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tv   U.S. Senate  CSPAN  June 2, 2011 9:00am-12:00pm EDT

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because to get a loan, to expand or even survive am going to have to guarantee it personally and put on the table everything i've worked for my whole life. but i have to do that to grow. >> thank you, mr. chairman. i yield back. >> i'm going to jump in here real quick because we'll have a series of votes coming up here in a bit. i don't know when they are. i do have a question to you mr. hall. you mentioned earlier and i heard this, too, about possible bias out there against making it harder for franchisees. i've got friends who are trying to get loans on startups that are new franchises, and they get that impression that there is a bias against that or it's that much tougher. can you expand on that? and i'd be very curious to hear what the others have to say in the banking community. >> well, you know, i think historically people have had a negative thought about
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restaurant industry and about startups just in general. because the sba program is not about giving away money to loans that will pay back. it's a program where you really have to pay the money back. there has to be a plan in place. so, i think there probably has been traditionally a bias against the franchises, but i think we are turning that around with partially the work the -- we look at it as the glass is half full rather than half empty. we're not putting the blame on you guys. this is our responsibility. we have to operate, grow. and the way we're doing it is working together as a group with some of the people that need to make loans. and the things that we're doing our, like the underwriting issue that was brought up earlier. we accept some of that responsibility. we probably weren't given the right information because we didn't know what to do. so through the leadership, we
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are creating this environment where we are showing our members, both franchise owners and franchisees, how to make that loan application and the things that the bank needs to be successful. so hopefully we're going to overcome that bias that i think has been out there. but i certainly know that it has been there but our efforts in the future will be try to overcome that. >> anybody else? >> i will add, i think that start those are the most difficult loans to finance. they oftentimes have the least liquidy going in. they are oftentimes people of may or may not have been in a business and want to do something and. so i think the issue is less of a bias and more of just, they're just harder to do. so i think one of the things that we talked with ifa is our cd a small business committees put together a template with a series of questions for the franchise, how successful your franchise has been, and a whole
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series of questions and we're hoping as an industry that by starting that communication that will have more success with stars because they do think they are the most difficult things to do. >> let me back that up with a question and i would be very curious and everybody, when it comes to startups, this is the age-old question, if you're not wealthy you are very limited when it comes to your personal guarantee. but you're trying to do a startup and you have a good business plan, you know, is there anything that can be done to make that process a little bit easier? because of those other people that i worry about more than anything else. we have great ideas out there in many cases, but if the individual is a wealthy they don't have the personal backing or the personal guarantee, the equity out there. so is there anything that can be done? i will just run right down the line and start with you. >> traditionally what happened is those initial entrepreneurial type efforts have been financed by friends, family, other
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outside people. a big part of steel, whatever they could do to get -- do whatever they have to do to get started. and i think that it's about what's happened. i think also in the franchise industry as what we have a lot of people come into doubt that their initial capital is coming in what we call -- somebody who has herzl relationship with them. very difficult to get institutional type investor to get involved in any kind of the small business type of we're talking about. but as a rule i think that initial capital comes from just the effort from the individual. i very seldom in the history of being in business have i seen a startup like that be able to go in and find a place other than through some foundation or something, get started money. so might personal experience is normally they have to take the first step to getting to
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business which is one reason we love the franchise business because they are not taken a first in total by themselves. they can acutely some of his money, they didn't business with support from someone else to help be successful going forward and to grow. >> ms. ozer? >> i agree totally with what mr. hall was saying. when you look at, as i have for years, projections and business plans to begin with. we see lots of people that we suggest they go back to the small business to the centers, they go to the score offices and so forth to work on the business plan. at the initial equity when you talk about that, that is the most difficult part, the hardest one is the start of capital. they go to friends and family and initial investors, but we won't be one of% financing. and what we find a lot of times what i see is that these people have access money from credit card. and a lot of times we see that's how they started businesses, and then if they do have this
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wonderful idea, they come to us where they have already proven some top line success and have credit card debt. that's one of the beauties of sba's vinny. -- lending. they can bid on a small basis and that's how they get it. but the initial capitalization is if you don't have it, you have to get a gift letter from your friends and family, you have to get investors. if you can sell the bank on your idea then maybe you can sell it to somebody else and bring on partners and so forth because they do have to have some percentage of money to do that. i have information you on the percentage of startup loans that were done by the sba, if you're interested in hearing that. >> very much. >> mr. chairman, would you yield? >> yes. >> i do by the way, and that is my frustration. because when we passed the job creation still, it was with the purpose of helping provide capital, affordable capital to
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those who, when not able to get it through conventional financial institutions. and what we have seen is that the federal government and sba is guilty as charged. because what we are seeing is a concentration on big loans. those increase the loan from two to 5 million, and the percentage of smaller loans defined as those less of 150,000 have declined through sba guaranteed loans, from 17% to 8%. so the problem with this recession, compared to other recessions, is that people lost their jobs and they started off businesses. they created businesses. this time around because credit standard has tightened and sba hasn't held because basically
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those guarantee lenders are concentrating on making the big loans. that's financing do not create jobs.yçñyyçzyyç startups.ñyyçyçyç >> with all due respect, theyçyç volume is up 6.3 person inyçñy numbers, and 38.8% in dollars iy 20,011 year-to-date versus 2010ç year-to-date.ñyyçñy there's 29% of the loans toñy start ups which is defined as businesses under open for two years or less. there were 10,474 loans made to startups. so far this year, versus 9856 last year. and the start of dollars are 3.255 billion year to date versus 2.3 for 6 billion last year. so it is up higher but the information, the thing i have
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seen just in my bank is that there's been a lot of startups because there are a lot of people out of work. and some of these people that are out of work actually do have money as a startup to start their businesses because they've even been laid off with a package or their older, more successful people that lost their jobs, and they can to capitalization. so we are doing them. and as far as the small loans falling off, a lot of people are using the sba express low -- loans less. but we need those larger loans because ask of these girls like mr. hall essay, people that have five and six, they get above the 2 million, they have to renovate their stores, they need 5 million. so in my -- spent i want to go back to my original question, and that is i'm talking about people you are doing startups that don't have, i'd be very interested in hearing what you have to say, or what can we do a
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what can be done to help those individuals. we hear a lot about there's people have that money or something to back them up. i've talked about those people that don't. what do we do in your experience or what can be done in your experience? >> i think it's an ongoing process though i don't think there's one silver bullet that gets it. i think it's a combination of them finding personal funds or friends and family to get started. coming into the bank and working on business plans and beginning a discussion, i think one of the most interesting things to me is that customers who come in and have discussions about what they're thinking about, get to know them long before they come in for the loan request, that helps a lot. and i think then just making sure that we have programs with
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score and others to help out, in the bank that a worker in the past we actually worked with a foundation to do first time business owner training. some with similar to the first buyer homeowner train. that was very successful to people that graduated from those programs were more successful in their businesses and other startups. so i think there's a whole bunch of different things that we just need to put together to make it work as opposed to one big thing. >> mr. jacobe, do you have anything to add? >> we have done surveys asking small business owners from the experience starting what did they do right and what did they do wrong. one of the things that they highlighted was not starting with enough capital. they tried to get in and he didn't have enough capital to make it. and i think in this environment, some availability of at least some mid-level of capital is
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even more necessary because they will not have immediate success. so you don't want a lot of people going out there and trying in this environment without some kind of capital foundation. >> who is next? >> thank you, mr. chairman. ms. ozer, you testified before that the issue is really a demand issue or a topline issue. so that for businesses that have adequate demand really to support a pro forma that allows them to come to a bank and security loan. and that is inhibiting their ability from a financial perspective to come in and be successful in the loan process because they need to grow their
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top line in order to be successful to have the ability to repay the loan. is that a fair summary of what you think many businesses are at? >> i'm not sure that we're communicate on the same -- i'm saying that existing businesses right now, not startups are i'm not talking about pro forma spirit i'm saying that what we are seeing is that the bottom line is profitable but some of them have been experiencing downward trends in the top line so that in order for us to make a loan, we need to see year-to-year that either the bleeding has stopped and they can still pay, or that it's back to increasing again. >> okay, but that obviously puts them in a position where there is not as much demand for bank loans if they are not having growth topline comedy club don't need a line of credit, for instance, or to increase their line of credit. because they're not buying additional barometers or additional products for resale.
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>> they are still funding the receivables and sometimes they need a short-term capital so they can fund a daily activities but if you're not a cash business given the level of business that they are doing, they still need short-term credit lines in order to operate on their regular cash spent but they are not increasing the level of their bombing, i'm assuming. >> well, it all depends. a lot of them they still need to maintain a. spent i said increase. they're not increasing their borrowing because they don't have additional sales. or additional product that they're purchasing. >> but they need to grow. >> you want to comment on that? >> yes, sir. let me just put in a dairy queen perspective. five dairy queens. and my sales are not going up dramatically, i'm about to have to borrow money to renovate those facilities to maintain my existing business, or else you can be in business and not keep
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up with competition and you are just slowly going out of business. so i wouldn't -- i would say to you, certainly in my personal case i'm going to borrow money without the expectation of greater sales but i hope i didn't and i hope i'm able to get it higher bottom line but at the end of it i would probably have a lesser bottom line but i'm still going to be in business. i think there's a lot of that going on that maybe doesn't make much sense to you but if you think about it, i have my base. is my base goes away, where do i get my money? i am willing to accept less profit to grow, but what i'm also doing is growing jobs, keeping people employed in keeping my system in place. >> would it be fair to characterize which are doing is more a form of capital known as opposed to a working capital loan? >> well, in my business i've got to have money to make payroll. so when i have to borrow that money to do the construction, it
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certainly that would be a capital loan. but i'm telling you in a business environment right now, your margins are so thin that you just literally, there's no big cushion. we don't have a big pile of money sitting in a bank waiting. we are figure out how to get where we need to be. but i just want to respond to your point about the idea of comedy will be a situation we can't always look at this and say i'm going to have, get this much return. and serving in the small business and private because part it's about the family. it's about keeping these people employed in keeping our business going. >> and some of this would be cured by increased sales. >> be great. love to have it. love to have the. more blizzard is good for me. >> i want to go back to something that mr. jacobe said before. you focus on housing, if we solve the housing problem that that we do a number of beneficial things, including presumably increasing available collateral. for loans. what is the solution there?
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i'm curious as to the bankers with on the panel, do they have a substantial amount of foreclosed properties that they're holding on their balance sheets, or is that not an issue for your banks? >> for my bank it's not. certainly for a number of our member banks who are some of the largest banks in the country, they certainly have been working through those issues. but i think, i think from the standpoint of housing value, we talk about startups and other kinds of small businesses, and once the bar would is beyond personal credit cards and personal savings, the place that they oftentimes go to next is to pledge their house, either as a personal loan or a business loan to fund the business. so home equity guys have gone down, especially in certain parts of the country more than others. it taken away that source of
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collateral which is made more difficult. >> mr. jacobe, what is the solution? >> well, i wish i knew. the real solution is you've got a bottom in housing, a bottom in values so that everybody can start improving from that point on. and what's the danger now, if you've seen the latest reports is everybody is during the double dipping housing and other -- another step down. as other repercussions throughout the economy. i think that traditionally americans have valued homeownership, some people seem to be moving away from that but i think the nation needs to value homeownership and do whatever it can to stabilize housing and get people buying again in a secure environment. if you're going out to buy a house today and leverage works reverse, if it works against you, and so if the price of the house you're going to buy goes down 5% you can lose your down
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payment. the point is you got to stabilize that. i think people underestimate how important housing is to the future of the economy. >> thank you, and i yield back. >> mr. kaufman. >> thank you, mr. chairman. there's been discussion about some of the banking regulators, and in my community some of the smaller community banks were particularly hard hit, and their concern was that they felt that there was an overreaction to some degree that they were paying for the sense of the big banks during the financial crisis. and that for example, their cap the reserve at a 20% increase early on in this crisis. and their market niche seem to be commercial real estate which was particularly hard hit are buy one if you could comment in terms of small business access to capital related to community banks. in your view, was there an
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overreaction by the regulators? anybody. >> well, we are a little bit larger than a community bank having 14 billion in assets, but our commercial real estate division was the most hard hit in our bank. so as far as an overreaction is concerned, the perception is that the amount of capital that you have on reserve now is going to be looked at if they say that it's supposed to be 10%, then you really need a 13% or 15%. so as such, i don't think that they have overreacted tasha are you saying the regulators have overreacted speak with regulators to the community banks. >> i don't know the answer to the. i just don't know if they overreacted but they reacted a program in some cases.
