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The original documents are located in Box 27, folder "Outer Continental Shelf Oil Leasing
- Publications (2)" of the John Marsh Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Page
Calendar No. 1088
93D CONGRESS
SENATE
REPORT
2d Session
No. 93-1140
ENERGY SUPPLY ACT OF 1974
SEPTEMBER 9, 1974.-Ordered to be printed
Mr. JACKSON, from the Committee on Interior and Insular Affairs,
submitted the following
REPORT
together with
MINORITY VIEWS
[To accompany S. 3221]
The Committee on Interior and Insular Affairs, to which was re-
ferred the bill (S. 3221) to increase the supply of energy in the United
States from the Outer Continental Shelf; to amend the Outer Con-
tinental Shelf Lands Act; and for other purposes, having considered
the same, reports favorably thereon with an amendment and recom-
mends that the bill, as amended, do pass.
The amendment is as follows:
The amendment to the text strikes all after the enacting clause and
inserts a complete new text which is printed in italic type in the re-
ported bill.
I. PURPOSE
During the next decade, development of conventional oil and gas
from the United States Outer Continental Shelf can be expected (a)
to provide the largest single source of increased domestic energy, (b)
to supply this energy at a lower average cost to the U.S. economy than
any alternative and (c) to supply it with substantially less harm to
the environment than almost any other source.
OCS oil and gas and the policy issues associated with them have
been relatively neglected during the recent crisis in favor of much less
promising concerns such as price incentives for stripper wells and
other marginal onshore production (whose aggregate potential con-
tribution to increased output is quite small) or research and develop-
ment for coal and oil shale conversion (which are high cost sources,
have long payout times, and pose very serious environmental prob-
Digitized from Box 27 of The John Marsh Files at the Gerald R. Ford Presidential Library
2
3
lems). Our effort to improve the short- and medium-term supply of
natural resources of the "subsoil and seabed of the Continental Shelf
domestic primary fuels should be directed first of all toward increas-
beneath the high seas but contiguous to the coasts of the United
ing the rate of exploration and development on the OCS.
States" to be subject to the control and jurisdiction of the U.S. The
The major policy issues concerning the OCS are the rate and loca-
proclamation did not define the seaward limits of the Continental
tion of leasing, environmental safeguards, impacts on coastal states,
Shelf but the accompanying press release (September 28, 1945) from
the lease allocation system and the extent to which industry informa-
the White House indicated that the submerged land which is covered
tion about the nature and extent of the resources should be divulged
by no more than 100 fathoms (600 feet) of water was considered as
to the government and to the public.
the Continental Shelf.
Because the OCS represents such a large and promising area for oil
The 1958 Geneva Convention on the Continental Shelf ratified by
and gas exploration, the Committee believes that the Congress must
the U.S. in 1960 includes an open-ended definition of the Shelf as
update the Outer Continental Shelf Lands Act of 1953 (67 Stat. 462,
extending to a depth of 200 meters "or beyond that limit to where
43 U.S.C. §§ 1331-1343) which has never been amended to provide
the depth of the superjacent waters admits of the exploitation of the
adequate authority and guidelines for the kind of development activity
natural resources."
that probably will take place in the next few years.
In 1947 and 1950, the Supreme Court ruled on the controversy be-
Despite the intense and justified concern of many people over the
tween the United States and various coastal states over ownership and
potential damage to the environment from oil and gas development on
control of the Shelf. The Supreme Court decided that the entire Shelf
the OCS, there is an increasing feeling that OCS development may
was under Federal control. United States V. California, 332 U.S. 19
well be more acceptable environmentally than other potential domes-
(1947) ; United States V. Louisiana, 339 U.S. 699 (1950) United
tic energy resources such as massive strip mining for coal and oil
States V. Texas, 339 U.S. 707 (1950). However, in 1953 Congress passed
shale.
the Submerged Lands Act which "released and relinquished" to the
There are a variety of obstacles to OCS oil and gas development
coastal states that portion of the Shelf extending out from the mean
today. These include technological, economic, environmental, legal
high tide line for 3 miles or to their historic boundaries. Congress fol-
and administrative problems.
lowed this with the OCS Lands Act which was primarily designed to
S. 3221 is designed to remove these obstacles in order to facilitate
be an affirmation of the 1945 assertion of jurisdiction by President
rapid and responsible-as opposed to quick and dirty-development
Truman.
of the oil and gas resources of the Outer Continental Shelf.
The 1953 Act reflects this emphasis on jurisdictional questions. Its
There are two basic thrusts to the bill. First, it reasserts Congress'
special Constitutional responsibility to "make all needful rules and
"bare bones" leasing authority with essentially no statutory standards
or guidelines also reflects the relative lack of basic knowledge concern-
regulations respecting the territory or other property belonging to
ing, and interest in, development of the resources of the Shelf at that
the United States". (U.S. Const. Art. IV Sec. 3 Cl. 2) The 1953 Outer
time.
Continental Shelf Lands Act is essentially a carte blanche delegation
CURRENT EMPHASIS ON DOMESTIC SOURCES OF ENERGY
of authority to the Secretary of the Interior. The increased importance
of OCS resources, the increased consideration of environmental im-
Since the imposition of the Arab oil embargo the United States has
pacts and emphasis on comprehensive planning, require Congress to
become intensely concerned about its dependence on foreign sources of
put some "flesh on the bones" in the form of standards and criteria for
energy. Congress and the nation have focused on the means of reducing
the Secretary to follow in the exercise of his authority.
U.S. reliance on foreign energy supplies and prudently exploiting a
Second, the bill gives the Secretary new authority needed to man-
substantial domestic resource base. One of the major results of this
age the programs anticipated in the last third of the twentieth century.
effort is the National Energy Research and Development Policy Act
passed by the Senate last December. That Act establishes as a national
II. BACKGROUND AND NEED
objective "development within 10 years of the option and the capa-
bility for the United States to become energy self-sufficient through
HISTORY OF OCS ACT
the use of domestic energy resources by socially and environmentally
In 1953, Congress enacted the Outer Continental Shelf Lands Act.
acceptable means."
This Act authorizes the Secretary of the Interior to grant mineral
The research and development program authorized by that act is
leases on the Outer Continental Shelf and to prescribe regulations for
designed to help meet that goal over the next 10 years. However, in
their administration.
the shorter term, available domestic energy resources, particularly
Presently, the Outer Continental Shelf program is handled jointly
fossil fuels, must be developed more rapidly.
by the Geological Survey and the Bureau of Land Management under
During the next decade, development of conventional oil and gas
a joint arrangement which divides responsibility by allocating to the
from the United States Outer Continental Shelf can be expected (a)
BLM the leasing function and to the Survey the prelease resource
to provide the largest single source of increased domestic energy, (b)
evaluation and the post-lease administration function.
to supply this energy at a lower average cost to the U.S. economy than
The OCS Act of 1953 stemmed from the proclamation on the Con-
any alternative and (c) to supply it with substantially less harm to
tinental Shelf issued by President Truman in 1945. It declared the
the environment than almost any other source.
4
5
HISTORY OF OUTER CONTINENTAL SHELF RESOURCE DEVELOPMENT
portant one, because many billions of dollars of investment and much
The total shelf and continental margin area of the Outer Conti-
effort separate the one from the other.
nental Shelf is estimated to be approximately 1,175,680,000 acres (in-
The U.S. Geological Survey estimates that the potential recoverable
cluding areas beyond the 200-meter water depth to 2,500-meter water
petroleum resources remaining on the OCS of the United States out to
depth). Of this total, the area under Federal jurisdiction is approxi-
a water depth of 200 meters are 58-116 billion barrels of crude oil and
mately 1,146,680,000 acres.
natural gas liquids and about 355-710 trillion cubic feet of natural gas.
Pursuant to the Submerged Lands Act and subsequent court deci-
For purposes of comparison, the United States consumed 6 billion
sions, coastal states have jurisdictions within 3 miles of their
barrels of oil and 23 trillion cubic feet of gas in 1973.
coasts and Texas and Florida have jurisdiction for three marine
leagues off their Gulf of Mexico coasts-which accounts for the differ-
NEED FOR LEASING IN "FRONTIER AREAS"
ence in area of the shelf and margin area and that part under Federal
jurisdiction.
Of the 1,081,000 barrels a day produced in 1973 the major portion or
The Department of the Interior reports that since the passage of the
1,029,000 barrels a day came from wells in the Gulf of Mexico, in
other words, almost all of it.
OCS Lands Act (67 Stat. 462; 43 U.S.C., Sec. 1331-1343) on August 7,
1953, 33 lease sales have been held, the large majority of which have
The remaining 52,000 barrels a day was produced from fields off
Southern California.
been offshore Louisiana and Texas. Nineteen hundred forty leases have
been issued embracing over eight million acres. Petroleum and sulfur
Gas production totaled 8.9 billion cubic feet a day in 1973, all but
production amounts to approximately 12 percent of total domestic
20 million cubic feet a day from the Gulf of Mexico.
production and natural gas production amounts to approximately 13
During the past 20 years, over 12,000 wells have been drilled on
percent.
Federal Outer Continental Shelf lands resulting in total production
Production of hydrocarbons includes over three billion barrels of
of 3.3 billion barrels of oil and 20.7 trillion cubic feet of gas.
oil (including condensate) and nineteen trillion m.c.f. of natural gas.
If we are to increase our OCS oil and gas development, leasing must
Also over thirteen million long tons of sulfur and over 4 million long
take place in new or "frontier" areas. A number of steps have already
been taken in that direction.
tons of salt have been produced.
The Outer Continental Shelf Lands Act provides for payment to
On April 18, 1973, the President announced that the Outer Con-
tinental Shelf leasing rate would be increased from 1 million acres
the Federal Government of revenues derived from oil and gas leases
on the Outer Continental Shelf subject to Federal jurisdiction.
per year to 3 million acres per year and that the 5-year tentative
leasing schedule should be revised to reflect this acceleration.
All OCS leases issued to date have required payment to the Federal
On April 18, 1973, the President directed the Council of Environ-
Government based on a royalty rate of 162/3 percent in the amount or
value of the production saved, removed, or sold from the lease. The
mental Quality (CEQ) to study the environmental impact of oil and
gas production on the Atlantic and Gulf of Alaska Outer Continental
annual rental and minimum royalty required for leases offered at gen-
eral lease sales (unproven areas) have been $3 per acre, and have been
Shelf, since it was clear that continued accelerated leasing in the
Gulf of Mexico and offshore California would soon consume available
$10 per acre for leases offered at drainage sales (proven areas). Total
acreage in those areas.
Federal revenues from Outer Continental Shelf resource development
On January 23, 1974, the President directed that Outer Continental
amount to over 10 billion dollars.
Shelf leasing be even further accelerated and that 10 million acres be
leased in 1975.
OCS OIL AND GAS RESERVES
In February of this year, Secretary of the Interior Morton asked the
The U.S. Geological Survey recently estimated that there are now
States, environmental and industry groups, and the general public to
proved reserves of 2.2 billion barrels of oil and 2.0 trillion cubic feet
list the Outer Continental Shelf areas in which they had the greatest
of gas in the OCS off Southern California, and 3.5 billion barrels of
interest by their order of preference and to specify environmental
oil and 36.8 trillion cubic feet of gas in the OCS in the Gulf of Mexico
problems that would be encountered in developing these Outer Conti-
off Louisiana and Texas. This is a total of 5.7 billion barrels of oil
nental Shelf areas.
and 38.8 trillion cubic feet of gas.
The Committee believes that the OCS Lands Act must be amended
In addition to the proved, discovered reserves known to exist on the
as provided in S. 3221 before any large-scale expansion of leasing
OCS, the continental margin of the United States is believed to con-
takes place.
tain very large amounts of undiscovered oil and gas resources. The
III. MAJOR PROVISIONS
presence of these resources has not actually been demonstrated, nor
Policy.-The Act declares that the OCS is a vital national resource
can it be determined what portion may prove to be economically recov-
reserve held by the Federal government for all the people, which
erable even if they are discovered. The figures given represent those
should be made available for orderly development, subject to envi-
arrived at by geological inference from indirect evidence. The dis-
ronmental safeguards, when necessary to meet national needs.
tinction between potential resources and proved reserves is an im-
6
7
Leasing Program.-The Secretary is directed to prepare a compre-
informed decisions about fair market value of resources. As part of
hensive leasing program designed to carry out the objective of making
this program the Secretary would be authorized to purchase data and
available for leasing as soon as practicable all OCS lands geologically
contract for stratigraphic drilling on the OCS.
favorable for oil and gas development without undue environmental
The Secretary would prepare and publish maps and reports on the
damage. This program would indicate the size, timing, and location of
OCS. This information should help potential oil and gas developers
leasing activity which the Secretary believes would meet national
to participate in and the general public to understand, OCS programs.
energy needs over the next 10 years. The leasing program must be
Research and Development.-To improve technology used in OCS
consistent with the following principles:
development, the Secretary would be directed to carry out a research
(1) management of the Outer Continental Shelf in a manner
and development program where such research was not being done ade-
which considers all its resource values and the potential impact
quately by others. This would include consideration of (1) downhole
of oil and gas development on other resource values and the
marine environment;
safety devices, (2) methods for reestablishing control of blowing out
(2) timing and location of leasing SO as to distribute more
or burning wells, (3) methods for containing and cleaning up oil
evenly exploration, development and production of oil and gas
spills, (4) improved drilling bits, (5) improved flaw detection systems
among various areas of the Outer Continental Shelf considering:
for undersea pipelines, (6) new or improved methods of development
(A) existing information concerning their geographical,
in water depths over six hundred meters, and (7) subsea production
systems.
geological and ecological characteristics;
(B) their location with respect to, and relative needs of,
Oil Spill Liability.-The bill puts into law the existing rule, estab-
regional energy markets;
lished by Departmental regulation, that an OCS lessee is liable for
(C) interest by potential oil and gas producers in explora-
the total cost of control and removal of spilled oil. It also creates a
tion and development as indicated by tract nominations and
new strict liability rule for damages from OCS oil spills. The pro-
other representations;
visions are patterned after the Trans-Alaska Pipeline Authorization
(D) an equitable sharing of developmental benefits and
Act of 1973. (Title II of P.L. 93-153.)
The damage liability is imposed without regard to fault. and with-
environmental risks among various regions of the United
States; and
out regard to ownership of the land or resource damaged if the land
(3) receipt of fair market value for public resources.
or resource is relied on for subsistence or economic purposes. Thus
The program would include estimates of appropriations and staffing
there can be recovery for damage to fisheries despite the fact that the
required to prepare the necessary environmental impact statements,
fisherman has no property right in the uncaught fish. Resort owners
obtain resource data and any other information needed to decide
could also recover for loss of business caused by an oil spill on the
whether to issue any lease and to supervise operations under every
beach even though they do not own the beach. On the other hand,
lease in the manner necessary to assure compliance with the require-
sport fishermen or vacationers could not recover for any inconvenience
ments of the law, the regulations, and the lease.
caused by a spill.
The environmental impact statement on the leasing program would
The provision puts a limit of $100 million for damages from any
include an assessment by the Secretary of the relative significance of
one incident. The lessee is liable for the first $7 million and the Off-
the OCS energy resources toward meeting national demands, the capa-
shore Oil Pollution Settlement Fund, created by the Act, is liable for
balance.
bility of industry to develop those resources, and the relative environ-
mental hazard of each area proposed to be leased.
The money in this Fund will come from a fee of 21/2 on each barrel
There are provisions for public participation in the development of
of oil produced from the Outer Continental Shelf. The Fund will be
the program and coordination with the states which may be impacted
administered by OCS lessees subject to audit by the General Account-
ing Office.
by leasing and with management programs established pursuant to
the Coastal Zone Management Act of 1972.
The Fund is authorized to borrow from commercial sources so no
The leasing program would have to be reviewed and reapproved
government funds would be used to pay damage claims.
annually. Once the program has been approved, and no later than
The Committee believes that a comprehensive Federal statute gov-
January 1, 1978, no leases would be issued unless they are for areas
erning liability for all ocean oil spill damages is badly needed. This
included in the program. The Secretary would be authorized to obtain
law should cover OCS operations, tankers, deepwater ports and all
from private sources any data and reports which he needed to prepare
other sources. Section 303 of S. 3221 calls for a liability study by the
the program.
Attorney General which would assist in preparing a comprehensive
Federal Oil and Gas Survey Program.-The Secretary would be
statute. The Committee anticipates working on this subject with the
directed to conduct a survey of oil and gas resources of the OCS. This
other Committees participating in the National Ocean Policy Study.
program would be designed to provide information about the probable
Assistance to the Coastal States.-The coastal states are impacted
location, extent and characteristics of these resources. It would provide
by OCS development in a variety of ways. Testimony received by the
a basis for development and revision of the leasing program and more
National Ocean Policy Study and the study done by the Council on
Environmental Quality, "OCS Oil and Gas-An Environmental
9
8
where failure or malfunction of the equipment would have a substan-
Assessment" indicates that the secondary impacts onshore are far
tial impact on public health, safety or the environment.
greater than the direct impact from oil spills and the activity on the
Enforcement of Safety Regulations.-To assure that increased
OCS lease site itself. These impacts stem from the development of
OCS development proceeds in as safe a manner as possible, the Secre-
onshore support facilities for OCS development and the location of
tary would be directed to conduct regular inspections and strictly en-
petroleum refining and transportation facilities near production sites.
force safety regulations. The inspections must take place at every stage
The Committee believes that coastal state opposition to OCS leasing
of operations which means that Congress must provide funding and
can lead to significant delays in oil and gas development. A major
manpower needed. Penalties for violation of the regulations would
reason for such opposition in "frontier" leasing areas such as the
be increased and lessees would be required to give the Secretary any
Atlantic and Alaska coasts as well as in California is concern about
information he needs to assure a safe operation.
the ability of State and local governments to cope with the onshore
Development and Production Requirements.-The Secretary would
economic and social problems caused by OCS development.
be directed to include a development plan in each lease which would
These legitimate concerns of these States must be balanced against
spell out the work to be performed and a time schedule for perform-
the national need to develop the Federal energy resources of the Outer
ance. These plans could, of course, be revised in light of changed
Continental Shelf. The Committee believes that the Federal Govern-
circumstances.
ment should assist the States in ameliorating adverse environmental
Revised Bidding Systems.-There has been considerable public dis-
impacts and controlling secondary economic and social impacts asso-
cussion and debate about the need for revised bidding systems for
ciated with OCS oil and gas development. For this reason S. 3221
OCS leases. The existing law authorizes two methods. The first is
provides that 10% of the Federal OCS revenues but not to exceed
awarding the leases to the highest bidder of a cash bonus with a royalty
$200 million per year will be available for grants to impacted coastal
rate fixed in advance of the sale. This is the method used in all OCS
States for this purpose.
lease sales to date.
The bill provides that these grants will be made by the Secretary
The second method would award the lease to the person bidding the
of the Interior. The Secretary must coordinate the grants with man-
highest royalty rate with a cash bonus fixed in advance.
agement programs established under the Coastal Zone Management
S. 3221 would eliminate the royalty bidding alternative. The Com-
programs established under the Coastal Zone Management Act of
mittee believes that royalty bidding frequently will result in very high
1972. The extent and nature of the overall adverse impacts may vary
bids because an operator risks little with such a bid. At high royalty
greatly. The Secretary is given broad discretion in determining the
rates only the lowest cost oil and gas will be developed and produced.
amount and purpose of the grants. One of the most important uses
(With a cash bonus and the present OCS royalty rate of 162/3 per-
of these grants will be to develop adequate planning and management
cent, an operator would develop any property for which the cost of
programs over the coastal landside areas where commercial and indus-
production less royalty was less than 831/3 percent of the wellhead
trial development is apt to occur. The Committee expects that in many
price. With a royalty rate of 75 percent, no oil that cost more than 25
instances, the grants would be used to supplement management pro-
percent of the wellhead price would be developed.) Perhaps only half
grams established under the Coastal Zone Management Act.
as much oil and gas would be produced from a given tract under roy-
Information submissions by industry.-The bill requires any person
alty bidding as under the cash bonus system.
holding a geological or geophysical exploration permit to submit to the
Cash bonus bidding is a good system of (a) placing acreage in the
government the data and information obtained during exploration.
hands of responsible, capable and diligent operators, (b) encouraging
All oil and gas lessees would have to submit data about the oil and gas
early exploration and development of OCS leases, (c) maximizing
resources in the area covered by the lease. The Secretary would keep
ultimate recovery, (d) assuring fair market value for the Government.
all proprietary data confidential until he determines that public avail-
However, the high initial investment required by cash bonus bidding
ability of the data would not damage the competitive position of the
tends to limit participation in OCS development.
permittee or lessee.
The Committee believes that alternative lease allocation systems
The Committee feels strongly that private parties using public re-
should be considered. The Department of Interior has announced that
sources for private profit should be required to make information they
it intends to experiment with royalty and net profit sharing bidding.
obtain about the resources available to the representatives of the pub-
Others have advocated work program bidding such as has been used
lic. At the same time, the Committee recognizes the value of this in-
in the North Sea. S. 3221 calls for a study of alternative systems with
formation to the individual explorer or producer. The provisions of
a report and recommendations to Congress within one year.
S. 3221 are designed to balance the public's interest in obtaining in-
In the interim, S. 3221 would also authorize two approaches to net
formation about its resources and public's interest in maintaining an
profit sharing. One would allow leases to be issued to the highest cash
active and competitive oil and gas industry.
bonus bidder, with the United States taking a share of the net profits
Safety and Performance Standards.-S. 3221 directs the Secretary
of not less than 30%. The other would permit bidding based on the
to establish safety and performance standards for all pieces of equip-
net profit share with a fixed cash bonus. The Committee recognizes
ment pertinent to public health, safety or environmental protection.
that these alternatives may not be the "perfect solution". However,
These standards must require use of the best available technology
10
11
they should facilitate entry into the OCS development business of
SECTION 18-DEVELOPMENT OF OUTER CONTINENTAL SHELF LEASING
more independent producers and are certainly worth trying on an
PROGRAM
experimental basis.
IV. COMMITTEE RECOMMENDATION
Section 18 establishes a policy of making available for leasing as
soon as practicable all OCS lands determined to be both geologically
The Committee on Interior and Insular Affairs in open markup
favorable for oil and gas and capable of supporting development with-
session on August 12 recommended that S. 3221 be approved by the
out undue environmental hazard.
Senate.
The Committee recognizes that the phrase "without undue environ-
V. LEGISLATIVE HISTORY
mental hazard or damage" is imprecise. The Committee also recognizes
that any oil and gas development will involve some environmental
S. 3221 was introduced on March 22, 1974. Hearings were held on
hazard or damage. This section establishes a process which will permit
the bill by the Interior Committee on May 6, 7, 8 and 10. In addition
the Secretary to weigh the environmental risks against the potential
the Committee participated in the hearings conducted by the National
benefits from making the oil and gas available to meet national energy
Ocean Policy Study on the economic, environmental, and social im-
needs.
pacts of development of the oil and gas resources of the Outer Con-
Subsection 18(b) directs the Secretary to prepare a 10-year leasing
tinental Shelf. These took place on April 23, 24, 25, and May 2 and 22.
program. It sets out policies to be followed in preparing the program
A major focus of these hearings was the Council on Environmental
including orderly development of energy resources, environmental
Quality's study entitled, "OCS Oil and Gas-An Environmental As-
protection, receipt of fair market value, public participation, and
sessment", released April 18.
intergovernmental coordination.
In addition the Committee has, since the initiation of the National
The leasing program should display the information for all inter-
Fuels and Energy Policy Study, conducted several hearings dealing
ested Federal, State and local government officials, the oil and gas
with OCS matters. These have been printed as Outer Continental
industry, and the general public.
Shelf Policy Issues (92-27, parts I-III) ; Federal Leasing and Dis-
Subsection 18 (c) requires that the program include estimates of the
posal Issues (92-32) ; and Trends in Oil and Gas Exploration (92-33,
appropriations and staffing required to prepare the necessary envi-
parts I and II).
ronmental impact statements, obtain resource data and any other in-
formation needed to carry out the law including supervision of all
VI. SECTION-BY-SECTION ANALYSIS
operations to assure compliance. The Committee intends that these
estimates represent the Secretary's best judgment of actual needs
Section 1 contains the short title and table of contents.
rather than the views of the Office of Management and Budget as to
what funding levels are appropriate for inclusion in the President's
TITLE I. FINDINGS AND PURPOSES
Budget.
Section 101 sets out a number of findings about the current and
Subsection 18 (d) requires the inclusion in the environmental im-
future energy supply situation, and the potential role of the oil and
pact statement on the leasing program of an assessment by the Secre-
gas resources of the Outer Continental Shelf (OCS).
tary of the relative significance of the probable oil and gas resources
Section 102 states the purposes of the Act. These include increasing
of each area proposed to be offered for lease in meeting national de-
production of oil and gas from the Outer Continental Shelf in a man-
mands, the most likely rate of exploration and development that is
ner which assures orderly resources development, protection of the
expected to occur if the areas are leased, and the relative environ-
environment, and receipt of fair market return for public resources
mental hazard of each area. The Committee recognizes that the Sec-
and encouraging development of new technology to increase human
retary cannot determine these factors with a great degree of precision.
However, an expression of his best judgment based on available infor-
safety and eliminate or reduce environmental damage.
mation should be very helpful in balancing the conflicting values in-
volved during the decision-making process.
TITLE II. INCREASED PRODUCTION OF OUTER CONTINENTAL SHELF
Subsection 18(e) directs the Secretary to establish procedures for
ENERGY RESOURCES
receipt and consideration of nominations for areas to be offered for
This title contains a series of amendments to the Outer Continental
lease or to be excluded from leasing, for public notice of and partici-
Shelf Lands Act of 1953 (43 U.S.C. 1331-43) (OCS Act).
pation in development of the leasing program, for review by State and
Section 201 amends Section 3 of the OCS Act to add a policy state-
local governments which may be impacted by the proposed leasing,
ment that OCS is held for all the people, and its resources should be
and for coordination of the program with management programs
made available for orderly development subject to environmental
established pursuant to the Coastal Zone Management Act of 1972.
safeguards.
These procedures will be applicable to any revision or reapproval of
Section 202 adds 12 new sections to the OCS Act. These are
the leasing program.
12
13
The Secretary uses a nomination process at the present time. The
Committee wants to be sure that this form of industry and public
The Committee believes that the government must have better in-
formation about the resources it owns than it has had in the past. Pub-
participation in the leasing program is continued.
Subsection 18(f) calls for publication of a proposed leasing pro-
lication of this information should be helpful to potential entrants
gram in the Federal Register and its submission to the Congress within
into the OCS oil and gas development industry, particularly those
with less capital to risk than the large major oil companies.
two years after enactment of this section.
Subsection 18 (g) provides that after the leasing program has been
As part of the survey program, Subsection 19(b) authorizes the
Secretary to contract for, or purchase the results of or, where the re-
approved by the Secretary or after January 1, 1978, whichever comes
first, no OCS leases may be issued unless they are for areas included
quired information is not available from commercial sources, conduct
in the approved leasing program. The Committee believes that the
seismic, geomagnetic, gravitational, geophysical, or geochemical in-
vestigations, and to contract for or purchase the results of strati-
10-year program should be adopted as soon as possible. At the same
graphic drilling. The Committee believes that in most instances the
time, we recognize that this will take some time and that leasing
should continue during this time. Three years should be ample time to
Secretary can acquire the information required for the survey pro-
gram from private industry. This will allow the present active explor-
develop the program.
Subsection 18(h) provides that the Secretary may revise and re-
ation and data industry to continue without the government as a direct
approve the leasing program at any time and he must review and
competitor. However, this subsection does authorize the Secretary to
conduct certain investigations directly.
reapprove the leasing program at least once each year. The require-
Subsection 19 directs the Secretary to prepare and publish and
ment for annual reapproval is designed to assure that the program
fully reflects new information and changing conditions. Obviously,
keep current a series of detailed topographic, geological, and geophysi-
cal maps of and reports about the Outer Continental Shelf, based on
substantial changes in the program may be required in some years,
nonproprietary data, which shall include, but not necessarily be lim-
while in others there may be little or no change.
Subsection 18(i) authorizes the Secretary to obtain from public
ited to, the results of seismic, gravitational, and magnetic surveys on
sources or to purchase from private sources, any surveys, data, reports,
an appropriate grid spacing to define the general topography, geology,
and geophysical characteristics of the area.
or other information (excluding interpretations of such data, surveys,
The Committee believes that these maps and reports should be very
reports, or other information) which may be necessary to assist him in
valuable to all persons interested in OCS oil and gas development. In
preparing environment impact statements and making other evalua-
order to be sure that once the survey program is underway the maps
tions required by this Act. The Secretary must maintain the confi-
and reports are available to potential lessees and other interested per-
dentiality of all proprietary data or information for such period of
sons, this subsection requires publication of the maps no later than six
time as is agreed to by the parties. This confidentiality requirement is
months prior to the last day for submission of bids for any areas of
designed to allow the Secretary to negotiate for the purchase of data
the Outer Continental Shelf scheduled for lease on or after January 1,
on the basis that it will be kept confidential for as long as the seller
1978. The Committee intends that the topographic maps be prepared
wishes. Requiring the public release of all purchased data at any par-
by the National Oceanic and Atmospheric Administration, National
ticular time would tend to lead data owners to refuse to sell the data to
Ocean Survey. The Secretary of the Interior, would simply provide
the Secretary. This provision allows the Secretary and the owner of
for publication.
the information to work out a mutually acceptable arrangement.
Subsection 19 (d) provides that within six months after enactment
Subsection 18(j) authorizes and directs the heads of all Federal de-
of this section, the Secretary shall submit to Congress a plan for con-
partments or agencies to provide the Secretary with any nonpro-
ducting the survey and mapping programs required by this section.
prietary information he requests to assist him in preparing the leasing
This plan will identify the areas to be surveyed and mapped during
program.
the first five years of the programs and estimates of the appropriations
and staffing required.
SECTION 19-FEDERAL OUTER CONTINENTAL SHELF OIL AND GAS SURVEY
Subsection 19 (e) provides that information about the program be
PROGRAM
included in the Secretary's annual report of activity under the OCS
Lands Act.
Subsection 19 (a) directs the Secretary to conduct a survey program
Subsection 19 (f) provides that the Secretary will not have to pre-
regarding oil and gas resources of the Outer Continental Shelf. The
pare an environmental impact statement before taking actions to carry
program will provide information about the probable location, extent,
out the oil and gas survey.
and characteristics of such resources in order to provide a basis for
Subsection 19 (g) authorizes appropriations to carry out the survey
(1) development and revision of the leasing program required by sec-
program in fiscal years 1975 and 1976. The Committee intends to re-
tion 18 of the Act, (2) greater and better informed competitive inter-
view the survey program and enact additional authorization legisla-
est by potential producers in the oil and gas resources of the Outer
tion for future years.
Continental Shelf, (3) more informed decisions regarding the value
Subsection 19(h) provides that any person holding an oil and gas
of public resources and revenues to be expected from leasing them, and
lease shall provide the Secretary with any existing data (excluding
(4) the mapping program required by subsection 19(c).
interpretations of such data) about the oil or gas resources in the area
14
15
subject to the lease. All proprietary data or information will be kept
by the Manned Undersea Science and Technology Office of the Na-
confidential until the Secretary determines that public availability of
tional Oceanic and Atmospheric Administration. The expected in-
such proprietary data or information would not damage the competi-
crease in OCS operations in deep water makes it imperative that this
tive position of the lessee.
work be continued and expanded if necessary to assure diver safety.
The Committee believes that users of public resources should fur-
nish resource information to the government. However, the Commit-
SECTION 21-ENFORCEMENT OF SAFETY REGULATIONS INSPECTIONS
tee recognizes the competitive value of proprietary information. This
subsection is designed to balance the competing interests involved.
