406 Dirksen EPW Hearing Room

Patricia Horn

Vice President and General Counsel, OGE Enogex Incorporated

Chairman Crapo and other members of the Fisheries, Wildlife and Water Subcommittee, I am pleased to share with you the experiences of Enogex Inc. (“Enogex”) concerning the consulting process pursuant to Section 7 of the Endangered Species Act (“ESA”).


My name is Patricia Horn and I am Vice President of Enogex[1]. Our company takes great pride in our environmental performance. We know that environmental responsibility is important to the quality of life of our customers, the communities we serve and our own employees and their families. It is also critical to our success.


We are a company committed to complying with and, when possible, exceeding government-established environmental standards. We seek to continually monitor, assess and improve our environmental performance. We also seek to foster strong working relationships with the local, state and federal agencies that monitor our environmental stewardship.


Finally, we believe we have a dual responsibility to protect our natural resources and to provide safe, reliable and reasonably priced power and gas transportation services. The company will, therefore, bring to any emerging environmental policy discussion the need for a sensible balance between environmental gain and its resulting costs and resources.


The purpose of this testimony is to outline the historical interpretation and the more recent philosophy and change of the U.S. Fish and Wildlife Service (“USFWS”) in its informal and formal consultations relating to protection of an endangered species believed to exist in areas where Enogex conducts pipeline construction activities in Oklahoma and Arkansas.


Background. Enogex and the oil and gas industry conduct a wide variety of operations from construction of well pads and access roads to laying gathering and transmission pipeline systems for the delivery of natural gas to intra and inter-state markets. Enogex conducts its activities in the majority of counties in Oklahoma and in numerous counties in Arkansas.


In order to proceed with oil and gas construction activities, Enogex requests applicable environmental clearances or informal consultations relating to any endangered species that may be present in the areas of the planned construction. Enogex requests these clearances from the USFWS. An endangered species, the American Burying Beetle (Nicrophorus americanus) (“ABB”) has been identified as existing in Oklahoma and Arkansas.


The ABB was listed as endangered in 1989. At the time of listing it was believed that there were only populations in Rhode Island and Oklahoma. As of 2002, populations are now known from Rhode Island, Oklahoma, Nebraska, South Dakota, Kansas, Massachusetts and Arkansas. The beetle is listed as existing in 17 Oklahoma Counties and 4 Arkansas Counties. It is suspected in other counties in these two states. (These known and suspected counties will be referred to as “the ABB Counties”)


The ABB is a large beetle that ranges from 1 to 1.5 inches in length, has four red-orange spots on its wing covers, and is distinguished by its larger size and its orange-red pronotum. The beetles are habitat generalists, occurring in many different habitats. They feed on carrion and lay their eggs in or adjacent to a buried vertebrate carcass. It is suspected that carrion availability in a given area is more important than the vegetation or soil structure. The beetle is typically active in Oklahoma and Arkansas from mid-May to mid-September. Adults are presumed to be an annual species, fully nocturnal and are usually active only when nighttime temperatures exceed 60 F (15C). The remainder of the year it hibernates. The ABB has been recorded traveling as much as 2 miles per night.


Historical Treatment. Historically, Enogex has requested environmental clearances relating to any endangered species in the ABB Counties from the USFWS in Tulsa, Oklahoma and Conway, Arkansas. Informal consultations relating to projects being initiated in the ABB Counties have always resulted in a “no adverse impact” finding by the USFWS. Such clearances from the USFWS were typically determined within a few days to a little more than a month with the responses generally provided within 30 days. Accordingly, projects received clearances and were allowed to proceed without delay.


Enogex’s main construction activities relate to laying gathering or transmission pipeline to connect producing natural gas wells to its pipeline system to allow the produced natural gas to be marketed. To be competitive and allow Enogex the ability to provide these services, wells must be connected efficiently and without delay. It is not feasible to begin the construction of the connecting pipeline until it is determined that a well being drilled will produce in commercial quantities. Upon this determination, Enogex customers expect and demand that the pipeline be constructed and placed in service without delay to transport the natural gas produced to the market place. If Enogex is unable to predict and understand the timing required to timely complete its construction, it cannot be competitive and meet the expectations of the well operators, working interest owners or royalty owners in the producing well.