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>> from a borrower perspective, you know, most farmers i know think it was an overreaction especially in the smaller bank level because that was the most given response as to why they couldn't get the same credit they've had in the past. we are facing increased regulation and that's, from a borrower's perspective they're serving his perception out there. and just as a general comment, i mean, and the regulators, in good times seems to me it out to be a little more conservative in trying to get you to put stuff back, and then in bad times it seems like it out to be trying to help the good borrowers get to the tough times. because we're talking about people who have had long history of performance, and because of really something they didn't have much control over, or -- have struggled. i think community banks are in exactly the same position. so that again gets back to our program where we're tried to max
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these two people, we both have been in the same position, see if we can get together and get some supply meet the demand situation. >> i've had a number of community bankers and for me that even if they had a performing loan in commercial real estate, that those loans were downgraded and that they should have just been maybe a watch put on it but not downgraded. anybody else comment on this? just one last related question, and that is in terms of job creation which is subject to today's conference, access to capital is very important. but what tasha i was a small business owner. and the majority of small businesses, in terms of job creation, what would be the impact of increasing income tax
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rates on job creation, knowing that in some of these corporations that essentially that's the tax rate that you pay? would anybody like to comment on that? >> i'm a sucker. you know, as a small business owner, you know, as you know, as you've already all take your lead most of the money is disclosed to from businesses to our personal tax return. there's nobody going to tell you we want more taxes. i would say right now though i'm not afraid to pay what is there and what needs to be paid, but on the other hand we have been hit with the alternative minimum tax, as a lot of people have been hit by that over a period of time as it just creeped out. people are floating the business incomes flowing through to the personal tax return, and they're not getting any deductions and its -- i know sounds like a lot
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of money but in today's environment trying to survive and capitalize your business out of your personal situation, which is what all small businesspeople do, there's some issues as a taxpayer, i don't want to pay anymore taxes. i'm willing to pay my fair share, and i want to pay my fair share but also have to survive, and i will tell you if you start taxing, and unfortunate i'm afraid the same situation with health care, you will lose jobs. in the real world you will lose jobs. it has to happen because there's no other -- we if we so tight right now there's no place for it to go. >> thank you, mr. chairman. i yield back. >> thank you very much, mr. chairman. thank you, ranking member velazquez. and i like to thank our panel for their testimony today. we all understand when all of our nation's small businesses are active participants in a robust recovery that adds jobs, will our nation fully recovery from the recent economic
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downturn. i also understand that allowing the regulatory environment to return to one that allowed for the financial collapse in the first place is irresponsible at best. today's testimony, especially that of mr. jacobe and mr. kottler, illustrate the difficult task facing our nation with a lack of consumer spending highlighted as a top concern of small businesses. small business owners with regards to hiring. this fact is getting us back to the anemic consumer spending. the fact that private lenders are not lending even to those who would otherwise be deemed creditworthy has led to the issue that ms. ozer pointed out regarding this seven day progra approaching a season later this year. sow my question is this. given that there is a need and also recognizing that return to lax repertory environment that cause our current problem would be unwise, what else is needed
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to incentivize private lenders to free up the capital that would allow small businesses to expand and hire, which in turn would turn around the weak consumer spending and get our economy back on track? >> that's a really tough question. i think there are a lot of things that could be done that would encourage local lenders to hold more loans. everybody who is try to figure that out has had difficulty in terms of how to do that effectively, and you tried with various kinds of programs. you know, the big thing is to try to get consumer spending again, and that's a larger issue. once that happens and everything turns positive. if any in and you can figure out a way to get lenders told more loans instead of the government
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programs, but the more loans in some kind of incentive way that would help also. >> i think that, you know, utilizing the government programs is helping us to do that, but even at that level i agree with dr. jacobe in the fact that the consumer confidence and consumer spending is all hand in hand, and that is all tied up with more jobs, more disposable income. and so forth. so if we can continue to try to get the money out there to businesses that hire people, many out let will go on. but it's a very difficult situation, and i tend to agree with him that until the home level, the values in their homes comes back and they have confidence that they're not going to lose their homes, and that's their priority is where they live. and that have jobs and money to put on the table.
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when that comes back, i think that the banks are doing everything they can with the tools that they have to get money out there to small businesses. i know that in our bank, you know, someone else asked about the foreclosure rate. if the people are paying on the loan, we are working with them and not for closing, even though they have been downgraded because the regulators are forcing us to downgrade because the ltv's are not there. but if the loans are being paid, they are still in bank. so the banks are trying to work with the people that they have, to keep the businesses going, to keep people employed, to keep people spending money, a cycle. >> mr. kottler, did you want to speed it your capital one. you have to have the answer. [laughter] >> what's in your wallet? >> i'm not there anymore but i do recognize that.
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but it's interesting when you watch barbers, in a robust economy, you see barbers coming in, and they want working capital lines of credit to hire new people, to fund new contracts. they want to purchase new equipment, which then leads to more people to run that equipment to more jobs. coming out of the bottom of this recession, what we saw was we started to see loan demand go up. but it was for things like i want to buy the building i'm in because i've been leasing and now it is worse -- worth less and i can get a good deal on it. i want to buy my competitor who has we can. i can do that. those kind of those don't necessary create jobs. so as we get more consumer spending and we get more, more economic growth, then we'll start to see those kind of loans from established businesses be the kind of loans that say we are willing to commit and expand. and that's not, we've seen less of that up to this point.
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>> did you want to add anything at all, sir? okay, i yield back the bows of my time. thank you again. .. [inaudible conversations]
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[inaudible conversations] >> live coverage from capitol hill this morning, we're in the rayburn house office building as the committee is this morning holding a hearing assessing the coverage of the oil spill. witnesses will testify on the obama administration's response to the oil spill and what they've been doing since capping that well. panelists will hear from mississippi governor haley barbour and craig taffaro. chairman of the committee is california congressman darrell issa. congressman cummings is in the room, we are still waiting for the chair. when he does arrive, we expect this hearing to get under way.
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this is live coverage on c-span2. [inaudible conversations] [inaudible conversations]
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>> again, we are in the rayburn house office building as the house oversight and government reform committee is holding a hearing this morning assessing the recovery efforts of the gulf of mexico oil spill. one of the witnesses is mississippi governor haley barbour and st. bernard's parish president craig taffaro. >> the committee will come to order. the oversight committee exists to secure two fundamental principles. first, americans have a right to know that the money washington takes from them is well spent. and, second, americans deserve an efficient, effective government that works for them. our duty on the oversight and government reform committee is to protect these rights. our solemn respondent is to --
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responsibility is to hold government accountable to taxpayers, because taxpayers have a right the know what they get from their government. we work tirelessly in partnership with citizen watchdogs to deliver facts to the american people and bring genuine reform to the federal bureaucracy. this is our mission. this morning we will review the enormous task confronted in the gulf as a result of the bp oil spill and the obama administration's choices made then and to this day. it is clear that this was a manmade disaster, that 11 people died in what should not have happened. but it's the choices after an initial event that we will focus on today. that is not to take away bp's
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ultimate responsibility. but this committee reviews government actions both prospectively and retrospectively. we cannot expect to do a better job next time if we do not focus on what was done right and what was done wrong in this disaster. the government made several decisions under its authority. one of them was not to use stafford act. and, in fact, to leave the very entity that created this pollution in a position of authority and lead. there are many reasons this may have happened, but we have to ask; should it happen again? congress has the clear power and authority to change the rules of the road. we should not have to choose between holding a polluter responsible and 'em pouring -- empowering leaders at the federal, state and local level
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to do what they are responsible to do on behalf of their citizens. the reimbursement for actions directly and indirectly belongs to british petroleum. they have said they will meet that challenge, and we will hold them to it. but as the days and weeks went on after an initial spill 40 some miles out at sea, it became obvious that we lacked the resources in place to do the job that was coming. the response was slow and chaotic. additionally, we will hear from testimony today that the secondary damage turned out to be, in many cases, far worse than the little or no oil that came to the shores of communities: that is part of what we have to deal with here today. oil spills and other events are inevitable. in my hometown of cleveland,
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more than 60 years ago a liquefied natural gas container went bad, and many died. it has not stopped us from resourcing and using natural gas here in america. three mile island is still in the memory of people my age. it has not stopped us from using nuclear fuel as a primary source for baseload. coal miners, to our dismay, continue to die trying to harvest that fuel around the world. it is a necessary part of our society that dangerous jobs are done by people who choose to do them and have a right to be protected in thats process. in that process. but this hearing is not about the riskiness of any of these fuel sources. it is, in fact, about whether the federal government knows better time than they did before
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this event. additionally, it is important for us to understand that just as hurricane katrina told us that fema had problems working with states, fema was not necessarily ready for a loss of vast areas of response. we now know that even when all the response capabilities were in place, even when it was a single event of a company that did not do their job and did not play properly by the rules, we find secondary events throughout the area. we find oil coming ashore and not being responded to for a number of reasons. we additionally find a loss of revenue in unrelated areas. we will hear from our second panel and from our first that the loss of tourism was needless and extreme in areas in which the water was clean, the shore was pristine and, in fact, people were scared away.
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we need to make sure that does not happen again, we need to make sure that governors and local officials are empowered to do what is in the best interest of their people, and that the american people get a fair understanding of the scope of any problem or spill. lastly, we will hear today that as a result of one reckless action we find countless billions of dollars of revenue lost. good hard working meshes out of -- americans out of work. resources necessary to make us less oil reliant on countries that often are not friendly to us leaving to the very countries that, in fact, will now produce the oil that we are forced to buy. in america today both sides of the aisle talk about jobs. i, for one, am not an economist, but i can understand that if $400 billion worth of purchased oil were produced here in america, there would be
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countless millions of direct and indirect jobs available to americans. there are many things that we are not competitive on here in america. certainly, one we are competitive on is natural resource extraction from our coastal waters and onshore locations. i look forward to hearing from my old friend and the considerably well known figure to all of us, governor barbour, and with that, i recognize the gentleman from maryland for his opening statement. >> thank you very much, mr. chairman, and good morning. let me first welcome governor barbour, and i thank you very much for being with us today. i also want to take a moment to recognize dick gregory who is a person who has fought hard for so many people for so long in our audience. thank you, mr. gregory, for being a part of this hearing today. governor barbour, your state has been through a tremendous amount of difficulty, and i sincerely
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look forward to your testimony. let me also welcome michael bromwich from the department of interior. mr. bromwich, you agreed to be here with incredibly short notice, so we thank you very much for your testimony and for your expertise. finally, let me welcome the residents of the gulf who have traveled here today to share their views with the committee. earlier this year the national commission on the bp deepwater horizon oil spill issued a comprehensive report on the causes of the spill. the report found that this disaster was avoidable and that it resulted from clear mistakes made in the first instance by bp, halliburton and transocean. and by government officials. these were extremely difficult lessons to learn. now, more than a year later, officials in both the oil industry and our government appear to be heeding these lessons and retooling the way
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they do business. first, we must never, ever forget that 11 individuals lost their lives in an explosion on april 20th. to address deficiencies that contributed to these deaths, the interior department issued an improved workplace safety rule that many, including industry, believe will significantly enhance worker safety. the department also completely reorganized the minerals management service. mms had been criticized because it oversaw the safety of drilling, the environmental impacts caused by drilling, and the revenue generated from drilling. according to the national commission, mms had a built-in incentive to promote offshore drilling in sharp tension with its mandate to insure safe drilling and environmental protection. the department also implemented a number of critical safety measures to insure that a blowout like this would never
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happen again. for example, a new drilling safety rule would strengthen standard for well control procedures. drilling equipment and well design, and it required independent and third party inspections. finally, the department issued a notice to lease sees to require oil companies to demonstrate they can actually cap a well, they can actually cap a well and handle a deepwater blowout before any new drilling permits were issued. these were responsible steps taken after it became clear to the nation, after 87 days that bp simply did not have the technology available, in other words, the technology was far outdistancing our ability to control it. mr. chairman, i have to say that i am disappointed by your actions today. you stated that the committee investigations -- investigates have interviewed more than 50 government officials, scores of
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residents, business owners and whistleblowers as part of this investigation. that is news to everyone on this side of the aisle because you completely excluded us from that effort. and you have not explained why. unfortunately, this is the definition of partisanship, and it undermines the integrity of this committee. and by the way, this report that's being submitted this morning was submitted to the press before we even saw it. nevertheless, moving forward, it is our obligation as members of the united states congress to develop constructive ways to help people in the gulf rebuild their lives and their livelihoods. in my former capacity as chairman of the subcommittee on coast guard and marry time transportation, i visited the gulf twice while oil was flowing. i saw how the spill affected small businesses that rely on tourism, fishing and other industries. i've offered several measures to provide real solutions to gulf
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residents. last congress i offer add provision that cut in half from 90 days to 45 days the amount of time responsible parties had to settle claims arising from the spill. i also worked on provisions with chairman overstar to strengthen the coast guard's oversight of oil spill response plans. this year, just recently, i offered an amendment to h.r. swz 1229 to require all oil and gas exploration and production activities in the gulf to be conducted by u.s. flag vessels. talking about jobs, that's jobs. this, which would have immediately stimulated the gulf economy. unfortunately, the rules committee did not allow a vote on my amendment. my basic point is this: we have a tremendous opportunity in this committee to really help people, people who are undergone extreme hardship. as the goal of today's hearing, if we can focus on identifying even one positive, proactive solution that we can agree on, i
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think the hearing will be a success. >> i thank you. i ask for one minute to respond. without objection. to my ranking member, just for your edification, this investigation began under your predecessor, chairman towns. we went down jointly and separately. he authorized minority trips when i was in the minority, in addition to the joint trips we did including members of both parties. when i took the chair, we continued that investigation. we have had joint trips in addition to we have authorized minority trips down there. as a matter of fact, we've never turned down a request by the minority to go on staff fact-finding. every request that's been asked for has been granted. it is true that both your side and my side under both the majority and minority have gone both together and independently, but i certainly think that i don't, i will not belittle any effort that your side made to
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get independent facts. i hope you were not intending to do so by saying you were surprised we'd made 50 trips when some of them were made together. >> mr. chairman, may i have a minute? >> of course. >> let me say this, mr., actually, from the very beginning my number one concern is helping the american people. and it is about the integrity of this committee. i do not belittle for one second the findings and the things that the majority has done. what i'm saying is that we want to be a true partner in all of that. i have said to you privately and openly that we, too, care about government operating prop beerily. we -- properly. we, too, care about making sure that every agency of government does what it is supposed to do. we, too, want to make sure there's no agency caught up in a culture of mediocrity.