Subsection 21 (a) directs the Secretary to regularly inspect all op-
erations authorized pursuant to this Act and strictly enforce safety
SECTION 20-RESEARCH AND DEVELOPMENT
regulations promulgated pursuant to this Act and other applicable
laws and regulations relating to public health, safety, and environ-
Subsection (a) authorizes and directs the Secretary to carry out
mental protection. It also requires holders of leases to allow access to
a research and development program designed to improve technology
any inspector promptly and provide any requested documents and
related to development of OCS oil and gas resources where he deter-
records that are pertinent to public health, safety, or environmental
mines that such research and development is not being adequately con-
ducted by any other public or private entity.
protection. The subsection also requires physical observation by an inspector
The Committee does not want the Secretary to get involved in a re-
of the installation or testing at least once each year of all safety equip-
search and development program which duplicates work being done
ment designed to prevent or ameliorate blowouts, fires, spillages, or
by private industry, or another government agency. However, it is
other major accidents; and periodic onsite inspection without advance
clear that there are needs for new technology which are not being met.
notice to the lessee to assure compliance with public health, safety, or
Where there are gaps in ongoing efforts, this provision authorizes the
environmental protection regulations.
Secretary to fill them.
The Secretary also must investigate and report on all major fires and
Subsection 20 (b) requires the Secretary, after review and comment
major oil spillage occurring as a result of operations pursuant to this
by the Administrator of the Environmental Protection Agency, to
Act.
establish safety and environmental performance standards for all
Subsection 21 (c) provides that the Secretary shall consider any
pieces of equipment, that are pertinent to public health, safety, or en-
allegation from any person of the existence of a violation of any
vironmental protection, used in exploration, development, and produc-
safety regulations issued under this Act. The Secretary must answer
tion of oil and gas from the Outer Continental Shelf. These standards
such allegation no later than ninety days after receipt thereof, stating
must call for use of best available technology when the potential ef-
whether or not such alleged violations exist and, if so, what action has
fect of malfunctions on public health, safety, or the environment would
been taken.
be substantial.
This provision is designed to allow any interested person who
The Committee believes that requiring use of best available tech-
believes the safety regulations are being violated to trigger an investi-
nology is essential to assure the highest degree of safety in OCS oper-
gation by the Secretary. In most cases this form of citizen involve-
ations. However, the Committee does not intend that installed equip-
ment would be more effective than legal action.
ment must be replaced with every minor technological improvement.
It also recognizes that there may be more than one "best" way to
SECTION 22-LIABILITY FOR OIL SPILLS
achieve a particular objective or do a particular job.
Subsection directs the Secretary, with the concurrence of the
Subsection 22 (a) requires any person in charge of any operations
Secretary of the department in which the Coast Guard is operating,
in the Outer Continental Shelf, as soon as he has knowledge of a dis-
to establish equipment and performance standards for oil spill cleanup
charge or spillage of oil from an operation, to notify immediately the
plans and operations. Such standards shall be coordinated with the
appropriate agency of the United States Government.
National Oil and Hazardous Substances Pollution Contingency Plan.
Subsection 22 (b) is patterned after the tanker oil spill liability
The Committee is aware that the Secretary has already developed
provisions of the Trans-Alaska Pipeline Authorization Act of 1973.
procedures for oil spill cleanup. This subsection does not require him
Subsection 22 (b) (1) makes the holder of a lease or right-of-way
to start all over again, but rather to update the existing program.
issued or maintained under this Act and the Offshore Oil Pollution
Under Subsection (d) the Secretary, in cooperation with the
Settlements Fund established by this subsection strictly liable with-
Secretary of the Navy and the Director of the National Institutes of
out regard to fault and without regard to ownership of any adversely
Health, will conduct studies of underwater diving techniques and
affected lands, structures, fish, wildlife, or biotic or other natural re-
equipment suitable for protection of human safety at depths greater
sources relied upon by any damaged party for subsistence or economic
than those where such diving now takes place.
purposes. The holder is liable for all damages, sustained by any per-
The Committee is aware that the Navy is conducting diving studies
son as a result of discharges of oil or gas from any operation author-
at the present time. Work on oil platform submersibles is being done
ized under this Act if such damages occurred (A) within the territory
of the United States, Canada, or Mexico or (B) in or on waters within
16
17
two hundred nautical miles of the baseline of the United States,
SECTION 23-NEGOTIATIONS WITH STATES
Canada, or Mexico from which the territorial sea of the United States,
Canada, or Mexico is measured, or (C) within one hundred nautical
Section 23 directs the Secretary to negotiate with those coastal
miles of any operation authorized under this Act.
States which are asserting jurisdiction over the Outer Continental
The Committee included damages in Canada and Mexico in order
Shelf with a view to developing interim agreements which will allow
to protect the interests of our neighbors.
energy resource development prior to final judicial resolution of the
rule. Subsection 22 (b) (2) provides three exceptions to the strict liability
dispute. The Committee is aware of the current litigation between the
United States and the Atlantic Coastal States over those States'
Strict liability is not imposed on the holder or the fund if the holder
claims to ownership of the Outer Continental Shelf. The Committee
or the fund proves that the damage was caused by an act of war.
believes that such disputes should not be allowed to prevent develop-
Strict liability is not imposed on the holder if the holder proves that
ment of the OCS oil and gas resources.
the damage was caused by the negligence of the United States or other
governmental agency. Strict liability is not imposed with respect to
SECTION 24-DETERMINATION OF BOUNDARIES
the claim of a damaged person if the holder or the fund proves that
the damage was caused by the negligence or intentional act of such
Section 24 authorizes the President to establish procedures for set-
person.
tling any outstanding boundary disputes, including international
Strict liability for all claims out of any one incident is limited to
boundaries between the United States and Canada and between the
$100 million. The holder is liable for the first $7 million and the fund
United States and Mexico, and establish boundaries between adjacent
is liable for the balance. If the total claims allowed exceed $100,000,000,
States, as directed in section 4 of the OCS Act. Negotiations of this
they are reduced proportionately.
type have been going on for many years. This section expresses the
In any case where liability without regard to fault is imposed pur-
sense of the Committee that a greater sense of urgency is needed in
suant to this subsection, the rules of subrogation shall apply in ac-
order to arrive at a settlement.
cordance with the State law.
The Offshore Oil Pollution Settlements Fund is administered by the
SECTION 25-COASTAL STATE FUND
holders of leases issued under this Act under regulations prescribed
by the Secretary. The fund is subject to annual audit by the Comp-
Subsection 25 (a) establishes a Coastal States Fund in the Treasury.
troller General. A fee of 21/2 cents per barrel of oil produced pursuant
The Secretary is directed to make grants from the Fund to the coastal
to any lease issued or maintained under this Act is paid into the fund.
States impacted by anticipated or actual oil and gas production to
Costs of administration are paid from the fund. If the fund is unable
assist them to ameliorate adverse environmental effects and control
to satisfy a claim, the fund may borrow the money needed to satisfy
secondary social and economic impacts associated with the develop-
the claim from any commercial credit source, at the lowest available
ment of Federal energy resources in, or on the Outer Continental Shelf
rate of interest.
adjacent to those States. The grants may be used for planning, con-
Notice of the damage must be given to the Secretary within three
struction of public facilities, and provision of public services, and such
years following the date on which the damage occurred. The collection
other activities as the Secretary may prescribe by regulations. The
of amounts for the fund ceases when $100 million has been accumu-
grants must be used for activities directly related to such environ-
lated, but is renewed when the accumulation in the fund falls below
mental effects and social and economic impacts. In order to be eligible
$85 million.
for grants from the Fund, the coastal State must establish pollution
Subsection 22 (c) restates the existing rule established by Depart-
containment and cleanup systems for pollution from oil and gas devel-
mental regulation, that the lessee is liable for the total cost of control
opment activities on its submerged lands.
and removal of any spilled oil.
The Committee believes that the Federal Government should assist
Subsection 22 (d) requires all holders of leases issued or maintained
the States in ameliorating adverse environmental impacts and con-
under this Act to establish and maintain evidence of financial responsi-
trolling secondary economic and social impacts associated with OCS
bility of not less than $7 million. It spells out ways of establishing such
oil and gas development. The need for such grants is discussed in the
responsibility.
Major Provisions section of this report.
Subsection 22 (e) provides that Section 22 does not supersede section
Subsection 25 (b) gives the Secretary broad discretion to determine
311 of the Federal Water Pollution Control Act Amendments of 1972
the amount and purpose of the grants and to set guidelines for grant
or preempt the field of strict liability or to enlarge or diminish the
eligibility. The Secretary must coordinate the grants with manage-
authority of any State to impose additional requirements.
ment programs established under the Coastal Zone Management Act
The Committee did not want to override the cleanup requirements of
of 1972. The Committee expects the Secretary to work closely with the
the 1972 Act except to provide unlimited liability for cost of cleaning
Secretary of Commerce in developing criteria for grants and estab-
up OCS oil spills. The Committee also did not want to preclude the
lishing coordination procedures.
States from imposing more stringent requirements if they wished to
The Committee rejected the concept of coastal States receiving a
do SO.
fixed share of Federal OCS revenues. However, the Committee recog-
nizes that Federal decisions to develop OCS resources can have impacts
38-533 0 74 2
18
19
on the States. It is the Committee's intent that grants under this section
tems permitted under present law as compared to the bonus bidding
shall be adequate to compensate impacted coastal States for the full
system; (2) evaluation of alternative bidding systems not permitted
costs of any adverse environmental effects and social and economic
under present law; (3) measures to ease entry of new competitors;
ment, and production.
impacts caused by Federal offshore oil and gas exploration, develop-
and (4) measures to increase supply to independent refiners and
distributors.
Subsection 25 (c) provides that ten per centum of the Federal
The Committee believes that it would be desirable to increase the
revenues from the Outer Continental Shelf Lands Act shall be paid
competition in the OCS oil and gas development industry. The Com-
into the Fund. However, the total amount paid into the Fund shall
mittee recognizes that OCS development requires large capital expend-
not exceed $200 million per year.
itures which tend to limit participation. The study required by this
The Committee believes that the $200 million per year ceiling on the
section is designed to assist the Committee in making further changes
Fund future. should provide an adequate source of grants for the foreseeable
in the Outer Continental Shelf Lands Act.
In order to make some funds available for grants immediately, sub-
SECTION 28-ENFORCEMENT AND PENALTIES
section 25(d) authorizes a direct appropriation to the Fund of $100
million. This amount will be repaid out of future OCS revenues allo-
Subsection 28(a) authorizes the Attorney General to institute, at
cated to the Fund.
the request of the Secretary, civil actions for restraining orders or in-
SECTION 26-CITIZEN SUITS
junctions or other appropriate remedies to enforce the Act or any
regulation or order issued under it.
Section 26 provides for citizen participation in the enforcement of
Subsection 28 (b) provides for a civil penalty to be assessed against
the Act by civil law suits (1) against any person who is alleged to be
any person who after notice of failure to comply and opportunity for
in violation of the Act or the regulations, or any lease or permit issued
a hearing continues to fail to comply with the Act or any regulation
under the Act; or (2) against the Secretary for alleged failure to per-
or order issued under it. The maximum penalty is $5,000 per day.
form a nondiscretionary act or duty.
Subsection 28 (c) provides criminal penalties for knowing and will-
Suits may be brought by "any person having an interest which is or
ful violations of any provision of this Act, or any regulation or order
may be adversely a ffected." The Committee intends that this includes
issued under the authority of this Act designed to protect public
persons who meet the requirements for standing to sue set out by the
health, safety, or the environment or conserve natural resources. There
Supreme Court in Sierra Club V. Morton (405 U.S. 727 (1972)).
are also criminal penalties for any person who knowingly and will-
Subsection (b) requires that no action for violation of the law may
fully makes any false statement, representation, or certification in any
be started for 60 days after written notice under oath of the alleged
application, record, report, plan, or other document filed or required
violation to the alleged violator and the Secretary. If the Secretary
to be maintained under this Act, or who knowingly and willfully falsi-
begins a civil action against the violation, no court action could take
fies, tampers with, or renders inaccurate any monitoring device or
place on the citizen's suit. The 60-day waiting period does not apply
method of record required to be maintained under this Act or know-
when the violation or failure to act constitutes an imminent threat to
ingly and willfully reveals any data or information required to be kept
the plaintiff's health or safety or would immediately affect a legal
confidential by this Act.
interest of the plaintiff. This provision is designed to give the Secre-
The criminal penalty is a fine not more than $100,000, or imprison-
tary and the alleged violator an opportunity to stop any violation thus
ment for not more than one year, or both.
making court proceedings unnecessary.
Subsection 28 (d) provides for application of the criminal penalties
Subsection (d) provides that the court may award costs of litigation
against corporate officials when the violator is a corporation or other
including reasonable attorney's fees to any party and require a bond
business entity.
where a temporary restraining order or preliminary injunction is
Subsection 28 (e) states that the remedies prescribed in this section
sought.
may be exercised concurrently and are in addition to any other rem-
The Committee believes that citizen suits can play an important role
edies afforded by any other law or regulation.
in assuring that lessees comply with the law. The possibility of a citizen
suit should help to keep program administrators "on their toes."
SECTION 29-ENVIRONMENTAL BASELINE AND MONITORING STUDIES
SECTION 27-PROMOTION OF COMPETITION
Subsection 29(a) requires that prior to permitting oil and gas
drilling on any area of the Outer Continental Shelf not previously
Section 27 directs the Secretary to prepare a report with recom-
leased under this Act, the Secretary, in consultation with the Admin-
mendations for promoting competition and maximizing production
istrator of the National Oceanic and Atmospheric Administration of
and revenues from the leasing of Outer Continental Shelf lands. The
the Department of Commerce, shall make a study of the area involved
report is due within one year and will include a plan for implementing
to establish a baseline of those critical parameters of the Outer Con-
recommended administrative changes and drafts of any proposed leg-
tinental Shelf environment which may be affected by oil and gas
islation. The report will consider (1) other competitive bidding sys-
development.
20
21
The Committee believes that these environmental baseline studies
eliminate the provision which allows royalty bidding. The new sub-
are essential to determining the actual environmental impacts of oil
section (a) retains the cash bonus bidding option and adds the option
and gas development. The baselines studies may be made after leases
of a lease under which a net profits share is reserved to the United
are issued but must be completed prior to the time drilling begins.
States.
Subsection (b) requires monitoring of production areas in a man-
The Committee's decision to eliminate the royalty bidding alterna-
ner designed to provide time-series data which can be compared with
tive is based on the widespread agreement of most economists and oil
changes. previously collected data for the purpose of identifying any significant
industry representatives concerning the unndesirable effects of royalty
bidding. Specifically, the Committee believes that royalty bidding
Subsection (c) directs the Secretary to give preference to the use
would encourage speculation, increase the likelihood of premature
of Government owned and Government operated vessels, to the maxi-
shutdown of production under conditions of high royalty rates, and
mum extent practicable, in contracting for work in connection with
result in reduction in petroleum output and lease revenues.
the environmental baseline and monitoring studies. The Secretary will
However, the Committee wants to provide a lease allocation system
coordinate all such studies with the Administrator of the National
that would encourage the widest possible participation in competitive
Oceanic and Atmospheric Administration and shall, whenever pos-
lease sales consistent with receipt by the public of fair market value
sible, utilize existing Government owned and Government operated
for its resources. Testimony before this Committee and elsewhere has
marine research laboratories in conducting the studies.
revealed general acceptance of the proposition that high bonus bids
The Conference Report of the House and Senate Appropriations
have created a barrier to the entry of small and medium size oil firms
Committees on the Special Energy Research and Development Act
to the OCS arena. The Committee believes that net profits share ar-
of 1975, H.R. 14434 (H. Rept. No. 93-1123), detailed the agreement
rangements can be effective in shifting government revenue away from
that with regard to energy-related environmental baseline research on
initial bonuses and into deferred payments made out of a leaseholders
the Outer Continental Shelf, the resources of the agency best out-
profits.
fitted to carry out this task be utilized on a contract basis. It was agreed
Under the provisions of Section 203 the Secretary would be allowed
that this agency was the National Oceanic and Atmospheric Admin-
to offer net profits leases either (1) on the basis of a cash bonus with
istration (NOAA) of the Department of Commerce. The Special
a fixed share of the net profits derived from operation of the tract of
Energy R & D Act appropriated $6,630,000 to the Department of Com-
no less than 30 per centum reserved to the United States, or (2) on the
merce to remove from mothball, properly outfit and man three of the
basis of a fixed cash bonus with the net profit share reserved to the
nation's finest research vessels, the Discoverer, the Surveyor, and the
United States as the bid variable.
Miller Freeman. These vessels would be made available to work with
In order to determine net profits it is necessary to resolve a number
the Department of Interior in conducting environmental baseline re-
of potentially complex accounting issues concerning the allocation of
search, especially in target areas for new development.
costs and income. The overall impact of these matters on the govern-
The Committee wants the studies mandated by the section to be
ment's revenue should be relatively minor since any reduction in the
cooperative efforts of all government agencies with canability. This
public's net profits share (resulting-for example-from the calucula-
would include NOAA, the Geological Survey, and the Bureau of
tion of net profits after rather than before income taxes) probably
Land Managment.
would be offset by a compensating increase in bonus payments. This
Testimony in five days of hearings before the Senate Ocean Policy
increase could be substantial. Since a reduction in bonuses is an im-
Study (S. Res. 222) has confirmed that current Federal data-gather-
portant objective of the legislation it was decided that these cost alloca-
ing efforts on the OCS are inadequate and insufficient to cope with a
tion issues should be resolved in favor of lower bonuses, with attention
stepped-up leasing effort. Additional scientists, ships and equipment
to administrative simplicity and accepted industry practices.
are going to be needed.
Under existing law, all OCS oil and gas leases are for a primary
Section 203 revises the terms under which the Secretary of the In-
term of five years. As amended by Section 203, Subsection 8(b) of the
terior may offer oil and gas leases on the Outer Continental Shelf.
OCS Lands Act would permit the Secretary to issue leases with a
Under existing law the Secretary is permitted to offer oil and gas
primary term of up to ten years.
lcases on the basis of either (1) a cash bonus bid with a royalty fixed
The purpose of the increase in permissible maximum primary lease
at no less than 121/2% of the gross revenue from the lease, or (2) on the
term is to encourage exploration and development in areas of un-
basis of a royalty rate bid with a fixed cash bonus. Since the OCS
usually deep water or adverse weather conditions, where the five year
Lands Act was approved in 1953 all OCS leases have been offered for
period may be insufficient for both exploration and the mobilization of
cash bonus bids with a royalty rate fixed at 16% of the gross value of
new technology called for in the event of a discovery.
production. The Department of the Interior plans a small scale test of
Section 204 further amends Section 8 of the OCS Lands Act by
royalty bidding as part of the OCS lease sale scheduled for September,
requiring that royalty and net profits share oil produced from all
1974. Section 203 revises subsection 8(a) of the OCS Lands Act to
leases granted after the effective date of the amendment be offered
22
23
by the Government at a competitive auction. The physical quantity
The Committee recognizes that there must be some flexibility in the
represented by the Government's net profit share is determined by
degree of detail required in development plans. It expects that the
dividing the net profit due the United States attributable to oil by
Secretary will require exploration activity to start within a specified
its unit value at the wellhead.
time. If production is established the development plan would need to
The existing law (Section 5(a) (1)) authorizes sales of royaltv oil
be revised. This subsection authorizes revisions of development plans
and gas "at not less than market value" but sets out no other guidelines.
if the Secretary determines that revision will lead to greater recov-
The Secretary has been allocating royalty oil to "small refiners", as
ery of the oil and gas, improve the efficiency of the recovery operation,
defined in Department regulations.
or is the only means available to avoid substantial economic hardship
The purpose of the amendment is to create a free market in crude
on the lessee or permittee.
petroleum. However, the Committee was anxious to insure that inde-
The new subsection 5(e) prohibits flaring of natural gas from any
pendent refiners not be denied access to OCS crude. To this end, Sec-
well after the date of enactment of S. 3221, unless the Secretary finds
tion 203 directs the Secretary to limit participation in sales where such
that there is no practicable way to obtain production or to conduct
limitation is necessary to assure adequate supplies of oil at equitable
testing or workover operations without flaring.
prices to independent refiners. The Secretary can define the term "in-
The Committee believes that unnecessary waste of this valuable nat-
dependent refiner" by regulation. The Committee intends that the term
ural resource must not be permitted.
apply only to those refiners not part of an organization which produces
Section 207 amends Section 11 of the OCS Lands Act which author-
crude petroleum. The Secretary could impose a size limitation in terms
izes the Secretary to permit geological and geophysical exploration
of refining capacity if he deemed that desirable.
in the Outer Continental Shelf.
Section 205 amends Section 15 of the OCS Lands Act to provide for
The revised Section 11 would require that all permits for such ex-
a comprehensive annual report by the Secretary to the Congress on
plorations contain terms and conditions designed to (1) prevent in-
the entire Outer Continental Shelf program. It specifies that the re-
terference with actual operations under any OCS lease and (2) prevent
port include: a detailing of all moneys received and expended, and of
or minimize environmental damage. The permittee would be required
all leasing, development, and production activities; a summary of
to furnish the Secretary with copies of all data (including geological,
management, supervision, and enforcement activities; a summary of
geophysical, and geochemical data, well logs, and drill core analyses)
grants made from the Coastal State Fund; and recommendations to
obtained during such exploration. The Secretary must maintain the
the Congress for improvements in management, safety and amount
confidentiality of all data SO obtained until after the areas involved
of production in leasing and operations in the Outer Continental Shelf
have been leased or until such time as he determines that making the
and for resolution of jurisdictional conflicts or ambiguities.
data available to the public would not damage the competitive position
This report will aid the Congress in performing its oversight func-
of the permittee, whichever comes later.
tions and should be very useful to anyone interested in the OCS
The Committee believes that requiring the permittee to give the
program.
data to the representative of the property owner (i.e. the Secretary)
Section 206 adds two new subsections to Section 5 of the OCS Lands
is an appropriate condition for allowing the exploration. At the same
Act. Both are designed to insure maximum production from outstand-
time, the Committee believes that the confidentiality requirement will
ing leases.
protect the competitive interest of the explorer.
The new subsection (d) provides that all leases issued after
Section 208 is a technical amendment to delete material from Sub-
S. 3221 is enacted must require that development be carried out in
section 5 (a) (2) which duplicates the new Section 28 which would be
accordance with a development plan which has been approved by the
added by S. 3221.
Secretary. Failure to comply with the development plan will ter-
Paragraph (2) of Subsection 4(a) of the OCS Lands Act provides
minate the lease.
that:
The development plan will set forth, in the degree of detail estab-
To the extent that they are applicable and not inconsistent with
lished in regulations issued by the Secretary, specific work to be per-
this Act or with other Federal laws and regulations of the Secre-
formed, environmental protection and health and safety standards to
tary now in effect or hereafter adopted, the civil and criminal laws
be met, and a time schedule for performance. The development plan
of each adjacent State as of the effective date of this Act are
may apply to all leases included within a production unit.
hereby declared to be the law of the United States for that por-
A proposed development plan must be submitted to the Secretary
tion of the subsoil and seabed of the Outer Continental Shelf, and
within six months after the date of enactment of S. 3221 for all out-
artificial islands and fixed structures erected thereon, which would
standing permits and leases. Failure to submit a development plan or
be within the area of the State if its boundaries were extended
lease. to comply with an approved development plan shall terminate the
seaward to the outer margin of the Outer Continental Shelf.
The phrase "as of the effective date of this Act" has been interpreted
to freeze the applicable State law as of August 7, 1953. The Commit-
24
25
tee believes that whenever State law is applied on the Outer Continen-
tal Shelf it should be the law in effect at the time of application. Sec-
2. S. 3221 was ordered favorably reported to the Senate on a roll
tion 209 achieves this by deleting the reference to the effective date of
call vote of 10 yeas and 5 nays. The vote was as follows:
the OCS Lands Act.
Jackson-Yea
Fannin-Nay
Bible-Yea
Hansen-Nay
TITLE III. MISCELLANEOUS PROVISIONS
Church-Yea
Hatfield-Yea
Section 301 directs the Secretary of Transportation to review ap-
Metcalf-Yea
Buckley-Nay
Johnston-Yea
propriations and staffing needed to monitor adequately pipelines to
McClure-Nay
Abourezk-Yea
assure that they meet safety standards and to identify needs for new
Bartlett-Nay
legislation. It also directs the Interstate Commerce Commission and
Haskell-Yea
Nelson-Yea
the Secretary of Transportation to report on the adequacy for trans-
Metzenbaum-Yea
portation facilities for OCS oil and gas.
Section 302 directs the Secretary of the Interior to report to the
VIII. COST ESTIMATES
Comptroller General and the Congress within 6 months on all shut-
in oil and gas wells and all wells flaring natural gas. The Comptroller
In accordance with Section 252 (a) of the Legislative Reorganization
General is to review and evaluate the reasons for allowing the wells
Act of 1970 the Committee provides the following estimates of cost:
to be shut-in or to flare gas within 6 months after receiving the
Enactment of S. 3221 will entail some increase of Federal costs for
Secretary's report. The Committee is aware that the Secretary and the
more intensive management and inspection of OCS operations. The
Federal Power Commission have collected considerable data on this
Committee believes that these costs should be offset by increased rev-
subject already. It is not intended that this job should be repeated as
enues to the government from the increased oil and gas development
on the OCS.
long as the existing reports contain the information needed by the
Comptroller General.
Section 303 directs the Attorney General to study methods for im-
plementing a uniform Federal law providing liability for damage
from marine oil spills from all sources, including OCS operations,
tankers, and deepwater ports. The Administrative Conference of the
United States and the Office of Technology Assessment are to be
consulted.
The Committee is acutely aware of the need for a comprehensive
Federal statute providing liability for oil spill damage. The Trans-
Alaska Pipeline Act (P.L. 93-153) established special liability rules
and funding for oil which passes through the pipeline and is spilled
from tankers. The Deepwater Ports Act currently under consideration
will establish another set of rules for such ports, as will this Act, for
OCS spills. Legislation for tanker oil spill liability is being drafted
by the Committee on Commerce. The Committee hopes that one Fed-
eral law can be enacted to cover all these situations. Section 303 is
identical to a provision in the Deepwater Ports bill being reported
jointly by this Committee, and the Committees on Public Works and
Commerce.
Section 304 is a standard severability clause.
VII. TABULATION OF VOTES CAST IN COMMITTEE
Pursuant to Section 133 (b) of the Legislative Reorganization Act
of 1946, as amended, the following is a tabulation of voters of the
Committee during consideration of S. 3221:
1. During the Committee's consideration of S. 3221 a number of
voice votes and formal roll call votes were taken on amendments.
These votes were taken in open markup session and, because they
were previously announced by the Committee in accord with the pro-
visions of Section 133 (b), it is not necessary that they be tabulated
in the Committee report.
26
27
IX. EXECUTIVE COMMUNICATIONS
the Secretary would be required to carry out a research and development
OF
program to improve technology related to development of OCS oil and
gas resources.
United States Department of the Interior
The bill provides for a safety and environmental protection
OFFICE OF THE SECRETARY
program which would include (i) safety and environmental standards for
WASHINGTON, D.C. 20240
equipment used in OCS exploration, development and production, (ii)
equipment and performance standards for oil spill cleanup plans and
operations, and (iii) a safety regulation enforcement program which
MAY 4 1974
includes specified Federal inspection of OCS operations. Issuance
and continuance of leases would be conditioned upon compliance with
Dear Mr. Chairman:
such regulations. A standard of strict liability for oil spill
damages would be imposed on leaseholders except where damage is caused
This responds to your request for the views of this Department
by war or the damaged party.
concerning several bills which deal with the energy resources of the
Outer Continental Shelf, S. 3221, S. 2762, S. 2858, S. 2922, S. 2389
Section 8 of the Outer Continental Shelf Lands Act would be revised
and S. 3185.
to specify that bidding for OCS leases on a "net profit" basis is allowed,
in addition to bonus bidding, but royalty bidding would be excluded.
We recommend that none of these bills be enacted, since appropriate
The bill would also permit the Secretary to sell Federal royalty
law. action with respect to OCS energy resources can be taken under existing
oil by competitive bidding and would prohibit him from continuing
leases which would otherwise terminate, unless there is a reasonable
assurance of production from such leases within the period of an
The bills
extension. Additional provisions are included to assure full
development and maximum production from OCS leases, including a
S. 3221 would require the Secretary of the Interior to undertake a
General Accounting Office audit of shut-in wells, Secretarial uniti-
program of promoting petroleum production from the Outer Continental
zation or cooperation or pooling agreements, and review authority
Shelf subject to new environmental and safety requirements. The
for development plans.
Outer Continental Shelf Lands Act would be amended to declare that United
States policy is to make available for leasing prior to 1985 all OCS
Five percent of OCS revenues would be paid into a newly created Coastal
lands determined to have geologically favorable potential and be capable of
States Fund, subject to a $200 million per year maximum. The Secretary
development the without undue environmental harm. To carry out this policy
would be authorized to make grants from the Fund to coastal States
the Secretary would be required to develop a leasing program, specifying
to ameliorate adverse environmental effects and control secondary
size, timing and location of leasing activity that will best
social and economic impacts associated with development of Federal
meet energy needs for the ten year period following approval, subject
OCS energy resources. Secretarial regulations for administration of
to certain criteria directed toward overall resource management, geographic
the Fund would include requirements for grant eligibility, with the
decentralization of leasing and receipt of fair market value for public
proviso that no grant could be made for more than ninety percent of
resources. An open nomination procedure would be established for areas
the cost of activities to be conducted under the grant. The Secretary
to be leased or excluded from leasing. The bill specifies matters
would also be authorized to negotiate with a view to developing interim
to be included in the environmental impact statement for leased areas
agreements to permit energy resource development prior to final
and authorizes the Secretary to obtain all information from public
judicial resolution of disputes relating to such resources. The President
or private sources necessary to make evaluations required by the Act.
would be authorized to establish procedures for resolution of international
or interstate boundary disputes.
The bill would also require the Secretary to undertake a major OCS oil
and gas survey, including geologic investigations and drilling, and
a mapping program. No part of the survey and mapping program would
be considered a major Federal action under the National Environmental
leases or permits for oil or gas exploration or development on the
Policy Act of 1969 except drilling exploratory wells. Persons holding
OCS would be required to provide the Secretary with pertinent information
concerning the area which the lease or permit covers. In addition,
28
29
S. 2858 requires the Secretary to prepare within 6 months of enactment
S. 2922 would provide that sixty percent of revenues from OCS leases
a leasing schedule of all OCS areas to be leased in the ensuing five
after enactment would be paid to the adjacent coastal states without
years. The schedule must include an assessment of relative hazards to
limitation on use except that (i) rentals, bonuses or revenues other
the environment, or commercial or recreational uses of adjacent ocean
then royalties shall be included only if necessary to produce revenues
and coastal areas, of operations in each area, compared to the environ-
of $50 million in each state and (ii) if revenues attributable to a
mental hazard in all other areas under consideration in the leasing
state in any one year exceed $25 million the share of the excess over
schedule. Broad authority is provided for the Secretary to obtain
that amount shall be reduced in accordance with a schedule of percentages
information necessary to assist him in making the assessment. Within
ranging from 45 down to 10 percent on the excess over $50 million.
the earlier of (1) one year after enactment or (2) promulgation of
the five-year leasing schedule and assessment of environmental hazards,
S. 2922 also requires the Secretary within one year after enactment
the Secretary would be prohibited from taking steps to lease any area
to conduct a comprehensive study and collect all relevant data on
until other areas having a lesser hazard to the environment or commercial
OCS areas "potentially available for exploration of oil and gas
or recreational uses have already been leased or the leasing process
resources,' but not yet leased pursuant to the Act. No leasing could be
for such areas has already begun. New leasing schedules and environmental
conducted on any area until the study of that area was completed.
assessments would be required at not less than five year intervals.
On the basis of the study and other specified procedures, the Secretary
The bill also would establish a policy of insuring, "through improved
would also be required to designate (i) priority areas having the
techniques, maximum precautions, and constant use of the best available
greatest potential for development of oil and gas resources and the least
technology by well-trained personnel, the safest possible operations
risk of environmental damage (ii) areas of critical environmental
in the Outer Continental Shelf.' A number of fixed requirements to
concern in which leasing should be prohibited. The bill specifies
implement this policy are set forth in the bill together with an
certain sources from which the Secretary would gather information,
elaboration of procedures to be followed in imposing safety requirements.
including non-governmental parties. All such information must be
Additional enforcement provisions and civil and criminal penalties are
made available to the public but, unless otherwise provided by law
included in the bill. The bill also imposes strict liability for
or the Act, individual company data obtained would be kept confidential
unlawful oil spills up to $15 million and subject to the defense that
for one year except as necessary to carry out the bill's provisions.
damage resulted from an act of the injured party or an act of war or
Public hearings would be required in coastal areas affected by leasing
government. Liability in excess of $15 million would be subject to
and the consent of the Governor of any affected coastal state would
ordinary negligence rules.
also be required.