Prior to late 2002, Enogex submitted environmental clearance requests or informal consultations to the USFWS for the ABB Counties and received clearances that either no endangered species were present or, if present, the proposed project would have no adverse effect on the ABB. During years 2000 through 2002, Enogex submitted 54 informal consultations to the Tulsa, Oklahoma USFWS and 46 to the Conway, Arkansas USFWS and each time received the clearances to proceed with the planned pipeline construction. A change in these clearances being granted without comment began in July, 2002.


Initial Change in Consultation Process. By letters dated July 16 and 18, 2002, Enogex was advised by the USFWS that two proposed pipeline projects in Latimer County, Oklahoma were in the vicinity of where the ABB may occur. The USFWS, at this time, recommended that the pipeline projects be implemented outside the ABB’s active period (early October through April) and thereby avoid impacts on the species. If this recommendation was not feasible, the agency recommended continuously baiting beetles away from the project area using chicken parts or mice to ensure that beetles would not be adversely impacted by the proposed projects. The USFWS advised that if the proposed projects could be implemented outside of the beetle’s active period or if the recommended baiting protocol was followed, then the ABB would not likely be adversely impacted by the projects. Therefore, no further Section 7 consultation would be needed.


Drastic Change in Consultation Process. In October, 2002, in response to requested informal consultations relating to pipeline construction projects to connect two recently completed natural gas wells in Latimer County, Oklahoma, Enogex was advised by USFWS of a drastic change in treatment relating to the USFWS’s informal consultation policy relating to the ABB. The USFWS advised that sufficient site-specific information on the occurrence of beetles within the project areas was not available and that therefore the USFWS could not provide an accurate assessment of the impacts of the projects on the species. The USFWS recommended that Enogex conduct a survey for the presence of the ABB in the project areas. The USFWS advised that the survey should be conducted by a biologist with knowledge of the life history of the ABB and who has a Section 10 permit from the USFWS to conduct such surveys. Due to the beetle being active only during the warm summer months, the USFWS advised that the survey could only be conducted between late April and early September. If beetles were observed, further Section 7 consultation would be required.


If Enogex could not proceed until after a survey in the summer, the connection of these newly completed wells by Enogex would be delayed by at least 8 months. Enogex responded quickly to understand the request and data that would be required to properly initiate a formal consultation immediately. Enogex retained a biologist to conduct field surveys. It consulted with the EPA to determine what further information needed to be provided to EPA so that a formal consultation could be requested. Enogex provided detailed project information, construction protocol, operations and maintenance protocol, geological survey maps, survey plats, storm water pollution prevention plans and recently completed habitat surveys to the USFWS and EPA. The EPA formal consultation letter was sent to USFWS on November 27, 2002. The final Biological Opinion (“BO”) from the USFWS was received on January 23, 2003.


The BO issued by the USFWS determined that after reviewing the current status of the ABB, the environmental baseline for the action area, and the cumulative effects of the proposed action, the projects were not likely to jeopardize the continued existence of the ABB across its entire range. No critical habitat has been designated for this species, therefore none was affected. The BO provided numerous restrictions, implementation of required terms and conditions relating to construction practices and established a permitted take.


Immediate Effects of Change to Pending Commercial Well Connects. As noted, these most recent requests for consultations to the USFWS related to two recently completed natural gas wells ready to produce natural gas to the market place. One of the wells was not connected to Enogex and the connection was awarded to a competitor. This resulted in significant revenue loss to Enogex exceeding $1,000,000 over the life of the well. Additionally, because the delay prevented the natural gas in the well from reaching the market, the well producer lost approximately $2,000,000. After receipt of the BO by Enogex and extensive education and training to its operators and contractors, the second well was connected to Enogex. The delay in the treatment of the ABB consultation resulted in a loss to Enogex exceeding $150,000. Additionally, the delay caused the well producer to lose approximately $2,500,000 because the natural gas in the well could not get to the market.