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so i look forward going forward, like i said, want to move on, but i want to make it clear that we, too, are partners. we, too, were elected per district, so we want to make sure our voices are heard too. >> i thank the gentleman. with that, we are prepared to introduce our first panel. i'm going to deny myself the honor of introducing governor barbour and instead go to congressman steven blaz sew, for his introduction of his governor. and i understand your governor when you were in the statehouse. the gentleman is recognized for an introduction. >> good morning. thank you, chairman issa, ranking member couple us and members for the privilege of letting me introduce his leadership firsthand after the devastation of hurricane katrina and more recently the deepwater horizon oil spill. indeed, no other governor has been as frequently challenged to rise to the occasion of leading
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a state during a time of crisis, whether manmade or natural. and each time governor barbour shouldered the burden in a manner that calmed tempers and resulted in credible, efficient outcomes. to accomplish this, he met each event with a balanced regimen of compassion and order, allaying fears and the sense of loss with hope and the prospect of swift recovery. i vividly remember the many times the governor and his beautiful wife marsha walked hand in hand with the victims in the aftermath of it all, assured them that everything was going to be all right. more recently, he continues to guide our state through historical floods and a severe tornado season. he has not only led mississippi through the country's worst natural manmade disaster, but he challenged us to build back bigger and better. he is a great leader in every sense of the word, and of course i'm talking about mississippi's 63rd governor, haley barbour. mr. chairman, as someone who represents a district devastated
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by the oil spill, i appreciate you directing the committee to assess the recovery efforts of bp and the obama administration. i would like to briefly mention that as someone who has worked offshore on drilling platforms, i have a particular concern on how the administration came to the decision to institute a moratorium without conducting a study of how it will impact the gulf coast economy. we know now that this thoughtless decision would decleese oil production for the next two years. a loss of production of this magnitude will continue to have a negative impact on the gulf coast economy for years to come. studies conducted by louisiana state university put potential estimated job loss by the moratorium and subsequent perm tore yum on the gulf coast region at around 24,000. the ripple effect of these lost jobs and high energy prices hurts our national economy. the majority of the jobs lost in mississippi are from the fourth congressional district of mississippi, the district i represent.
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i've worked offshore, i know the value of the jobs that the offshore drilling industry provides. i look forward into further investigation into the economic impact of the administration's decisions and motivations. i applaud the committee for the extensive work on this critical issue, and i look forward to hearing the testimony by the witnesses and the outcome of this important hearing. and thank you again, chairman issa, and the members for allowing me the honor of introducing governor haley barbour. i yield back. >> i thank the gentleman. pursuant to the rules of the committee, governor, would you rise to take the oath? governor, do you solemnly swear or affirm that the testimony you're about to give will be the truth, the whole truth and nothing but the truth? >> i do. >> let the record reflect that the governor answer inside the affirmative. governor, you know this routine, you've seen it for years. your entire statement will be placed in the record. we will not hold you to an exact five minutes, but come as close as you can. >> thank you, mr. chairman.
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>> gentleman's recognized. >> and to the ranking member and all the members of the committee, thank you very much for having me here. i am going to not read my statement. let me start off by saying that this disaster is very different from other disasters. when representative palazzo talks about katrina, we had obliteration, it looked like the hand of god had just wiped away the gulf coast for blocks, and in some places for miles. we had hurricane-force winds 40 miles inland. and to get people to where they got confident that the coast was going to come back, where they had hope for their families and their communities, where they were willing to return home was an enormous part of the job. in this case, keeping people calm. you know, you had an oil well
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blow out 100-plus miles away from be our coast. and i should say at this point this experience for us was a little different than for louisiana. louisiana was closer to the well, they got wet, brown oil into some of their areas. we didn't. we were about 108 miles from the well head to the city of gulfport, and by the time oil got to us, a, it had been a long time since the well blew out; b, what got to us you would not recognize as oil. there was this orange mixture of water and the remnant of oil that the oil people call mousse. and then there were what we call tarballs and tar patties. when i was a kid, we used to go to the beach, we used to throw 'em at each other, tarballs, because the gulf of mexico seeps
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out somewhere as much as a million, 400,000 barrels a year according to the usgis every year through the floor. so, you know, we were used to tarballs. but when this happened, people were, obviously, very, very concerned. and one of the big jobs was to keep people calm, to keep people, understand that we're going to prepare, we're going to have a good plan, we're going to execute the plan, we're going to protect the coast, particularly the habitat, particularly the coastal lands where the shrimp and other important wildlife actually are born and start to grow. and we had to do that with a different set of rules. and the first point i want to make is the stafford act. the decision was made that this disaster would be managed under
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the oil pollution act. not the stafford act. as has been said to the committee by others, the disadvantage of that for us is we're used to the stafford act. florida, alabama, mississippi, louisiana, texas, we've managed disasters under the stafford act because that's what hurricanes are managed under. that's what tornadoes are managed under. that's what floods like we have in mississippi today. so, a, it was a, it was something we knew. but very important from a governor's point of view, the stafford act expressly says that the federal government will supplement the work of the state, not supplant it. one of the problems we had under the oil pollution act early on, lasted for several weeks, the coast guard who headed unified command -- and we're accustomed to unified command, we have
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unified command under stafford act disasters -- they took the position that the national guard worked for them. and this became a real issue, which i'll talk about in a minute. but under the stafford act it's very clear, the national guard works for the governor unless the president federalizes the national guard. we're not mad at anybody about it, but it didn't work well when they tried to assume command over the national guard. and i should say president bush after katrina talked about federalizing the response. and i very loudly and publicly said, no, that we don't want the army coming into mississippi or the marines coming into mississippi. they're not trained for that, they don't know the terrain, they don't know the people. so stafford act, whether -- and the stafford act, by the way, has a lot of improvement that it needs. but the oil pollution act ought
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to be changed to say flatly, like the stafford act, it's supplemental to the states, and it doesn't usurp the state's authority. where this came into play was in our plan to defend the state's shoreline against oil. we developed a layered defense plan beginning outside the barrier islands, using the barrier islands to protect us, protecting the gaps between the barrier islands. the oil that got through to the sound, that would be our principle place to try to pick it up, steer it toward beaches, keep it out of marshlands. as it turned out, the coast guard approved that plan, never understood how to execute it. and after the second time that oil got to our barrier islands completely undetected, much less contested. undetected. we demanded that we be put in charge of this. and the coast guard agreed, and
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we worked out a system that worked. i will just tell you, before that there was no command and control. in fact, unified command could not even speak to the hundreds of vessels of opportunity that we had gotten bp to hire to form picket lines to spot the oil as far out where we could try to steer it and collect it. they didn't have any means of talking to 'em. so we had to step that up to get command and control as it should be. two other points i want to make. and i'll be glad to -- i'm trying not to get into too much detail. for us this turned out to be primarily an economic disaster. now, it may be that there is something lurking beneath the sea or that is going to develop that becomes ecologically dangerous. and we're all over that. and not just mississippi, all
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the states, the federal government, all kind of scientists. but thus far the environmental damage for us, again, we're different from louisiana, has been very manageable. we have on the coastline of mississippi we have 80 miles of coastline. we never closed one mile of beach except for one time in the whole experience. we had one 2-mile section of beach that we closed overnight because we had a high tide after a hurricane where some oil got across the highway, and we couldn't clean it all up. otherwise we cleaned up the oil that got to the beaches every day the day it got there. so our environmental damage -- unless there is something to come -- is not our issue. our issue is a gigantic economic loss. the talked about tourism.
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our tourism industry was clobbered. our season starts when our schools get out which are earlier than in the north. our schools get out the middle of may. so that's when the tourist season starts. of course, this happened late april. so people saw on tv the same brown pelican coated with looked like 3 inches of oil, i mean, looked like a chocolate pelican. and they showed it every hour, every day, 24 hours a day for weeks and weeks and weeks. and the news media, particularly 24-hour cable tv, gave citizens the impression the whole gulf coast was coated in oil. people deduced from that that it was unsafe, unpleasant, don't want to go there. they canceled their reservations, they canceled their contracts to buy condominium and not just in mississippi, but all across the gulf coast. the president, to his credit, actually it got so bad that the president came to mississippi, alabama and florida and held
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news conferences on the beach to say, look, the beaches are clean, the water is clear, it's beautiful down here, come on down here. but that one news day can't compete with what was being seen every day, every hour for weeks. huge economic problem and loss there. and then, of course, in the fishing side on seafood, huge losses because they closed our waters. and i should say to you right now we have not, since this oil spill, had one sample of seafood in mississippi waters that was tested that had not passed the test and meet every standard. the same is true for the federal government. finish we haven't had one, one sample of seafood that failed, yet we have people that won't buy seafood from the gulf coast in new york and san francisco, in chicago because of what they saw on television. so the fishermen have some mitigation of their losses
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because they got hired to be vessels of opportunity. the processers were slammed. so seafood, a huge problem. the oil and gas industry, the moratorium for which there was no reason, in fact, the government appointed a panel to look at this, and the panel disagreed with the announcement that was made that you got the impression it was the panel's recommendation to have a moratorium. ..