S. 2672 creates a Marine Resources Conservation and Development Fund
The bill imposes several additional leasing requirements. The Secretary
into which would be paid seventy percent of the revenues from OCS leases
must make public sixty days prior to entering into any lease the term
after enactment. Thirty percent of such revenues would be paid to
of a lease, the background information obtained for the area in which
the coastal state adjacent to the lease to be used for conservation
the lease is located, and, upon request, bids and supporting materials.
purposes. The Marine Resources Conservation and Development Fund would
Special conditions to take the background information into account
be available to the Secretary of Interior for "broad and varied marine
could be imposed in any lease and specific authority would be given to
resources conservation and development programs." A newly established
allow the Secretary to give preference as to the oil and gas produced
Advisory Board would be established to assist the Secretary in carrying
to the area affected by the lease. The bill also requires the Secretary
out his functions in using the Fund, and Regional Environmental Review
to impose specified production requirements and to conduct a survey
Boards would be established to review the adequacy of provisions of
of 'producing, shut-in' wells.
law and regulations to protect the environment and to monitor enforcement
actions, make recommendations to the Secretary, and hold public hearings
S. 2922 also adds a requirement that no lease be issued until the
in connection with administration of the Act.
Federal Trade Commission and the Department of Justice determine that
it will not involve an antitrust law violation. Also required would
30
31
be a Secretarial report with recommendations for promoting competititon
Discussion We agree generally with many of the essential objectives
and maximizing revenues from OCS leasing and a plan for implementing
of these bills, but recommend against their enactment at this time.
such recommendations. The report would be required to consider various
The existing Outer Continental Shelf Lands Act permits substantial
bidding systems, measures to ease entry of new competitors and measures
latitude for adjustment to changing circumstances and our program
to increase supply to independent refiners and distributors.
for development of the OCS can be fully carried out under the present
law. Significant changes in that law could seriously delay achievement
The Environemntal Protection Agency would be given authority to prescribe
of the degree of national energy independence which we believe is vital.
and enforce environmental protection regulations and an Outer Continental
Shelf Operations Advisory Board would be established. The bill would also
Discussed more specifically below are some of the more important respects
require States to prepare a report like the environmental impact statement
in which we believe provisios of these bills are either unnecessary or
which Federal agencies are required to prepare under the National
undesirable.
Environmental Policy Act before construction or development of any kind
is permitted on navigable waters, as defined in section 2(a) (2) of the
Scope of leasing program Provisions limiting or otherwise modifying the
Submerged Lands Act. The bill also imposes strict oil discharge
scope of the OCS leasing program are undesirable. For example, the goal
responsibility up to $100 million, subject to certain defenses including
stated in S. 3221 of leasing all available prospectively productive OCS
the defense that the discharge was caused by act of war or by negligence
lands by 1985 is unrealistic and implies a rapid rate of development
of the damaged party. An Outer Continental Shelf Liability Fund would
which may involve undesirable environmental or other effects and which
be established to pay claims in excess of those recoverable against
is far in excess of that presently planned. Our best estimate of the
private parties (up to $100 million). Owners and operators of vessels
next appropriate change in the scope of the OCS program is to lease
would be liable only up to $14 million. The Fund would be constituted
some 10 million acres in calendar year 1975. We believe that the rate
and continually replenished by a five cents per barrel fee imposed on
of leasing implicit in S. 3221 would dispose of vast OCS acreages
OCS production.
without increasing petroleum exploration and production beyond that
achievable under the current program. The current leasing program is
The bill would also require the Secretary to establish and maintain on
sufficiently large that availability of drilling rigs will be the main
OCS lands a reserve operating capacity for ninety days production of
limiting constraint rather than availability of unexplored leases.
an amount of oil equal to one-fourth of 1972 crude oil imports.
Conversely, the requirement in S. 2858 that all areas be ranked by
expected productivity and hazard to environmental, commercial and
S. 2380 requires a distribution of OCS revenues from leases after enactment
recreational factors and be made available for development SO that the
(1) 50% to the adjacent coastal state (ii) 25% to other states, and
most environmentally safe areas are leased first is unduly restrictive.
(iii) 25% to the Federal government.
We lack information and administrative ability to carry out this task,
even if it were desirable to do SO. Complying with this bill's
S. 3185 specifies a formula for determining Federal OCS revenues in
limitations could well result in a moratorium on leasing vitally needed
addition to the cash bonus for each lease executed after enactment.
OCS energy resources.
Under the formula, the Federal government would receive sixty percent
of the well head value of oil and gas produced after deduction of
Furthermore, the CEQ study has concluded that leasing can be carried
production and exploration costs. Such costs would be limited to forty
out in the areas included in that study if appropriate safety and
percent of the well head value of oil and gas produced, except that
environmental requirements are adhered to in each area. We intend to
the Secretary could allow additional costs associated with secondary
require of the industry whatever design criteria and practices are
recovery methods. Exploration and production costs could be carried
necessary to meet the CEQ concerns.
over from year to year. The Secretary would also be given discretion
to reduce the 60 percent Federal share to 50 percent and to require
In contrast, the present law provides sufficient flexibility for an
that not over 16 2/3 percent of the Federal entitlement be paid in
appropriate balancing of energy and environmental factors. Our concern
kind. The Secretary would have authority to prescribe regulations
is to improve the leasing system within the present framework and in
and lease terms including imposition of rentals.
this connection the Department recently has adopted a two-tier system for
32
33
designating tracts to be leased. Under it industry nominates promising
areas and the public at large is invited to comment on environmental and
We also oppose the provision in S. 2922 specifically requiring FTC and
other considerations bearing on tract selection. Based on this and its
Justice Department review and approval of each lease for antitrust law
own independent review, the Department then specifies areas to be leased.
violations. Normal antitrust inforcement procedures are adequate to
assure compliance with these laws and individual lease reviews would
A related consideration is the specific study or other requirements
unduly disrupt the OCS program. In addition, the bill's requirement
found in several of the bills which are prerequisites to leasing.
that Interior report on ways to promote competition is unnecessary in
S. 2922, for example, requires completion of a very comprehensive study
light of our present continuing effort to develop more competitive
and also mandates that the consent of adjacent coastal State governors
leasing system.
be obtained prior to leasing. We concur in the need for adequate study
of areas to be leased. Present law adequately provides for this through
Safety and environmental programs. The need for constantly improving our
the National Environmental Policy Act and the Outer Continental Shelf
environmental protection and safety programs is clear and we concur
Lands Act, and our policy is to expand our capability rapidly for
in the broad objective of several of the bills to achieve this end.
determining all the facts necessary to a balanced leasing program.
We also agree that consultation with coastal States is appropriate
The Interior Department is, however, implementing the present OCS Lands
but requiring consent of their governors is unwise in view of the broader
Act in accordance with the National Environmental Policy Act to insure
national aspects of the OCS program.
that these considerations are adequately taken into account. Provisions
such as those contained in S. 2858, S. 2672, S. 2922 and S. 3221 are
Lease offering and conditions - competition and other economic
unnecessary as the actions are authorized under existing laws. Also
considerations The OCS Lands Act provide that leasing of OCS lands
such provisions might be detrimental if transitional problems of
shall be by competitive sealed bidding on the basis of a cash
complying with their provisions delay current studies or other actions
bonus bid with a fixed royalty on a bid royalty with a fixed bonus,
we are currently undertaking to improve environmental protection and
but in no instance can the royalty be less than 12.5 percent. The
other requirements. Moreover, complying with such elaborate procedures
leases are for a five year term. These provisions are sufficiently
as those mandated in section 4 of S. 2858 (particularly new sections 10
flexible for institution of the most desirable alternative leasing
of the Act) could well hinder prompt and balanced development of
systems to promote competition while serving the public's interest
environmental and safety requirements. And we oppose specifically the
in receiving a fair return for its resources and using those resources
undersirable fragmentation of responsibility which would result from
in the most responsible manner.
assigning safety and environmental regulation responsibility to the
Environemental Protection Agency, as does S. 2922.
Different methods of bidding for OCS leases are under constant
consideration. Bonus bidding has historically been used for Federal
The Department is undertaking preparation of a full environmental impact
OCS leasing, but the Department is committed to a test royalty bid
statement on the new 10 million acre leasing program pursuant to the
offering not later than the September 1974 OCS lease sale. Although
National Environmental Policy Act. The Council on Environmental Quality
this experiment is a royalty bid experiment, we believe that the
has recently completed a study of OCS leasing, which includes a number
information developed will tell us enough about both bonus and royalty
of recommendations which we believe will improve our administration of
bidding to indicate whether further consideration of other possible
the OCS program. These and other actions will, we submit, appropriately
bidding methods is justified. We are also examining the feasibility
serve the objective of insuring safety and environmental protection.
of a number of other systems such as profit sharing, installment or
contingency bonus payments.
Research and Development A strong research and development program is
essential both with respect to energy and environmental aspects of
We are opposed to mandating any single system which would result in
OCS mineral development. It is, however, being accomplished
a loss of the flexibility which the present Act provides. Imposition,
under existing law and several provisions in the bills under consideration
for example, of the net revenue sharing formula in S. 3185 would be
might, if enacted, actually adversely affect the R&D effort. Mandating
highly undesirable, even though such a leasing system may have advantages
(as well as disadvantages) compared to other leasing methods.
34
35
a wide range of studies by different agencies, as does S. 3221, may
Moreover, since the bill's provisions would exempt all actions other than the
preclude desirable coordination and executive flexibility. S. 2672 would
drilling of exploratory wells from classification as a major Federal
channel funds on an arbitrary basis to states and thereby constitute
action for the purposes of Section 102(2)(c) of NEPA, it would seem
an unwise diffusion of R&D efforts.
that exploratory wells must therefore be considered major Federal actions.
Requiring an EIS could significantly delay the drilling of exploratory wells
Public information and participation in OCS decisions Assuring that
that are important to the conduct and completion of the survey and mapping
the public has access to information needed to make intelligent decisions
programs prescribed under S. 3221 and could result in unnecessary delays
with respect to OCS energy resources and an adequate opportunity to
in the preparation and publication of the prescribed maps and in the
participate in OCS program decisions is essential. Equally important
development of information important to an effective and expeditious leasing
is the desirability of developing a more extensive resource information
program for OCS lands.
base.
Similar objections appear in several of the other bills. S. 2922 imposes
The Interior Department presently has the necessary authority to pursue
several data gathering requirements in section 3 (adding a new section
these objectives. Consultations with industry representatives,
15 to the OCS Lands Act) which are costly and may be virtually impossible
environmentalists and others are presently underway concerning the
to obtain within the time frame set forth. The impact of the study
advisability of an exploratory program. The present OCS Lands Act
requirement is particularly serious because of the bill's requirement
permits the Department to require that permittee furnish us with
that no leasing be conducted in any area for which the study has not been
data obtained during exploration and we expect to reach conclusions
completed.
about what should be done in this regard shortly.
Distribution of OCS revenues Several of the bills (S. 3221,
It would not be appropriate to amend the OCS Lands Act at this time
S. 2672, S. 2922, S. 2389) would divert revenues from the U.S. Treasury
to require the development of specific informational programs.
to adjacent coastal and other states and we oppose such provisions.
To illustrate, the survey and mapping program required by section
Receipts under the Outer Continental Shelf Lands Act from OCS oil and
202 of S. 3221 would impact quite heavily and perhaps undesirably
gas leases belong to the Federal Government and currently make a
on our OCS program. If enacted, this provision would require that
substantial contribution to Federal income. If such revenues were
a survey of OCS oil and gas resources be conducted and that the
diverted to coastal and other States, as the bills provide, the Federal
Secretary maintain a current series of detailed topographic, geological,
Government would need to increase its income from other sources. Also
and geophysical maps of and reports about the OCS. Maps for all
the bills adopt inflexible allocations of funds to such States without
areas under lease or proposed for leasing prior to July 1, 1977,
regard to need or resources.
would have to be prepared and published prior to July 1, 1976; maps
of areas proposed for leasing after July 1, 1977, would have to
#
be prepared and published not later than six months prior to the
last day for submitting bids for the areas offered for lease; the
To summarize, the bills before the Committee deal with the major issues
maps of all prospective areas must be prepared and published not
relating to use of the energy resources of the Outer Continental Shelf.
later than ten years after the date of enactment.
To meet our present energy needs, however, we believe that the present
OCS Lands Act provides a satisfactory framework and that further legislation
Under these provisions a plan for conducting the prescribed survey and
such as that before the Committee is undesirable or unnecessary.
mapping programs would have to be submitted to Congress within six months
after enactment. A progress report to Congress, including a summary of
initial data compiled, would be due within 20 months after enactment,
and progress reports would be required on an annual basis thereafter.
Conducting such an extensive mapping and survey effort would be extremely
difficult, expecially within the time frame set forth, and would not
likely produce results justifying the effort. Again, our present program
undertaken pursuant to existing authority and modified as needs change,
should be satisfactory.
36
37
The Office of Management and Budget has advised that there is no
HENRY M. JACKSON, WASH. CHAIRMAN
objection to the presentation of this report from the standpoint
AM NEV.
PAUL J. FANNIN, ARIZ.
RANK CHURCH, IDAHO
CLIFFORD P. HANSEN, 1440.
of the Administrations's program.
IT NETCALF, MONT.
MANK O. HATFIELD, OREG.
MENNITT CHNSTON JR., LA.
JAMES L. BUCKLEY, N.Y.
11459 ADDRESS 5. DAK.
JAMES A. MC CLURE, IDAHO
LOTO 6. ASKELL COLO.
DEWEY F. BARTLETT, . OKLA.
Sincerely yours,
APPOOD NE WON, W.S.
United States Senate
DWARD M. METZENSAUM OHIO
In ? Writa'e
COMMITTEE ON
JERRY T. VERKLER, STAFF DIRECTOR
INTERIOR AND INSULAR AFFAIRS
WASHINGTON, D.C. 20510
Under
Secretary of the Interior
Hon. Henry M. Jackson
20 May 1974
Chairmman, Committee on
Interior and Insular Affairs
United States Senate
Washington, D.C. 20510
The Honorable John C. Whitaker
Under Secretary
Department of the Interior
Washington, D. C. 20240
Dear Secretary Whitaker:
During your testimony on May 6 on S. 3221 and other
bills pending before the Subcommittee which would revise
the Outer Continental Shelf Lands Act, you indicated that
the Department was in "general agreement with many of the
essential objectives of the bills" but you recommended
against their enactment "at this time". Your statement
indicated that your recommendation was based on the be-
lief "that a significant change in that law (ocs Lands
Act) could create serious delays in achieving the degree
of energy self-sufficiency for the nation which is no
necessary".
In order to help the Subcommittee in its deliberations,
I would appreciate it if you would specify what provisions
of S. 3221 could, in your opinion, "create serious delays"
and indicate precisely how and why such delays could occur.
In addition to this information, I have a number of
specific questions which I would like the Department to
answer. They are:
1. What is the status of the alternatives for Outer
Continental Shelf exploratory programs which you indicated
the Department was discussing with environmental and in-
dustry groups?
38
39
The Honorable John C. Whitaker
20 May 1974
STATEMENT
OF
Page 2
United States Department of the Interior
2. You indicated that the Department had not decided
OFFICE OF THE SECRETARY
to conduct profit sharing experiments because there might
WASHINGTON, D.C. 20240
be a legal challenge. Do you object to being given the
express authority to conduct such an experiment as S. 3221
would provide?
3. You indicated that the Department was establishing
JUL
}
974
an environmental monitoring and/or baseline study program
in the Mississippi-Alabama-Florida area leased recently.
Please describe this program in some detail. What is the
Honorable Lee Metcalf
nature and scope of the information being sought? How
Chairman, Subcommittee on
Minerals, Materials and Fuels
long will the studies be conducted? What level of funding
United States Senate
and manpower is allocated to these studies?
Washington, D.C. 20510
4. You indicated that the coastal states have the
Dear Senator Metcalf:
right to refuse to allow a pipeline from the Federal Outer
Continental Shelf to cross the State owned subjerged lands.
Has the Department Solicitor or the Attorney General made
S. May testimony on S. 3221 and other legislation dealing
In response 6 to your letter regarding Under Secretary Whitaker's
a formal ruling on this question? If so, please furnish
of S. 3221, 3221 please find enclosed our comments on specific with
it to the Committee. If no formal ruling has been made,
of which could create serious delays in achieving provisions degree
what is the basis for your opinion? It appears to me
energy self-sufficiency for the nation which is so necessary. the
that your position is inconsistent with the provisions of
at Generally, while many features of the bill are apparently
Section 6 of the Submerged Lands Act (43 USC 1314) which
early improving OCS leasing procedures, there is little to directed
reserves certain rights to the United States over the sub-
exploration and optimm production from OCS leases. encourage
merged lands.
studies with and reporting. The bill requires minerals fact geophysical
investigation authority proposed concentrates heavily on geological and Much of the
5. You indicated that in order to lease tan million
authority to implement findings and recommendations.
obligations to report to Congress, without reference finding to
acres in 1975 as directed by the President the Department
would probably offer between 12 and 15 million acres. In
Responses are also provided to the five specific questions you asked.
light of the experience in the Department's most recent sale,
when less than 50% of the acreage offered was actually leased,
We will be glad to provide any further information you desire.
isn't it likely that the Department might have to offer
twenty million acres in 1975?
Sincerely yours,
Thank you very much for your cooperation.
(Sgd) Ken M. Brown
Very truly yours,
Ken M. Brown
Legislative Counsel
Enclosures
Lee Metcalf
Chairman, Subcommittee on
Minerals, Materials and Fuels
41
40
or
Question 1:
United States Department of the Interior
What is the status of the alternatives for Outer Continental Shelf
exploratory programs which you indicated the Department was discussing
OFFICE OF THE SECRETARY
with environmental and industry groups?
WASHINGTON, D.C. 20240
Answer:
We have had a series of useful discussions with representatives from
Memorandum
MAY 2 4. 1974
industry and environmental organizations. A report summarizing the
To:
Secretary
various opinions that were expressed during these discussions is enclosed.
Under Secretary
After a careful appraisal of the alternative exploratory programs which
Through:
Jared G. Carter
had been proposed, we doubt that any one of them would add much to the
From:
Darius W. Gaskins, Jr.
10-million acre offshore leasing program planned for 1975. But we have
Subject:
OCS - Summary of consultations with Industry and Environmental
Organizations
not completely rejected the option of accelerating offshore activities
We recently met with representatives of the following companies:
by a suitable exploratory program and will closely examine each promising
Amoco
Exxon
Murphy 011
program that is recommended. We are also pursuing some other measures
Citgo
General Crude 011
Phillips
Columbia Gas
Gulf
Shell
which will increase the rate of exploration on the Outer Continental Shelf.
Continental 011
Husky 011
Sun 0il
Dow Chemical
Mobil
Texaco
The Department is discussing a limited deep stratigraphic drilling program
and environmental organizations:
with an industry group, which would provide geologic information for
Center for Law and Social Policy
NRDC
several frontier areas. All drilling would take place under carefully
Environmental Policy Center
National Wildlife Federation
The Institute of Ecology
Sierra Club
specified conditions to prevent undue harm to the environment. All infor-
National Audubon
Sport Fishing Institute
mation would be made available to the Department 30 days after collection,
to obtain their views on the alternative exploration programs we had been
considering and on some other matters. Briefly, the programs are:
except for information on environmental hazards or shows of petroleum,
1.
Sale in 1975 in several frontier areas covering a limited number of
which must be reported immediately. Data on environmental hazards would be,
leases and requiring unitized exploration.
and data on shows of petroleum when judged to be significant may be, made
2. Company exploratory drilling on structures through one-year leases
in limited number of frontier areas, followed by a preference lease
public at once. The Department is also considering a policy of requiring
if a discovery is made. All data to be made public.
that all industry geological and geophysical data should be made available
3. Federal exploratory leasing program, all data being made public
ismediately
to the Government. Such data would be released to the public 10 years
4.
Federal stratigraphic drilling program, all data being made public
after collection, or 60 days after a lease sale, whichever comes sooner. A
immediately.
public hearing has been scheduled for the 15th of July for this purpose.
42
43
This is a summary of their answers to the main questions put to them.
The representatives of the environmental organizations did not have
very firm opinions on the programs. To the extent that preferences
Question 1: Would any of the proposed exploration programs get petroleum
were stated, they favor
faster than the planned ten million acre two-tier leasing
program?
an exploratory drilling program financed and operated by
the government over any company-financed program;
There was not a single company which thought that any of the proposed
programs would add much to the current ten million acre program. A
delaying the ten million acre leasing program until the
typical comment was: "We believe pre-lease drilling is wholly
results of the government exploration program are known;
unnecessary, would delay the programs, and further would not be very
effective because the best structures are usually large and complex, and
baseline studies before any lease sales take place, or at
they require a considerable exploration program involving many wells to
least before production begins, followed by a comprehensive
define their potential." We were told repeatedly that a few holes even
monitoring program.
when drilled on structure would not condemn an area if they turn out to
be dry and not significantly increase the speed of initial exploration
Question 2: Would a stratigraphic drilling program in frontier areas
if shows of hydrocarbon appear. Specific examples noted were:
be useful in guiding lease sales toward the most promising
structures? In particular, are you going to participate
About 200 holes were drilled in the North Sea before the first
in the stratigraphic program of the "Sun group?"
major oil discovery was made.
There was no agreement on the merits of stratigraphic drilling. Most of
About 65 holes have been drilled off Nova Scotia without finding
the majors indicated that stratigraphic data would not add much to geo-
commercial quantities of hydrocarbons.
physical information. "Stratigraphic data is of minimal value if one
has good geophysical data. The latter will indicate where the structures
With the exception of Prudhoe Bay, many unsuccessful holes were
are and that's where we will drill." It was apparent that they would
drilled on the Alaskan North Slope.
prefer less commonly available information before lease sales rather
than more. As one of them put it, publicly available data just drives
This is not to say that some companies would not like more information
up bid prices.
on frontier OCS basins. One major, c.g., said that 30 holes if drilled
on structure would really give us a lot of information. The Oregon/
Three of the independent companies argued that stratigraphic data for
Washington case was cited as an example where a few holes told a lot
frontier areas would be quite useful since we lack definite knowledge
about that area. And 1f one of the proposed exploration programs had
about sedimentary structures. In their view, stratigraphic information
to be selected, this company would prefer alternative 1. But they, as
can be used to guide lease sales toward the most promising tested
well as all the other companies, would rather proceed under our planned
structures. One large independent company would join the Sun group
accelerated leasing program and drill the holes in the course of
although they think it is a waste of time and money, because "the
exploring their tracts acquired at regular lease sales.
positive indications don't prove anything and the negative indications
don't downgrade expectations." One of the majors stated that they
One other major company stated a preference if one of the programs had
would join the Sun group merely to protect themselves, while another
to be adopted. Their view was that if data must be made public, the
definitely would not. The other companies did not commit themselves.
government may as well drill the wells, and so they opted for alterna-
tive 3. All the other companies, majors and independents, did not
Question 3: Are there significant advantages, particularly with respect
favor any of the proposed programs.
to rig-years saved, in unitizing the exploration efforts in
frontier areas?
One independent company was fearful that such exploration programs could
destroy the independents' offshore business since the government may as
Most companies were either mildly for or mildly against unitization.
a result be selling known oil deposits. This would favor the integrated
Some believed that unitization would result in considerable savings in
companies and bring in large end users who would simply outbid the
the number of exploratory wells drilled and, given the shortages of rigs,
independents. The company argued that the independents make their money
drilling pipes, casings, etc., significantly increase the rate of develop-
by finding and selling crude oil.
ment in frontier areas. All companies, however, would prefer voluntary
to imposed unitization, saying that far more voluntary units would exist
if the government had not practiced checkerboard leasing in the past.
Unitizati CO entail problems with respect to allocating expiora-
plan and the drilling operator.
tion costs fairly among the participants, and agreeing on the drilling
44
45
Question 4: What are your views about the Department's planned
One major company suggested that instead of a ban against
accelerated leasing program?
joint bidding, the government might impose an upper bound
The companies, large and small, universally approved of accelerated
on the number of tracts a company can acquire in any one sale.
leasing. Some stated that the oil industry has a large spare capacity
to explore and develop much more acreage than in the past. Some believed
All of the independent companies favored joint bidding "but
that the industry can respond to sales of 10-15 million acres per year,
1f joint bidding has to be limited, then the largest companies
while others suggested smaller numbers. All companies emphasized the
should be prohibited from bidding jointly."
importance of announcing sales frequently and regularly as far into the
future as possible; this would make their planning efforts and those of
Bright spot analysis was said to be an important new tool in
their contractors far easier.
geophysical exploration, primarily in locating and identifying
gas deposits. "Bright spot techniques may increase confidence
Almost all companies--majors and independents--took the opportunity to
to as much as 75 percent on existence of hydrocarbons, but
we still will not know volumes."
make the following points:
They like the present bidding system and do not want any
Although we talked to only a relatively small number of companies, we
significant changes. Except for two independents, no company
believe that we did have a representative sample and that the answers
likes royalty bidding. The two companies favor some form of
would not change much if more companies were canvassed. In appraising
royalty bidding to case the front money problem. Many of the
the responses of the companies to our questions, we must remember that
companies prefer to see a general reduction in the level of
they basically are satisfied with the terms and conditions of offshore
bonuses paid, but "although a bonus bidding system has a
leases, and will therefore reject any modifications which are going to
front money problem, the other alternatives have worse
change the familiar pattern of doing business unless the modifications
disadvantages."
are clearly in the best interests of the industry. Despite this recog-
nized bias, it is doubtful whether any of the exploration programs which
Two of the independent companies stated that a royalty bidding
had been proposed would add much to our accelerated leasing program.
system would encourage speculative land acquisitions, and
Notwithstanding the somewhat negative attitude of the majors toward the
bring in such end users as utilities and airlines who would
Sun 011 stratigraphic drilling program, there is no good reason why we
simply outbid all but the very largest of the independents.
should not approve this project. We are presently examining all aspects
They favor the current bidding system and a large-scale
of unitization and will have a staff paper on this topic in the near
leasing program because "this would satiate the majors and
future.
leave a lot of good acreage for the smaller companies.
Four companies, while acknowledging that such a system would
probably not be feasible in the U.S., stressed the desirability
of the British system in which tracts are allocated on the basis
Darius W. Gaskins, Jr.
of work commitments and fixed profit sharing.
They would like us to establish clear guidelines about our bid
rejection system so that all participants know which criteria
are being used. "Why doesn't the government state the minimum
bid it will accept for each tract in advance of a lease sale?"
Some companies are quite upset about any bid rejections. "We
can't understand why you reject bids. After all, we are
bidding in an auction."
With respect to our proposed ban on joint bidding by the
largest companies, some of the majors
1. wanted to know how we arrived at the cutoff point of
5 billion barrels, and
2. did not think it was desirable to prohibit joint bidding
by the majors.
46
47
Question 2:
Question 3:
You indicated that the Department had not decided to conduct profit sharing
You indicated that the Department was establishing an environmental
experiments because there might be a legal challenge. Do you object to
monitoring and/or baseline study program in the Mississippi-Alabama-
being given the expressed authority to conduct such an experiment as
Florida area leased recently. Please describe this program in some
S.3221 would provide?
detail. What is the nature and scope of the information being sought?
How long will the studies be conducted? What level of funding and man-
Answer:
power is allocated to these studies?
At the time of the May 6, 1974 testimony, the Department was concerned
Answer:
that a profit sharing leasing experiment could not be conducted under the
In May 1974, a Bureau of Land Management. (BLM) contract was signed with
existing provisions of the OCS Lands Act without being subject to legal
the State University System of Florida Institute of Oceanography (SUSIO).
challenge. We now have a Solicitor's opinion which states that the existing
The terms of this contract provide for the initial sampling of a baseline
Act offers sufficient flexibility to allow a profit sharing experiment.
environmental survey of the Outer Continental Shelf (OCS) areas that were
Therefore, as stated earlier under the discussion of delay problems of
leased in the December 1973, Mississippi-Alabama-Florida lease sale.
S.3221, the Department is attempting to formulate a profit sharing test.
Field sampling began in mid-May, and will be completed for this first
It is expected that the experiment can be held no later than January 1975.
sample by the end of June after which time laboratory analysis will
We do not now see a need for specific legislation to grant authority to
commence. Results of this baseline study will be finalized by March 15,
conduct such an experiment.
1975. Some of the environmental aspects to be studied include: background
levels of hydrocarbons in water, sediment and organisms; background levels
of tract metals in water, sediments and organisms; characteristization of
benthic and planktonic communities; description of sediments and relation-
and
ships between organisms and abiotic parameters; standard oceanographic
measurements suchas salinity, temperature, micronutrients, dissolved oxygen).
The aim of the program is to establish a pre-operational baseline of those
critical parameters in the OCS environment which may be affected by oil
and gas development activities. Future measurements to be made on the
48
49
same stations, both inside the leased areas and outside on the control
Question 4:
stations, will provide time series data which can be compared with pre-
You indicated that the coastal states have the right to refuse to allow
a pipeline from the Federal Outer Continental Shelf to cross the State
viously collected information for the purpose of determining significant
owned submerged lands. Has the Department Solicitor or the Attorney
General made a formal ruling on this question? If so, please furnish
changes.
it to the Committee. If no formal ruling has been made, what is the
basis for your opinion? It appears to me that your position is incon-
sistent with the provisions of Section:6 of the Submerged Lands Act
It is anticipated that these baseline/monitoring studies in the MAFLA area
(43 USC 1314) which reserves certain rights to the United States over
the submerged lands.
will continue for at least five years, and will be funded at $10-15 million.
By the end of FY '74 the BLM will have added 9 new staff positions to
Answer:
develop study plans, review proposals, coordinate the efforts of all
The question of coastal States right to refuse to allow a pipeline from
contractors, oversee contract activity, and liaison with Federal, State,
the OCS to cross State owned submerged lands arose during preparation of
and local agencies and institutions. An additional eleven positions will
legislation to license deepwater ports on the OCS. The Solicitor's
be open in FY '75. No manpower is being added to perform the actual
opinion is that coastal States do have the power to restrict pipelines
sampling and analytical work.
from crossing submerged lands beneath State territorial waters. A copy
of this opinion, dated September 20, 1973, is attached.
Besides the baseline/monitoring program in the MAFLA area, BLM has requested
funds to conduct similar studies in four other OCS areas: The Gulf of
Alaska, Southern California, South Texas, and the Atlantic Coast. Study
plans for these four additional areas are in various stages of development.
The National Oceanic and Atmospheric Administration, in conjunction with
the U.S. Geological Survey, the Bureau of Sport Fisheries and Wildlife, and
the University of Alaska has submitted a proposal entitled "Environmental
Assessment of the Northwestern Gulf of Alaska-First Year Program." This
study plan represents a first step in the assessment of the marine environ-
ment in the Gulf of Alaska.
38-533 o 4
50
51
OF
United States Department of the Interior
but shall not be deemed to include, proprietary
rights of ownership, or the rights of tanagement,
administration, leasing, use, and development of
OFF
OFFICE OF THE SOLICITOR
the lands and natural resources which are speci-
WASHINGTON, D.C. 20240
fically recognized, confirmed, established, and
vested in and assigned to the respective States
IN REPLY REFER TO:
and others by section 3 of this Act."
The statutory authority in § 6(a) of the Submerged Lands Act quoted
above does give the United States some authority in the three mile
zone, but a mere retention of rights in, and nowers of regulation
Memorandum
and control of, lands for the constitutional purpose of commerce
SEP 1973
does not provide adequate statutory authority for the exercise of
To:
Deputy Under Secretary Carter
the right of eminent domain to obtain a right-of-way for a pipeline.