Future Implications. This recent change in treatment and approach of the ABB by the USFWS is not based on any new data or science about the ABB. Instead, it is our understanding that this change is based upon new interpretation of existing data differently from previous reviews. Currently, the USFWS is responding with a very aggressive approach for the purpose of preservation of the ABB. Enogex has been informed that all proposed construction projects located within the ABB Counties will be exhaustively scrutinized and formal consultation initiated.


If a pipeline, oil and gas operator or other construction company wishes to construct during the ABB hibernating season (late September to late April) and the project triggers a federal nexus, the company will be required to enter into formal consultation with the USFWS. The result will be the issuance of a Biological Opinion that will state restrictions, construction practices and permitted take of the species. Such consultation, if not delayed, is required to be completed within 135 days after the Formal Consultation is officially requested. A federal nexus trigger includes projects that exceed 5 acres of soil disturbance, cross jurisdictional waters or involve mechanized clearing of forested wetlands, and include all FERC regulated projects.


The USFWS has noted construction activities presented to it for consultation in the ABB Counties in 2002 included pipelines, roads, cell towers, residential developments, bridges, mining, petroleum production, sewer lagoons, commercial developments, recreational developments, fiber optics, cable and electrical lines and water treatment facilities. Clearly, the implications of this new procedure and expansive interpretation of the ABB data will have far reaching effects to any construction activity in these ABB Counties.


As noted, Enogex’s experience in the past is that it took approximately 30 days to receive clearances to proceed with pipeline construction. Under the new interpretation, the USFWS has 135 days to complete the formal consultation. The most recent construction projects for which formal consultations were entered into by Enogex took approximately 4 months to receive what the USFWS called “expedited” clearance.


In addition, Enogex has been required to hire a third party biologist to survey the proposed project area for the presence of the beetle. These surveys are time consuming and expensive to complete. Enogex estimates an average of $5,000 is incurred for each project in order to provide data relating to the specific area and the presence or absence of the ABB.


Enogex (and all effected parties) will be required to expend enormous resources of time, energy and money to establish construction programs, training, third party experts and to implement the expansive conditions and requirements to meet the conditions now being imposed by the USFWS in these areas. Such additional costs and burdens must be questioned when it has not been established that necessary preservation or recovery of the ABB will result.


It is also believed that this new, expansive approach in the preservation philosophy by the USFWS in one district will be implemented in other areas. Enogex has recently been advised that this same process will be implemented in Arkansas.


Conclusion. Along with numerous oil and gas industry trade associations such as Mid-Continent Oil and Gas Association, Oklahoma Independent Petroleum Association, Gas Processors Association and Oklahoma Farm Bureau, Enogex is seeking to address the USFWS’s procedural changes in the protection of the American Burying Beetle. Enogex believes that the first step needs to focus on whether the facts present relating to the ABB merit this comprehensive and far reaching change in consultations and clearances being granted. After accurate and complete data is established then the measures necessary to properly preserve this endangered species can be implemented. Until this step is undertaken and accomplished, actions - such as the recent actions taken by the USFWS - only tend to create unnecessary hardship on the agency and unnecessary hardship on the public attempting to do business in these areas, and they result in no true protection to the ABB. Enogex is hopeful that this issue can be resolved without affected parties having to resort to a costly and time-consuming litigation process.


Mr. Chairman and members of this Committee, Enogex appreciates and seeks any assistance that this Committee can provide to address this critical issue.

[1] Enogex is a natural gas pipeline and energy company that operates the nation’s 10th largest natural gas pipeline system with more than 10,000 miles of pipe, 13 processing plants and 23 billion cubic feet of gas storage, principally in Oklahoma and Arkansas. Oklahoma City-based OGE Energy Corp. (NYSE: OGE) is the parent company of Enogex and Oklahoma Gas and Electric Company (OG&E). OGE Energy and its subsidiaries have about 3,000 employees.


OG&E, a regulated electric utility, serves approximately 720,000 retail customers in a service territory spanning 30,000 square miles in Oklahoma and western Arkansas, and wholesale customers throughout the mid-continent region. OG&E has eight power generating facilities with combined capacity of approximately 5,700 megawatts.