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>> in the last year the number of -- the number of permits for new deepwater drilling has decreased 85%. and that's a huge problem. let me close by saying this. for those of y'all that want to help the states that were hurt, understanding that this was an economic problem for us, and again, louisiana as a little different from the rest of us, this was an economic problem. remember, the natural resources, damage assessments and the payments that can be made under that were largely limited to environmental. and while there is some loss of use, rooms there, largely the states cannot be compensated from the economic loss, except
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by getting part of the civil fines that are going to be assessed against bp and the responsible parties. and i would ask you to consider as members of congress looking at this and understanding that this is the best way to help these states recover, because it is economic recovery that they have to get, unless something really changes on the embargo. i apologize i went over, mr. chairman. >> no apology required. i would now ask unanimous consent that the staff report entitled the bp oil spill recovery effort, the legacy of choices made by the obama administration be entered into the record. without objection, so ordered. i would also note for the minority that after the break, it's my intention to have a committee vote to make this a committee report. so, during this intervening period, the minority has comments, questions, anything to
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add, the final report will reflect comments by the minority so that it is, in fact, a bipartisan report. the gentleman is recognized. >> it's my understanding, according to the committee rules, we have to have three days before committee vote. >> that's correct. i'm giving you more than 10 days notice. >> i thought you said today? >> no, no. what i'm doing is i asked and got permission to enter this into the record. i'm going to elevate it to the committee report after the minority has entered their comments and any suggestions are made. right now it's the basis for a committee report. it is to make sure that your staff working on the same set of facts, edit, make changes, suggest changes, make any other comments so that it becomes a joint report. and i wanted to reflect both majority and minority opinion. >> when will that vote be?
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>> it will be after the break at the earliest. so it is more than 10 days. i'm just noticing it for the future. >> okay. >> and with that i would like to recognize the former chairman of both committee, the general from indiana, mr. burton, for his i've been opening, or five minute questions. >> welcome, governor barbour, it's great to see you again. it looks like you have a good looking articulate young man to congress. >> it won't take them long to get greater. >> that will come in time if he sticks around this place. first of all, let me say i have been to the gulf coast, not mississippi, but i will come, and i walked on the beach is down there. and also on beaches i believe on the east coast of florida. and i saw these tarballs. this was when there was no
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oilwell problem. and so, when you just said that 1.4 million of barrels of oil leak out natural feature, i hope everybody in the country knows that. because that amount coming out naturally doesn't cause any kind of problem. and that ought to be included in the discussion when we talk about deepwater drilling in the gulf. you also said that 85%, there's been an 85% loss in drilling permits. that is tragic, especially in view of the fact that we just sent $2 billion down to brazil so that they can go in deepwater. and we can't. and it really surprise me but i think you said there were 31,000 wells in the last 50 years down there, and it's been done, drilled without any real big problems. and yet, right now this administration is stopping us from doing here and we're sending billions and billions and billions of dollars over to
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the middle east, to countries that don't like us very much, and that really, really bothers me. and i hope that you are able to benefit go on a crusade to tell the story that you told us today, because i think the american people need to know that. we have the ability to move rapidly towards energy independence over the next decade, if we use natural gas and oil and she'll call and be converted into coal. we are not doing any of it. and as a result, this country is really suffering. and i really, sympathize with you on the impact, the fiscal impact that was going on that took place down in the gulf during the terrible crisis. and i want to say one more thing about the media. i really sympathize with you in this drumbeat that went on and on and on over a month or two months showing the problems that
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were created down there, which obviously had a devastating impact on you and your economy. and i hope that any future when these kinds of tragedies occur, the media will not sensationalize it to the degree that it hurts economies like that in the gulf states. i just had a couple of questions. you said that the stafford act could have been handled -- could've been handled much better under the stafford act. can you elaborate -- you may have mentioned it in your opening remarks, but what could have been done that would've been better to help manage the problem in the gulf if you as governor and the and the governor of louisiana did have the control that you wanted? >> two big reasons the stafford act being preferable to state a local governments, we are used to it. we deal with it all the time. i think when you have some of the local officials later today, we've all had to work on the stafford act because that's what we do hurricanes, tornadoes, floods, et cetera.
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for me specifically as governor, the stafford act expressly says that the efforts of the federal government of the stafford act are to supplement the state efforts are under the oil pollution act there was an impression that the federal government was in charge of the unified command, and they told everybody what to do. and that not only is contrary to the u.s. constitution, bad law, but it also didn't work. i mean, our people were much better able to do things than the federal people were able to do. >> let me just speak the stafford act is a purpose -- perfect adult. >> have the federal government recognize your jurisdiction under the stafford act, tell me how that would have been more of a positive situation or solution for your. >> where it really became very apparent, we have a defense plan to defend our shores from oil. different from louisiana because we are 100 miles away.
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we recruited 1100 quote vessels of opportunity of those are people who rated their boats to, to put them out of session for picket lines to try to stop the oil south of the barrier islands, in the same. so we had actually a five layered defense. we found out weeks into that the coast guard had no way of managing that. they had approved the plan. they had no way of managing that. we literally sent people to wal-mart to buy radios. we had a situation where our air national guard, starting 4:00 every morning, flew infrared photography of the whole sound and south of the sound to find the oil. the coast guard had no way to tell the vessels of opportunity where to go. we had to set up a whole communication system, and
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command-and-control system, which we did not do for weeks because we thought the coast guard knew more about this than we did. but it turned out that we had to set up the comedic haitian system. we had to set up the command-and-control system. and frankly, they were cooperative when it got to it. but should american to that. we were lucky that this disaster was manageable enough that you could make those kinds of mistakes and still clean them up. >> thank you, mr. chairman. thank you, governor. >> would the gentleman yield his remaining time? >> i would be happy to. >> i'm sorry, i was over. >> we do not yield the other side of the remaining time. without i recognize the gentlelady from new york for five minutes. >> i thank the chairman for recognizing me, and welcome, governor. welcome representative.
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it's very good to see you again. thank you for being here. governor, the government accountability office, the nonpartisan bipartisan unit issued, and i believe they will be testifying later on today on panel, they issued several reports warning that taxpayers are not receiving a just or fair return for oil and gas in the gulf of mexico. specifically, the gao reports the fault of these so-called royalties released granted by congress is a mid 1990s when gas and oil companies were not doing as well as they are today, but they encourage additional exploration of the time when oil and gas were lower. and under some of these leases, oil companies pay absolutely no royalties at all to the american
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people when they drill on federal land. and this is oil that is owned by the american people. it is on federal land. usually there's a royalty paid back to the government to the taxpayers, but here they pay absolutely nothing back. and i would like to quote from the report. special lower royalty rates referred to as royalty relief granted on leases issued in the deep water areas north of mexico from 1996 to 2000, appeared in which oil and gas prices and industry profit were much lower than they are today, could result in between 21 billion, and $53 billion in lost revenue to the american people. to the federal government, compared to what they would have received without these provisions. end quote.
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our chairman in a rare expression of bipartisan support, i want to compliment you, mr. ice, for the significant work that you've done in this area. and on this issue. you had call to an end to this october 7, 2009, chairman issa issued a staff report warning that actual shortfalls to u.s. taxpayers could be much, much larger, and this is what his report said, and i quote, depending upon the market price of oil and natural gas, the total cost of forgoing royalties could total nearly $80 billion. oil and gas royalty payments represent one of the countries largest nontax sources of revenue. taxpayers must get every cent that is owed to them, end quote. and i agree completely with chairman issa. and governor, do you agree with
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chairman issa on this state of? >> man, i can say that we are very familiar with this in that for more than 50 years the rest of the country has been sucking the gulf drive and we get nothing. the period of time to talk about in the late '90s, all this production of the gulf of mexico and the states were paid nothing, zero, nothing. when you drill on government land in wyoming, wyoming gets some of the money. but fortunately in the last administration, this was changed, and we're going to start on a little stairstep basis getting a little bit of the royalty, and ultimately may be about 2017 or something, the states will get a legitimate fair share of the royalty. so i am very sympathetic to the royalty owner, because we feel like we should be considered royalty owners, too.
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and that the federal taxpayer and the taxpayer of mississippi, both ought to be getting a fair royalty for the production of oil and gas. or if it's cold, on land or whatever, i think that is absolutely the case. but i hope you all will please understand we are only five states in the country that allow offshore towing, the other 45 ought to let us, five, to allow it. they ought to allow us participate in royalty owners, to. >> the real royalty owner is the american taxpayer. so do you believe the taxpayer has a right to every cent that is owed to them under these leases, and that they should be completely corrected as the chairman said? >> and i believe the mississippi taxpayer should share in that when we are dealing in the waters that are mississippi waters and are part of the outer continental shelf that is recognized as mississippi.
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so i'm not arguing with your point about the federal taxpayers. i just want to make sure that the state taxpayers get treated as royalty owners in the five states that allow this. it's not fair for the other 45 states that burned the oil that we have taken out of our outer continental shelf and they get treated the same way we do. >> well, i must speak that was a yes. >> i must state for the record though when chairman markey are ranking member markie has a bill on this that would corrected, and what came before congress early this year as an amendment, and several other amendments regretfully, chairman issa voted against it. and i feel the same as governor barbour, that they should be corrected, that the american taxpayer is entitled to the royalties for oil extracted from taxpayer owned federal and state owned property. and i hope that you will join
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with us in a bipartisan way to correct this going forward so that there is fair treatment to the states into the government, and basically to the american taxpayer. >> we now recognize the gentleman from oklahoma. >> i would like to yield my time back to the chairman. >> i thank the gentleman. congressman, you don't have to remain -- you are welcome to stay. you look good with the governor. you always look good next to governor. that will look good. >> i thank you. governor, congresswoman maloney did make a valid point but i want to follow-up on your point too. today you're going to have an economic loss that will be unreimbursed as result of the bp oil spill, correct? >> no question of that.
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>> and so for the foreseeable future, if there were to be another one, would you potentially have another oil loss in which federal government was able to get fines, the federal government -- i don't think we collect royalties on what is built into the goal, but short of that, we will continue from that particular day, that's not a relief one, it's not covered by the clinton era contract failures. the fact is, you stand at risk without an ability to get any premium on that risk in the gulf, is that correct? if it is outside -- welcome to. >> we are not compensated for what we do. >> so let me ask a straightforward question. to you believe that from this side, that we should look at legislation that provides sooner and more specific revenue sharing, based on the potential risk, in other words, effectively an insurance policy where you would have revenue,
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not for current expenditure, but for future expenditure, if you have another economic event like this? >> two things. there is legislation which pass i think in 2006 that is going to stairstep up, going to give the states a share and stairstep it up, and maybe by 2017 we -- >> i think you get 10% of the royalties. >> it will go up to maybe 35% or something. but until that goes into effect, and i would urge y'all, put it into effect community, you know, that's what we would like to see. put into effect immediately. then we would have some compensation for the risk we take. right now the only way that i see that we can reasonably be compensated for the damage done to us is if you take the clean water act fines, and they're going to be clean water act fines potentially in the
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billions, and that the states that were affected be given a share of that, with enough flexibility that they can spend it to help their economy. that day not have to get the money and say, we're going to use all this money to clean up from the bp oil spill. bp has already paid the clip for the bp oil spill. our damage is economic damage, to tourism, to the seafood industry, not that the seafood was hurt, just that nobody would buy it. they wouldn't let us finish fourth and and for the people work in the oil and gas industry, somebody mentioned a very sad thing that 11 people died on this oil rig. four of them were from mississippi. and this will, that gives you an idea of sort of a reference. we have a lot of people to work in this industry, and right now you know where they are? i went and visited the oil rigs
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80 miles west of israel. i met two guys from mississippi who were working in that oil well in israel you have been working in the gulf of mexico the year before, and they had to leave because of the moratorium. >> we certainly have seen a lot of those rigs sail loft. let me ask you a follow-up question. you mentioned the immediate following, too much control by federal government in bp, but governor, doesn't that continue -- doesn't that continue until today? is a bp still in the driver seat on compensation? arch on the backend ability to help your people? >> regardless -- i'm a recovering warrior, so i know that a judge has ruled that the gulf coast compensation facility, whatever it is called, that that is not true independent of bp. and that may legally be technically be right but i think
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they're trying to do a good job. we don't get many complaints in mississippi. they're doing something that is complicated. and i will say this about it. it is sure better than having to litigate all this where people wouldn't get their money for years and years and years, and the trial lawyers would get half the money. so, it is a long way from perfect, just like what i do a long way from perfect. but i think it is better than the alternative of litigation. and as i say, we have cases that are typical cases where people are not satisfied, but we really don't get complaints that we've been paid mississippi counties, people have been paid about 340, $350 million. >> and a gentlelady from new york is left but i might note for the record that i still am trying to find a constitutional way to suggest for those flawed
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contracts that were signed, this committee held hearings much earlier on it, found that the oil companies thought they were going to be paying royalties were actually surprised when they found out in the contracts allow them not to. with that i would recognize the gentleman from maryland, the ranking member for five minutes. >> thank you, mr. chairman. governor barbour, there is in the animal kingdom down in disney world there is a saying over the animal kingdom that says this, it says we did not inherit our environment from our ancestors. we borrow it from our children. and in that light, you know, i was reading a statement on a written statement, and it said, and i quote, the other major economic impact resulted from the moratorium. and i want to step away from broad generalities and focus on specific measures to prevent this kind of massive oil spill from ever happening again.