From:
Assistant Solicitor - Minerals
I find no authority in the Outer Continental Shelf Lands Act to
authorize the Federal Government to condemn a right-of-way across
Division of Energy and Resources
State lands in order to develop the Federal resources of the Outer
Subject: of Pipeline a State rights-of-way across submerged lands
Continental Shelf. In any event that Act pertains to the resources
of the United States Outer Continental Shelf and would not extend
to oil imported from a foreign country. So for the constal States
whether 1973, The Solicitor on a "Deepwater State has asked Port me Legislation". to respond to The your memorandum of August 14,
have been willing to cooperate with Federal lessees and the need to
acquire rights-of-way in the face of State opposition has not arisen.
referred to as territorial waters in what crossing
lands beneath State could prohibit pipelines from specific question the submerged is
Gulf of Mexico the "three mile zone" (or three Senator Johnston
June Fergerwore
the Outer Continental off Texas Shelf. and Florida) lying between league the zone coast in and the
Frederick N. Ferguson
We for conclude Congress that to coastal States presently have this
overcome it would require new Federal power legislation. and that
cc:
Secretary's Files
The these Submerged lands Lands Act (43 U.S.C. §§ 1301-1315) to
Mr. Allen (OL)
States. beneath territorial waters to the granted title
Mr. Findlay (OL)
Act nor the Outer rights in this area. Neither the United
have proprietary Consequently, the coastal States, and respective not the coastal States,
Mr. Ferguson
Miss Wagner
crossing the Federal three Government authority with U.S.C. §§
grants the Continental Shelf Lands Act (43 Submerged 1331-1343) Lands
DER Reading File
Docket Section
8/31/73
be granted only by mile the State. zone. A right-of-way respect across State to pipelines lands can
FNFerguson:bar:9-20-73
grants Although title section 3 of the Submerged Lands Act (43
United States States, section 6 (43 U.S.C. § 1314) retains mile for zone the
the coastal to the submerged lands within the three U.S.C. § 1311) to
"all its navigational servitude and rights
national commerce, navigation, national defense, and purposes
navigable waters for the constitutional and of
powers of regulation and control of said lands in and
affairs, all of which shall be paramount inter- to,
53
52
Question 5:
the sales in an attempt to lease the ten million acres annually.
You indicated that in order to lease ten million acres in 1975 as directed
by the President, the Department would probably offer between 12 and 15
To assist the Department in selecting the most promising areas for leasing,
million acres. In light of the experience in the Department's most recent
sale, when less than 50 percent of the acreage offered was actually leased,
a Federal Register notice of February 20, 1974, requested industry to
isn't it likely that the Department might have to offer 20 million acres
in 1975?
designate their preference of areas to be offered for leasing. The notice
Answer:
also asked for a rating of areas based upon environmental concern. A
A decline in the amount of acreage leased as compared to the total offered
report of the responses to the Federal Register notice is enclosed.
was not unexpected by the Department. It was recognized that to maintain
a high level of leasing, attractive prospects must be selected and offered
for sale. This is becoming more of a problem because nearly all of the
successful offshore leasing has taken place off Louisiana and East Texas
and the amount of favorable acreage remaining in this area is limited.
Secondly, it was anticipated that industry would be more selective in
their leasing practices and in committing available capital when they
were aware that plans were being prepared to expand leasing to new areas.
The proposed schedule for leasing ten million acres annually will concen-
trate heavily on leasing in new frontier areas. Moreover, industry has
indicated that they will strongly support initial leasing in new frontier
areas because of the potential involved. Therefore, if expansion of leasing
into new areas is not delayed because of environmental or other problems,
it is still the belief of the Department that ten million acres can be
leased during 1975 by offering for sale up to 15 million acres. We will,
however, continually monitor the individual lease sales as the accelerated
leasing program progresses. If it appears that the amount of acreage leased
of the total offered does decline, we will increase the acreage offered in
55
54
OF
Likewise, sections 18(f) through (j) would have a minimal practical
effect, except perhaps in two respects. First, section 18(h) requires
United States Department of the Interior
the Secretary to review and reapprove the leasing program at least
once each year. This intrusion of executive discretion may, on the
OFFICE OF THE SECRETARY
one hand, require needless paperwork and establish an unenforceable
WASHINGTON, D.C. 20240
requirement or, on the other hand, compel too much review and reapproval
of leasing programs. Second, section 18(i) confers broad authority
JUL 2 6 1974
on the Secretary to obtain information needed to prepare environmental
impact statements with little regard for recently enacted energy data
Dear Mr. Chairman:
and information provisions, the need for limiting governmental authority
or providing appropriate protection of private interests.
In accordance with Secretary Morton's July 16 letter on Committee
Print No. 1 of S. 3221, relating to the energy resources of the
OCS oil and gas survey program. To a large degree the bill's
Outer Continental Shelf (OCS) this letter sets forth the Interior
provisions adding a new section 19 to the OCS Lands Act (page 9, line 1
Department's analysis of Committee Print No. 1 and our position con-
through page 11, line 18) are unnecessary, but to the extent they are
cerning its major provisions. We previously expressed our views on
likely to have an actual effect, they could impact quite heavily and
S. 3221 as originally introduced by letter dated May 4, 1974.
perhaps undesirably on our OCS program. The bill would require that a
survey of all OCS oil and gas resources be conducted and that the
We oppose amending the Outer Continental Shelf Lands Acts at this
Secretary maintain a current series of detailed topographic, geological
time, because it would disrupt current efforts to achieve full
and geophysical maps of and reports about the OCS. Maps would be
utilization of these resources. The specific problems that enactment
required no later than six months prior to the last day for submission
of S. 3221 would cause are discussed below.
of bids for OCS areas scheduled for lease on or after July 1, 1977; and
in no case later than ten years after enactment of all other areas.
Leasing program. Title II of the bill purports to establish a national
policy of use of OCS resources and the criteria for a leasing program.
Under these provisions a plan for conducting the prescribed survey and
Taken together these provisions are so general for the most part that
mapping programs would have to be submitted to Congress within six months
they contribute little or nothing to a sound program. Our present
after enactment. A progress report to Congress, including a summary of
policy and actions are easily comprehended by these provisions which are
initial data compiled, would be due within 20 months after enactment,
at best unnecessary and at worst confusing and productive of controversy
and progress reports would be required on an annual basis thereafter.
and litigation. Where these provisions are more specific, they are in
Conducting such an extensive mapping and survey effort would be extremely
several instances either superfluous or harmful. We believe it is
difficult, especially within the time frame set forth, and would not
undesirable at this time to require development of a ten-year leasing
likely produce results justifying the effort. Carrying out the mapping
program as contemplated by the bill, since this would divert scarce funds
and survey requirements (including surveys on a spacing no greater
and manpower from more pressing matters in the OCS, and other programs.
than two kilometers) would require large expenditures of money, possibly
For any leasing program, however, it is standard governmental operating
on the order of several billion dollars. Again, our present program
procedure to prepare at the appropriate time the budget and manpower
undertaken pursuant to existing authority and modified as needs
estimates called for in new section 18(c) of the OCS Lands Act which the
change, should be satisfactory.
bill would add (page 6, line 20 through page 7, line 5). New section
18(d) mentions some factors which must be included in the environmental
Moreover, since the bill's provisions would exempt all actions other
impact statement on the leasing program. These are factors which obviously
than the drilling of exploratory wells from classification as a major
will be included whether or not section 18(d) becomes law, but we oppose
Federal action for the purposes of section 102(2)(c) of the National
on principle this amendment to the National Environmental Policy Act.
Environmental Policy Act, it would seem that exploratory wells must
New section 18(e) requires the Secretary of the Interior to establish
therefore be concidered major Federal actions. Requiring an environmental
procedures for a leasing tract-nomination system-something we have already
impact statement could significantly delay the drilling of exploratory
done under the present OCS Lands Act, as indicated in our May 4 letter.
wells that are important to the conduct and completion of the survey and
mapping programs prescribed under S. 3221 and could result in unnecessary
delays in the preparation and publication of the prescribed maps and in
the development of information important to an effective and expeditious
leasing program for OCS lands.
56
57
Research and development. A strong research and development program
with respect to both energy and environmental aspects of OCS mineral
Lease terms. The provisions of the present OCS Lands Act are
development is being accomplished under existing law. New section 20
sufficiently flexible for institution of the most desirable alternative
of the Act (page 11, line 20 through page 13, line 7) is superfluous.
leasing systems to promote competition while serving the public's
interest in receiving a fair return for its resources and using
Safety. As pointed out in our May 4 letter, a recent OCS study by
those resources in the most responsible manner. Different methods
the Council on Environmental Quality has concluded that leasing can
of bidding for OCS leases are under constant consideration. Bonus
be carried out in OCS areas if appropriate safety and environmental
bidding has historically been used for Federal OCS leasing, but the
requirements are adhered to and we intend to require of industry
Department is committed to a test royalty bid offering not later than
whatever measures are needed to assure a safe and environmentally
the September 1974 OCS lease sale. Although this experiment is a
sound program. In this regard, we are meeting the concerns under-
royalty bid experiment, we believe that the information developed
lying the new section 21 which the bill would add to the OCS Lands
will tell us enough about both bonus and royalty bidding to indicate
Act, including inspection, accident investigation and reporting
whether further consideration of other possible bidding methods is
measures
justified. We are also examining the feasibility of a number of
other systems such as profit sharing, installment or contingency
Liability for oil spills. The Administration currently has under
bonus payments We are opposed to mandating any single system which
consideration comprehensive legislation relating to oil spill and
would result in a loss of the flexibility which the present Act
other OCS liability. We recommend that the Committee defer action
provides.
in this area until the Administration proposal is developed. The
Council on Environmental Quality has previously commented on new
Section 203 of the bill would revise setion 8 of the OCS Lands Act
section 22 (page 15, line 23 through page 17, line 19).
to specify that bidding for OCS leases on a "net profit" basis is
allowed, in addition to bonus bidding, but royalty bidding would be
Negotiation with States and boundary determinations. New sections 23
excluded. The Committee Print modified the original bill to specify
and 24 of the OCS Lands Act (page 17, line 20 through page 18, line 8)
that not less than 30% of net profit must be paid to the United States,
provide no new authority for the Executive Branch and merely call
instead of requiring a 55% payment. Section 204 of the bill would
for actions pertaining to the matters with which we are already
also permit the Secretary to sell Federal royalty oil by competitive
dealing.
bidding and would prohibit him from continuing leases which would
otherwise terminate, unless there is a reasonable assurance of pro-
Coastal State Fund. We are opposed to provisions of the bill which
duction from such leases within the period of an extension. Additional
would create a new program of grants to adjacent coastal States and
provisions are included in section 206 to assure full development and
thereby divert revenues from the U.S. Treasury. Receipts under the
maximum production from OCS leases, Secretarial unitization or coopera-
OCS Lands Act from OCS oil and gas leases belong to the Federal
tion or pooling agreements, and review authority for development plans.
Government and curently make a substantial contribution to Federal
In our view "net profit" bidding is permitted under the present Act
income. If such revenues were diverted to coastal States, as new
subject to certain non-objectionable limitations. We are continuing
section 25 of the Act would provide (page 18, line 10 through page
to evaluate the desirability of "net profit" and other forms of
19, line 20), the Federal Government would need to increase its income
bidding.
from other sources. In effect, the bill increases Federal expenditures
outside the normal budget and appropriation process, which is both bad
managment and inflationary. It results in an inflexible allocation
of funds to such States without regard to need or resources and also
fractionates efforts to address the environmental, social and enconmic
problems of OCS energy development.
FORD is LIBRARY DERALD
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Miscellaneous. Sections 301 and 302 of the bill require several
STATEMENT OF THE HONORABLE RUSSELL W. PETERSON,
investigations and studies as to which attention is already being
CHAIRMAN, COUNCIL ON ENVIRONMENTAL QUALITY
directed. The authority conferred is redundant and poses the
BEFORE THE SUBCOMMITTEE ON MINERALS, MATERIALS,
potential of confusing current authorities and efforts.
AND FUELS OF THE SENATE COMMITTEE ON
INTERIOR AND INSULAR AFFAIRS
In regard to section 302, we have been studying and monitoring shut-in
and flaring wells under the OCS Lands Act and have furnished information
to the Congress on this subject.
May 10, 1974
Sincerely yours,
Mr. Chairman and Members of the Committee:
Royston C. Hughes
I am pleased to appear here today to discuss the
Assistant Secretary of the Interior
study on Outer Continental Shelf oil and gas which the
Honorable Henry M. Jackson
Chairman, Committee on
Council on Environmental Quality has recently completed and
Interior and Insular Affairs
United States Senate
how that study relates to the legislation on this subject
Washington, D.C. 20510
pending before the Committee.
On April 18, 1974, the Council submitted to the
President the results of a one-year study which had been
prepared at his request. Although we have made the report
OCS OIL AND GAS - AN ENVIRONMENTAL ASSESSMENT available to
the committee, I would like to submit a copy of the report
for the record.
In my April 24, 1974 testimony before the Senate
Commerce Committee's hearings on National Oceans Policy, I
summarized the findings and recommendations of CEQ's report.
I understand that the Committee on Interior and Insular
Affairs is participating in that study so there is no need
for me to repeat that summary here. I have attached a
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61
summary of detailed findings of CEQ's study to my statement
As a result of the study, the Council developed the
for the record.
following ranking of relative environmental risks, ranging
This report was intended to advise the President on
from lowest to highest, associated with potential oil and
the relative risks of oil and gas development in the
gas operations in the Atlantic and Gulf of Alaska outer
Atlantic and Gulf of Alaska outer continental shelves (OCS)
continental shelves:
and to suggest ways in which the risks can be minimized or
Eastern Georges Bank (East of 68° W; EDS 1 and 2)
prevented.
Southern Baltimore Canyon (South of 37° N; EDS 9)
To carry out this assessment, the Council undertook
Western Georges Bank (West of 68° W; EDS 3 and 4)
Central Baltimore Canyon (Between 37° and 39.5°
studies in a number of areas. Both offshore and onshore
N; EDS 6,7, and 8)
impacts of oil spills and discharges and of other OCS-related
Northern Baltimore Canyon (North of 39.5° N; EDS 5)
Southeast Georgia Embayment (EDS 10,11,12,13, and 14)
activities were studied. Statistical analyses of oil
Western Gulf of Alaska (West of 150° W; ADS 7,8, and 9)
spill data were performed to identify specific problem
Eastern Gulf of Alaska (East of 150° W; ADS 1,2,3,
4,5, and 6)
areas. The movement of oil in the oceans was determined
The hypothetical development locations are identified in
using computer modeling techniques. The ability of OCS
Figures 1 and 2 which are attached.
technology and practices to perform safely under hostile weather
and seismic conditions was assessed. Estimates of potential
The ranking is CEQ's best estimate of the overall
oil and gas resources which may be found in the various
relative degree of risk to the marine, coastal, and human
OCS areas were reviewed. The potential benefits of OCS
environment; it is based on an integration of the study's
oil and gas production from those areas in satisfying
findings with respect to the effects of development onshore
regional energy demand were investigated. Finally, the
as well as of oil spills offshore, incidence of severe
effectiveness of Federal regulatory and enforcement processes
weather and seismic phenomena in potential development
and the broader issues of intergovernmental coordination and
areas, the state of technology, and projections of regional
planning were examined.
energy needs.
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The Council also concluded that the Federal Government
Santa Barbara, it is argued by some, was a critical
must be guided by and committed to a set of essential principle:
step in catalyzing general public reaction to the many
in choosing areas to lease and in administering environ-
environmental problems we face. Although the Outer
Continental Shelf Lands Act of 1953 was passed long before
mentally safe offshore operations.
the environmental awareness of the past few years, the Act
Now I would like to turn to the relationship between
has effectively been "amended" by recent legislation. The
the CEQ study and the legislation pending before the
National Environmental Policy Act of 1969 sponsored by this
Committee. As Under Secretary Whitaker indicated before
Committee and three 1972 laws -- the Coastal Zone Management
the Committee on May 6, the Administration recommends
Act, the Federal Water Pollution Control Act Amendments,
against enactment of the bills before the Committee at
and the Marine Protection, Research and Sanctuaries Act --
this time. The Council agrees with many of the objectives
have required incorporation of more responsive environ-
of the bills, recognizing as they do the need for
mental objectives, procedures, and practices into the
environmental protection of our marine, coastal, and onshore
administration of the Outer Continental Shelf Lands Act.
resources. It does not appear necessary or desirable,
however, to enact these bills in order to ensure that the
The CEQ study found that consistent application of
environmental risks of OCS oil and gas operations be made
several guiding principles in OCS leasing and development
acceptable.
can significantly reduce the risk to every element of the
Progress has been made by the offshore oil and gas
environment. These principles which interpret and amplify
industry in improving technology and work practices since
principles implicit in the environmental legislation
1969 Santa Barbara accident. In addition, more stringent
recently enacted include:
Federal regulations for OCS operations have been issued and
Exploration and development of the OCS must take
place under a policy which puts very high priority
enforcement of these regulations has been strengthened.
on environmental protection.
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The location and phasing of OCS leasing should be
the several OCS areas we studied strongly recommends that
designed to achieve the energy supply objectives
these differences be fully recognized in the evolution of
of the leasing program at minimum environmental
risk.
an OCS leasing program. Second, the recent revision of
The best commercially available technology must
oil and natural gas resource estimates to lower values adds to
be used to minimize environmental risks in new
OCS areas.
the growing recognition that we must plan now to use our
Regulatory authorities available to Federal agencies
limited petroleum resources more carefully in the future.
must be fully implemented and requirements strictly
enforced to minimize environmental risks in new
For any type of resource development, the risks and costs must
OCS areas.
be balanced with the benefits to be gained. The Council
Planning at all phases of OCS oil and gas operations
must respect the dynamic relationship between
believes that when the risk of developing OCS oil and gas
initial Federal leasing decisions and subsequent
state and local community action. The states and
based on our current state of knowledge and technology -- is
the communities affected must be given complete
information as early as possible so that planning
greater than that of an available alternative, then we
can precede and channel the inevitable development
pressures. Experience must be continuously
should not move ahead until we know more and can do better.
integrated into the management process.
Most of the bills before this Committee do recognize the
The Council strongly encourages the Department of
need to incorporate environmental factors into our OCS leasing
Interior and other Federal agencies with responsibilities
goals. Some place more emphasis on avoidance of oil and gas
in the OCS to fully consider these principles in their
operations in environmentally hazardous OCS areas than
policies and program.
others. Some seem to place primary emphasis on accelerated
I would now like to comment on some of the specific
development of the OCS with environmental protection added as
provisions in the proposed bills and point out sections of
an afterthought.
our report relating to the provisions.
Leasing Program Goals
Two findings of the CEQ study strongly emphasize the
need for a well-planned leasing OCS program. First, the
significant differences in relative environmental risks among
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The Council strongly recommends a balanced approach --
CEQ is working with the Department of Interior and
one where measures for expanded energy supply are balanced
other Federal agencies to determine if there are environ-
with measures for environmental protection. If the risk
mental benéfits and costs which derive from specific features
from OCS development is acceptable, the Council believes
of alternative leasing arrangements and, if negative impacts
that we should proceed with caution and with a commitment
may occur, how they can be kept at acceptable levels.
to prevent or minimize damage.
Federal OCS Responsibility
Our recommendations to the President and the affected
In OCS OIL AND GAS - AN ENVIRONMENTAL ASSESSMENT,
Federal agencies were designed to bring about such a
we pointed out that in the past the industry has in effect
balance. This balance can be accomplished within the
determined the information needs for OCS leasing. We
existing legislative framework. We will be working with the
indicated that
Department of Interior and other Federal agencies to see
"Industry's incentives, however, are
not always sufficient to generate all
that it is achieved.
the data necessary for effective environ-
mental regulation. Prior to a lease sale,
Alternative Leasing Arrangements
industry understandably concentrates on
The Council did not conduct a detailed study of alternative
obtaining and analyzing data that locate
petroleum deposits. The unavailability of
high-resolution seismic data to USGS before
OCS leasing arrangements. During the seven public hearings
completing the final environmental impact
statement is due in part to the fact that
which we conducted last September and October, we heard
the companies have little economic
incentive to acquire such costly data until
testimony from a number of witnesses on a number of proposed
after tracts are finally selected. After
the lease sale, moreover, there is little
modifications to the existing leasing system. In our
economic incentive for industry to acquire
data solely for assessment of environmental
analyses we could not identify significant differences in
risks.
environmental effects resulting from different leasing
Numerous suggestions have been made in various studies
arrangements. Therefore we felt that, while consideration
and in our public hearings for making more information and
of these issues in the evolution of national energy policy
analyses available to the Government and public.
is essential, they did fall outside of the scope of our
mandate.
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In our report, the Council recommended that the
Studies of seismic and bottom conditions soon to be
Department of the Interior determine the kinds of information
undertaken in the Gulf of Alaska by the U.S. Geological
and analyses necessary for adequate assessment of environmental
Survey are directly responsive to the Council's concern
factors at all stages of leasing and development. The Depart-
with the potential impacts of geological hazards on offshore
ment should take appropriate measures to obtain such infor-
operations in that area.
mation, including acquisition and analysis of high-resolution,
near-surface seismic reflection data for the purpose of
Adequacy of OCS Technology and Practices
determining the nature and magnitude of geologic hazards
As I stated above, the offshore oil and gas industry
prior to tract selection.
and Federal regulatory agencies have made real progress in
The Council also recommends that the Department of
the past several years. However, our report has found that
Interior consider the competitive consequences, at different
operations in both frontier OCS regions would confront
stages in the process, of requiring disclosure of certain
harsher conditions than have been previously faced in
industry data and analyses. The department should weigh
other United States offshore areas and that conditions in
those consequences against the benefits to be obtained and
the Gulf of Alaska are more severe than the industry has yet
develop standards for governing such disclosure. In making
experienced anywhere in the world.
that balance, it should consider particularly the need
Storm conditions in parts of the Atlantic may be more
for informed public participation in the NEPA process.
severe than in the Gulf of Alaska or the North Sea. Average
As Under Secretary Whitaker pointed out on Monday, the
weather conditions generally will be worse, though, in the
OCS Lands Act allows the Department of Interior to require
Gulf of Alaska.
lessees to provide the Secretary with copies of all data
obtained during exploration. The Department will soon
publish proposed rulemaking on this matter in the Federal
Register.
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Earthquakes and tidal waves also present serious
The Council recognizes the important role of research
problems in the Gulf of Alaska with large (Richter magnitude 7)
and development in bringing into use more environmentally
earthquakes expected every 3 to 5 years and giant (Richter
protective OCS technologies. We have purposely called for
magnitude 8) earthquakes expected every 25 years in the
the development of performance requirements which will
area where oil and gas development has been proposed.
encourage the development and early adoption of safer equip-
Based on our evaluation of OCS technology to meet
ment and facilities, rather than lock the industry into a
the conditions which would be confronted, the Council made
static technology. Specifically, we have called for the
a number of recommendations to the Federal agencies responsibl
use of the best commercially available technology in critical
for establishing standards and procedures for OCS operations.
OCS operation and, and at the same time, we encourage the
The recommendations are grouped in three major
industry to do better.
areas -- improved consideration of the human element in
The technology assessment and technical recommendations
OCS equipment design and operating practices, improved
in our report cover most of the research and development topics
technology to meet the harsher conditions of the Atlantic
identified in S.3221.
and Gulf of Alaska OCS, and improved technology and
The Council feels that its recommended actions can
practices to minimize the impacts in virgin OCS areas. The
be accomplished under the existing legislative framework.
specific recommendations are detailed in the attached
If technology R&D and performance testing are required in
summary. The Council believes that adoption of these
carrying out the recommendations as we anticipate they
recommendations would substantially reduce the risk of
will, then we believe that the industry should bear the
operations in the new OCS areas.
cost of the R&D with the Federal government conducting
independent evaluation of equipment and facility
performance.
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72
At least three states -- Maine, Massachusetts, and
Oil Spill Liability
Florida -- have enacted legislation providing for oil
In its assessment of oil spill liability coverage,
pollution liability. Unlike the Federal measures, all
the Council found that there was no private party recovery
three allow private parties recovery for pollution damage
under Federal law for pollution damage from non-vessel or
within state jurisdiction (i.e., within 3 miles of the
non-oil-vessel pollution sources. Interior Department
coast). But most states have not provided for oil spill
regulations issued under the OCS Lands Act make lessees
liability. Although additional state action may be useful,
financially responsible for total removal of pollution
the Council believes economic and administrative con-
from drilling and production operations. If the lessee
siderations in ensuring adequate compensation and financially
does not take necessary cleanup measures, the Geological
responsible defendants make uniformity desirable.
Survey's area supervisor is authorized to do so at the
The Council in its report recommended that a compre-
lessee's expense.
hensive Federal liability system for OCS-related oil
Similarly, the Federal Water Pollution Control Act
spill cleanup and damages be established through new
prohibits certain discharges of oil and hazardous sub-
legislation. CEQ believes the Federal Government should
stances and authorizes Federal Government cleanup at the
carefully consider the full economic and environmental.
operator's expense unless the operator does so properly.
implications of various types of liability --- fault or no-
These provisions do not apply, however, to offshore
fault - and various means of ensuring adequate compensation
facilities beyond 3 miles of the coast or to any pollution
such as liability insurance for operators or a revolving
damage beyond 12 miles.
fund financed through charges on operators. The Trans-
Alaska Pipeline Authorization Act is one precedent which
certainly bears close study.
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Because of the scope of the oil spill liability issue
First, such a provision provides a clear channel for
and the inadvisability of dealing with the complex subject
remedying violations. Second, such a provision can serve
piecemeal, the Council does not believe that it is necessary
to improve administrative effectiveness in developing
or advisable to amend the OCS Lands Act to add a liability
regulations and ensuring compliance by keeping Federal
section. The Administration is now studying the liability issu
regulators on their toes. Third, citizen suit provisions
in a broad context and will carefully assess the merits of
would reduce challenges based on complicated legal theories.
alternative approaches including the possibility of compre-
Other Federal agencies are opposed to citizen suit
hensive Federal liability legislation to cover oil pollution
provisions because they believe that citizen suits could
from vessels as well as from offshore oil operations.
lead to unacceptable delays in accelerating leasing and
development in the Outer Continental Shelf. Some believe
Citizen Suit
that there are currently available means for legal redress
The Council's report stated that citizen suit
and there is no need to broaden the basis of standing to
provisions, which allow interested persons to sue to remedy
sue to enforce OCS regulations.
violation of Federal regulations or permit conditions, can
provide a useful compliance mechanism. The Council
OCS Revenue Sharing
recommended that the Secretary of the Interior seek the
The Council's report did not address the issue of OCS
establishment of such a right under the OCS Lands Act.
revenue sharing. We did recognize the critical need for
As you know, the Administration opposes amending the
close cooperation between the Federal Government and the
OCS Lands Act at this time. This position includes the
coastal states to minimize the adverse impacts of onshore
citizen suit provision. The Council, however, believes
development induced by OCS oil and gas operations. The
that a citizen suit provision is a beneficial feature for
Council recommended expanded use of the NEPA process and
the Coastal Zone Management Act and future use of a land use
several reasons.
planning act as three mechanisms for facilitating the
required coordination.
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The Coastal Zone Managment Act may be the best
Summary of Specific Findings
mechanism for routing Federal assistance to the states to
undertake advanced planning for onshore development. In
Probability and Fate of Oil Spills
addition, as our report points out states can strengthen
A comprehensive analysis of oil spill data for
offshore platforms, pipelines, and tankers was performed
their coastal zone management programs by developing
by ECO, Inc., and the Massachusetts Institute of Technology.
This analysis indicated that, for a given size of oil field,
special technical expertise on all phases of OCS develop-
oil spills are highly likely during the life of an oil field.
For example, if a medium sized field (two billion barrels
ment and its onshore and offshore impacts. Funding for such
in place) is discovered and produced, it is likely that one
large platform spill (over 1,000 barrels) and either one
efforts can come from general revenue sharing, specialized
large pipeline spill if pipeline transportation is used or
nearly two large tanker spills if tanker transportation is
Federal assistance, or increased tax and other economic
used will occur during the life of the field. More spills
would likely occur in large fields; fewer spills would
benefits accruing from onshore development.
occur in smaller fields. Smaller spills are likely to
occur more frequently, e.g., although during the life of
a medium-sized field only one large platform spill is
The Council hopes that its report and the companion
likely to occur, over 33,000 barrels -- mostly from small
spills -- are likely to be released from platforms
volumes detailing the study of onshore impacts can be of
during the same period.
assistance to states and local communities in anticipating
The potential impacts of OCS operations on the ocean
and coastal environment depends in part on where oil
planning needs. Through long-range and dynamic planning,
released in the ocean travels and how it weathers. The
movement of oil spilled into the ocean was determined by
we believe that states and local communities can avoid
the Massachusetts Institute of Technology using computer
modeling techniques. This model calculates the probability
unbearable sudden increases in planning and
of oil coming ashore from hypothetical oil and gas resource
locations (see section on OCS Resources) and, to test the
implementation costs.
sensitivity of results to specific spill location, from
various points closer to and farther from the coast. Wind
Summary
and current data are used so results could be presented in
terms of the percentage of the time that an oil spill would
The Council believes that these hearings are very
beach during the "best" and "worst" seasons. For all sites
considered, spring and summer tend to be the worst seasons.
useful in opening for public scrutiny the important public
The results of the modeling for the Atlantic are presented
in Table 6-1. Similar results are given in the report for
policy questions surrounding the development of OCS resources.
the Gulf of Alaska.
I hope that this discussion of the relationship between
The results presented below are based on hypothetical
oil spills released from platforms, pipelines, and tankers
our report and the bills pending before the Committee
in or near potential oil fields. Further, it is assumed, in
these examples, that oil spill contaiment and cleanup
has been of assistance.
systems are not deployed to mitigate the impact of the spills.
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For the Georges Bank area, the probability of oil
spills reaching shore from the hypothetical sites in the
Offshore Impacts of OCS Development
eastern Bank (EDS 1 and 2) is low -- 15 to 20 percent in spring,
the worst season. Closer to shore in the western Bank
The Council found that significant adverse ecological
(EDS 3 and 4) the probability reaches 35 to 50 percent in
impacts can result from accidental oil spills, continuous
the spring.
discharges of oil from platforms and ships, and construction
activities. Significant impacts can be mitigated or
For the Baltimore Canyon area, the probability of oil
eliminated, however, by proper siting, stringent environmental
beaching varies widely. In the southern part of the area
controls; careful construction and operation, and adequate
(EDS 9), the probability is nearly zero in all seasons.
baseline studies and monitoring to identify areas to be
In the central part (EDS 6,7, and 8), it reaches 20 percent
avoided and additional measures needed.
in the spring. In the northern part (northof EDS 5),
it increased dramatically as the release site was
The study found that there are two major types of
moved closer to Long Island, especially during the summer.
causes of impacts on marine and coastal biology. There
At the site 50 miles from shore, the probability is only 10
are transient causes such as (a) impacts of oil spills,
percent; at 25 miles it has increased to 75 percent, and at 10
and (b) impacts of platform construction and pipelaying.
miles it has risen to 95-100 percent.
Equally important, though, are operational causes such as
(a) discharge of oil from platforms; (b) discharge of
For the Southeast Georgia Embayment, a similar pattern
drilling muds, cuttings, etc., and (c) discharge of oily
was found for oil releases from all sites -- in the spring,
ballast from tankers.
there is a 95-100 percent probability of oil reaching shore
from all of the sites.
To analyze the ecological effects of oil spills and
discharges and construction activities, CEQ contracted the
Two different patterns of oil spill behavior emerged
Massachusetts Institute of Technology. In predicting the
in the Gulf of Alaska. In the western Gulf (ADS 7,8, and 9),
impact of oil spills and discharges on marine organisms,
the probability of oil coming ashore was relatively low
MIT considered both initial impacts and population
5 to 10 percent in summer, the worst season, except for
recovery. Five types of effects were identified -- direct
release sites near to shore in the vicinity of ADS 7.
lethal toxicity, sublethal effects, coating, tainting,
During other seasons, the probability of oil going ashore
and habitat changes.
from these sites is near zero. In the eastern Gulf, however,
the probability is 95-100 percent in the summer for all sites
An important consideration is the persistence of 011
in the marine or coastal environment. Although previous
and 40-75 percent even in winter, the best season.
estimates of oil persistence in different environments
have not been based on careful, quantitative analysis,
Because of uncertainty in wind and current data, these
modeling results should not be interpreted as exact
they do indicate that oil probably persists much longer
in salt marshes with soft sediments (up to 10 years) than
predictions of the movement of oil in the marine areas
studied. The results do indicate reliable trends which are
on rocky shores or coarse sediments (a few months). The
adequate for identifying problem areas. The computer modelin
degradation and weathering of the oil depends on a
number of factors such as temperature, turbulence, sunlight,
does not consider the use of oil spill containment and clean-
etc. It does appear that oil would persist longer in the
up equipment.
