Part of this budget proposal takes that off of the regular budget and charges fees to industry for the inspections that the BLM needs to do on those oil and gas wells, and redirects the funds that would have been used for inspections toward more effective responses in permitting. We've had some pilots going on in the BLM to automate the authorizations for permits to drill. This continues to support those programs and make them more efficient. A more efficient and effective permitting process [also] reduces the litigation on our leases and facilitates more efficient permitting."

The proposed budget calls for giving $169.4 million to BOEM, a 7.6% ($11.9 million) increase over 2012. The request includes an additional $5.8 million over 2012 funding to promote offshore conventional energy development. Also included is "an increase of $3.0 million for conventional energy development activities to develop baseline characterization and monitoring capabilities in the Gulf of Mexico, support the acquisition and processing of geophysical and geological data for the Atlantic OCS [Outer Continental Shelf], and advance the use of technology to support the review of development plans," DOI said.

USGS would receive $1.2 billion under the proposed budget, 9% ($98.8 million) more than it received in 2012. It includes an additional $13 million to continue fracking research in tandem with the Department of Energy and the Environmental Protection Agency (see Daily GPI, May 20, 2013).

The additional funding for fracking is necessary, DOI said, "to better understand and minimize potential environmental, health and safety impacts of energy development involving fracking. New work will address issues such as water quality and quantity, ecosystem, community and human health impacts, and induced seismicity."

"Whether we actually have more oil and gas development is dependent on industry and what it chooses to do in terms of its investment," Jewell said. "We don't want to be a barrier to that. This [budget proposal] actually aligns the supply of people that we have to be responsive to the demand of industry by taking some of it out of the annual appropriations process and tying it more closely into fees."

The fee system would move the department closer to the model of the Federal Energy Regulatory Commission, which is entirely funded by fees it levies for its oversight services.

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