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everyone remembers bp's repeated failures to cap the well. it became clear to me that bp had no idea how to end this disaster. every week they would try a new strategy. but it was a complete trial and error fiasco. they tried to top it. i was down there when they're trying to build a top hat. i watch them doing it. .. is called nsl
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2010 and are you familiar with that requirement? >> i'm not familiar with that specific requirement. >> all right. well, let me read exactly what it says. it says each oil company must demonstrate -- and i quote this. that it has access to and can deploy surface and subsea containment resources that would be adequate to promptly respond to a blowout, end of quote. is that -- and so, governor, here's my question, do you think this specific safety measure
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should be repealed? >> congressman, superficially, that's a reasonable statement that you have just made. how it's enforced and regulated is something of which i'm ignorant. but what i do know is, we've had more than 31,000 wells drilled in the gulf of mexico in my life. this is the only time anything like this -- anything vaguely like this has ever happened. and when you consider the amount of our domestic oil production that comes out of the gulf, and comes from offshore drilling elsewhere, when you consider the fact that we have an energy security, a military security and a national security issue in this country because we import way too much foreign oil including a lot from people who are not our friends, then i would not be in favor of anything that reduces the
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production of domestic oil. i think the risks are way too small compared to what you give up. >> so in other words, if this were to happen again, if we had 87 days of oil spewing out into our waters, you're saying that the risk of that far outweighs the economic situation? and i'm not trying to put words in our mouth. i want to understand you. >> i understand. >> i'll tell you i saw what you're talking about. i saw the pelican. i saw -- i talked to the fishermen. i talked to the tourism people. i even talked to the industry people, a lot of them. and do you know what they said? and this is before we knew the full impact of it. they said you know what? we agree that we ought to have some kind of -- we should have the ability to -- and it should be proven ability to cap something like this before we even continue. >> and i think beyond that,
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congressman, it's very clear that this well blew out because normal standard procedures and protocols weren't followed. i don't think there's any question that corners were cut. i don't know whose fault it was. i don't know who the specific responsible party is. but i don't think there's any question that that was the cause of all this and that is why i say the risk in 1 out of 31,000 is worth taking when you're talking about something that's so important to the economy of the united states of america. that's why i have that view. >> i understand. thank you. >> the gentleman from tennessee is recognized for five minutes >> thank you, mr. chairman. thank you governor barbour for being here. along the lines of the negative effects of stricter drilling regulations on the offshore industry, why don't we take a minute and have you expound on
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the effects that the bureau of ocean energy management revenue and enforcement has been issuing -- well, let me back up. the bureau of ocean energy management revenue enforcement has been issuing a great deal of new regulations affecting offshore drilling. have your constituents been in touch with you about these new rules? >> yes. >> and did they find them problematic? >> well, the people that talked to us don't know all the details of the rules. all they know is that the regulatory efforts of the government are shutting down the gulf. have shut down the gulf. i mentioned earlier, i was in israel this winter, like in february, our offshore drilling rig -- two of the guys who were working on the rig were from mississippi. almost every american on that rig had been working in the gulf of mexico a year before. they had got run out of the gulf because of the moratorium and
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because of the belief, the perception, that the -- that it was going to be a long time before there was going to be drilling again in the gulf of mexico. that's what we get. people who have lost their jobs, kids who have lost their jobs, who are worried about -- who are worried about this. the service -- we have people who work offshore, but we also have significant service industries in our state that repair rigs that build service boats, that work on boats and that. so it is a big industry in the gulf south. >> okay. let's talk a little bit about bp's actions during this spill and recovery. there were many officials and citizens that said bp played too large of a role in the spill response and the federal government should not have let him play that large of a role and that was a common criticism that we heard in the media of the spill. at any point during the disaster during the recovery phase did bp
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have too much of a say in the response? >> well, no question, bp add big say in their response. and they were paying for it. but i have to tell you, congressman, sometimes bp was easier to deal with than the government. that's just a fact of life that we learn. that sometimes the federal government is not the easiest business to deal with. everything we were asking for, they had to pay for. everything that we asked them to do, they considered and almost every time they did it, where many times we would ask the federal government for something, like skimmers -- when we were trying to get skimmers, we thought the federal government was going to have to -- was supposed to have skimmers for us when the oil got close enough. it turns out we had to go get bp to give us the money to get some shipyards in mississippi to build the skimmers. so we'd have enough skimmers. so i'm not going to berate that
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part of the oil pollution act. what we didn't like was this state sovereignty by the federal government. >> if you want to put on your teachers hat for a moment and grade the response efforts of bp, the coast guard and the obama administration, what grade would you give each of them? >> you know, when you have been through the worst natural disaster in american history, as governor of mississippi, you learn not to criticize people too harshly for unprecedented, unforeseen disasters, natural or otherwise. but they had a hard time. they seemed slow to try to get in charge. we had the problems i'm talking about with command and control. but i don't want to be overly critical because when stuff like this happens, you make mistakes. and so that's why i'm -- i try
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not to assess blame. let's just figure out how to do it better. >> and i think that's very diplomatic and reasonable because no one can fully prepare for these. we always learn and we try to make improvements, and i think -- i agree with your statement. one last thing on the seafood. you said in your opening statements. the seafood is safe to eat and what the reproduction or is it too early to tell. >> we have had no evidence whatsoever or finding of anything from the oil spill that got into the reproductive chain. i mean, we're not seeing fish with four eyes or anything like that. but for a variety of reasons, we had a really great fall, but with the freshwater that's being allowed into the mississippi sound because of flood control in the river and the open of the bonnie carath through the lake
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pontchartrain and we're getting a lot of water that's going to kill the oysters. we're going to have to rebuild the oysters bed. the oysters can't get away the shrimp and the fin fish they get away from the freshwater and it shouldn't affect them. we have had some losses in dolphins, sea turtles that are more than normal. the peculiar thing about it is, we started seeing it before the oil spill. just a little bit before the oil spill this started happening. so nobody has been able to tie it but that is something we've got our antenna up about. is it we have seen mortality rates among sea mammals and sea turtles, for some reason, have been rising since last march or so. >> thank you, governor. >> thank you, sir. >> the gentleman's time has expired. we now go to the gentlelady from
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the district of columbia, ms. norton for five minutes. >> thank you very much, mr. chairman. governor, i appreciate your coming. i've listened to what you've had to say. much of it is reasonable. you say it's better than to litigate. i also agree you have blessings and curses in your part of the economy. the united states depends on your economy and the seafood there and sometimes they are at odds with each other. there are certain kinds of risks that have to be taken. i take it you would agree, therefore, that the best way to handle those risks is to prevent them. >> well, ma'am, if you mean -- >> quit -- >> no, ma'am. >> i mean, obviously, governor,
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an oil -- i mean, from preventing an oil spill. >> that's right. follow the right protocols and procedures so you don't have one to start with. >> yes, sir, it's what is hearing is all about. it's about the oil spill. now, the administration has focused on how to prevent it from happening again. but it has been severely criticized for regulations that would apparently accomplish and increase regulations and it's been burdensome and it's been criticized because the regulations would cost jobs. therefore, i was intrigued by what some of the -- from the very opposite top of the oil industry is saying and i would like your view on this. let's take john watkin who's the chairman and ceo of chevron. he indicates that he himself --
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they themselves have a burden here. but he says, and i'm quoting now, far from resisting are those rules, he means the regulations that are coming out, our industry is helping to strengthen them. the proactive and uncompromising approach of safety is the test we should all apply to any company starting with our own. in an industry that is always edging up against the frontiers of the biology and engineering. the best practices should be the only practices, corporate responsibility does not end with meeting market demands. would you agree with mr. watson, the chairman and ceo and his statement. >> with the statement i would. because i think what he's saying is the chairman of a big oil
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company, his incentive, among others, is he doesn't want his stockholders to be out $20 billion like the bp stockholders are. and that he's going to make sure they do it right the first time. >> and you're saying -- and what is -- what is -- what is really interesting in what he's saying is that the company not only supports the administration's new safety measures but they are working with the administration to make them stronger. he does not appear to be fighting the regulations for which the administration has been criticized. i want to give you another example from the top of the industry, the president of shell, marvin odom. again, shouldering his own responsibility but he says additional safeguards beyond what he himself would do must be strengthened across the industry to develop the capacity to quickly respond and resolve a
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deep water well blowout in the gulf of mexico. regardless of how unlikely it is that this situation will occur. and it didn't come from members of congress, that comes from the top of the oil industry and i just want to know if you would agree with mr. odum as well? >> i certainly don't take any issue with what you said. >> because i agree with you about the importance of preventing rather than litigating as you said, do you hold the industry accountable, here you have another oil executive arguing for more robust requirements to demonstrate the capacity to cap a well if there's a blowout. i just think it's important to bring out how the industry, instead of fighting regulations
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is working with the administration for tougher regulations? i think their concern, governor, is that these regulations would be across-the-board. so some of them are not engaged in spending more money to be more safe than others. so if there are regulations saying all of you are held to the highest standard given this blowout, then everybody, it seems to me, in the marketplace will be on an even playing field. >> the gentlelady's time has expired. >> i'll just simply say, ma'am, these companies have huge incentives to self-regulate. we went from -- for 50 years with one -- well, no occasions in 31,000 wells before bp. it's the only time it's ever happened and i think what the ceo of chevron is saying and the ceo of shell are saying is, yeah, we want to work with the government. we want to make sure there's
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rational regulation. that's not saying every regulation anybody can think of is something that we're for. in fact, mr. watson has been very, very public in saying that the moratorium was terrible. and was a huge mistake. >> and the difference between a moratorium and new regulation. >> well, it's a form of regulation. we're going to shut you down and while we're writing new regulations. while everything that you said i am very comfortable with, there are connotations there that i don't think we should take too far. if the idea is that no risk is too small and no cost is too high, i don't think any of -- any company in any industry would agree with that. >> and, of course, governor, that's a -- >> the gentleman from pennsylvania is recognized, mr. kelly. >> thank you, mr. chairman. i would like to yield my time back to the chair. >> i thank the gentleman. governor, that means he's given me the time.
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>> i couldn't see him. i'm sorry. >> i have no shortage of questions in responses. governor are you familiar with the containment -- >> no, ma'am -- nost. i was thinking of ms. norton. >> they are the group that's basically overseeing billion dollars of funds that were put together by the various oil companies so that would happen that one of in the-1,000 times they would have a whole different category of response. did that refresh your memory. >> i didn't know it by that time. but it's the industry effort for post-oil spill, yeah, i'm familiar with the program not with the name. >> and wasn't that billion dollars spent by the companies that had never had significant spills in the gulf. exxon, chevron, and conoco. i wanted to make sure we got that in the record. another thing i wanted to get in
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the record, as you know, governor, when you and i first met i was a businessman and you were a recovering businessman. it takes a long time to recover. the number you gave earlier was meaningful enough to repeat it. 1.4 million barrels per year seep into the gulf approximately automatically, right? >> yes, sir. that is what the usgis says. >> and for aeons, the gulf has absorbed that. it diffuses it. it ultimately is part of the ecosystem. let's go matter as a businessman and i want to get through it as quickly as possible. the federal government estimates that approximately 25% of that 4. -- or the federal government estimates 4.9 million barrels came out of the well into the gulf. approximately 25% or a little
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over 1.2 million were recovered. that leaves us 3.4 million barrels that got into the gulf in this disaster. i'm not reducing this for a minute but let's just do the numbers. so of that, approximately another 25% was burned off and another 25% was estimated to be dispersed using disbursement and we all understand there's some controversy about whether disbursement and if you take that was dispersed or burned off you're down to half, 2 million nearly 3 million barrels, no matter how you look at it whether you take the whole amount or the reduced amount, you got less than three years worth of oil went in, in one short quarter of the year period and you got about two years, if you give credit for these efforts to mitigate. is it any surprise to you that the gulf fish, shellfish and so
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on is doing just fine when, in fact, this is essentially, including the natural amount that's still coming in the gulf, this is about three year's worth maybe total that went into the gulf in one year. that this is not such a big thing even though it's a big thing to us individually and big a-big thing when it gets to your shores? >> congressman, right after the oil spill happened, in the first month or so, we had professors and experts who told us that the gulf for lack of a better term would digest this. that there are microorganisms in the gulf of mexico, and i think in other places where you have oil seeps that eat the oil. >> including santa barbara, california. >> that's right. i think probably the first place in the country that it was ever talked about was santa barbara. that they have oil that seeps through the floor there.