Gulf of Alaska than in the Atlantic.
The study found that oil spills can be a "considerable
potential threat" to breeding flocks or other aggregations
of birds. Birds are most susceptible to coating with oil
which increases heat losses from the body and often leads to
death because of exposure. Both Atlantic and Gulf of
Alaska coastal areas provide wintering, breeding, and
feeding grounds for thousands of species of birds. In the
Gulf of Alaska, over 200 species are found along the coast,
including whole populations of some species such as the
endangered Dusky Canada goose.
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Oil spills and discharges can also threaten fish populations
Onshore Impacts of OCS Development
found that finfish and shellfish in the larval stages
The Council found that there were two major causes
MIT particularly susceptible if oil, even at low concentrations, oil can
of onshore impacts induced by OCS oil and gas operations
are enters spawning or nursery areas. The presence of in
in coastal communities: construction and service for
inhibit or prevent homing or spawning behavior
offshore operations, and industrialization based on the
also anadromous species such as salmon. The report identifies each
landing of the oil and gas (oil storage and refining,
a number of potentially threatened fish species in of
gas process, and petrochemical processing). The induced
the potential OCS areas.
onshore activities can have both positive and negative
effects on the coastal communities affected. These effects
The study discusses recovery from the effects of oil
include demographic, economic (jobs and value of output),
spills and concludes that some biological populations,
physical (water demand, electrical requirements, houses
including some species of birds and anadromous fish, may
and offices), social (schools, hospitals, police, etc.),
require many years to recover from the results of a spill.
and environmental (air and water pollution, solid waste
disposal, land use).
oil spills can threaten not only biologically productive
coastal wetlands and salt marshes but also beaches and
The nature and magnitude of the impacts depend on
recreational areas.
many factors - the level and location of OCS oil and gas
production, the nature of the area where induced develop-
Effects of pipeline construction through coastal wetlands
ment is located, the extent of state and local planning
also considered. Measures to minimize the physical
efforts to cope with the development. Based upon a number
were and biological impacts were suggested; avoidance of pipeline
of necessary assumptions which are described in the report,
corridors in environmentally sensitive areas was recommended.
the Council analyzed the impacts upon
sample areas along the Atlantic, the Gulf of Alaska, and
To support the study of the biological effects of oil,
the west coast. In particular, four sample areas were
environmental resource inventories in the OCS areas studied
chosen along the Atlantic: Bristol County, Mass.; Cape
were compiled and assessed. Providing the inventories
May and Cumberland Counties, N.J.; Charleston, S.C., and
to MIT were the Research Institute of the Gulf of Maine
Jacksonville, Fla. Two areas -- Cordova and Valdez were
(TRIGOM), the University of Rhode Island, the Virginia
chosen in Alaska and two Puget Sound and San Francisco --
Institute of Marine Sciences (VIMS) and the University of
were chosen on the west coast.
Alaska. Many important data were not available such as
data on species life histories, effects of oil at various
In general, the Council found that local impacts were
stages in the life cycles, and wildlife, bird, and commercial
much more substantial than regional impacts. Economic impacts
fisheries, especially for the Gulf of Alaska.
range widely. For example, by the year 2000, as many as
75,000 jobs could be created in the Charleston sample area
while only 20,000 could be created in Bristol County, Mass.,
assuming high levels of OCS production. Significant shifts
in the size and nature of the local population could occur
from larger economic impacts. The areas studied in Alaska
and Charleston, S.C, could be subjected to greater economic
and demographic impacts as a result of OCS-related activities.
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Status of Technology
The study indicates that impacts on the social
infrastructure of the sample areas may be significant.
The Council found that the performance of the offshore
The demand for services -- hospitals, schools, housing,
transportation, sewage treatment, and public utilities
oil and gas industry has improved substantially since
may be difficult to meet. The sample areas with greatest
Santa Barbara. In addition, more stringent Federal regulations
for OCS operations have been issued and Federal enforcement
water supply problems are San Francisco and Southern New
of these regulations has been strengthened.
Jersey, although Charleston would also have significant
problems.
Operations in the two frontier OCS areas, however, will
Land suitable for primary industrial development
confront harsher conditions than have been previously faced
in other areas. The study points out that storm conditions
appears adequate along the Atlantic. Such land may not
in parts of the Atlantic may be more severe than in the
be widely available in the Alaskan, San Francisco, and
Gulf of Alaska or the North Sea. Weather conditions
Puget Sound areas because of environmental, locational,
and topographical constraints. Even along the Atlantic,
generally will be worse, though, in the Gulf of Alaska.
Earthquakes and tidal waves also present serious
wetlands, national parks and seashores, and coastal
recreational areas significantly reduce the land avail-
problems in the Gulf of Alaska with large (Richter
magnitude 7) earthquakes expected every 3 to 5 years and
able for both primary industrial and general development.
giant (Richter magnitude 8) earthquakes expected every 25
Without careful planning and controls, land development
years in the area where oil and gas development has been
could significantly impact wetlands, parks, and recre-
proposed.
ational areas as well as destroy important pristeen
ecosystems.
As indicated in the section on Probability and Fate
The study indicated that air and water pollution are not
of Oil Spills, oil spills are highly likely during the life
generally expected to be significant because of increased
of an oil field unless significant improvements are made in
use of emission and effluent control technologies. In
OCS technology and practices.
selected locations, hydrocarbon emissions and BOD levels
may rise due to concentration of refineries and petrochemical
The Council made recommendations in three major
industries. In these areas, decreased hydrocarbon emissions
areas -- improved consideration of the human element in
as a result of auto emission controls would be offset by
OCS equipment design and operating practices, improved
new sources of hydrocarbons, especially from refineries.
technology to meet the harsher conditions of the Atlantic
Where significant increases in population are anticipated,.
and Gulf of Alaska OCS, and improved technology and
as in Charleston, auto emissions may also be a factor.
practices to minimize the impacts in virgin OCS areas.
These recommendations are summarized below:
1.
Improved consideration of the human element in
OCS equipment design and operating practices
--- Incorporation of human factors engineering
into OCS equipment design
Certification of critical OCS operating
personnèl
85
84
Institutional and Legal Mechanisms for
Improved technology to meet harsher conditions
Managing OCS Development
2.
Detailed performance requirements for drilling
The Council found that OCS development will vitally
platforms
affect important state interests, and state regulatory
authorities can significantly shape OCS development and
-- Detailed performance requirements for production
related nearshore and onshore activities. Federal-state
platforms
coordination is therefore urgently needed. The Council
recommended that affected states strengthen their coastal
Detailed performance requirements for offshore
zone management agencies, and that Federal agencies
oil storage facilities
cooperate with them on an ongoing basis. Federal-state
cooperative efforts should focus on development of state
-- Use of subsea production equipment where
coastal zone plans prior to OCS development. The National
environmental protection would be enhanced
Environmental Policy Act (NEPA) process can be another important
means for Federal-state coordination.
-- Detailed performance requirements for surface-
actuated subsurface safety valves
Within the Federal government, OCS responsibilities
are fragmented and there is no formal coordinating mechanism.
-- Requirement that improved methods of downhole
Establishment of the Department of Energy and Natural
pressure measurement be used
Resources could improve coordination. The Council believes
that NEPA is the best planning tool for the near term.
-- Detailed performance requirements for workover
Impact statements concerning OCS activites should discuss
and servicing operations on OCS platforms
alternative uses of specific OCS, nearshore, and onshore
areas; and all Federal agencies proposing major OCS actions
-- Detailed performance requirements for OCS
should prepare programmatic impact statements on a regional
pipeline protection
basis.
-- Requirement that tankers transporting OCS oil
The Department of Intérior has primarily acquired data
employ segregated ballast capacity preferably
in the past with a view to locating productive tracts and
with double bottoms
has treated industry data as proprietary. The Council
recommended that Interior obtain the data necessary to assess
3.
Improved technology and practices to minimize
environmental and safety factors at all stages of leasing
impacts in virgin OCS areas
and development, and develop standards to govern public
disclosure of such information.
-- Identification of critical environmental areas
and incorporation of appropriate measures in
The effectiveness of OCS inspections was
National Oil Pollution Contingency Plan
criticized in a recent GAO report, and an in-house Interior
study has found existing enforcement sanctions inadequate
-- Establishment of effluent standards for waste
to deter violations. The Council recommended that Interior
water discharge from OCS facilities, including
propose more stringent sanctions and establish and train
installation of best commercially available
inspection teams as necessary to verify compliance.
control technology to minimize oil discharge
The major gap in the liability system concerns
Development of detailed guidelines for disposal
private party recovery of damages from non-vessel-source
of drilling muds, cuttings, etc.
pollution. The Council recommended that establishment of
a comprehensive Federal liability system for OCS-related
Continuation of efforts to improve oil spill
oil spill cleanup and damages through new legislation.
containment and cleanup capability
-- Advanced planning for pipeline corridor siting
and designation of corridors which minimize
intrusion into environmentally sensitive
86
87
OCS Resources
Perspectives on Energy Growth
Although the presence of oil and gas in the Atlantic
Three energy growth scenarios are examined for the
and Gulf of Alaska OCS has not been confirmed by exploratory
nation, and for the New England, Middle Atlantic, South
drilling, geological and geophysical. investigations indicate
Atlantic and West Coast Regions. For all three scenarios
that conditions favorable to the accumulation of large
including the low growth* case, existing domestic oil and
reservoirs of oil and gas exist in parts of the Atlantic
gas sources will have to be supplemented by imports,
and Gulf of Alaska. Exceptionally thick sediment beds
synthetic oil and gas produced from coal and shale, and
(potential sources of hydrocarbons) and potential geological
oil and gas produced in new areas.
traps occur in the Baltimore Canyon and Georges Bank. Some
extremely large potential geological traps and thick sedi-
On the East Coast, OCS oil and gas could replace
ments occur in the Gulf of Alaska.
imported oil and gas and domestic coal in the primary fuel
mix. Assuming medium energy demand growth and average
Recent estimates by the U.S. Geological Survey indicate
Georges Bank production estimates, the New England region
that the Atlantic OCS may contain 10 to 20 billion barrels
may obtain 30 percent of its crude petroleum and 70 percent
of undiscovered economically recoverable petroleum liquids
of its gas from the Georges Bank by 1985. The Baltimore
(crude oil and natural gas liquids). The Atlantic OCS may
Canyon may provide 13 percent of the oil and 10 percent of
also contain 55 to 110 trillion cubic feet of natural gas.
the gaseous fuel requirements for the Mid-Atlantic by 1985.
Estimates of oil and gas resources in the Gulf of Alaska
Production from the Southeast Georgia Embayment may provide
are not as well characterized as those in the Atlantic,
15 percent of the South Atlantic region's oil requirements
with petroleum liquid resources estimates ranging from three to
and 13 percent of its gas requirements by 1985.
25 billion barrels and natural gas from 15 to 30 trillion
cubic feet. The recent U.S.G.S. estimates (March 1974) are
Pacific Coast requirements for additional oil can be
substantially lower than those quoted earlier by the
met from the Alaskan North Slope. Production from the
Geological Survey.
Gulf of Alaska could not be absorbed by the Pacific Coast;
Alaskan oil would shift to other parts of the country,
For purposes of modeling environmental and economic
particularly the Midwest.
impacts, hypothetical locations of potential oil and gas
accumulations were developed. The locations, indicated
An analysis of the environmental tradeoffs between
by a circle of 25-mile radius, are shown in Figures 1 and 2.
OCS oil and gas and increased imports or increased domestic
The circles are located in areas where the sediments are
coal indicates that oil and gas development on the OCS
thicker than 10,000 feet and cover one or more attractive
could lead to lower oil pollution levels in the oceans
geological traps. The locations were developed using
than from imported oil. Environmental impacts -- both
publicly available information only.
offshore and onshore -- from OCS oil and gas development
must be balanced against the impacts resulting from
increased coal use such as strip mining and increased air
pollution.
*CEQ's Half and Half Plan is based on growth in net per capita
energy consumption of 0.7 percent per year and on a continuing
conservation effort which would, through improved efficiency
and elimination of waste, save energy at a rate of 0.7 percent
per year. This program -- half growth and half conservation --
would provide an effective increase in usable energy of 1.4
percent per year, equal to the average rate of growth experi-
enced from 1947 to 1972.
88
89
1
NEW
ENGLAND
TROUGH
Seattle
Boston
4 GEORGES 3 2 BANK
WASHINGTON/OREGON
Los Angeles
San Francisco
MID-ATLANTIC
MASSACHUSETTS/
RHODE ISLAND
New York
NORTHERN
CALIFORNIA
TROUGH
Bristol
5
WASHINGTON
Whatcom
Skagit
7
8
BALTIMORE CANYON 6
§
58°
56°
Washington
NEW JERSEY/NEW YORK/
Cross
Sound
CALIFORNIA
Solano
Contra Costa
PENNSYLVANIA/DELAWARE
200
MILES 20
50 KILOME TERS KILOMETERS
Assumptions
REGION
Locality
Hypothetical
Driling Sites
Cumberland
Cape May
9
140°
w
$
CANADA
R
S'A
OF
SOUTH ATLANTIC
CULF
145°
Cordove
SOUTH CAROLINA/GEORGIA
Valder
Berkeley
Atlanta
12 11 GEORGIA SMBAYMENT
Hinchinbrook
GULF OF ALASKÁ
Dorchester
William
Sound
5
Charieston
Anchorage
6
Assumptions
SOUTH CAROLINA/FLORIDA
Nassau
St. Johns
150°
REGION
Duval
Clay
Baker
L
13 14
Locality
INEM your
8
D
Hypothetical
Figure 1-2. Gulf of Alaska Hypothetical Drilling Sites and Alaska/
West Coast Hypothetical Onshore Development Areas
Drilling Sites
Figure 1-1. Atlantic Hypothetical Drilling Sites and Hypothetical Onshore Development Areas
155°
TEXT
Trinity
Chiriko
91
90
STATEMENT OF
TABLE 6-1
HONORABLE JOHN R. QUARLES
DEPUTY ADMINISTRATOR
Probabilities of Oil Spills Coming Ashore from Hypothetical Spill Sites in the Atlantic Ocean
ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE
Distance from shore
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS
Shore point
Season'
10
25
50
75
100
125
Center of EDS
UNITED STATES SENATE
miles
miles
miles
miles
miles
miles
WASHINGTON, D. C.
east
east
east
east
east
east
MAY 6, 1974
Nantucket
Spring
65%
45%
30%
25%
20%
20%
15% (EDS 1)
Autumn
30
10
5
0-5
0-5
Near 0
Near 0 (EDS 1)
Nantucket Shoals
Spring
50
50
35
30
20
20
20 (EDS 2)
35 (EDS 3)
Winter
5
5
5
5
5
4-5
Near 0 (EDS 2)
Mr. Chairman, I am appearing on behalf of the
Near 0 (EDS 3)
Davis South Shoal
Spring
55
50
35
25
20
-
50 (EDS 4)
Environmental Protection Agency, to discuss the environmental
Winter
10
10
5
5
5
-
5-10 (EDS 4)
Great South Bay
Summer
95-100
75
10
-
-
-
10 (EDS 5)
issues addressed in the various bills now pending in the
(Long Island)
Winter
30
15
Near 0
-
-
-
Near 0 (EDS 5)
Atlantic City
Spring
-
20
25
15
-
-
20 (EDS 6)
Congress which would amend the Outer Continental Shelf Lands
Winter
-
0-5
0-5
0-5
-
-
0-5 (EDS 6)
Fenwick Island
Spring
-
15
20
20
-
-
20 (EDS 7)
Act of 1953. I am accompanied by Dr. A. Gordon Everett,
Winter
-
0-5
0.5
5
-
-
5 (EDS 7)
Chincoteague Inlet
Spring
-
5
15
25
-
-
20 IEDS 8)
Director, Office of Technology, and Mr. Kenneth E. Biglane,
Autumn
-
0-5
0-5
0-5
-
-
0-5 (EDS 8)
Cape Henry, Va.
Spring
Near 0
Near 0
Near 0
Near 0 (EDS 9)
Director, Division of Oil and Special Materials Control.
-
-
-
Autumn
-
Near 0
Near 0
Near 0
-
-
Near 0 (EDS 9)
Cape Romain, S.C.
Spring
-
95
65
Near 0
-
-
95 (EDS 10)
As this Committee is aware, the search for and develop-
Autumn
-
Near 0
Near 0
Near 0
-
-
Near 0 IEDS 10)
Savannah
Spring
-
95-100
95
80
20
95-100 (EDS 11)
ment of petroleum and natural gas on the submerged continental
-
Autumn
-
20
5
Near o
Near 0
-
5 (EDS 11)
Fernandina Beach,
Spring
-
95
55
20
0-5
-
90 (EDS 12)
margins of this country touches on many political, economic,
Fla.
Winter
-
15
10
Near 0
Near 0
-
15 (EDS 12)
Daytona Beach,
Summer
-
-
-
-
-
-
50 (EDS 13)
legal, and environmental considerations. Our needs for new
Fla.
Autumn
-
-
-
-
-
-
Near 0 IEDS 13)
and more abundant supplies of energy resources are not
- Computer model not run at this point.
I Two seasons are listed for each area. In the first season, oil spilled has the highest probability of reaching shore; in the second
season, oil spilled has the lowest probability. Probabilities are intermediate in the unlisted seasons.
inseparable from our needs to preserve our natural environment.
"The estimates for Great South Bay are distances south of the bay rather than east.
Source: The Massachusetts Institute of Technology Department of Ocean Engineering.
We must realize, however, that a mere enlargement of energy
supplies will only serve to aggravate the misuse and wasteful
consumption of energy resources. Energy independence requires
that our national efforts be directed toward not only increasing
energy production, while minimizing adverse impacts on the
environment, but, more importantly, toward reducing demand.
92
93
The Congress has demonstrated its concern for the
other marine resources found in the leasing areas--requires
development of resources on the OCS through hearings and
full implementation and strict enforcement of the require-
legislation. We have before us today seven bills focusing
ments and authorities available to Federal agencies.
In
on the Outer Continental Shelf as examples of Congressional
this regard EPA has important environmental regulatory
efforts. These bills embrace several common themes:
responsibilities under existing law that have significant
(1) The need for new energy sources to be recovered
impact on the OCS and adjacent shore areas.
without undue risk to the marine, coastal, and
The Clean Air Act requires that the States submit
human environments.
implementation plans to achieve national air quality standards.
(2) Proposed alteration and adjustments to be made
Our authority under the Act will oblige States through their
in environmental regulatory controls.
plans to take full account of new energy-related facilities.
(3) The need for further study and accelerated
Particular attention will have to be paid to concentrations
development of technology which must accompany
of new onshore facilities for the processing of oil and gas
the envisioned expansion of OCS leasing.
production from the Shelf. Under our regulations, concentra-
(4) Proposed changes in leasing, management, financing,
tions of new pollution sources must be assessed at the
and use of Federal revenues.
earliest planning stages. This is to ensure that the ambient
I believe that by directing my discussion to those areas
air quality standards will be achieved and maintained. The
most closely relating to environmental concerns, Mr. Chairman,
Act requires that the best available technology be used for
I will be able to best present EPA's views on the various
new sources of air pollution.
legislative proposals that have been made. The bills speci-
Under the Federal Water Pollution Control Act and the
fically dealing with leasing, management, financing, and
Marine Protection, Research and Sanctuaries Act, a Federal
disposition of Federal revenues do not fall within EPA's
program of marine pollution abatement and control was
purview.
established. EPA sets ocean discharge criteria which are then
The need to regulate and manage the uses of natural
used to evaluate permit applications for the dumping or dis-
resources-particularly oil and gas on the OCS, but also
charge of waste material into the waters of the territorial
94
95
sea, the contiguous zone, and the oceans. We are now
and coordinated fashion to control, contain and mitigate
promulgating effluent limitations under the Federal Water
the adverse effects of the spill on the ocean and shoreside
Pollution Control Act requiring use of the best practicable
environments.
control technology by 1977 and best available control
The potential danger of environmental damage is
technology by 1983 for discharges into the navigable waters,
inextricably associated with increased production activity
including coastal waters and from offshore facilities.
on the OCS and serves to underscore the importance of safety
One of our continuing concerns is the responsiblity
and environmental protection programs. Several of the bills
we hold under the Federal Water Pollution Control Act for the
we are now considering give particular attention to this
control of oil and hazardous substances spills. Response to
area. The solution they envision is to be largely accompanied
oil spill incidents and marine disasters creating potential
by the transfer or partial assignment of many of the authori-
pollution hazards, which occur upon the navigable waters of
ties just described to other Federal agencies. Not only would
the United States, adjoining shorelines and the waters of the
these assignments lead to needless duplication of effort but
contiguous zone is governed by section 311 (c) (2). The
in many instances such readjustment or diversification of
National Oil and Hazardous Substances Contingency Plan prepared
responsiblity would lessen the comprehensive treatment now
pursuant to that section delineates procedures, techniques,
received under existing authority.
and responsibilities of the various Federal, State, and local
EPA was given the primary Federal responsibility for
agencies. The Environmental Protection Agency and the United
S
coming to grips with the complex problems of protecting our
States Coast Guard have shared the lead in spill control
12
natural environment. Our Agency experience, motivation, and
programs in this country's navigable waters. With respect to
[8
competence in handling this duty are not further encumbered
the Outer Continental Shelf, the Department of the Interior,
of
by other responsibilities. With respect to the OCS, we see
U. S. Geological Survey, is the lead agency and provides the
55
no reason for a departure from the present system.
expertise for oil pollution control programs connected with
E
We cannot agree that these alterations are necessary for
exploration, drilling, and production operations. In the
the accelerated development of the Outer Continental Shelf.
event of a Shelf oil spill episode, all three agencies act
As indicated earlier in our discussion of the National
pursuant to the National Contingency Plan, in a pre-designated
Contingency Plan, EPA has established a good working
96
97
relationship with other agencies and the changes contemplated
EPA is actively working with other Federal agencies
would tend to create a confusion over respective areas of
to identify in order of rank recognizable research needs
responsibility detrimental not only to our advances in energy
and to initiate an integrated approach to achieve these
production but also to the environment.
research goals. Through discussions with the Department of
EPA's activities have not been solely confined to the
the Interior and the National Oceanic and Atmospheric
development of response programs or implementation plans. We
Administration we have helped to lay the groundwork for the
are also pursuing a variety of research projects concerning
establishment of an interagency team to develop the resources
oil pollution effects in our Office of Research and Develop-
management data necessary to the responsibilities that each
ment.
agency has for the OCS. In this effort considerable progress
In fiscal year 1973, EPA conducted a $2.14 million-dollar
is being made. The Environmental Protection Agency is also
research and development program in oil spill containment,
participating as a member of the OCS Resource Management
removal and recovery, approximately 30 percent of the budget
Advisory Board which was set up through the Bureau of Land
was allocated to the completion of an advance testing and
Management.
evaluation facility, for oil spill control equipment.
We are pleased to see the bills proposed recognize this
EPA has also supported a National Academy of Sciences
important research-gathering need New legislation is not
workshop on Input, Fates and Effects of Petroleum in the
required because existing authority is currently adequate.
Marine Environment. This report is now in the process of
We at EPA believe that the end product of the organiza-
being published and will provide an up-to-date overview of
tion, planning, and study already a part of the existing
the results of recent research in this area.
Outer Continental Shelf development program will be an
The importance and availability of adequate baseline
improvement in the quality and scope of management of both
and resources management data prior to commencement of pro-
renewable and non-renewable resources. Such data will also
duction activities which may alter the existing conditions
improve the quality of environmental impact statements and
cannot be overemphasized. Such data should include food-
should do much to aid the progress of energy development by
chain effects, geological data, physical, meteorological,
removing the problem areas and gaps in information prior to
and oceanographic information.
the review and evaluation stages.
38-533 o 74 7
98
99
In summary, Mr. Chairman, we would recommend that the
proceeds in an environmentally sound manner. We agree that
present environmental regulatory scheme and assignment of
continuing research and monitoring activities are necessary
authority be kept intact. The legislative remedies suggested
but again the authorities presently available should be
fail to consider the existing framework of environmental
expanded rather than readjusted.
authorities and responsibilities now established. The
This concludes my prepared statement, Mr. Chairman.
experience and progress being made today in the administration
My colleagues and I will be pleased to answer any questions
of the Outer Continental Shelf Lands Act as well as the
the Committee might have.
application of other authorities held by the various agencies
Thank you.
argue strongly against restructuring the present mechanisms
We have good working relationships with the Department of the
Interior, the National Ocean and Atmospheric Administration,
and the Coast Guard. Should these relationships be realigned
as a result of amendments and alterations to the present law,
the possibility for confusion, delay of present efforts and
even possible cross-purposes between regulations exercised by
one agency and permit requirements issued by another is a most
likely consequence. As we are committed to maximizing protec-
tion of the environment while pursuing increases in energy
production, our goal must not be endangered or delayed by
needless reorganization.
The Environmental Protection Agency agrees that new
energy sources must be found and developed to meet this
country's growing demands for energy. The balance must be
struck with the dual need to ensure that the development
100
101
to contain and remove pollutants. This arrangement has worked
Of
DEPARTMENT
well and we see no reason to change existing responsibilities
OFFICE OF THE SECRETARY OF TRANSPORTATION
COMMITTEE
for the containment, removal, and investigation of oil spills
WASHINGTON, D.C. 20590
on the OCS. We presently have this responsibility for the
UNITED STATES of AMERICA
territorial sea and the contiguous zone under section 311 of the
MAY 9 1974
Federal Water Pollution Control Act (FWPCA), and Title I of the
Ports and Waterways Safety Act. We also have the experience
and expertise in, as well as the personnel and resources available
Honorable Henry M. Jackson
for, oil spill containment, and removal for the coastal marine
Chairman, Committee on Interior and Insular Affairs
environment generally. (See, for example, the Intervention on
the High Seas Act, and the Oil Pollution Act of 1961.)
United States Senate
Washington, D. C. 20510
We are also concerned about the personnel safety aspects of
offshore drilling operations. The regulation of oil production
Dear Mr. Chairman:
facilities themselves belongs within the expertise of the U. S.
We would like to take this opportunity to offer the views
Geological Survey in DOI. However, we must be assured that we
of the Department of Transportation on S. 3221, a bill
will have adequate authority to inspect facilities for fire
safety, evacuation, and other maritime related personnel safety
"To increase the supply of energy in the United
interests consistent with the authority established in the OCS
States from the Outer Continental Shelf; to amend
Lands Act. Similarly, our aids-to-navigation authority under
the Outer Continental Shelf Lands Act; and for
that Act and under title 14, United States Code, must remain
undisturbed.
other purposes."
and S. 2858 and S. 2922, similar bills entitled the "Outer
The Office of Management and Budget advises that, from the
Continental Shelf Safety Act of 1974" and the "Outer
standpoint of the Administration's program, there would be
Continental Shelf Lands Act Amendments of 1974" respectively.
no objection to the submission of this report to the Committee.
The purpose of these bills is to make oil and natural gas
resources in the Outer Continental Shelf (OCS) available as
Sincerely,
rapidly as possible, consistent with the need for orderly
resource development and protection of the environment.
The Department of Transportation objects to enactment of the
Rayleyt Rady Rodney E. Eyster
blayst
bills, particularly with regard to the application of environ-
mental protection and marine safety regulations to the OCS,
General Counsel
due to their failure to reflect and conform with the established
responsibilities of this Department for: (1) pipeline safety;
(2) prevention, containment, and removal of oil spills; and,
(3) marine safety and navigational aids.
With regard to pipeline safety, we are opposed to any provision
which would remove from this Department the responsibility for
safety of oil and gas pipelines and storage facilities which are
consistent with existing laws.
The bills S. 2858, S. 2922, and S. 3221 would assign responsi-
bility for the removal of oil spills on the OCS to the National
Oceanic and Atmospheric Administration (NOAA), the Environmental
Protection Agency (EPA), and the Department of Interior (DOI)
respectively. DOT and DOI have agreed on their respective
responsibilities on the OCS in a Memorandum of Understanding
dated August 16, 1971. This Department has the expertise and
capability for coordination and direction in respect to measures
102
103
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
6. S. 3185, a bill "To amend the Outer Continental
WASHINGTON, D.C. 20503
Shelf Lands Act with respect to payments to be made
under oil and gas leases pursuant to such Act"
(requested March 28, 1974); and,
MAY 16 1974
7. S. 3346, a bill "To amend certain provisions of
of the United States, and for other purposes"
law relating to the leasing of oil and gas deposits
(requested April 17, 1974).
Honorable Henry M. Jackson
Chairman, Committee on Interior
The the Office of Management and Budget concurs in the
and Insular Affairs
United States Senate
bills. accordingly recommends against enactment of the seven
and Department of the Interior in its reports on these views bills, of
3106 New Senate Office Building
Washington, D. C. 20510
Sincerely,
Dear Mr. Chairman:
This is in response to your requests for the views of the
Office of Management and Budget on the following bills:
nufred H Ronemel
1. S. 2389, a bill "To authorize certain revenues
from leases on the Outer Continental Shelf to be
made available to coastal and other States"
Wilfred H. Rommel
(requested March 28, 1974);
Assistant Director for
Legislative Reference
2. S. 2672, a bill "To create a Marine Resources
Conservation and Development Fund; to provide for
the distribution of revenues from Outer Continental
Shelf lands; and for other purposes" (requested
March 28, 1974);
3. S. 2858, a bill "To amend the Outer Continental
Shelf Lands Act for the purpose of increasing the
safety of offshore drilling and production"
(requested February 9, 1974 and March 28, 1974);
4. S. 2922, a bill entitled the "Outer Continental
Shelf Lands Act Amendments of 1974" (requested
March 7, 1974 and March 28, 1974);
5. S. 3221, a bill entitled the "Energy Supply Act
of 1974" (requested March 28, 1974);
105
104
Statement by
FEDERAL ENERGY ADMINISTRATION
Robert M. White
Administrator, National Oceanic
WASHINGTON, D.C. 20461
and Atmospheric Administration
Department of Commerce
JUL 15 1974
before the
OFFICE OF THE ADMINISTRATOR
Senate Interior and Insular Affairs Committee
The Honorable Henry M. Jackson
May 6, 1974
Chairman, Interior and Insular Affairs
New Senate Office Building, Room 3110
Washington, D.C. 20510
Mr. Chairman, I wish to thank you and members of the Committee
Dear Mr. Chairman:
for the invitation and opportunity to comment on S. 3221, the "Energy
I have recently learned that your Committee is planning
Supply Act of 1974," and other bills pending before the Committee which
to consider S3321, which would amend the Outer Continental
Shelf Lands Act of 1953. As Duke Ligon testified in early
would amend the "Outer Continental Shelf Act of 1953."
May, (copy attached) it is the opinion of the Administration
that no amendments are necessary or desirable at this time
The Department of Commerce, through the National Oceanic and
since many of the matters contained within the proposed
amendments can be handled more effectively and expeditiously
Atmospheric Administration (NOAA), has broad responsibilities which are
under existing laws.
affected by the bills being considered by this Committee. While we
The Outer Continental Shelf Lands Act is broad and flexible.
Changes and adjustments to existing policy can by carried
recognize that the basic intent of the bills is to accelerate the
out by virtue of authority contained in that Act. As a
matter of fact, the Interior Department is pursuing that
development of oil and gas on our continental shelves, we believe that
course through changes in leasing regulations, additional
proposed changes, and by some experimental lease sales planned
enactment would result in a duplication of authorities, programs and
for execution beginning later this year.
capabilities that already exist in part within the National Oceanic and
In light of the above and in the hope that we can avoid
confusion in this matter, I would appreciate your recon-
Atmospheric Administration of the Department of Commerce and in part in
sidering the desirability of proceeding with any amendments
to the Outer Continental Shelf Lands Act at this time.
other agencies. I propose only to comment on those aspects of the bill
Sincerely,
which overlap noáa, deferring comment on other provisions to other Adminis-
Jroms John CU Sawhill
tration witnesses. In particular, I would like to discuss the provisions
of the bill which relate to Coastal Zone Management, Environmental Assessment,
Administrator
and Marine Mapping and Charting.