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but there were scientists who predicted that the gulf would essentially eat this up. and that's organisms would eat it up and there's millions and they would multiply. if you're in the job as the head of the disaster management you don't assume that's true. so we never assumed it was true. but it looks like to the layman from afar that that is, in fact, what happened. that the microorganisms were able to manage this and maybe that wasn't totally unforeseeable because they do eat up so much oil every year. two other thing i would mention, unlike exxon valdez, this was light oil. and secondly, the water was warm. exxon valdez, the water was very, very cold. the water here is pretty dang warm and the light touch, the benzines, the toluenes, they all evaporate faster in that warm
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water. >> i thank the gentleman. the time has expired. i recognize mr. clay for five minutes. >> thank you, mr. chairman. and thank you, governor, for coming today to the hearing. >> thank you, sir. >> governor, the national commission report noted something that may seem obvious which is that offshore oil and gas industry is inherently dangerous. but the commission also reported the accident are surprisingly comment that involved loss of well control. here's what the report said. drilling rigs are themselves dangerous places to work. hence, heavy work, chemicals flammable oil and gas all surrounded by the open sea environment far from shore. where weather and water conditions can change rapidly and dramatically. the seriousness of these risks to worker safety and the environment are underscored by
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the sheer number of accidents. governor, the commission report then says that there have been 76 accidents in the gulf between 1996 and 2009 that involve loss of well control accidents. and many of these accidents occurred very close to your state. were you aware of these figures? 76 accidents? >> of course, if my state is an oil and gas state, not just offshore and a drilling rig is dangerous. i mean, you see a lot of people who worked in the oil fields who lost fingers. got hurt. you know, got hurt one way or the other and got burned. it's a dangerous thing. the accidents you're talking about, though, all turned out to be -- were managed. they were manageable and managed. the bp macondo well spill is unique. but yes, sir, it's a dangerous
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industry and there are accidents that happen onshore and off. >> but do you think these numbers indicate the new safety measures were long overdue well before the deepwater oil spill? >> i think the industry tries very hard to protect their people 'cause it's very expensive when they don't. and so rational regulation is something we all ought to be for. we need to be careful of the excessive unnecessary and harmful regulations is my point. >> fair enough. some have suggested that new safety measures should apply only to deepwater wells because that's where bp's rig was when it exploded. do you believe that shallow water drilling should be exempt from new safety measures the administration is implementing? >> well, again, if you're talking about safety measures,
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to try to prevent injuries i don't think that's what you're talking about. treating the -- my only i would deepwater wells off the shelf as well. >> thank you for the answer. governor, doctor harriet perry of the university of southern mississippi's gulf coast research lab identified oil droplets in blue crab larvae last summer. this was the first time she had seen anything like that in 42 years of studying the species. do you think those oil droplets would do to the moratorium or the bp disaster. >> if they had shown up in any samples that we ever took out of the gulf, i would have been concerned about them. the seafood samples and we're very proud of the gulf
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laboratory of the usm but that finding was never replicated or we didn't have any similar findings in any samples that came out of the catch. and that's why it hasn't -- that hasn't bothered me. we just have had no seafood sample and neither has the federal government according to what they've reported to us that had any kind of evidence of oil pollution on it. >> governor, here, there are a number of reports of red snapper showing up with legions on the gulf. louisiana university professor is fairly confident that these legions are consistent with the toxic oil exposure. and i can share it with you, but here's a photo of the lesion of the red snapper.
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do you think that was a result of the oil spill. >> again, congressman, if there was showing up in any samples of seafood taken by the federal government or state government, i would be more concerned about it than when a college professor finds it in some anomalous place. >> but would you be concerned about -- >> if it were showing up in seafood samples that we're sampling by the thousands between the federal government and the state government, then that would give me real pause, but we're not. the fact that we're not finding it, means that i'm really not -- i don't know what the professors are finding or reporting to the news media. >> the gentleman's time has expired. the question has been asked and answered. we now go to the gentleman from texas. and please do not get into this texas versus mississippi oil,
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okay? you're recognized for five minutes. >> texas and mississippi share a common bond. we're both bordered by the gulf of mexico and both deeply affected by what happens in the gulf of mexico both environmentally and economically. i think you alluded in the answer to the -- one of your answers to the previous questions, governor, there are other countries that are drilling in the gulf of mexico and whose oil and gas rigs -- if there were to be an accident similar to bp or even smaller would affect our coast, is that not correct? >> particularly florida. >> so -- >> sure. >> absolutely. you got the brazilians looking at drilling. cuba is offering leases. just immediately nearby in florida, mexico for a long time. i know you're a recovering attorney. i'm a recovering attorney too. the u.s. doesn't have any
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jurisdiction over any of those -- any of those drilling operations. we can enact every imaginable regulation, and cuba and mexico could say, no. >> that's correct. >> don't you think it might be a better use of our resources rather than crippling our domestic companies and our domestic exploration 25% of our domestic oil supply that we might be focusing on how to respond in the event one of these accidents -- or any sort of accident occurs again? >> i do. i do think it's more -- i think it's appropriate the oil industry is doing it itself. they know more about it than anybody else. it looks to me we ought to be using our resources to have more american energy. that we need to get ourselves off of foreign energy and the best way to do that is to increase the supply of american industry. this has hurt that because this is a big source of domestic oil
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and the number of permits for new deepwater wells, about a fourth of all our oil is down 85% 85% the first year. and whether it's coal or oil or gas or hydraulic fracturing, we need to produce more american energy. >> and no -- in your opinion, no amount of government regulation will protect us from what other countries are doing? >> well, if we have rash regulation, that is good. but to have excessive regulation, unnecessary regulation, that's bad. >> and regulations like -- and slowdowns in issuing permits i think you would consider to be a problem, too? >> of course it is. >> and like texas, i assume mississippi has seen significant job loss as a result of that? >> we have, though, most of the guys have just left. >> and are you seeing assets
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that have been based in your state moving into other areas of the world, drilling platforms and -- >> what we saw happen after the moratorium, some of the big rigs to come for maintenance. it's good because you can't work but after the maintenance was done, they left. the way the industry works, those big rigs, they go work on big jobs. they're very expensive to move, not only in cost of moving but opportunity costs. they get paid huge amounts of money a day to operate them. whether they come back i assume they will come back is a serious issue. we saw not only the jobs move but we saw the drilling rigs that produced the jobs go to australia, go to angola, brazil. so that's a big damage to us not just to jobs on the platforms but jobs in the service industry. >> all right.
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and i appreciate you coming up and taking the time to share your experiences with us. i know your time is valuable so i'll yield back. thank you. >> would the gentleman yield? >> oh, yes, sir. >> thank you. >> governor, 250,000 barrels a day less are going to be taken out of the gulf. if more than a quarter of that is mississippi-related economic-related, what does that do to your economy relative to oil in the foreseeable future? that's the estimate. it's undenied at this point for the next two years. >> we get so little of it. >> i'm not talking about the royalty revenues. i'm talking about the jobs. >> well, it does have an effect on jobs. we have a lot of people who work offshore. as i said, i don't mean this as precision, but 4 of the 11 people killed on the rig were killed from mississippi which gives you a sense of the number of people that we have working in the industry on rigs, in the service industries. we have companies in my state
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that manufacture drilling rigs. that build service boats. so it ripples all through the economy. >> governor, last question, isn't it -- isn't it really a question of do we get it in america or do we get it somewhere else? isn't that really the gulf question today? >> well, if you look at when is the united states had reduced use of oil, it's every time been a recession. and so i don't want a recession. if we're going to keep a strong economy, we have got to produce more energy in the united states including oil. and to go shoot the best goose we've got laying golden eggs, the gulf of mexico, where we're getting 30% of our oil, or we were, and that production is going down now. and it's going to keep going down. remember, oil production today
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is based on decisions that were made in the past. normally, several years in the past. a moratorium is one of the few things that has an immediate impact. when we see -- what we're seeing right now with high energy prices, the speculators are speculating the u.s. is going to be producing less and less oil because they think the administration's policies will result in that. so they're betting the price of oil is going to go up. and then you take that with the value of the dollar which oil prices are denominated as dollars as the value of the dollar goes down, then that's a double whammy for the people who are paying $4 for gasoline. and the people that think you're going to deal with that by raising taxes on oil companies forget that they won't pay those taxes. they're just going to pass it on to the guy who pumps gas in his pickup truck. and so that's why they produced
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the best oil, and that's the best thing to keep oil prices reasonable. >> thank you, governor. mr. davis is recognized for 5 minutes. >> thank you very much, mr. chairman. thank you, governor, for being here. >> thank you, sir. >> i've listened intently to your testimony. of course, i grew up in the mississippi delta. >> did you really? >> on the other side of the river near greenville, mississippi, just a few miles. as dick gregory knows in chicago we fondly say that the only place where you will find more african-americans from mississippi is in mississippi. >> amen. >> and so we have a tremendous relationship with the state itself and we watch there closely what takes place and what goes on. i know that we're talking about the worse environmental disaster
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in the history of our country. but as you indicated in your testimony, it also has massive economic impact, particularly, in the fishing and tourism industries. and i want to focus a little bit there. according to the noaa, the total amount of shrimp caught commercially in the gulf decreased 27% from 2009 to 2010. the amount of shrimp caught commercially in mississippi was down 60% last year from the year before. could you share, and you've done it eloquently, a bit more of the economic impact that has occurred as a result of the oil spill? >> the fish industry hurt very badly because waters were
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closed, federal waters were closed first. mississippi waters were closed once we had encroachment. louisiana, because they were closer to the well, their waters were closed very early as well. and this is -- this is the principal fisheries for us for shrimp. now, we have big shrimp boats that will go all the way down the texas coast and come all the way back around the florida coast but there are not that many of them that are that big that go that far. so we have a lot of fishermen in the shrimp industry who's waters were closed to them. their losses were mitigated by the fact that bp was willing to hire their boats to be part of this vessels of opportunity program, about 1100 boats participated. and most days we'd have 5, 6, 700 boats out there and they would be getting paid -- some of them made fishing but the
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processors got clobbered. and nowhere if they don't have processors. and so while they were getting a chance to be helped, there was nobody who was helping the processors. and without the processor there's no fishermen. and so fishing was hurt that way. recreational fishing which is a real industry in my state. there are people in chicago who come down there and boat captains take them out fishing. shut out. shut down. again, they got some relief from the program but hurt very badly. so just in that -- just in that little small segment, we don't even talk about motels, restaurants. louisiana, to their great credit, they have new orleans. and if there's oil on the beach in venice, tourists still come to new orleans. >> are you confident that our food and drug administration and environmental protection agency
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that the agencies that we rely upon to determine the safety in many instances of especially the things that we consume that they are equipped, really give us information that we need to know to feel comfortable and secure? >> i have no reason not to be, congressman. and so i am. it is -- it's a team of state and federal, but, yes, sir. >> let me ask you, other than perhaps the lifting of any moratorium, what else can the federal government do that might assist with the economy? we know that the economy, obviously, was hurt badly. we know what the economy was even before the spill. what can the federal government do to add further assistance? >> the federal government is able to collect enormous fines
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under the clean water act. now, the federal government could assess those fines and through whatever process, either by agreement or by litigation say bp is going to pay x billions. the federal government could take that and just put it in the general treasury and move on and use it to reduce the debt, you know. it might cover a day or two worth of deficit. but we think the best thing the federal government could do is let some of the money, and there's legislation in the senate, i believe, to let most of the fine money go to the states. let the states use the money for with flexibility, with economic growth there. maybe that -- it has to be related to the gulf and the gulf economy. but we're going to have people who were fishermen two years ago that are not fishermen today and they're never going to be fishermen again because of the capital investment and the cost.
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we need to create jobs for them on the coast. maybe at the port. maybe in alabama they've got something totally different. maybe in florida, there's a whole different concept. but we would like to see a significant part of the fine money be given to the states and the states have the flexibility to use the money to have the maximum minimal growth in the areas. thank you congressman, thank you for answer. >> we'll go mr. labrador for a few minutes. >> in idaho, obviously, we don't have an oil industry so i don't spend a lot of time thinking about this. but i think about commonsense. there's a lot of commonsense lacking in here. i'll give you an example. you had a colloquy with several people here on the panel -- on this side and sometimes
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commonsense just seems to lack in washington, d.c. a couple of weeks ago, maybe a month ago, the first lady, her plane was close to -- they claim that it was close to an accident. and apparently she was within three miles of another plane. and the regulations said that all planes should be within five miles of each other. and apparently the first lady was within three miles and i'll get to my point and i think you'll get it in just a second. so the response in washington, d.c., was not, hey, gee, somebody screwed up and they failed to comply with the regulation. they should have been 5 miles instead of 3 miles. the response in washington was, we need new regulation. and it seems like that's all i ever hear about in washington, d.c. when somebody screws up, when somebody makes a mistake, we don't, say, that idiot didn't follow the regulations.
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what we're seeing -- we need new regulation. and it's to me incomprehensible. that all we can ever think about is adding regulation upon regulation when the regulators are not doing their job. they already have regulations that should actually be enforced and instead all we ever talk about is making it more difficult for industries, for private enterprise, for individuals to live, to survive. so can you explain to me -- and i think you mentioned this earlier, i think you mentioned that the macondo incident occurred because regulations were not followed. in fact, i think your word was that some corners were cut. can you explain that a little bit more to me, what you meant by that? >> i can't cite the regulatory regime, but in the normal standards and protocols of shutting in a well, it was clear from the reports at the time and nobody has denied it, that they
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didn't follow the standards and protocols that the industry had -- had been using settled on and had worked with great result for a long, long, long time. this was widely reported and so it always seemed to me pretty clear why the well blew out. and this was reportedly, again, with nobody arguing -- this was a pretty tough well. they had trouble with this well. it had hiccups. it had belches of natural gas that they had trouble with. they had to shut the well down at least once during this. so this wasn't a well to cut corners on. this was a big elephant well, but they did cut the corners and you're right. when you say the issue is following the regulations we got now, i can't improve on your
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statement. in washington we don't understand is, why is it that we can't understand is we have regulations -- i think you used a number -- we've done this in the gulf 30,000 times and this is the first time something like this happens. can you repeat that again? you said -- >> yeah, there have been more than 31,000 oil wells drilled in the gulf of mexico in the last 50 years or since they opened the gulf in our four states. and there's never like this vaguely to happen. >> okay. i think i will yield the rest my time to the chairman. i just for the life of me i cannot understand why we cannot not in washington just understand that if we enforce the regulations that are in place, we will actually be able to have a good environment. we will be able to have good water and jobs and the economy will improve. thank you very much. >> thank you. >> you know, i'm going to follow up on the gentleman's line of questioning because i think it
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was excellent. governor, on the day that the oil well blew 100 miles off your shore, there were two mms officials, a father and son team, that came on; reviewed, passed and left. isn't that so as far as you know? >> i don't know that, but -- >> but i assume it's true if you said it. >> but we're going to have the administrator of the successor organization mms up here next and that's going to be one of our questions, why is it that what failed before won't fail again? and that's going to be a line of questioning, as not just of the new regulations but an agency that failed to ensure safety. what has changed there. so hopefully they'll be as candid as you've been. >> well, i have to say to you, i accept that because the 31,000 wells i actually got from janet napolitano and i accept that those two guys were there. >> thank you, governor. the gentleman from virginia,
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mr. connelly. and by the way, i didn't have to look up what chutzpah was in your opening statement. but it was interesting to see using imported words. >> thank you. thank you, mr. chairman. where i come from, chutzpah is a very common word. and i want to welcome governor haley barbour to this committee. and just speaking for myself, i regret very much you're not running for president. i think you would have added a good political sense and humor so we're sorry we're not going to see your candidacy. >> thank you very much, congressman. that's very gracious. >> and thank you for your service. governor, i was listening to your explaining with congressman burton and explaining about the negative media attention as somebody who ran a very large county with 1.1 million people i can sympathize but on the other hand, was it the bad media that caused a hit to the mississippi
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economy or was it the devastation of the oil spill itself? >> congressman, we didn't have devastation. i mean, the problem was the news media took the very, very, very worst areas in louisiana and they repeatedly showed that over and over and over. and it gave people the impression, that's the way it was all over the gulf coast. they would actually have stories about mississippi and pictures from louisiana. >> hmmm. >> and you may not have been in here, literally, on our 80-mile shoreline, we never closed 1 foot of beach for one day except on one occasion. we had a high tide, either right before or right after a hurricane missed us, and it pushed some water over the highway and through a culvert and it pushed some oil patties up there and we closed that beach for more than -- we
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actually closed that beach overnight. that's the only time, but if you watched tv in virginia, you saw louisiana and you thought mississippi and florida and alabama for that matter and texas were all the same way. and that's what killed our tourist season. >> yes. common problem with the media sometimes in terms of -- >> amen. that's bipartisan. >> yep, absolutely. when you look back now and if someone gave you a truth serum, do you think in retrospect that the process for permitting and improving deepwater horizon oil rig was flawed? for example, it got a categorical exclusion under the process because the process allowed for that? in retrospect, was that a mistake? the nepa and one other aspect,
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governor, and then please respond -- the nepa process predicted under the nepa review, which was truncated that under the worst case scenario we were looking at 4300 barrels of oil spilled and it would never reach the shore? >> congressman, in answer to your question, i think that what we had done for 50 years with more than 31,000 oil wells, with very positive results, in fact, nothing like this ever having happened, i would not take issue with that. i mean, regardless of what we do, occasionally you're going to have the bad outcome. but we're not going to make people quit taking left hand turns. we're not going to outlaw left hand turns.
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this happened one time, does that mean we have to turn the world upside down and i think the answer is no. >> governor, i would agree with you. i don't think we have to send the world upside down. really, my question is not that. that's not my only choice. the question is, could we in retrospect have tightened up regulation and been more rigorous in the review process such that and the enforcement, for example, get the blowout protection equipment that might have stemmed the spill or contained it? i mean, you know, i take your point that the devastation wasn't what was presented visually on television. fully respect and understand that. on the other hand, at one point the extent of the spill on the surface of the water would have gone from my district in
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northern virginia all the way to new york city if it were super imposed on the map here. that's eye-popping. and that's a deep concern to all of us. and so all i'm asking is don't turn the world upside down, could we not on a bipartisan basis agree that in light of that experience, it only requires one to create such environmental havoc. this is in the category it seems of a nuclear disaster. it only requires one to, you know -- turning left hand and having an accident god forbid this is a terrible thing if someone is hurt but it's a very contained thing. these things are not. >> if chairman is correct that there were two government regulators on the rig that day, and if the reports that have been written over and over and over without contradiction, they did not follow the normal protocols and they did not follow the standards and these two regulators were on the well
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that day, i think the congressman from idaho's point is the right point. it's not that we need more regulation. it's that we need to actually enforce the regulations in real life. if that is factually accurate, i have no reason to think it's not. >> mr. chairman, would you indulge me -- >> the gentleman is recognized for one more question. >> just a clarification, mr. chairman. thank you. do you mean by that, let's have the full regulatory process that's on the books right now, no more exclusions? >> yeah, i couldn't go that far because of my lack of information. there may be some exclusions that are well-founded that are like we see in many, many other processes, regulatory and otherwise, you know, like you fill out the form. if the answer to c and skip down to f and i don't know that exclusions are that type.
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>> thank you, governor. >> i thank the gentleman. governor, this may come as a surprise to you, but i haven't had my round of questions yet. i'm going last. oh, there may be another minority member coming and i'm going now and i recognize myself for five minutes. governor, i'm going to put up on the board a quote from secretary salazar for your comment. and i'll read it. there is no question that the suspension of deepwater drilling will have a significant negative economic impact on direct and indirect employment in the oil and gas industry as well as other secondary economic consequences. >> that's correct. >> but he did it anyway. >> that's correct. >> can you explain why somebody would know that it was going to hurt economically and by the way, he follows that up, which isn't on this book -- he follows
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up by noting that there's an extremely good history of safety in the oil industry. >> mr. chairman, my own view is that the policy of the administration is to increase the cost of energy so that people will use less of it. and, therefore, there'll be less pollution. and alternative forms of energy will become more economically competitive. i said that publicly thousands of times. i might as well say it here. when they did the moratorium, that was my assumption. that this was consistent with this policy. and look, it's one policy. it works. we got $4 gasoline. and gasoline in january of 2009
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was 1.80-something. but that's what i took to be the rationale for that. is to make these other alternatives economically competitive, you had to increase the price of oil and other traditional -- >> well, it's certainly done that. by the way, the quote that wasn't on the screen is i'm also aware that as a general matter the safety record for deepwater drilling has been good. i'm going to go to one more very -- a very interesting quote because the next panel is going to be dealing with this. last week, or two weeks ago, as it was, secretary hays was here and told us there was no connection between high oil prices and domestic production, meaning he was quite sure if we drilled more here it wouldn't change the global price. i'm going to take you to page 23 of an mms report, mms -- it's titled mms economic impact assessment. at the time, they were assessing -- and i'll just read
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it 'cause it's a little hard to read that one. they were assessing at $75 a barrel, which is where we were, not where we are, unfortunately, that if production went down by 84,000 barrels a day, .84 million barrels a day, that we would have an increase of about 47 cents a barrel. now, it went down by three times that. now, you're not an oil speculator, neither am i. but it would not surprise you that if you went down -- if you got a half a dollar increase for such a minor one and if you decrease by three times that amount, wouldn't you guess it would go up a whole lot more than that, 10, $15 a barrel could certainly happen if you took that much out of a limited economy? and particularly, if the market believes that this is going to be policy for a while, that you're going to have a moratorium in the gulf. that you're going to reduce production in the gulf. that your going to issue 85%
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fewer new deepwater drilling permits, that the market sees that as there's going to be less u.s. oil production. and while whoever said you can't affect the price of oil overnight, well, of course, that is absolutely true. but if there is a belief that the u.s. is going to produce less and less oil going forward, particularly, because of government policy, then the price of oil is going to go up. >> one more thing i wanted to get into the record. governor, you're one of the many states that are a right to work states, aren't you? >> yes, sir. >> in fact, every state in the gulf of mexico, every oil state is a right to work state? >> i think all the states in the gulf of mexico -- i don't know if every oil state is -- >> i'm sorry. california is a oil state and we're not right to work. every gulf oil state is a right to work. >> it's my belief. >> does it surprise you that the
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policies of this administration seem to be targeting the economic well-being of your area? and i'm not trying to say it's a big plot or anything else. but it does seem like if 9/11 aircraft fly into the pentagon, fly into the twin towers, the next day we're figuring how to get airplanes back in the air. and yet, the economy, the seafood economy, the tourism economy and the oil economy of your states -- when you're suffering, it seems like there's no limit to how long this administration will take to have a moratorium to think about whether or not they can let you do something that's so vital to your economy? >> well, the moratorium was a mistake. it was very harmful, not only to our state but i think more importantly very harmful to the country. i can't read what's in people's hearts or what's inside their heads.
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but i have noted -- and i haven't said it here but i think it's appropriate to say, there has been an effort to raise taxes on the oil industry because it's a very profitable industry. but -- >> every day here, governor. >> it's interesting in the senate bill to raise taxes on oil industries, the idea was deficit reduction, to raise the taxes $2 billion a day. i mean, $2 billion, in a year. the problem is that's half of one day's deficit. you know, you'd to have raise the taxes on an oil industry by a factor of 700 times more than that because $2 billion tax increase on the oil industry is equal to one-half of one day's deficit. i mention that because it says to me, that can't be the real reason. i mean, the real reason can't be to touch the deficit 'cause it doesn't even touch the deficit. and, of course, as we know, the guy who's going to pay it is the one who pumps gas in his truck.