Attachment
Coastal Zone Management
cc: The Honorable Paul J. Fannin
United States Senate
The Coastal Zone Management Act of 1972 is now being implemented by
NOAA. This Act lays the basis for rational and balanced management of our
106
107
coastal zone. Such management must anticipate the near-shore and onshore
Achievement of a satisfactory coastal zone plan does not stop
problems that accompany outer continental shelf oil and gas development.
with the planning itself but requires implementation over a period
Under the Act, the Federal Government
of years, and the Coastal Zone Management Act makes provision for
will provide funding to the coastal States to help in this management
this by a program of grants that would be of special importance where
process, so that they can deal effectively with the secondary and supporting
difficult questions of energy siting are concerned.
activities that will be associated with offshore oil and gas production.
It would seem logical that funds to the coastal States come through
S. 3221, however, would amend the Outer Continental Shelf Lands Act
the Coastal Zone Management Act so that Federal funding to the States
to provide a Coastal State Fund, into which 5% of the Federal revenues
can be used and developed in a comprehensive way.
from the resources of the shelf would be paid. The Secretary of the Interior
The Coastal Zone Management Act is being rapidly implemented.
would be authorized to make matching grants to the coastal states from this
Although the first funding for the program became available only last
Fund to "ameliorate adverse environmental effects and control secondary
December, Federal program development grants have already been given
social and economic impacts" caused by the development of energy resources
to six coastal States in the last 45 days. We expect to have almost
on the continental shelf. Such grants may be used for "planning, construction
all the coastal States involved in the grants phase of the Program by
of public facilities and provision of public services, and such other acti-
June 30 of this year.
vities as the Secretary may prescribe."
In my judgment, the coastal States are ready and willing to join
To the extent such grants are used for planning and management, they
with the Federal Government in planning for OCS development. They want
overlap the functions already provided for and funded with matching grants
effective involvement from the earliest moment in planning for this
under the Coastal Zone Management Act. This Act refers particularly to
development. This cooperation and financial assistance can be provided
the demands upon our lands and waters of the coastal zone arising, in
within the Coastal Zone Management Act.
part, from "extraction of mineral resources and fossil fuels." Cooperation
with the Federal Government in developing land and water use programs "of
more than local significance" is specifically stressed. The stated goal
is "the wise use of land and water resources of the coastal zone giving
full consideration to ecological, cultural, historic and esthetic values
as well as to needs for economic development." The overlap with S. 3221
is apparent.
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109
Environmental Assessment
Even prior to the recent interest in baseline studies of the Outer
I
understand that a representative of the Council on Environmental
Continental Shelf, we had initiated studies on the fate and effect of oil
Quality will testify on the impact of OCS oil and gas development on the
on marine ecosystems. These include studies of Prince William Sound,
environment. My own concern is that, as we move to develop the oil and
Alaska, and the New York Bight. Several of our National Marine Fisheries
gas resources of the shelf, we take timely steps to acquire, in a
Service Laboratories are undertaking detailed studies of the effects of
cost-effective manner, the scientific and technical information needed
oil on specific marine organisms; this is proving to be a crucial issue
to anticipate and minimize environmental impacts.
in understanding the environmental impact of Outer Continental Shelf
NQAA is the principal oceanic agency of the Federal Government with
development. Massachusetts Institute of Technology, supported through
a network of biological and physical laboratories in all our coastal areas,
NOAA's Sea Grant Program, has made an initial assessment of the potential
and with a large research and survey fleet. The National Marine Fisheries
environmental effects of oil and gas drilling on Georges Bank, which pro-
Service of NOAA is the repository of the basic knowledge of the fishery
vided a base for the further analyses done in connection with the recent
resources of shelf areas and is charged under the Fish and Wildlife
Council on Environmental Quality report on offshore oil and gas drilling.
Coordination Act for assessing the effects of pollution on fisheries and
These are only examples of our efforts being made under existing authorities
recommending means of alleviating dangerous or undesirable effects of
to understand the impact of oil and gas development upon the living resources
of the marine environment.
such pollution including petroleum pollution. The marine weather fore-
casting capabilities of the National Weather Service, and the ocean and
Marine Mapping and Charting
atmospheric data centers of the Environmental Data Service add to NOAA's
In our opinion, the combined capabilities of NOAA and the Geo-
comprehensive environmental capabilities. These capabilities are now
logical Survey of the Department of Interior essentially represent the
being brought to bear in work with the Bureau of Land Management (BIM) on
civil marine mapping capabilities of the Federal government, and are in
studies of the potential environmental impact of Outer Continental Shelf oil
a position to perform this work.
and gas development, particularly in the eastern Gulf of Mexico and the
Gulf of Alaska. We expect to continue to cooperate closely with BIM in the
design and implementation of needed studies in other areas as well. We
also are participating actively in the Department of the Interior's Outer
Continental Shelf Research Advisory Board, which is advising on the design
and conduct of baseline studies in potential lease areas.
110
111
Through our National Ocean Survey and its predecessor organization,
demarcation of the lateral seaward boundaries between the United States
the Coast and Geodetic Survey, our agency has had a long history of opera-
and Mexico.
tions, and more importantly, an expertise in the mapping and charting of
We fully concur that seaward boundary determinations are important
t..e waters off our coasts. We have completed bathymetric and geophysical
elements in the management and development of our outer continental shelf
surveys for 22 of some 154 map units required to map our continental shelves
seaward resources; however, necessary authorities and agency responsibilities
at a scale of 1:250,000. From these surveys we have produced to date 18
are available and new authority is not required.
bathymetric, 7 magnetic and 3 gravity maps at that scale. In addition, we
Thank you, Mr. Chairman, I would be pleased to answer any questions
have produced from existing sources of data 23 additional bathymetric maps
for the Committee.
at different scales.
We are now working to the requirements of the Department of Interior to
produce urgently needed bathymetric maps for their use in resource assess-
ment in the Gulf of Mexico, and are developing plans to assist them in other
areas as the leasing program increases.
NOAA, in coordination with the Department of Justice and the Department
of State, has been active in the determination of marine boundaries. Parties
heretofore involved in legal proceedings concerning boundary determinations,
be they private or govermmental, have turned to NOAA for technical assistance.
As a normal consequence of our charting the nation's coastal waters, we
have been involved in the development of the legal aspects of coastal
boundaries. The courts, as well as participants involved in litigation of
this highly technical area of law, have consistently looked to us as the
principle repository of expertise to settle boundary disputes. NOAA has
been traditionally consulted by the States regarding the seaward extension
of their own boundaries. The Congress, also, solicits technical comments
from us prior to its approval of compacts between states concerning seaward
lateral boundaries. In the international area, we established in 1972, in
collaboration with the Department of State and the Mexican government, the
112
113
X. CHANGES IN EXISTING Law
(σ) interest by potential oil and gas producers in explora-
In compliance with subsection (4) of rule XXIX of the Standing
tion and development as indicated by tract nominations and
other representations;
Rules of the Senate, changes in existing law made by the bill, S. 3221,
as ordered reported, are shown as follows (existing law proposed to be
(D) an equitable sharing of developmental benefits and
omitted is enclosed in black brackets, new matter is printed in italic,
environmental risks among various regions of the United
States; and
existing law in which no change is proposed is shown in roman):
1. Section 201 of S. 3221 would amend Section 3 of the Outer Conti-
(3) receipt of fair market return for public resources,
nental Shelf Lands Act as follows:
(c) The program shall include estimates of the appropriations and
SEC. 3. JURISDICTION OVER OUTER CONTINENTAL SHELF.-(a) It is
staffing required to prepare the necessary environmental impact state-
hereby declared to be the policy of the United States that the subsoil
ments, obtain resource data and any other information needed to
and seabed of the outer Continental Shelf appertain to the United
decide the order in which areas are to be scheduled for lease, to make
States and are subject to its jurisdiction, control, and power of disposi-
the analyses required prior to offering tracts for lease, and to super-
tion as provided in this Act.
vise operations under every lease in the manner necessary to assure
(b) This Act shall be construed in such manner that the character as
lease. compliance with the requirements of the law, the regulations, and the
high seas of the waters above the outer Continental Shelf and the right
to navigation and fishing therein shall not be affected.
(d) The environmental impact statement on the leasing program
(c) It is hereby declared that the Outer Continental Shelf is a vital
prepared in accordance with section 102(2) (C) of the National En-
national resource reserve held by the Federal Government for all the
vironmental Policy Act of 1969, shall include, but shall not be limited
people, which should be made available for orderly development, sub-
to, an assessment by the Secretary of the relative significance of the
ject to environmental safeguards, consistent with and when necessary
probable oil and gas resources of each area proposed to be offered for
to meet national needs.
lease in meeting national dęmands, the most likely rate of exploration
2. Section 202 of S. 3221 would add the following new sections to the
and development that is expected to occur if the areas are leased, and
Outer Continental Shelf Lands Act:
the relative environmental hazard of each area. Such environmental
impact statement shall be based on consideration of the following
DEVELOPMENT OF OUTER CONTINENTAL SHELF LEASING PROGRAM
factors, without being limited thereto: geological and geophysical
conditions, biological data on existing animal, marine, and plant life,
SEC. 18. (a) Congress declares that it is the policy of the United
and commercial and recreational uses of nearby land and water areas.
States that Outer Continental Shelf lands determined to be both geo-
(e) The Secrętary shall, by regulation, establish procedures for re-
logically favorable for the accumulation of oil and gas and capable of
ceipt and consideration of nominations for areas to be offered for lease
supporting oil and gas development without undue environmental
or to be excluded from leasing, for public notice of and participation
hazard or damage should be made available for leasing as soon as
in development of the leasing program, for review by State and local
practicable in accordance with subsection (b) of this section.
governments which may be impacted by the propoșed leasing, and for
(3) The Secretary is authorized and directed to prepare and main-
coordination of the program with management programs established
tain a leasing program to implement the policy set forth in subsection
pursuant to the Coastal Zone Management Act of 1972. These proce-
(a). The leasing program shall indicate as precisely as possible the
dures will be applicable to any revision or reapproval of the leasing
size, timing, and location of leasing activity that will best meet na-
program.
tional energy needs for the ten-year period following its approval or
(f) The Secretary shall publish a proposed leasing program in the
reapproval in a manner consistent with subsection (a) above and
Federal Register and submit it to the Congress within two years after
with the following principles:
enactment of this section.
(1) management of the Outer Continental Shelf in a manner
(g) After the leasing program has been approved by the Secretary
which considers all its resource values and the potential impact
or after January 1, 1978, whichever comes first, no leases under this
of oil and gas exploration and development on other resource
Act may be issued unless they are for areas included in the approved
values of the Outer Continental Shelf and the marine environ-
leasing program.
ment;
(h) The Secretary may revise and reapprove the leasing program
(2) timing and location of leasing 80 as more evenly to dis-
at any time and he must review and reapprove the leasing program
tribute exploration, development, and production of oil and gas
at least once each year.
among various areas of the Outer Continental Shelf, considering:
(i) The Secretary is authorized to obtain from public sources, or
(A) existing information concerning their geographical,
to purchase from private sources, any surveys, data, reports, or other
geological, and ecological characteristics;
information (excluding interpretations of such data, surveys, reports,
(B) their location with respect to, and relative needs of,
or other information) which may be necessary to assist him in pre-
regional energy markets;
paring environment impact statements and making other evaluations
38-533 74 8
114
115
required by this Act. The Secretary shall maintain the confidentiality
(h) The Secretary shall, by regulation, require that any person
of all proprietary data or information for such period of time as is
holding a lease issued pursuant to this Act for oil or gas exploration or
agreed to by the parties.
development on the Outer Continental Shelf shall provide the Sec-
(j) The heads of all Federal departments or agencies are authorized
retary wtih any existing data (excluding interpretation of such data)
and directed to provide the Secretary with any nonproprietary in-
about the oil or gas resources in the area subject to the lease. The Sec-
formation he requests to assist him in preparing the leasing program.
retary shall maintain the confidentiality of all proprietary data or in-
FEDERAL OUTER CONTINENTAL SHELF OIL AND GAS SURVEY PROGRAM
formation until such time as he determines that public availability
of such proprietary data or information would not damage the com-
SEC. 19. (a) The ,Secretary is authorized and directed to conduct a
petitive position of the lessee.
survey program regarding oil and gas resources of the Outer Con-
tinental Shelf. This program shall be designed to provide information
RESEARCH AND DEVELOPMENT
about the probable location, extent, and characteristics of such re-
SEC. 20. (a) The Secretary is authorized and directed to carry out a
sources in order to provide a basis for (1) development. and revision
research and development program designed to improve technology
of the leasing program required by section 18 of this Act, (2) greater
related to development of the oil and gas resources of the Outer Conti-
and better informed competitive interest by potential producers in the
nental Shelf where he determines that such research and development
oil and gas resources of the Outer Continental Shelf, (3) more in-
is not being adequately conducted by any other public or private entity
formed decisions regarding the value of public resources and revenues
including but not limited to-
to be expected from leasing them, and (4) the mapping program re-
(1) downhole safety devices,
quired by subsection (c) of this section.
(2) methods for reestablishing control of blowing out or burn-
(b) The Secretary is authorized to contract for, or purchase the
ing wells,
results of or, where the required information is not available from
(3) methods for containing and cleaning up oil spills,
commercial sources, conduct seismic, geomagnetic, gravitational, geo-
(4) improved drill bits,
physical, or geochemical investigations, and to contract for or pur-
(5) improved flaw detection systems for undersea pipelines,
chase the results of stratigraphic drilling, needed to implement the
(6) new or improved methods of development in water depths
provisions of this section.
over six hunderd meters, and
(c) The ,Secretary is directed to prepare and publish and keep cur-
(7) subsea production systems.
rent a series of detailed topographic, geological, and geophysical maps
(b) The Secretary shall, after review and comment by the Adminis-
of and reports about the Outer Continental Shelf, based on nonpro-
trator of the Environmental Protection Agency, establish safety and
prietary data, which shall include, but not necessarily be limited to,
environmental performance standards for all pieces of equipment, that
the results of seismic, gravitational, and magnetic surveys on an ap-
are pertinent to public health, safety, or environmental protection, used
propriate grid spacing to define the general topography, geology,
in exploration, development, and production of oil and gas from the
and geophysical characteristics of the area. Such maps shall be pre-
Outer Continental Shelf. To achieve the purposes of this subsection,
pared and published no later than six months prior to the last day for
such standards shall require the use of best available technology when
submission of bids for any areas of the Outer Continental Shelf
the potential effect on public health, safety, or the environment would
scheduled for lease on or after January 1, 1978.
be substantial.
(d) Within six months after enactment of this section, the Secretary
(c) The Secretary, with the concurrence of the Secretary of the
shall develop and submit to Congress a plan for conducting the survey
department in which the Coast Guard is operating, shall establish
and mapping programs required by this section. This plan shall in-
equipment and performance standards for oil spill cleanup plans and
clude an identification of the areas to be surveyed and mapped during
operations. Such standards shall be coordinated with the National Oil
the first five years of the programs and estimates of the appropria-
and Hazardous Substances Pollution Contingency Plan, and reviewed
tions and staffing required to supplement them.
by the Administrator of the Environmental Protection Agency, and
(e) The ,Secretary shall include in the annual report required by
the Administrator of the National Oceanic and Atmospheric
section 15 of this Act, information concerning the carrying out of his
Administration.
duties under this section, and shall include as a part of each such re-
(d) The Secretary, in cooperation with the Secretary of the Navy
port a summary of the current data for the period covered by the
and the Director of the ,National Institutes of Health, shall conduct
report.
studies of underwater diving techniques and equipment suitable for
(f) No action taken to implement this section shall be considered a
protection of human safety at depths greater than those where such
major Federal action for the purposes of section 102 (2) (C) of the
diving now takes place.
National Environmental Policy Act of 1969.
(g) There are hereby authorized to be appropriated such sums as
ENFORCEMENT OF SAFETY REGULATIONS; INSPECTIONS
are necessary to carry out the purposes of this section during fiscal
Sec. 21. (a) (1) The Secretary shall regularly inspect all operations
years 1975 and 1976.
authorized pursuant to this Act and strictly enforce safety regulations
116
117
promulgated pursuant to this Act and other applicable laws and regu-
or Mexico or (B) in or on waters within two hundred nautical miles of
lations relating to public health, safety, or environmental protection.
the baseline of the United States, Canada, or Mexico from which the
All holders of leases under this Act shall allow promptly access at the
territorial sea of the United States, Canada, or Mexico is measured, or
site of any operations subject to safety regulations to any inspector,
(C) within one hundred nautical miles of any operation authorized
and provide such documents and records that are pertinent to public
under this Act. Claims for such injury or damages may be determined
health, safety, or environmental protection, as the Secretary or his
by arbitration or judicial proceedings.
designee may request.
(2) Strict liqbility shall not be imposed under this subsection on
(2) The Secretary shall promulgate regulations within ninety days
the holder or the fund if the holder or the fund proves that the damage
of the enactment of this section to provide for
was caused by an act of war. Strict liability shall not be imposed under
(4) physical observation at least once each year by an inspector
this subsection on the holder if the holder proves that the damage was
of the installation or testing of all safety equipment designed to
caused by the negligence of the United States or other governmental
prevent or ameliorate blowouts, fires, spillages, or other major
agency. Strict liability shall not be imposed under this subsection with
accidents; and
respect to the claim of a damaged person if the holder or the fund
(B) periodic onsite inspection without advance notice to the
proves that the damage was caused by the negligence or intentional act
lessee to assure compliance with public health, safety, or envi-
of such person.
ronmental protection regulations.
(3) Strict liability for all claims arising out of any one incident shall
(3) The ,Secretary shall make an investigation and public report
not exceed $100,000,000. The holder shall be liable for the first $7,000,-
on all major fires and major oil spillage occurring as a result of opera-
000 of such claims that are allowed. The fund shall be liable for the bal-
tions pursuant to this Act. For the purposes of this subsection, a
ance of the claims that are allowed up to $100,000,000. If the total
major oil spillage is any spillage in one instance of more than two
claims allowed exceed $100,000,000, they shall be reduced proportion-
hundred barrels of oil over a period of thirty days: Provided, That
ately. The unpaid portion of any claim may be asserted and adjudi-
the Secretary may, in his discretion, make an investigation and report
cated under other. applicable ederal or State law.
of lesser oil spillages. All holders of leases under this Act shall coop-
(4) In any case where liability without regard to fault is imposed
erate with the Secretary in the course of such investigations.
pursuant to this subsection, the rules of subrogation shall apply in
(4) For the purposes of carrying out his responsibilities under this
accordance with the laws of the State in which such damages occurred:
section, the Secretary may by agreement utilize with or without reim-
Provided, however, That in the event such damages occurred outside
bursement the services, personnel, or facilities of any Federal agency.
the jurisdiction of any State, the rules of subrogation shall apply in
(b) The Secretary shall include in his annual report to Congress
accordance with the laws applicable pursuant to section 4 of this Act.
required by section 15 of this Act the number of violations of safety
(5) The offshore Oil Pollution Settlements Fund is hereby estab-
regulations found, the names of the violators, and the action taken
lished as a nonprofit corporate entity that may sue and be sued in its
thereon.
own name. The fund shall be administered by the holders of leases
(c) The Secretary shall consider any allegation from any person of
issued under this Act under regulations prescribed by the Secretary.
the existence of a violation of any safety regulations issued under this
The fund shall be subject to an annual audit by the Comptroller Gen-
Act. The Secretary shall answer such allegation no later than ninety
eral, and a copy of the audit shall be submitted to the Congress. Claims
days after receipt thereof, stating whether or not such alleged viola-
allowed against the fund shall be paid only from moneys deposited in
tions exist and, if 80, what action has been taken.
the fund.
(6) There is hereby imposed on each barrel of oil produced pur-
LIABILITY FOR OIL SPILLS
suant to any lease issued or maintained under this Act of a fee of
SEC. 22. (a) Any person in charge of any operations in the Outer
21/2 cents per barrel. The fund shall collect the fee from the lessees or
Continental Shelf, as soon as he has knowledge of a discharge or spill-
their assignees. Costs of administration shall be paid from the money
age of oil from an operation, shall immediately notify the appropriate
collected by the fund, and all sums not needed for administration and
agency of the United States Government of such discharge.
the satisfaction of claims shall be invested prudently in income pro-
(b) (1) Notwithstanding the provisions of any other law, the holder
ducing securities approved by the Secretary. Income from such secu-
of a lease or right-of-way issued or maintained under this Act and
rities shall be added to the principal of the fund.
the Offshore Oil Pollution ,Settlements Fund (hęreinafter referred to
(7) Subject to the limitation contained in subparagraph (3) of this
as "the fund") established by this subsection shall be strictly liable
subsection, if the fund is unable to satisfy a claim asserted and finally
without regard to fault and without regard to ownership of any ad-
determined under this subsection, the fund may borrow the money
versely affected lands, structures, fish, wildlife, or biotic or other natu-
needed to satisfy the claim from any commercial credit source, at the
ral resources relied upon by any damaged party for subsistence or
lowest available rate of interest, subject to the approval of the
economic purposes, in accordance with the provisions of this subsection
Secretary.
for all damages, sustained by any person as a result of discharges of
(8) No compensation shall be paid under this subsection unless
oil or gas from any operation authorized under this Act if such dam-
notice of the damage is given to the Secretary within three years
ages occurred (A) within the territory of the United States, Canada,
following the date on which the damage occurred.
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119
(9) Payment of compensation for any damage pursuant to this
subsection shall be subject to the holder or the fund acquiring by
COASTAL STATE FUND
subrogation all rights of the claimant to recover for such damages
SEC. 25. (a) There is hereby established in the Treasury of the
from any other person.
United States the Coastal States Fund (hereinafter referred to as the
(10) The collection of amounts for the fund shall cease when
"fund"). The Secretary shall make grants from the fund to the coastal
$100,000,000 has been accumulated, but shall be renewed when the
States impacted by anticipated or actual oil and gas production to
accumulation in the fund falls below $85,000,000. The fund shall insure
assist them to ameliorate adverse environmental effects and control
that collections are equitable to all holders of a lease or right-of-way.
secondary social and economic impacts associated with the development
(11) The several district courts of the United ,States shall have
of Federal energy resources in, or on the Outer Continental Shelf ad-
jurisdiction over claims against the fund.
jacent to the submerged lands of such States. Such grants may be used
(c) If any area within or without a lease granted or maintained
for planning, construction of public facilities, and provision of public
under this Act is polluted by any discharge or spillage of oil from
services, and such other activities as the Secretary may prescribe by
operations conducted by or on behalf of the holder of such lease, and
regulations. Such regulations shall, at a minimum, (1) provide that
such pollution damages or threatens to damage aquatic life, wildlife,
such activities be directly related to such environmental effects and
or public or private property, the control and removal of the pollutant
social and economic impacts; and (2) require each coastal State, as a
shall be at the expense of such holder, including administrative and
requirement of eligibility for grants from the fund, to establish pollu-
other costs incurred by the Secretary or any other Federal or State
tion containment and clean up systems for pollution from oil and gas
officer or agency. Upon failure of such holder to adequately control
development activities on the submerged lands of each such State.
and remove such pollutant, the Secretary in cooperation with other
(b) The Secretary, in accordance with the provisions of subsection
Federal, State, or local agencies, or in cooperation with such holder, or
(a), shall, by regulation, establish requirements for grant eligibility:
both, shall have the right to accomplish the control and removal at the
Provided, That it is the intent of this section that grants shall be made
expense of the holder.
to impacted coastal States to the maximum extent permitted by sub-
(d) The Secretary shall establish requirements that all holders of
secion (c) of this section and that grants shall be made to impacted
leases issued or maintained under this Act shall establish and maintain
coastal States in proportion to the effects and impacts of offshore oil
evidence. of financial responsibility of not less than $7 million. Fi-
and gas exploration, development and production on such States. Such
nancial responsibility may be established by any one of, or a combina-
grants shall not be on a matching basis but shall be adequate to com-
tion of, the following methods acceptable to the Secretary: (A) evi-
pensate impacted coastal States for the full costs of any environmental
dence of insurance, (B) surety bonds, (C) qualification as a self-
effects and social and economic impacts of offshore oil and gas explora-
insurer, or (D) other evidence of financial responsibility. Any bond
tion, development, and production. The Secretary shall coordinate all
filed shall be issued by a bonding company authorized to do business
grants with management programs established pursuant to the Coastal
in the United States.
Zone Management Act of 1972.
(e) The provisions of this section shall not be interpreted to super-
(c) Notwithstanding any other provision of law, 10 per centum of
sede section 311 of the Federal Water Pollution Control Act Amend-
the Federal revenues from the Outer Continental ,Shelf Lands Act, as
ments of 1972 or preempt the field of strict liability or to enlarge or
amended by this Act, shall be paid into the fund: Provided, That the
diminish the authority of any State to. impose additional require-
total amount paid into the fund shall not exceed $200,000,000 per year.
ments.
(d) There is hereby authorized to be appropriated to the fund
NEGOTIATIONS WITH STATES
$100,000,000.
SEC. 23. The Secretary is authorized and directed to negotiate
(e) For the purpose of this section, "coastal State" means a State or
with those coastal States which are asserting jurisdiction over the
territory of the United States in, or bordering on, the Atlantic, Pacific,
Outer Continental Shelf with a review to developing interim agree-
or Arctic Ocean, the Gulf of Mexico, or Long Island Sound.
ments which will allow energy resource development prior to final
CITIZEN SUITS
judicial resolution of the dispute.
SEC. 26. (a) Except as provided in-subsection (3) of this section,
DETERMINATION OF BOUNDARIES
any person having an interest which is or may be adversely affected
SEC. 24. Within one year following the date of enactment of this
may commence a civil action on his own behalf-
section, the President may establish procedures for settling any out-
(1) against any person including-
standing boundary disputes, including international boundaries be-
(A) the United States, and
tween the United States and Canada and between the United States
(B) any other governmental instrumentality or agency
and Mexico, and establish boundaries between adjacent States, as
to the extent permitted by the eleventh amendment to the
directed in section 4 of this Act.
Constitution who is alleged to be in violation of the provi-
sions of this Act or the regulation promulgated thereunder,
or any permit or lease issued by the Secretary; or
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121
(2) against the Secretary where there is alleged a failure of
the Secretary to perform any act or duty under this Act which is
(3) measures to ease entry of new competitors; and
not discretionary with the Secretary.
(4) measures to increase supply to independent refiners and
(b) No action may be commenced-
distributors.
(1) under subsection (a) (1) of this section-
ENFORCEMENT AND PENALTIES
(A) prior to sixty days after the plaintiff has given notice
Sec. 28. (a) At the request of the Secretary, the Attorney General
in writing under oath of the violation (i) to the Secretary,
may institute a civil action in the district court of the United States for
and (ii) to any alleged violator of the provisions of this Act
the district in which the affected operation is located for a restraining
or any regulations promulgated thereunder, or any permit or
order or injunction or other appropriate remedy to enforce any provi-
lease issued thereunder;
sion of this Act or any regulation or order issued under the authority
(B) if the ,Secretary has commenced and is diligently
of this Act.
prosecuting a civil action in a court of the United States to
(b) If any person shall fail to comply with any provision of this
require compliance with the provisions of this Act or the
Act, or any regulation or order issued under the authority of this Act,
regulations thereunder, or the lease, but in any such action in
after notice of such failure and expiration of any period allowed for
a court of the United States any person may intervene as a
corrective action, such person shall be liable for a civil penalty of not
matter of right; or
more than $5,000 for each and every day of the continuance of such
(2) Under subsection (a) (2) of this section prior to sixty days
failure. The Secretary may assess, collect, and compromise any such
after the plaintiff has given notice in writing under oath of such
penalty. No penalty shall be assessed until the person charged with a
action to the Secretary, in such manner as the Secretary shall by
regulation prescribe, except that such action may be brought
charge. violation shall have been given an opportunity for a hearing on such
immediately after such notification in the case where the violation
(c) Any person who knowingly and willfully violates any provision
complained of, constitutes an imminent threat to the health or
of this Act, or any regulation or order issued under the authority of
safety of the plaintiff or would immediately affect a legal interest
this Act designed to protect public health, safety, or the environment
of the plaintiff.
or conserve natural resources or knowingly and willfully makes any
(c) In any action under this section, the Secretary, if not a party,
false statement, representation, or certification in any application,
may intervene as a matter of right.
record, report, plan, or other' document filed or required to be main-
(d) The court, in issuing any final order in any action, brought pur-
tained under this Act, or who knowingly and willfully falsifies, tam-
suant to subsection (a) of this section, may award costs of litigation
pers with, or renders inaccurate any monitoring device or method of
including reasonable attorneys fees to any party, whenever the court
record required to be maintained under this Act or knowingly and
determines such award is appropriate. The court may, if a temporary
willfully reveals any data or information required to be kept confi-
restraining order or preliminary injunction is sought, require the
dential by this Act, shall, upon conviction, be punished by a fine of
filing of a bond or equivalent security in accordance with the Federal
not more than $100,000, or by imprisonment for not more than one
Rules of Civil Procedure.
year, or both. Each day that a violation continues shall constitute a
(e) Nothing in this section shall restrict any right which any person
separate offense.
or class of persons may have under this or any statute or common
(d) Whenever a corporation or other entity violates any provision
law to seek enforcement of any of the provisions of this Act and the
of this Act, or any regulation or order issued under the authority of
regulations thereunder, or to seek any other relief, including relief
this Act. any officer, or agent to such corporation or entity who author-
against the Secretary.
ized, ordered, or carried out such violation shall be subject to the same
PROMOTION OF COMPETITION
fines section. or imprisonment as provided for under subsection (c) of this
SEC. 27. Within one year after the date of enactment of this section,
(e) The remedies prescribed in this section shall be concurrent and
the Secretary shall prepare and publish a report with recommenda-
cumulative and the exercise of one does not preclude the exercise of
tions for promoting competition and maximizina production and rev-
the others. Further, the remedies prescribed in this section shall be
enues from the leasing of Outer Continental Shelf lands, and shall
in addition to any other remedies afforded by any other law or
regulation.
include a plan for implementing recommended administrative changes
and drafts of any proposed legislation. Such report shall include con-
ENVIRONMENTAL BASELINE AND MONITORING STUDIES
sideration of the following-
(1) other competitive bidding sustems permitted under present
SEC. 29. (a) Prior to permitting oil and gas drilling on any area
law as compared to the bonus bidding system;
of the Outer- Continental Shelf not previously leased under this Act,
(2) evaluation of alternative bidding systems not permitted
the ,Secretary; in consultation with the Administrator of the National
under present law;
Oceanic and Atmospheric Administration of the Department of Com-
merce, shall make a study of the area involved to establish a baseline
122
123
of those critical parameters of the Outer Continental ,Shelf environ-
Continental Shelf which are not covered by leases meeting the require-
ment which may be affected by oil and gas development. The study
ments of subsection (a) of section 6 of this Act. The bidding shall be
shall include, but need not be limited to, background levels of hydro-
by sealed bids and, at the discretion of the Secretary, shall be either
carbons in water, sediment, and organisms; background levels of trace
(1) on the basis of a cash bonus bid with a royalty fixed by the Secre-
metals in water, sediments, and organisms; characterization of benthic
tary at not less than 121/2 per centum in amount or value of the pro-
and planktonic communities; description of sediments and relation-
duction saved, removed, or sold, (2) on the basis of a cash bonus bid
ships between organisms and abiotic parameters; and standard oceano-
with a fixed share of the net profits derived from operation of the
graphic measurements such as salinity, temperature, micronutrients,
tract of no less than 30 per centum reserved to the United States, or
dissolved oxygen.
(3) on the basis of a fixed cash bonus with the net profit share reserved
(b) Subsequent to development of any area studied pursuant to
to the United States as the bid variáble. The United States net profit
subsection (a) of this section, the ,Secretary shall monitor the areas
share shall be calculated on the basis of the value of the production
involved in a manner designed to provide time-series data which can
saved, removed, or sold, less those capital and operating costs directly
be compared with previously collected data for the purpose of identify-
assignable to the development and operation (but not acquisition)
ing any significant changes.
of all oil and gas leases issued under this Act to the lessee under a net
(c) In carrying out the provisions of this section, the Secretary is
profit sharing arrangement. No capital or operating charges for mate-
directed to give preference to the use of Government owned and Gov-
rials or labor services not actually used on an area leased for oil or gas
ernment operated vessels, to the maximum extent practicable, in con-
under this Act under a net profit-sharing arrangement; allocation of
tracting for work in connection with such environmental baseline and
income taxes; or expenditure for materials or labor services used prior
monitoring studies. In order to avoid needless duplications, the Secre-
to lease acquisition shall be permitted as a deduction in the calculation
tary shall coordinate all such activities with the Administrator of the
of net income. The Secretary shall by regulation establish accounting
National Oceanic and Atmospheric Administration and shall, when-
procedures and standards to govern the calculation of net profits. In
ever possible, utilize existing Government owned and Government
the event of any dispute between the United States and a lessee con-
operated marine research laboratories in conducting research author-
cerning the calculation of the net profits, the burden of proof shall be
ized by this section.
on the lessee. That part of the net profit share due the United States
3. Section 203 of S. 3221 would amend Subsections (a) and (b) of
which is attributable to oil production may be taken in kind in the
Section 8 of the Outer Continental Shelf-Lands Act as follows:
form of oil and disposed of as provided in subsection (k) of this sec-
SEC. 8. LEASING OF OUTER CONTINENTAL SHELF.-[(a) In order to
tion. That part of the net profits share due in kind shall be deter-
meet the urgent need for further exploration and development of the
mined by dividing the net profit due the United States attributable to
oil and gas deposits of the submerged lands of the outer Continental
the product or products taken in kind by the fairmarket value at the
Shelf, the Secretary is authorized to grant to the highest responsible
wellhead of the oil and/or gas (as the case may be) saved, removed
qualified bidder by competitive bidding under regulations promulgated
or sold. In determining the attribution of profits as between oil and
in advance, oil and gas leases on submerged lands of the outer Conti-
gas, costs shall be allocated proportionately to the value of their
nental Shelf which are not covered by leases meeting the requirements
respective shares of production.
of subsection (a) of section 6 of this Act. The bidding shall be (1)
(b) An oil and gas lease issued by the Secretary pursuant to this
by sealed bids, and (2) at the discretion of the Secretary, on the basis
section shall (1) cover a compact. area not exceeding five thousand
of a cash bonus with a royalty fixed by the Secretary at not less than
seven hundred and-sixty acres, as the Secretary may determine, (2)
121/2 per centum in amount or value of the production saved, removed
be for a period of (i) in five years or (ii) for up to ten years where
or sold, or on the basis of royalty, but at not less than the per centum
the Secretary deems such longer period necessary to encourage ex-
above mentioned. with a cash bonus fixed by the Secretary.]
ploration and development in areas of unusually deep water or ad-
[(b) An oil and gas lease issued by the Secretarv pursuant to this
verse weather conditions, and as long thereafter as oil or may be
section shall (1) cover a compact area not exceeding five thousand
produced from the area in paying quantities, or drilling or well re-
seven hundred and sixty acres, as the Secretary may determine, (2)
working operations as approved by the Secretary are conducted there-
be for a period of five years and as long thereafter as oil or gas mav be
on, and (3) contain such rental provisions and such other terms and
produced from the area in paying quantities. or drilling or well re-
provisions as the Secretary may prescribe at the time of affering the
working operations as approved by the Secretary are conducted
area for lease.
thereon, (3) require the payment of a royalty of not less than 121/2
4. Section 204 of S. 3221 would amend Section 8 of the Outer Con-
per centum, in the amount or value of the production saved, removed,
tinental Shelf Lands Act by adding the following new subsection (k)
or sold from the lease. and (4) contain such rental provisions and such
(k) Upon commencement of production of oil from any lease, issued
other terms and provisions as the Secretary may prescribe at the time
after the effective date of this subsection, the Secretary shall offer to
of offering the area for lease.]
the public and sell by competitive bidding for not less than its fair
(a) The Secretary is authorized to grant to the highest responsible
market value, in such amounts and for such terms as he determines,
qualified bidder by competitive bidding under regulations promul-
that proportion of the oil produced from said lease which is due to
gated in advance, oil and gas leases on submerged lands of the Outer
the United States as royalty or net profit share oil. The Secretary
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125
shall limit participation in such sales where he finds such limitation
means available to avoid substantial economic hardship on the lessee or
necessary to assure adequate supplies of oil at equitable prices to in-
permittee.
dependent refiners. In the event that the Secretary limits participa-
(e) After the date of enactment of this section, holders of oil and
tion in such sales, he shall sell such oil at an equitable price. The lessee
gas leases issued pursuant to this Act shall not be permitted to flare
shall take any such royalty oil for which no acceptable bids are re-
natural gas from any well unless the Secretary finds that there is no
ceived and shall pay to the United States a cash royalty equal to its
practicable way to obtain production or to conduct testing or workover
fair market value, but in no event shall such royalty be less than the
operations without flaring.
highest bid.
7. Section 207 of S. 3221 would amend Section 11 of the Outer Con-
5. Section 205 of S. 3221 would amend Section 15 of the Outer Con-
tinental Shelf Lands Act as follows:
tinental Shelf Lands Act as follows:
[SEC. 11. GEOLOGICAL AND GEOPHYSICAL EXPLORATIONS.-Any agency
SEC. 15. REPORT BY SECRETARY.-As soon as practicable after the
of the United States and any person authorized by the Secretary may
end of each fiscal year, the Secretary shall submit to the President of
conduct geological and geophysical explorations in the outer Conti-
the Senate and the Speaker of the House of Representatives a report
nental Shelf, which do not interfere with or endanger actual opera-
detailing the amounts of all moneys received and expended in connec-
tions under any lease maintained or granted pursuant to this Act, and
tion with the administration of this Act during the preceding fiscal
which are not unduly harmful to aquatic life in such area.]
year.
ANNUAL REPORT BY SECRETARY TO CONGRESS
GEOLOGICAL AND GEOPHYSICAL EXPLORATION
SEC. 15. Within six months after the end of each fiscal year, the Sec-
SEC. 11. No person shall conduct any type of geological or geophysi-
retary shall submit to the President of the Senate and the Speaker of
cal explorations in the Outer Continental ,Shelf without a permit
the House of Representatives a report on the leasing and production
issued by the Secretary. Each such permit shall contain terms and
program in the Outer Continental Shelf during such fiscal year, in-
conditions designed to (1) prevent interference with actual operations
cluding a detailing of all moneys received and expended, and of all
under any lease maintained or granted pursuant to this Act; (2) pre-
leasing, development, and production activities; a summary of manage-
vent or minimize environmental damage; and (3) require the per-
ment, supervision, and enforcement activities; a summary of grants
mittee to furnish the Secretary with copies of all data (including geo-
made from the Coastal State Fund; and recommendations to the Con-
logical, geophysical, and geochemical data, well logs, and drill core
gress for improvements in management, safety and amount of pro-
analyses) obtained during such exploration. The Secretary shall main-
duction in leasing and operations in the Outer Continental ,Shelf and
tain the confidentiality of all data 80 obtained until after the areas in-
for resolution of jurisdictional conflicts or ambiguities.
volved have been leased under this Act or until such time as he deter-
6. Section 206 of S. 3221 would add the following new subsections
mines that making the data available to the public would not damage
to Section 5 of the Outer Continental Shelf Lands Act:
the competitive position of the permittee, whichever comes later.
8. Section 208 of S. 3221 would amend paragraph (2) of Subsection
Insuring Maximum Production From Oil and Gas Leases
5 (a) of the Outer Continental Shelf Lands Act as follows:
(2) [Any person who knowingly and willfully violates any rule or
(d) (1) After enactment of this section no oil and gas lease may be
regulation prescribed by the Secretary for the prevention of waste,
issued pursuant to this Act unless the lease requires that development
the conservation of the natural resources, or the protection of correla-
be carried out in accordance with a development plan which has been
tive rights shall be deemed guilty of a misdemeanor and punishable
approved by the Secretary, and provides that failure to comply with
by a fine of not more than $2,000 or by imprisonment for not more
such development plan will terminate the lease.
than six months, or by both such fine and imprisonment, and each day
(2) The development plan will set forth, in the degree of detail es-
of violation shall be deemed to be a separate offense.] The issuance
tablished in regulations issued by the Secretary, specific work to be
and continuance in effect of any lease, or of any extension, renewal,
performed, environmental protection and health and safety standards
or replacement of any lease under the provisions of this Act shall be
to be met, and a time schedule for performance. The development plan
conditioned upon compliance with the regulations issued under this
may apply to all leases included within a production unit.
Act and in force and effect on the date of the issuance of the lease if
(3) With respect to permits and leases outstanding on the date of
the lease is issued under the provisions of section 8 hereof, or with the
enactment of this section, a proposed development plan must be sub-
regulations issued under the provisions of section 6(b), clause (2),
mitted to the Secretary within six months after the date of enactment
hereof if the lease is maintained under the provisions of section 6
of this section. Failure to submit a development plan or to comply
hereof.
with an approved development plan shall terminate the permit or
9. Section 209 of S. 3221 would amend paragraph (2) of Subsection
lease.
4(a) of Outer Continental Shelf Lands Act as follows:
(4) The Secretary may approve revisions of development plans if
(2) To the extent that they are applicable and not inconsistent with
he determines that revision will lead to greater recovery of the oil and
this Act or with other Federal laws and regulations of the Secretary
gas, improve the efficiency of the recovery operation, or is the only
now in effect or hereafter adopted, the civil and criminal laws of each
126
adjacent State [as of the effective date of this Act] are hereby declared
to be the law of the United States for that portion of the subsoil and
seabed of the Outer Continental Shelf, and artificial islands and fixed
structures erected thereon, which would be within the area of the
State if its boundaries were extended seaward to the outer margin
of the Outer Continental Shelf, and the President shall determine and
publish in the Federal Register such projected lines extending seaward
MINORITY VIEWS OF SENATORS FANNIN, HANSEN,
and defining each such area. All of such applicable laws shall be ad-
BUCKLEY, McCLURE, AND BARTLETT
ministered and enforced by the appropriate officers and courts of
the United States. State taxation laws shall not apply to the Outer
SUMMARY OF MINORITY VIEWS
Continental Shelf.
We strongly oppose S. 3221 and voted against reporting it for the
following reasons:
1. The bill, while purporting to increase oil and gas production on
the Outer Continental Shelf, would in fact decrease production.
2. The bill is totally undesirable and unnecessary according to the
testimony of a majority of the witnesses and continued reiteration of
these and other repudiations of the bill by correspondence received
from the Administration which was ignored by the Committee.
3. The geological data disclosure authority granted by the bill is
confiscatory, anti-competitive, would discourage OCS exploratory
efforts and in combination with the mapping program required by the
bill could encourage "fly by night" speculators to seek OCS leasing
rights.
4. The first essential steps toward the formulation of a Federal Oil
and Gas Corporation would be taken under the broad authority and
punitive provisions created by the bill.
5. Many problems posed by various provisions of the bill, while
troublesome individually, taken in the aggregate would cause serious
delays and inequities in expanding OCS leasing, exploration, and pro-
duction programs thereby frustrating, rather than expediting, the
achievement of domestic energy self-sufficiency.
6. The coastal state fund created by the bill would implement an
unconscionable bribery of coastal states not to resist OCS leasing pro-
grams on federal lands adjacent to their coasts at the expense of all
U.S. taxpayers and particularly to the detriment of the citizens of
inland states.
These objections and others are set forth in detail below.
1. The bill, while purporting to increase oil and gas production on
the Outer Continental Shelf, would in fact decrease production
The findings section of the bill recognizes the need for increased
domestic production of oil and gas and the purposes section states that
the bill is intended to "increase domestic production of oil and natural
gas in order to assure material security, reduce dependence on un-
reliable foreign sources, and assist in maintaining a favorable balance
of payments " The substantive contents of the bill, however, would
have the effect of achieving just the opposite. The manifold disincen-
tives created by the bill, hereinafter discussed at length would impair
rather than increase domestic production on the OCS thereby frustrat-
ing material prosperity and national security, increasing dependence
on unreliable foreign sources, and contributing to an increasingly
infavorable balance of payments.
(127)
130
131
cumbered by other responsibilities. With respect to the OCS,
LETTER TO CHAIRMAN HENRY M. JACKSON FROM UNDER SECRETARY OF THE
we see no reason for a departure from the present system.
INTERIOR JOHN C. WHITAKER OF MAY 4, 1974
John C. Whitaker, on Monday, May 6, 1974, stated:
Hon. HENRY M. JACKSON,
In conclusion, Mr. Chairman, we are expanding, our
Chairman, Committee on Interior and Insular Affairs,
OCS leasing and we are convinced that this expanded pro-
U.S. Senate, Washington, D.C.
gram will be conducted under terms and conditions that pro-
DEAR MR. CHAIRMAN: This responds to your request for the views
tect our environment and our land based communities from
of this Department concerning several bills which deal with the energy
unacceptable adverse impacts.
resources of the Outer Continental Shelf, S. 3221, S. 2762, S. 2858,
We believe that the flexibility provided by the current
S. 2922, S. 2389 and S. 3185.
legislation is extremely desirable and that legislative changes
We recommend that none of these bills be enacted, since appropriate
are unnecessary at this time.
action with respect to OCS energy resources can be taken under exist-
Robert B. Kruger, Attorney-at-Law, on Tuesday, May 7, 1974
ing law.
testified:
The bills
In 1968, I was the project director for the Study of the
S. 3221 would require the Secretary of the Interior to undertake a
Outer Continental Shelf Lands of the United States, pre-
program of promoting petroleum production from the Outer Conti-
pared by my law firm for the Public Land Law Review
nental Shelf subject to new environmental and safety requirements.
Commission.
The Outer Continental Shelf Lands Act would be amended to declare
We made a comprehensive study of the operation of the
that United States policy is to make available for leasing prior to 1985
leasing system created under the Outer Continental Shelf
all OCS lands determined to have geologically favorable potential and
Lands Act.
be capable of development without undue environmental harm. To
Our basic conclusion at that time was that the leasing sys-
carry out this policy the Secretary would be required to develop a leas-
tem, itself, was a viable and competitive one which contained
ing program, specifying the size, timing and location of leasing activ-
no major structural defects.
ity that will best meet energy needs for the ten year period following
Eugene H. Luntey, on Friday, May 10, 1974, emphasized:
approval, subject to certain criteria directed toward overall resource
management, geographic decentralization of leasing and receipt of fair
We are not convinced that a revision of the OCS
market value for public resources. An open nomination procedure
Act is necessary, or would be the most expeditious route to
would be established for areas to be leased or excluded from leasing.
pursue such changes.
The bill specifies matters to be included in the environmental impact
We believe it may be possible for the bidding procedure to
statement for leased areas and authorizes the Secretary to obtain all
be modified by the Secretary of the Interior under the pres-
information from public or private sources necessary to make evalua-
ent Act so as to provide greater encouragement for explora-
tions required by the Act.
tion and development.
The bill would also require the Secretary to undertake a major OCS
Russell Petersen, on Friday, May 10, 1974, said:
oil and gas survey, including geologic investigations and drilling, and
Because of the scope of the oil spill liability issue and the
a mapping program. No part of the survey and mapping program
inadvisability of dealing with the complex subject piecemeal,
would be considered a major Federal action under the National En-
the Council does not believe that it is necessary or advisable
vironmental Policy Act of 1969 except drilling exploratory wells. Per-
to amend the OCS Lands Act to add a liability section.
sons holding leases or permits for oil or gas exploration or develop-
ment on the OCS would be required to provide the Secretary with
Eugene H. Luntey, on Friday, May 10, 1974, remarked:
pertinent information concerning the area which the lease or permit
*** due process under existing law would seem to offer
covers. In addition, the Secretary would be required to carry out a re-
reasonable safeguards and new legislation is not necessary to
search and development program to improve technology related to
ensure adequate accountability.
development of OCS oil and gas resources.
Despite the Administration's continuous and patient efforts to offer
The bill provides for a safety and environmental protection pro-
gram which would include (i) safety and environmental standards
written comments on a timely basis during the hearing and mark-up
for equipment used in OCS exploration, development and production,
stages of the Committee's consideration of the bill, nearly all such
(ii) equipment and performance standards for oil spill cleanup plans
communications were largely ignored. Five examples of such corre-
and operations, and (iii) a safety regulation enforcement program
spondence are included in relevant part below:
132
133
which includes specified Federal inspection of OCS operations.
program is sufficiently large that availability of drilling rigs will be
Issuance and continuance of leases would be conditioned upon com-
the main limiting constraint rather than availability of unexplored
pliance with such regulations. A standard of strict liability for oil
leases. ***
spill damages would be imposed on leaseholders except where damage
Furthermore, the CEQ study has concluded that leasing can be
is caused by war or the damaged party.
carried out in the areas included in that study if appropriate safety
Section 8 of the Outer Continental Shelf Lands Act would be re-
and environmental requirements are adhered to in each area. We intend
vised to specify that bidding for OCS leases on a "net profit" basis is
to require of the industry whatever design criteria and practices are
allowed, in addition to bonus bidding, but royalty bidding would be
necessary to meet the CEQ concerns.
excluded. The bill would also permit the Secretary to sell Federal
In contrast, the present law provides sufficient flexibility for an
royalty oil by competitive bidding and would prohibit him from con-
appropriate balancing of energy and environmental factors. Our con-
tinuing leases which would otherwise terminate, unless there is a rea-
cern is to improve the leasing system within the present framework
sonable assurance of production from such leases within the period of
and in this connection the Department recently has adopted a two-tier
an extension. Additional provisions are included to assure full devel-
system for designating tracts to be leased. Under it industry nominates
opment and maximum production from OCS leases, including a Gen-
promising areas and the public at large is invited to comment on en-
eral Accounting Office audit of shut-in wells, Secretarial unitization
vironmental and other considerations bearing on tract selection. Based
or cooperation or pooling agreements, and review authority for devel-
on this and its own independent review, the Department then specifies
opment plans.
areas to be leased. A related consideration is the specific study or other
Five percent of OCS revenues would be paid into a newly created
requirements found in several of the bills which are prerequisites to
Coastal States Fund, subject to a $200 million per year maximum. The
leasing. ***
Secretary would be authorized to make grants from the Fund to
We concur in the need for adequate study of areas to be leased.
coastal States to ameliorate adverse environmental effects and control
Present law adequately provides for this through the National En-
secondary social and economic impacts associated with development
vironmental Policy Act and the Outer Continental Shelf Lands Act,
of Federal OCS energy resources. Secretarial regulations for admin-
and our policy is to expand our capability rapidly for determining all
istration of the Fund would include requirements for grant eligibility,
the facts necessary to a balanced leasing program. We also agree that
with the proviso that no grant could be made for more than ninety
consultation with coastal States is appropriate but requiring consent
percent of the cost of activities to be conducted under the grant. The
of their governors is unwise in view of the broader national aspects
Secretary would also be authorized to negotiate with a view to devel-
of the OCS program.
oping interim agreements to permit energy resource development prior
Lease offering and conditions-competition and other economic con-
to final judicial resolution of disputes relating to such resources. The
siderations.-The OCS Lands Act provide that leasing of OCS lands
President would be authorized to establish procedures for resolution
shall be by competitive sealed bidding on the basis of a cash bonus
of international or interstate boundary disputes.
bid with a fixed royalty on a bid royalty with a fixed bonus, but in no
Discussion.-We agree generally with many of the essential objec-
instance can the royalty be less than 12.5 percent. The leases are for
tives of these bills, but recommend against their enactment at this
a five year term. These provisions are sufficiently flexible for institu-
time. The existing Outer Continental Shelf Lands Act permits sub-
tion of the most desirable alternative leasing systems to promote com-
stantial latitude for adjustment to changing circumstances and our
petition while serving the public's interest in receiving a fair return
program for development of the OCS can be fully carried out under
for its resources and using those resources in the most responsible
the present law. Significant changes in that law could seriously delay
manner.
achievement of the degree of national energy independence which we
Different methods of bidding for OCS leases are under constant con-
believe is vital.
sideration. Bonus bidding has historically been used for Federal OCS
Discussed more specifically below are some of the more important
leasing, but the Department is committed to a test royalty bid offering
respects in which we believe provisios of these bills are either unneces-
not later than the September 1974 OCS lease sale. Although this ex-
sary or undesirable.
periment is a royalty bid experiment, we believe that the information
Scope of leasing program.-Provisions limiting or otherwise modi-
developed will tell us enough about both bonus and royalty bidding to
fying the scope of the OCS leasing program are undesirable. For ex-
indicate whether further consideration of other possible bidding meth-
ample, the goal stated in S. 3221 of leasing all available prospectively
ods is justified. We are also examining the feasibility of a number of
productive OCS lands by 1985 is unrealistic and implies a rapid rate
other systems such as profit sharing, installment or contingency bonus
of development which may involve undesirable environmental or other
payments.
effects and which is far in excess of that presently planned. Our best
We are opposed to mandating any single system which would result
estimate of the next appropriate change in the scope of the OCS pro-
in a loss of the flexibility which the present Act provides. ***
gram is to lease some 10 million acres in calendar year 1975. We believe
Safety and environmental programs.-The need for constantly im-
that the rate of leasing implicit in S. 3221 would dispose of vast OCS
proving our environmental protection and safety programs is clear
acreages without increasing petroleum exploration and production be-
and we concur in the broad objective of several of the bills to achieve
yond that achievable under the current program. The current leasing
this end.
134
135
The Interior Department is, however, implementing the present
OCS Lands Act in accordance with the National Environmental Policy
Under these provisions a plan for conducting the prescribed survey
Act to insure that these considerations are adequately taken into
and mapping programs would have to be submitted to Congress within
account. Provisions such as those contained in ***
six months after enactment. A progress report to Congress, including
a summary of initial data compiled, would be due within 20 months
S. 3221 are unnecessary as the actions are authorized under exist-
after enactment, and progress reports would be required on an annual
ing laws. Also such provisions might be detrimental if transitional
basis thereafter. Conducting such an extensive mapping and survey ef-
problems of complying with their provisions delay current studies
fort would be extremely difficult, especially within the time frame set
or other actions we are currently undertaking to improve environ-
mental protection and other requirements. ***
forth, and would not likely produce results justifying the effort. Again,
The Department is undertaking preparation of a full environ-
our present program undertaken pursuant to existing authority and
modified as needs change, should be satisfactory.
mental impact statement on the new 10 million acre leasing program
Moreover, since the bill's provisions would exempt all actions other
pursuant to the National Environmental Policy Act. The Council on
than the drilling of exploratory wells from classification as a major
Environmental Quality has recently completed a study of OCS leas-
ing, which includes a number of recommendations which we believe
Federal action for the purposes of Section 102 (2) (C) of NEPA, it
will improve our administration of the OCS program. These and other
would seem that exploratory wells must therefore be considered major
actions will, we submit, appropriately serve the objective of insuring
Federal actions. Requiring an EIS could significantly delay the drill-
ing of exploratory wells that are important to the conduct and comple-
safety and environmental protection.
tion of the survey and mapping programs prescribed under S. 3221 and
Research and Development.-A strong research and development
program is essential both with respect to energy and environmental as-
could result in unnecessary delays in the preparation and publication
pects of OCS mineral development. It is, however, being accomplished
of the prescribed maps and in the development of information impor-
under existing law and several provisions in the bills under considera-
tant to an effective and expeditious leasing program for OCS lands.
Similar objections appear in several of the other bills. S. 2922 im-
tion might, if enacted, actually adversely affect the R&D effort. Man-
dating a wide range of studies by different agencies, as does S. 3221,
poses several data gathering requirements in section 3 (adding a new
may preclude desirable coordination and executive flexibility. ***
section 15 to the OCS Lands Act) which are costly and may be virtu-
Public information and participation in OCS decisions.-Assuring
ally impossible to obtain within the time frame set forth. The impact
that the public has access to information needed to make intelligent
of the study requirement is particularly serious because of the bill's
decisions with respect to OCS energy resources and an adequate op-
requirement that no leasing be conducted in any area for which the
study has not been completed.
portunity to participate in OCS program decisions is essential. Equally
important is the desirability of developing a more extensive resource
Distribution of OCS revenues ***
information base.
S. 3221, *** would divert revenues from the U.S. Treasury to ad-
The Interior Department presently has the necessary authority to
jacent coastal and other states and we oppose such provisions. Receipts
pursue these objectives. Consultations with industry representatives,
under the Outer Continental Shelf Lands Act from OCS oil and gas
environmentalists and others are presently underway concerning the
leases belong to the Federal Government and currently make a sub-
advisability of an exploratory program. The present OCS Lands
stantial contribution to Federal income. In such revenues were diverted
Act permits the Department to require that permittee furnish us with
to coastal and other States, as the bills provide, the Federal Govern-
data obtained during exploration and we expect to reach conclusions
ment would need to increase its income from other sources. Also the
about what should be done in this regard shortly.
bills adopt inflexible allocations of funds to such States without regard
It would not be appropriate to amend the OCS Lands Act at this
to need or resources.
time to require the development of specific informational programs.
To summarize, the bills before the Committee deal with the major
To illustrate, the survey and mapping program required by section
issues relating to use of the energy resources of the Outer Continental
202 of S. 3221 would impact quite heavily and perhaps undesirably
Shelf. To meet our present energy needs, however, we believe that the
on our OCS program. If enacted, this provision would require that
present OCS Lands Act provides a satisfactory framework and that
a survey of OCS oil and gas resources be conducted and that the
further legislation such as that before the Committee is undesirable or
Secretary maintain a current series of detailed topographic, geologi-
unnecessary.
cal, and geophysical maps of and reports about the OCS. Maps for all
The Office of Management and Budget has advised that there is no
areas under lease or proposed for leasing prior to July 1, 1977, would
objection to the presentation of this report from the standpoint of the
have to be prepared and published prior to July 1, 1976; maps of
Administration's program.
areas proposed for leasing after July 1, 1977; would have to be
Sincerely yours,
prepared and published not later than six months prior to the last
JOHN C. WHITAKER,
day for submitting bids for the areas offered for lease; the maps of
Under Secretary of the Interior.
all prospective areas must be prepared and published not later than
ten years after the date of enactment.
136
137
LETTER TO SUBCOMMITTEE CHAIRMAN LEE METCALF FROM LEGISLATIVE
Preparation and mapping for publication of such data would be
COUNSEL OF THE INTERIOR DEPARTMENT, KEN M. BROWN OF JULY 1,
costly in manpower and time; and because of the time lag for pre-
1974
paring and releasing the mapped data, the information supplied would
be of questionable value to industry. Industry itself collects and con-
Hon. LEE METCALF,
tinually updates data on potential OCS prospects well ahead of
Chairman, Subcommittee on Minerals, M aterials, and Fuels,
scheduled lease sales and in many instances ahead of the initial data
U.S. Senate, Washington, D.C.
gathered by the Government.
DEAR SENATOR METCALF In response to your letter regarding Under
This data publication provision may not significantly delay energy
Secretary Whitaker's May 6 testimony on S. 3221 and other legisla-
development from the OCS: However, it will divert technical exper-
tion dealing with S. 3221, please find enclosed our comments on spe-
tise away from data evaluation for selection of tracts to be offered for
cific provisions of S. 3221 which could create serious delays in achiev-
leasing. Identification of favorable prospects will be a critical factor
ing the degrees of energy self-sufficiency for the nation which is so
in the success of an accelerated leasing program, especially in new
necessary.
frontier areas.
Generally, while many features of the bill are apparently directed
Section 27.-This section requires completion of a study of methods
at improving OCS leasing procedures, there is little to encourage early
to promote competition and maximize revenue, and presumably pro-
exploration and optimum production from OCS leases. Much of the
duction, from leasing OCS lands. The study would include a plan for
authority proposed concentrates heavily on geological and geophysi-
implementing recommended administrative changes and drafts of
cal investigation and reporting. The bill requires minerals fact finding
proposed legislation.
studies with obligations to report to Congress, without reference to
The Department has evaluated these points in the past and is con-
authority to implement findings and recommendations.
tinually investigating procedures for improving OCS leasing. There-
Responses are also provided to the five specific questions you asked.
fore, completing a study of these specified points within one year
We will be glad to provide any further information you desire.
would prove to be only an exercise since there is no provision in the
Sincerely yours,
Act to incorporate further changes in leasing methods without addi-
KEN M. BROWN, Legislative Counsel.
tional legislation.
Enclosures.
Section 203, 8.-Under revision of the lease terms, OCS leasing
would be restricted to bonus bidding-royalty bidding would be elimi-
EXAMPLES OF SPECIFIC PROVISIONS OF S. 3221 WHICH COULD DELAY
nated. The Department is committed to hold a test of royalty bidding
ENERGY SELF-SUFFICIENCY
at the September 1974, OCS lease sale. Also, the Department is in-
vestigating the possibility of conducting a test of profit sharing at a
Section 202, 18(d).-This subsection is interpreted to call for an
future lease sale (possibly September 1974 or January 1975).
environmental impact statement on the leasing program which would
The proposed legislation, as written, would prevent such lease tests
include an oil and gas resource assessment of each area to be offered
or adoption of other leasing practices, if they are found to be desir-
for leasing.
able. The only exception to cash bonus bidding with a fixed royalty is
Past lease program schedules prepared by the Department have not
a cash bonus with profit sharing fixed at 55 percent. It should be rec-
required impact statements. Instead, environmental statements were
ognized that the profit sharing method would provide no royalty oil
prepared for individual sales scheduled. The Department is now pre-
for distribution under subsection (k) of this section.
paring a programmatic impact statement for the proposed accelerated
Section 206, 5.-Subsection (g) would require each lease issued after
program to lease ten million acres annually, and presumably a sepa-
enactment of this section to require an approved development plan.
rate impact statement will continue to be prepared for each lease sale
Approving a development plan prior to any drilling could be complex
under that schedule. None of these statements would satisfy the lan-
and could delay both exploration and production. Because of unique
guage of the bill as it is now written.
operating conditions encountered on the OCS and the diverse owner-
The time frame for completion of an impact statement in accordance
ship patterns that could exist, a separate plan probably would be
with NEPA and a resource assessment as required in the bill could be
necessary for each lease issued or unit formed. Requests for approval
restrictive. Preparation of a statement covering all areas to be in-
for revised plans (allowed under the bill) would be continuous. For
cluded in the program could require two to three years to complete.
instance, a successful OCS lease program of ten million acres annually
It probably would be more complex than the trans-Alaska pipeline
could involve up to 2,000 development plans.
and oil shale statements and much more comprehensive than the CEQ
It would be preferable for the Act to authorize the Secretary, at his
environmental assessment of OCS development on the Atlantic and
discretion, to require exploratory wells to be drilled within specified
Gulf of Alaska, which was completed in one year.
periods and if production were established, to file an approved devel-
Section 19.-The proposed legislation would increase the Depart-
opment plan within a given time-possibly six months. This approach
ment's obligation for gathering, mapping and publishing data on OCS
would not delay exploratory drilling, which would be carried out
resources. Geophysical maps and other data would be required to be
under existing stipulations and orders.
prepared and published by July 1, 1976, for OCS areas under lease or
scheduled for lease on or before June 30, 1977.
138
139
LETTER TO CHAIRMAN HENRY M. JACKSON FROM THE SECRETARY OF THE
in this matter, I would appreciate your reconsidering the desirability
INTERIOR, ROGERS C. B. MORTON, OF JULY 15, 1974
of proceeding with any amendments to the Outer Continental Shelf
Lands Act at this time.
DEAR MR. CHAIRMAN: In view of your Committee's plan to mark-up
Sincerely,
S. 3221, I wish to reiterate the Administration's strong opposition to
enactment of this legislation which would amend the Outer Con-
JOHN C. SAWHILL, Administrator.
tinental Shelf Lands Act. Our letter of May 4, 1974, expressed the
LETTER TO CHAIRMAN HENRY M. JACKSON FROM ASSISTANT SECRETARY OF
reasons for this position in detail.