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so do i think there are some people who don't like the oil industry or think it's a good whipping boy politically? i suspect that. but i can't say what's inside people's hearts or minds and don't pretend to. but i do know it wouldn't do anything about the deficit. >> governor, i couldn't agree with you more that we can't be sure of somebody's motives, although i can be sure that if wall street were to cause an economic meltdown, that this administration would allow it to be up and running the next day because they did. the last administration did, this administration did. we've had great disasters and great impacts in other areas of the economy but amazingly, the reforms came after everyone was back up and running, not before they were allowed to go back up and run. governor, you've been very kind with your time. we appreciate your being here. you're probably the most welcomed relief to us in congress to see somebody who's
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doing the right things, who's making the right decisions, who's steering a course for your state and we appreciate your taking your valuable time to be up here today. >> thank you, mr. chairman. thank you, congressman. >> we'll now take a five-minute recess to set up the next panel. ..
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[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> congressman darrel issa, california, chairs the house oversight and government affairs committee, they are holding a hearing on the gulf spill and oil recovery efforts. just finished from hearing from the governor of mississippi, haley barbour. there's another panel of witnesses set to testify, including folks from louisiana
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and florida. they are next in the two panel hearing that's expected to run a little bit longer than the earlier anticipated time. meanwhile, the house comes in about 20 minutes or so. they will continue work on homeland security spending on 2012. likely house passage will happen, and the house will move on or at least begin consideration of the military construction and veterans affairs bill for fiscal year 2012. you can follow the house on c-span. [inaudible conversations] [inaudible conversations]
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[inaudible conversations] [inaudible conversations] [inaudible conversations] [gavel] [inaudible conversations] >> try that again.
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[inaudible conversations] >> with that as you saw in the first panel, i'd ask all of the witnesses to rise and take the oath. do you solemnly swear or affirm that the testimony you are about to give will be the truth, the whole truth, and nothing but the truth. let the record reflect that all
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witnesses answered in the affirmative. gentleman, the first panel was one, you are five. i will ask you to please summarize your opening statements and stay within the five minutes for each other's and our side. i apologize the first panel going long. hopefully it set up questions and answers for all of you in the second panel. mr. taffaro. >> thank you, mr. chairman, committee members, ranking members cummings, i appreciate the opportunity to speak with you today. while there have been numerous reviews, reports, and studies completed in the -- in relation to the bp oil spill disaster, the reality of the impact continued to unfold and intermediate and long term obstacles and affects are just coming into focus. the experiences and lessons learned through the first year
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of the oil spill -- remaining years of the oil spill recovery. those directly and indirectly impacted by the spill are offered as just that, insights. my hope is that the message delivered is not lost in the corporate world of spin markets or spinoff media expose designed to sensationalize the event and leave the victims and the coast without the attention it is warranted. insight one, hold the responsible party accountable. there are a few axiums of our society that we learned. if you make a mess, clean it up. as simple as it sounds, there's been an allowance that allows bp to make it right on their own terms and not based on the impacted states, communities, businesses, and individuals. unlike the natural disasters that we continue to respond to as a nation, this disaster as an
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identified responsible party. there is no value in talking about the disaster in terms of responsibility if there are loopholes and justifications that allow the agent that created the mess to define the terms of the response. added to this message, here's the mess maker. somehow we seem to be routed focus is bp good or bad, is deep water drilling good or bad instead of who's responsible for the mess and has it being cleaned up in a way that does not create another mess. the reality is the value in cleaning up a mess that was created offering as much community and positive spin to the mess maker as any spin marketing campaign would accomplish. the second insight that i offer is to remove the response and restoration authority from the responsible party. this must not confuse the terms
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authority and responsibility. the responsible party being responsible should translate into doing what is deemed to be required to complete the action involved in addressing the environmental, coastal, social, economic, medical, and emotional impacts of the given disaster. removing the authority to decide what those interventions that shall be required from the responsible party protects the impacted states, communities, businesses, and individuals from further victimization. in an over simplify indication illustration, when we are involved in a car accident, the person who caused the accident doesn't get to dictate how and what treatment is dictated. insight number three, legislate for the disaster that will happen versus one that has already happened. a critical lesson that continues to face us is the need to address current legislation in a way that transcends the most recent disaster. while the need to know causal information in any disaster is
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important, the framework of legislation that allows flexibility in accomplishing the overarching mission of effect ev and expedient response and the ability to require action by a responsible party must be examined. while new legislation will not correct any of the ills of the bp deep water horizon spill, we can implement language, broader authority, stiffer penalty for lack of cooperation, including language that revokes the company's ability to operate under other permits if it is not compliant. while in all terms, making sure that production is not mutually exclusive with safety. unfortunately, we have a collective unit of citizens and industry leaders cannot predict the next disaster. we can predict the next respond, we can predict the next
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worst-case scenario and predict legislation. finally the last insight is to localize the response process to better serve the impacted victims. the shortest distance between two lines is a straight line. the shortest distance between two points is a straight line. no one argue that is. we continue to set aside the scientific law as well as we develop and address local needs at a nationalized approach. while impacted citizens of st. bernhard parish continue to have less than 70% of the claims unsettled, it continued unfeathered. while i have no problem with an honest's day pay for honest day's work, i question the claims processing and payment thereof without a performance clause in favor of the victims. we were told claims processed through the feinberg was independent. that's not true. we were told the claims would be easier to process at the local
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level in the feinberg plant. that's not true. we were told the feinberg plant had greater flexibility and could address the victims regardless of the impact of bp. we have found this is also not true. i have met mr. feinberg and have no personal problem with him as an individual. i do not claim to know his business. but i do know that because of the lack of ability to resolve claims at the local level, his program and process has been ineffective. st. bernhard has offered at no cost to the feinberg plant to assist him in identifying those that are likely to be questionable versus those who's local work history supports the need for assistance. a common tenant in the disaster response is disasters are local. this is supported because the impact of disaster is most real for the individuals living or mourning through it. we would ask that the local government and local involvement continue to be involved not only
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in the compensation process, but equally in the response and restoration phase of all disasters. thank you for allowing me to share my thoughts and thank you for keeping this issue at the forefront of this agenda. thank you. >> mr. williams. >> thank you, mr. chairman. on behalf of florida's 67 counties and more specifically our coastal and communities of northwest florida, i would like to thank the chairman and the committee members for the opportunity to address the house oversight and government reform committee this morning. before i begin my presentation to the committee, i would also like to take the opportunity and tell the chairman thank you for sending down two great staff members that saw first hands the things within my community and the state of florida, mr. gravel and hamilton, they created a special opportunity to create the experiences and tell the stories first han to -- firsthad to the members of the committee.
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i'm here to tell you what we faced in the days and months in the deepwater oil spill. we cannot ignore the good intentions and herculean efforts by the federal and state response teams. even the responsible party that tried to do the best while facing the unique and global tragedy. however, as a lifelong florida resident and survival of 20 hurricanes, best efforts are not effort. the response is not just swift, but clear, organized, and collaborative for the communities impacted. there is no question that florida has the foremost disaster response team in our country and arguably the world. with hurricane season the last six months, 20 storms, florida can ill afford anything but to be the best. yet in the immediate aftermath of the deepwater horizon oil spill, or expert response teams were forced under the oil pollution act of 1990, rather than the tried and true federal
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stafford act. our emergency management was turned upsidedown, leaving the unified command structure that was established outside of florida altogether. for example, during the first critical weeks of the oil spill, individuals based in alabama who had never stepped food in gulf county or other panhandle counties of florida that were using ten year old area plan maps were making final decisions regarding how gulf beaches and all of florida beaches would be protected. local resources were ignored as strangers decided whether to place oil protection booms near beaches and sensitive environmental resources. to compound matter, unify command was limited and rarely consistent with day to day. leaving my county and all of florida counties in the dark and concerned that any preparation and response effort would be too little, too late. with little information coming from unified command, local
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communities were force to expend significant financial resources gearing up and preparing for potential events that could be quantified or predicted. this came at a time when florida was laying off employees due to the economy. yet it took more than four months to see reimbursement. faced with these challenges, our coastal county themselves under the umbrella florida association of counties to address a range concern as we evolve the response to recovery. while counties consistently met with state and federal officials, in most instances, the role of the local community was minimized. more importantly, inspite of our efforts, recommendations regarding what type of recovery structure would meet our needs and never specifically sought. this story and experience has produced a short list of priorities that i would like to call lessoned learns. i share this with you in hopes that congress will take the concepts, review them, and any
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future disasters are operated with clear organization, collaboration, strong communication, focused on the local community, individuals, and the businesses directly impacted. we strongly encourage congress to review and evaluate opa. florida's emergency response system which operates under the stafford act, doesn't just work, it's an example to be followed. why not take the best response plans and teams and use them as a foundation of our disaster. the stafford act work because local communities are the first responsers, the state government responding to our local needs and the federal government responding to the state need. opa failed because it was a top-down approach that looked to the responsible party, rather than to utilize local expertise and resource. this lack of collaboration created duplication of all efforts. it could be our recommendation that congress provide greater clarity and direction to the process. probably the greatest frustration for everyone involved, both private and public for constant changes in
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the claims process, there were eight different policies, procedures, and applications within the first two months. the summer was almost over before the businesses and individuals finally had a solid process. as for the public or government claims, it would be our recommendation that cost associated with first responders, such as protection, prevention, mitigation should be clearly laid out similarly to the stafford act and not held hostage by the responsible party. in preparation for the next potential event, a separate funding process should be established on the state of emergency operation and local first responders plans are not delayed because of questions of financial capacity or whether it will approve the specific cost. in addition, loss of revenue should be included in a process that incorporates the third party review. the party should not have leverage over the state and local communities concerning economic issues and methodology and potential veto over certain
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claims. any independent, inbiased process should be established almost a year before it's completed. we also ask congress to establish and approve the gulf coast recovery fund with 80% going directly to the environmental restoration and economic recovery of the gulf coast region. i personally support and ask congress to support the report published in september of last year. mr. chairman, like you, we are committed to working with the federal and state partners and appreciate the opportunity to be before you today. >> thank you, mr. kief. >> thank you for the opportunity to testify and how we have been affected as a result of the bp disaster, moratorium, and related issues. offshore toeing is a partnership of three smaller marine towing companies that conduct a fleet in the gulf of mexico, providing
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services in the oil and gas sector, primarily rigs to and from in shallow water. we are located along the gulf coast of louisiana and collectively employ approximately 10 people. although the moratorium has been lifted and the shallow water sector was not to be effected, substantially economic impacts have been felt and economic recovery is more distance now than ever before. this company used to move 25 to 30 rigs a month. now we move 10 or less. due to the lack of drilling permits being issued. on top of that auto rigs are leaving the gulf as well due to the challenges with the issuance of drilling permits. we do not have term contracts. and work on the job to job on the spot market. bp will not compensate companies like ours because they claim that our economic losses are a
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result of the moratorium, not the spill. i was present during mr. brown's testimony and heard his testimony. he testified he felt the government was responsible as well for the blowout. but the administration continues to reflect as much light as they can on bp or anyone else they can claim. $20 billion sounds good, but grants us no relief. unforgiving governmental agency such as the boemer do not -- we have had few layoffs because of this crisis because we maintained an optimistic view relative to the industry in a timely fashion. we have used capital blended with lines of credit to offset the short comings that normal earnings would support. even the exercise has it's threshold. the beginning of the tolerance
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levels that have been established has been met now. expectations for a timely recovery are lower than ever. our confidence in the administration, government, and it's agencies are not what they used to be and we do not believe in any responsible solutions are in our near future. we have recently reduced wages on employees and have started a plan to begin releasing employees. we can no longer afford to subsidize unemployment and must enforce the unpopular but necessary exercises. our maintenance schedules have also been modified and changed because the necessity to replace and or overhaul machinery will no longer be necessary due to the lack of use. factories such as caterpillar, general motors, and john deere will be beginning to impacted as well. therefore, states such as michigan will feel the slowdown along with the rest of us.
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there are other items to be identified, but this is the biggest example to describe. we understand that precious lives were lost and environmental disaster that was some years in the making should not be ignored. however, there was a governmental agency that had a hand to play with this along with the others. environmentally, the american government and several administration over the past 60 years have ignored our environmental needs in this region. the louisiana coast, marshes, and wetlands are disappears at astonishing rate. they have ignored more governmental issues, including macondo, more than anyone else. mr. brown claims to be affected by the moratorium, he doesn't understand many people are offended by the actions or lack of actions by the government and agencies. the administration, government, agencies, media and the press have done a good job of ep


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