THE INTERIOR, ROYSTON C. HUGHES, OF JULY 26, 1974
We now have a sound program for the development of Outer
Continental Shelf energy resources which we believe will achieve
Hon. HENRY M. JACKSON,
substantially the same objectives as S. 3221. Extensive environmental
Chairman, Committee on Interior and Insular Affairs,
protection and safety measures are incorporated in our program to
U.S. Senate, Washington, D.C.
assure Outer Continental Shelf development is conducted with the
DEAR MR. CHAIRMAN: In accordance with Secretary Morton's July
minimum acceptable environmental costs and with the greatest possi-
16 letter on Committee Print No. 1 of S. 3221, relating to the energy
ble safety for workers. New bidding systems are being evaluated and
resources of the Outer Continental Shelf (OCS) this letter sets forth
test sales will be conducted to make certain these valuable energy
the Interior Department's analysis of Committee Print No. 1 and our
resources are leased in a manner which will guarantee a fair return to
position concerning its major provisions. We previously expressed our
the citizens of the United States and enhance fair competition among
views on S. 3221 as originally introduced by letter dated May 4, 1974.
bidders.
We oppose amending the Outer Continental Shelf Lands Acts at
The present Outer Continental Shelf Lands Act can fully accommo-
this time, because it would disrupt current efforts to achieve full
date these objectives and will permit a substantial degree of latitude
utilization of these resources. The specific problems that enactment
for adjustment to future changing circumstances, conditions and tech-
of S. 3221 would cause are discussed below.
nology. Enactment of S. 3221 at this time would disrupt these efforts
Leasing program.-Title II of the bill purports to establish a na-
resulting in serious delays in meeting the President's goal of energy
tional policy of use of OCS resources and the criteria for a leasing
self-sufficiency. I urge your support for the present program, which I
program. Taken together these provisions are so general for the most
believe best serves national energy needs, and for retaining the present
part that they contribute little or nothing to a sound program. Our
legislative framework governing the Outer Continental Shelf.
present policy and actions are easily comprehended by these provisions
Sincerely yours,
which are at best unnecessary and at worst confusing and productive
ROGERS MORTON,
of controversy and litigation. Where these provisions are more spe-
Secretary of the Interior.
cific, they are in several instances either superfluous or harmful. We
believe it is undesirable at this time to require development of a ten-
LETTER TO CHAIRMAN HENRY M. JACKSON FROM ADMINISTRATOR OF THE
year leasing program as contemplated by the bill, since this would
FEDERAL ENERGY ADMINISTRATION, JOHN C. SAWHILL, OF JULY 15, 1974
divert scarce funds and manpower from more pressing matters in the
Hon. HENRY M. JACKSON,
OCS, and other programs. For any leasing program, however, it is
Chairman, Interior and Insular Affairs, New Senate Office Building,
standard governmental operating procedure to prepare at the appro-
Washington, D.C.
priate time the budget and manpower estimates called for in new sec-
tion 18(c) of the OCS Lands Act which the bill would add (page' line
DEAR MR. CHAIRMAN: I have recently learned that your Committee
20 through page 7, line 5). New section 18(d) mentions some factors
is planning to consider S. 3221, which would amend the Outer Con-
which must be included in the environmental impact statement on the
tinental Shelf Lands Act of 1953. As Duke Ligon testified in early
leasing program. These are factors which obviously will be included
May (copy attached), it is the opinion of the Administration that no
whether or not section (d) becomes law, but we oppose on principle
amendments are necessary or desirable at this time since many of the
this amendment to the National Environmental Policy Act. New sec-
matters contained within the proposed amendments can be handled
tion 18(e) requires the Secretary of the Interior to establish pro-
more effectively and expeditiously under existing laws.
cedures for a leasing tract-nomination system-something we have al-
The Outer Continental Shelf Lands Act is broad and flexible.
ready done under the present OCS Lands Act, as indicated in our
Changes and adjustments to existing policy can be carried out by
May 4 letter.
virtue of authority contained in that Act. As a matter of fact, the
Likewise, sections 18(f) through (j) would have a minimal practi-
Interior Department is pursuing that course through changes in
cal effect, except perhaps in two respects. First, section 18(h) requires
leasing regulations, additional proposed changes, and by some experi-
the Secretary to review and reapprove the leasing program at least
mental lease sales planned for execution beginning later this year.
once each year. This intrusion of executive discretion may, on the one
In light of the above and in the hope that we can avoid confusion
hand, require needless paperwork and establish an unenforceable
140
141
requirement or, on the other hand, compel too much review and re-
sound program. In this regard, we are meeting the concerns underlying
approval of leasing programs. Second, section 18(i) confers broad
the new section 21 which the bill would add to the OCS Lands Act,
authority on the Secretary to obtain information needed to-prepare
including inspection, accident investigation and reporting measures.
environmental impact statements with little regard for recently en-
Liability for oil spills.-The Administration currently has under
acted energy data and information provisions, the need for limiting
consideration comprehensive legislation relating to oil spill and other
governmental authority or providing appropriate protection of private
OCS liability. We recommend that the Committee defer action in this
interests.
area until the Administration proposal is developed. The Council on
OCS oil and gas survey program.-To a large degree the bill's pro-
Environmental Quality has previously commented on new section 22
visions adding a new section 19 to the OCS Lands Act (page 9, line 1
(page 15, line 23 through page 17, line 19).
through page 11, line 18) are unnecessary, but to the extent they are
Negotiation with States and boundary determinations.-New sec-
likely to have an actual effect, they could impact quite heavily and
tions 23 and 24 of the OCS Lands Act (page 17, line 20 through page
perhaps undesirably on our OCS program. The bill would require that
18, line 8) provide no new authority for the Executive Branch and
a survey of all OCS oil and gas resources be conducted and that the
merely call for actions pertaining to the matters with which we are
Secretary maintain a current series of detailed topographic, geologi-
already dealing.
cal and geophysical maps of and reports about the OCS. Maps would
Coastal State Fund.-We are opposed to provisions of the bill which
be required no later than six months prior to the last day for submis-
would create a new program of grants to adjacent coastal States and
sion of bids for OCS areas scheduled for lease on or after July 1,
thereby divert revenues from the U.S. Treasury. Receipts under the
1977; and in no case later than ten years after enactment of all other
OCS Lands Act from OCS oil and gas leases belong to the Federal
areas.
Government and currently make a substantial contribution to Fed-
Under these provisions a plan for conducting the prescribed survey
eral income. If such revenues were diverted to coastal States, as new
and mapping programs would have to be submitted to Congress within
section 25 of the Act would provide (page 18, line 10 through page
six months after enactment. A progress report to Congress; including
19, line 20), the Federal Government would need to increase its in-
a summary of initial data compiled, would be due within 20 months
come from other sources. In effect, the bill increases Federal expendi-
after enactment, and progress reports would be required on an annual
tures outside the normal budget and appropriation process, which is
basis thereafter. Conducting such an extensive mapping and survey
both bad management and inflationary. It results in an inflexible
effort would be extremely difficult, especially within the time frame
allocation of funds to such States without regard to need or resources
set forth, and would not likely produce results justifying the effort.
and also fractionates efforts to address the environmental, social and
Carrying out the mapping and survey requirements (including surveys
economic problems of OCS energy development.
on a spacing no greater than two kilometers) would require large
Lease terms.-The provisions of the present OCS Lands Act are
expenditures of money, possibly on the order of several billion dollars.
sufficiently flexible for institution of the most desirable alternative
Again, our present program undertaken pursuant to existing authority
leasing systems to promote competition while serving the public's
and modified as needs change, should be satisfactory.
interest in receiving a fair return for its resources and using those re-
Moreover, since the bill's provisions would exempt all actions other
sources in the most responsible manner. Different methods of bidding
than the drilling of exploratory wells from classification as a major
for OCS leases are under constant consideration. Bonus bidding has
Federal action for the purposes of section 102 (C) of the National
historically been used for Federal OCS leasing, but the Department is
Environmental Policy Act, it would seem that exploratory wells must
committed to a test royalty bid offering not later than the September
therefore be considered major Federal actions. Requiring an environ-
1974 OCS lease sale. Although this experiment is a royalty bid experi-
mental impact statement could significantly delay the drilling of explo-
ment, we believe that the information developed will tell us enough
ratory wells that are important to the conduct and completion of the
about both bonus and royalty bidding to indicate whether further
survey and mapping programs prescribed under S. 3221 and could
consideration of other possible bidding methods is justified. We are
result in unnecessary delays in the preparation and publication of the
also examining the feasibility of a number of other systems such as
prescribed maps and in the development of information important to
profit sharing, installment or contingency bonus payments. We are
an effective and expeditious leasing program for OCS lands.
opposed to mandating any single system which would result in a loss
Research and development.-A strong research and development
of the flexibility which the present Act provides.
program with respect to both energy and environmental aspects of
Section 203 of the bill would revise section 8 of the OCS Lands Act
OCS mineral development is being accomplished under existing law.
to specify that bidding for OCS leases on a "net profit" basis is
New section 20 of the Act (page 11, line 20 through page 13, line 7) is
allowed, in addition to bonus bidding, but royalty bidding would be
superfluous.
excluded. The Committee Print modified the original bill to specify
Safety.-As pointed out in our May 4 letter, a recent OCS study by
that not less than 30% of net profit must be paid to the United States,
the Council on Environmental Quality has concluded that leasing can
instead of requiring a 55% payment. Section 204 of the bill would also
be carried out in OCS areas if appropriate safety and environmental
permit the Secretary to sell Federal royalty oil by competitive bidding
requirements are adhered to and we intend to require of industry
and would prohibit him from continuing leases which would other-
whatever measures are needed to assure a safe and environmentally
wise terminate, unless there is a reasonable assurance of production
142
143
from such leases within the period of an extension. Additional provi-
Even though the bill requires that the Secretary shall maintain
sions are included in section 206 to assure full development and maxi-
the confidentiality of all such proprietary data or information SO
mum production from OCS leases, Secretarial unitization or coopera-
received, these requirements have been qualified by vague clauses
tion or pooling agreements, and review authority for development
pertaining to the amount of time such information or data shall
plans. In our view "net profit" bidding is permitted under the present
remain confidential.
Act subject to certain non-objectionable limitations. We are continuing
It is likely that use of the data in the published maps and sur-
to evaluate the desirability of "net profit" and other forms of bidding.
veys required by the Act and in the environmental impact state-
Miscellaneous.-Sections 301 and 302 of the bill require several in-
ments required by The National Environmental Policy Act, let
vestigations and studies as to which attention is already being directed.
alone the high probability of "leaks", will result in disclosure of
The authority conferred is redundant and poses the potential of con-
proprietary information.
fusing current authorities and efforts.
B. Such disclosure of proprietary information and subsequent pub-
In regard to section 302, we have been studying and monitoring
lication as part of the Environmental Impact Statements or as part
shut-in and flaring wells under the OCS Lands Act and have furnished
information to the Congress on this subject.
of COMPETITIVE. the mapping publications required by the act would be ANTI-
Sincerely yours,
Such publication of proprietary information would alleviate
ROYSTON C. HUGHES,
or substantially reduce competition as between present or prospec-
Assistant Secretary of the Interior.
tive OCS lessees. Regarding the disclosure of raw data as well as
interpretative information, this anticompetitive effect is most
In summary, the Outer Continental Shelf Lands Act of 1953 has
severe in areas on the OCS not under lease. Exploration permits
been and remains a landmark legislative measure which provides an
convey no exclusive rights to the holder to explore any area of the
ample statutory foundation for the orderly management of the oil and
OCS. Each potential lessee has an equal right to explore any
gas resources of the federal offshore area. The administration has
unleased area of the OCS and in turn an incentive to do SO in order
repeatedly emphasized, and we agree, that tampering with an Act
to acquire sufficient information to enable him competitively to
that has steadfastly served the nation for over twenty years is unneces-
identify promising tracts. To require him to disclose either data
sary, undesirable, and counterproductive. S. 3221 is unnecessary,
or interpretative information resulting from such exploratory
undesirable, and counterproductive to the rapid attainment of energy
initiatives cuts at the heart of the competitive system.
self-sufficiency.
The very backbone of competitive free enterprise in the de-
3. The geological data disclosure authority granted by the bill is con-
velopment of the OCS is the fact that private companies main-
fiscatory, anticompetitive, would discourage OCS exploratory
tain and build their competitive positions on the strength of
efforts and in combination with the mapping program required
their own proprietary information. For such information to be
by the bill could encourage "fly by night" speculators to seek
given out by the Federal Government would destroy that free
OCS leasing rights
competition and therefore severely delay development of the
OCS resource.
Section 18(i) authorizes the Secretary of the Interior to obtain
unlimited "data" and "other information" from public and private
C. Rather than increasing the ease of entry into OCS production
sources concerning potential oil and gas reserves for use in preparing
operations and thereby providing for increased competition, the data
Environmental Impact Statements; and
and information disclosure requirements in combination with the
Section 19(h) directs the Secretary to require lessees and explora-
requirement that the Secretary publish such data and information
tion permit holders to disclose "any data about the oil or gas resources
would discourage private efforts to obtain such exploratory data and
information on the OCS.
in the area subject to the lease" in order to conduct a mapping
A company would object to using its own capital to finance
program.
exploratory efforts if the results of such efforts would automati-
Section 207 amends Section 11 of the existing Act and requires, as
a condition for the issuance of an exploration permit, that the per-
cally be turned over to the government, which, through publica-
mittee turn over to the government all data obtained (including well
tion of such information in the form of maps and environmental
logs and the actual drill cores) during exploration.
impact statements would in turn be making it available to com-
A. Such authority is CONFISCATORY in nature and could lead
peting companies. The result would be a substantial lessening
of private exploration forcing an increased level of federal ex-
to an unconstitutional "taking of proprietary information".
Although OCS lessees have, by regulation, traditionally been
ploration and a subsequent dependence upon such federal ex-
required to transmit raw data to the USGS resulting from drill-
ploratory information by all companies wishing to obtain OCS
ing and production operations, they have not been required to
leases. Thus, by virtue of the fact that the principal, if not ex-
disclose either raw data or proprietary interpretative information
clusive, source of exploratory information will be that collected
resulting from exploratory efforts conducted pursuant to an ex-
by the federal government greater uncertainty on the part of the
ploration permit for unleased areas. Requiring such disclosure
companies concerning the interpretation of such data and re-
could result in the confiscation of proprietary information.
luctance by the companies to rely upon the exploratory informa-
144
145
tion collected by the government would serve as a disincentive
Once private industry has been throughly discouraged and de-
to responsible companies to submit bids at future OCS lease sales.
lays in OCS development are apparent, the availability of mas-
D. Instead, "FLY BY NIGHT" SPECULATORS would be en-
sive amounts of high quality information, trained survey, drill-
couraged to try to make a "fast buck" by utilizing the data published
ing and geological personnel and modern, sophisticated equip-
by the federal government as a basis for submitting bids at future
ment, would dictate the use of it all "in the public interest". When
OCS sales.
all the above elements are present, we would have a federal oil and
The Interior Department has already been troubled by specu-
gas exploration company, complete with an unlimited supply of
lators (in one case, Fats Domino) submitting bids at OCS lease
prospects, a captive market and the ability to control prices.
sales. This problem would be seriously magnified if the data
Short of such a result, the government could easily be inclined to
provisions of the bill became law.
nationalize or partially nationalize the U.S. petroleum industry
4. The first essential steps toward the formulation of a Federal oil
as the British government has already announced its intention to
do in the North Sea area.
and gas corporation would be taken under the broad authority
and punitive provisions created by the bill
Such a temptation should never be presented to the government
in a nation whose economic strength is the result of its protection
Section 19(b) authorizes the Interior Department to obtain in-
of free enterprise.
formation by itself conducting, contracting for or purchasing the re-
sults of, surveys and investigations.
5. Many problems posed by various provisions of the bill, while
Section 19 (h) requires the industry to share its data about "the oil
troublesome individually, taken in the aggregate would cause
or gas resources" as a condition precedent for retaining a lease.
serious delays and inequities in expanding OCS leasing, ex-
Section 207 requires disclosure to the Interior Department of data
ploration, and production programs thereby frustrating, rather
obtained pursuant to exploration permits.
than expediting the achievement of domestic energy self-
Section 19(c) directs the Interior Department to map the OCS and
Sufficiency
to a degree of detail suitable for actually drilling for oil and gas and
A. Section 18(f), (g) and (h) prohibit leasing any OCS area
that no area may be leased until such maps are published.
after January 1, 1978, not included in a published leasing program.
A. Such authorities, if exercised, would cause the Interior Depart-
This requirement is not only unnecessarily cumbersome and
ment to compete directly with private enterprise.
rigid, but would also cause leasing delays by preventing practi-
The enormity of the mapping requirements creates a huge in-
cal and needed adjustments in areas to be included in individual
formational need which can be filled only by government enter-
lease sales. This intrusion into reasonable executive discretion
ing the data business in competition with private enterprise. Oil
may, on the one hand, require needless paperwork and establish
exploration and geophysical companies which normally sell their
and unenforceable requirement or, on the other hand, compel too
information to oil companies, will not want to supply geo-scien-
much review and reapproval of leasing programs.
tific data if they know it would be made public, since its value
B. Section 18(d), which amends NEPA, lists factors which need to
stems from its remaining confidential. There is, thus a strong
be included in environmental impact statements which although in-
disincentive to the industry which could be overcome only by
flexibly restrictive in parts is also too broad to be properly applied
government exercising its authority to perform the surveys on
regarding all future OCS lease sales, including those in virgin areas.
its own account. Because of government's market impact. not only
It is not only unnecessary but would also cause delays in expediting
would the geo-data industry lose a major customer, but it would
the Interior Department's already expanded leasing program.
face a new, all powerful competitor which would obtain, com-
C. Section 19(d) requires the Secretary within six months to sub-
pile and publish the data at a fraction of its cost.
mit to Congress a survey and mapping plan.
The need for increased drilling. caused by the mapping require-
This subsection would require delays in both mapping and leasing
ments, given the shortage of drilling rigs, would encourage the
programs by virtue of the fact that manpower needed for action pro-
creation of a drilling fleet which also would compete with the
grams would be taken away from their work to prepare a planning
drilling industry. Finally, the sections of the Act which authorize
document of questionable utility.
the collection of industry's raw data creates a distinct competitive
D. Section 21 of the bill calls for an arbitrarily expanded and de-
disadvantage and an exploratory disincentive to private enter-
tailed safety program.
prise. The results of such a situation would be uncertainty, court
This is one of the bill's most classic examples of "overkill".
battles. and delav. Industry would be forced out of business or
The Interior Department in its letter to the Chairman of May 4th
out of the country in an effort to seek opportunities, thus increas-
pointed out that:
ing the delay in OCS development and increasing costs to the
*** a recent OCS study by the Council on Environ-
consumer.
mental Quality has concluded that leasing can be carried
B. Given all the elements of a "business" opportunity, the urge of
out in OCS areas if appropriate safety and environmen-
the government to seize it would be irresistable.
tal requirements are adhered to and the Interior Depart-
38-533 O 74 10
146
147
ment is already requiring of industry whatever measures
In any action taken by the Federal Government different law-
are needed to assure a safe and environmentally sound
yers may have several different views which may or may not coin-
program. In fact it is already meeting the concerns
cide with the governments. The sole basis for permitting this di-
underlying the new section 21 which the bill would add
vergence of opinion to be argued in court should be whether or
to the OCS Lands Act, including inspection, accident in-
not a party has standing and is being injured. To provide other-
vestigation and reporting measures.
wise, as this section does, will encourage a proliferation of law
There is no way for the Congress to be able to generalize and
suits. The resultant effect will be lucrative attorneys' fees and
prescribe for all future individual platforms in the Gulf of
delay.
Mexico, the Atlantic, the Pacific and off Alaska, safety standards
Statutes should encourage obedience to orderly process and re-
as all inclusive as those contained in Section 21. Implementing
spect for lawful authority. This provision of S. 3221 does neither.
these safety requirements would cause serious delays not only
Section 26 would not only constitute an express invitation to
because of expanded manpower and cost requirements, but also
citizens to initiate law suits to delay any or all parts of the ex-
because of litigation which would result seeking to enjoin further
panded OCS program and thereby frustrate the early attainment
OCS leasing, exploration, and production until all safety stand-
of energy self sufficiency, but would additionally substitute gov-
ards had been complied with.
ernment by individual extremist groups for government by orga-
E. Section 26 of the bill authorizes citizen suits.
nized representation.
It thereby, in addition to citizen suits already encouraged by
The impact on attainment of energy self sufficiency is incalcu-
NEPA, creates broader standing for many new and separate
lable. Each suit could result in delay. Since continuing action is
causes of action to be brought against both the Interior Depart-
required of the Secretary (annual revision or reapproval of the
ment and any person alleged to be violating any part of the Act.
leasing plan, coastal state grants, revision of lease terms etc.)
In light of the experience of the trans-Alaska pipeline litigation
there is no end to the delay that can be encountered if suits are
and numerous suits already brought under NEPA to enjoin OCS
filed every time the Secretary is required to act.
lease sales, this section would constitute an express invitation to
Some measure of the type of delay this type of litigation can
each U.S. citizen to initiate lawsuits to slow down and otherwise
cause is illustrated by the nation's experience with the Alaska
delay the entire OCS program.
pipeline. The five year delay was ended only by an act of Congress
The citizens' suit provision of S. 3221 is one more step toward
at a time when due to severe petroleum shortages many were
waiting in long lines to obtain gasoline.
"government by combat between attorneys".
Under this provision any citizen with an interest which is or
The citizen suit concept had its origin, presumably, in instances
may be adversely affected may commence a civil action to enforce
where the government agencies responsible for enforcing the law
were failing to perform their duty. Suits by private citizens were
the law. Any citizen may intervene as a matter of right in a suit
a means of correcting that governmental dereliction. Section 26
being diligently prosecuted by the government.
assumes that the Secretary and other agencies of government will
By providing a forum for private citizens to share in or become
totally fail-to-perform their respective duties. It's almost anom-
the dominant partner in the Executive Branch's Constitutional
responsibility to execute and enforce the laws of the land, the
alous that the functions assigned to the Secretary would be
Congress is frustrating and thwarting the goal of orderly devel-
spelled out, and then, in effect, provide that if any citizen who
opment of the Outer Continental Shelf.
doesn't agree with the Secretary can bring the matter up in liti-
Our system of jurisprudence has traditionally provided relief
gation and let the Court decide whether the Secretary was right
to persons when direct injury is involved. The language of this
or wrong. A person who is injured should have "his day in court"
section, however, would substitute "interest" for "injury". It then
and he does without citizen suit provisions. The citizen suit pro-
goes one step further and attempts to create the interest by the
vision seems to encourage any person-who may not be injured-
to bring policy determinations into the courthouse.
trust concept of Section 201 which states that "is a vital na-
tional resource held in trust by the Federal Government for all
NEPA already presents sufficient opportunity for citizens to
participate in the OCS decision making process; in fact, too much
people". Under such a concept all citizens would have a justifi-
opportunity.
able interest under the bill even though the interest is shared in
The Courts have become more and more liberal in recent years
common with all other citizens and there is no injury to the party
bringing the suit. This is an abdication of government. Enforce-
in granting "standing" to sue. The liberalized standing concept
was somewhat narrowed by the Supreme Court in the Mineral
ment of the law of the land, insofar as the Outer Continental
King case (Sierra Club V. Morton). In that case the Court held
shelf is concerned, would be placed in the hands of citizens with-
that the goal is to put the right to litigate in the hands of those
out regard to the diligence with which the government is per-
who have a direct stake in the outcome, not those who seek to do
forming its responsibilities. The net result will be a government
no more than vindicate their own value preferences through the
by vigilantes.
judicial process. This decision still permits suit by any individual
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149
who has in fact suffered an injury or by an organization as a rep-
(c) Cleanup oil spills.
resentative of members who have in fact suffered an injury.
(d) Drilling bits.
In Natural Resources Defense Council v. Morton several orga-
(e) Flaw detection for undersea pipelines.
nizations sought and were granted an injunction barring lease sale
(f) Development of wells in deep water.
of oil and gas on OCS because the NEPA statement failed to dis-
(g) Subsea production.
cuss in detail alternatives to the sale. This resulted in a delay of
20 (b) Citizen and/or Company and or Union v. Secretary.-
one year.
Safety and environmental standards. 1. Almost certain chal-
The following is a list of suits which could be brought, and in all
lenges to safety and environmental standards for OCS explora-
likelihood would be brought, under the provisions of Section 26.
tion and production equipment.
The delays which could result from such litigation are evident.
20 (c) Citizen and Company v. Secretary.-
1. Cleanup and Performance standards of oil spill cleanup
Citizen v. Secretary--challenging 10 year plan
too rigid.
18 (b) (1) 1. Management does not consider all resources values
2. Cleanup and Performance standards of oil spill cleanup
properly.
too loose.
18 (b) (1) 2. Management does not consider potential impact oil
21 (a) Citizen and/or Union v. Secretary.-All types of litiga-
and gas exploration on other resource values of OCS.
tion-safety too loose, inspection not made or too lax, challenge
18 (b) (2) 3. Timing and location doesn't properly distribute and
continuation of lease.
decentralize exploration and development among various areas
21 (b) Company v. Secretary.-All types litigation-safety regu-
of OCS under (A), (B), (C) and (D).
lations too rigid.
18 (b) (3) 4. Doesn't provide for receipt of "fair market value."
18 (c) 5. Estimates of required appropriations and staffing im-
Citizen v. Company
proper.
22 (c) Where differences between environmentalists and Secretary
18 (d) 6. Environmental statement improperly assesses oil and
gas resources of each area.
over whether pollution threaten aquatic or wildlife citizens will
sue.
18 (d) 7. Environmental statement improperly assesses rates of
Citizen v. Secretary
expected exploration and development.
18 (d) 8. Environmental statement improperly assesses geologi-
29 1. Various challenges on Baseline and Monitoring Studies.
cal and geophysical conditions, biological data, commercial and
203 2. Leasing and accounting challenges.
recreational uses of "nearby land and water areas."
204.3. Disposition of royalty oil.
18 (e) 9. Challenge Secretary's regulations on procedures for re-
206 (d) 4. Litigation over extension of leases-waiver develop-
ceipt and consideration of nominations, public notice, partici-
ment requirements.
pation of State and local governments and coordination pro-
gram with programs under Coastal Zone Management Act.
Citizen and/or Company v. Secretary
18 (h) 10. Every revision by Secretary subject to same attacks.
23. Challenging any interim agreements between the U.S. and
Company v. Secretary-challenging 10 year plan
coastal states allowing energy resources development in dis-
18 (i) 1. Challenging right of government under 18(b) and (i) to
puted areas.
obtain private data about location of oil and gas reserves.
18 (j) 2. Challenging right of government agencies to disclose
Citizen and/or Company v. Secretary
data given in confidence.
25 Challenging V. Federal grants made to coastal states to assist
in ameliorating adverse environmental effects and control of
Citizen and/or Company v. Secretary
secondary social and economic impacts associated with OCS
19 (h) 1. Challenge requirement that holder of lease or permit give
National energy resources development.
Secretary any data about oil or gas resources subject to lease or
Citizen v. Secretary
permit.
203 (a) Challenging accounting procedures and standards govern-
Company v. Secretary-challenge research by Secretary
ing the calculation of net profits and the actual calculation of
net profits.
20 (a) 1. Challenge finding that research not being conducted by
F. Section 28 additionally authorizes the Attorney General to bring
other public or private entity.
suits against persons subject to the Act and imposes criminal and civil
(a) Safety devices.
penalties for violations of the Act.
(b) Controlling blowouts.
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151
This section is another case of "overkill" apparently designed to
In addition to the concept being ill-conceived, Section 22 is de-
cause more delays. Its inclusion suggests that OCS permittees and
ficient in the following ways:
lessees have been acting in bad faith. No such reports have been
received by the Committee substantiating such a notion. We con-
(1) A lessee is liable for damages to any person who is
clude therefore that the inclusion of this section was intended to
effected (a) within the territory of the United States, Can-
ada or Mexico; (b) in or on waters within two hundred
seek public favor by attacking U.S. petroleum companies in order
nautical miles of the baseline of the United States, Canada
to distract attention away from the dismal legislative record of the
or Mexico from which the territorial sea of the United States,
Ninety-third Congress regarding energy legislation.
Canada or Mexico is measured; or (c) within one hundred
G. Section 204 which amends Section 8 of the OCS Lands Act com-
nautical miles of any operations authorized under this Act."
mands the Secretary to dispose of its share of the oil by competitive
bid for not less than its fair market value.
It is inconceivable that in this bill dealing with development
of our Outer Continental Shelf that we are trying to estab-
There are no guidelines concerning how the Secretary will de-
lish international law on damages due to persons in foreign
termine value. This becomes particularly important when an inde-
countries. This is the purpose and intent of numerous inter-
pendent refuses to purchase as provided in Subsection (k) and
national conventions and conferences, which are now under-
the lessee is obligated to purchase for not less than the highest
way, e.g., Law of the Sea Conference in Caracas, Venezuela.
bid. Presumably, an independent could bid a high amount of a
The scope of any liability section at this time should be lim-
small quantity of oil, thus compelling the lessee to purchase the
ited to damages resulting in spills on the Outer Continental
remaining portion at such amount, even though it be higher than
Shelf or in or on waters above the Outer Continental Shelf.
fair market value.
(2) Strict liability is imposed for damages even if the dam-
This is a discriminatory and highly inequitable burden to place
ages that occur are caused by an "Act of God". This has been
on the lessee. If he cannot have the opportunity to bid on the
a well-accepted defense to strict liability and should be in-
royalty oil he should not be forced to pay a price higher than fair
cluded as such under Section 22 (b) (2). This is particularly
market value.
true when there is an absolute requirement to clean-up any
The provision is inconsistent with its title in that it attempts to
spills regardless of cause.
legislate the sale of net profit oil as well, which oil will be a contin-
(3) There is a limit of $100,000,000 for each incident with
ually indeterminate amount, depending on the profitability of op-
respect to damages but not clean-up. The $100,000,000 limit
erations for a given period. The provision as drawn precludes a
should be applied to both damages and clean-up. A $7,000,000
lessee from having access to a considerable portion of the oil de-
threshold liability for the lessee and a $100,000,000 limit is
rived from his lease as opposed to a fixed amount in a
more than adequate to instill incentives to operate safetly and
strict royalty situation which permits proper economic planning.
protect those damaged and affected by a spill.
The inability of a lessee to have access to net profits oil under his
I. Section 203. Revision of Lease Terms, provides that bidding shall
lease will thus have a negative effect on the valuation of an area
be at the discretion of the Secretary on the basis of a cash bonus with
and thus be reflected in his bids.
a fixed royalty or not less than 121/2% or on the basis of a cash bonus
The basic right to dispose of royalty oil is spelled out at the
with a share of the net profits derived from operation of the tract of
outset. However, the provision goes on to attempt to legislate the
no less than 30% reserved to the United States or on the basis of a cash
Secretary's right to discriminate against other than "independent
bonus with a variable net profit bid.
refiners", by limiting participation in such sales should the Sec-
The method of bidding on leases should be retained as presently
retary deem it appropriate. The authority of the Secretary to
written in the existing Act, but there should be a study and report
restrict the right of any parties to bid is highly questionable.
to Congress on all reasonable alternatives as called for in Section
H. Under Section 22, there is established strict liability for damages
27. The Department of the Interior and the Federal Energy Ad-
subject to a $100,000,000 limit for each incident and unlimited liability
ministration both oppose changing the law in this area. Further,
for a clean-up and removal. A liability fund is established through col-
it is illogical to call for a study of all alternatives and then man-
lection of 21/2 cents for each barrel of oil produced in the Outer Con-
date what ones are to be used.
tinental Shelf.
One of the alternatives is a "net profit" concept. If implemented
The Federal Water Pollution Control Act Amendments of 1972
this would severely reduce if not retard OCS development. A de-
and well-established tort law provide full and adequate protection
velopment program under a net profits sharing system would ne-
for damages and clean-up. To now establish new liability laws in
cessitate the recovery of substantially more reserves to economi-
this area is redundant and unnecessary. It is also counter to accel-
cally justify the required expenditures to develop. Under this type
erating development of our domestic supplies. This results from
of arrangement the lessee must recoup the tremendous costs of dry
requiring the diversion of $100,000,000 into a fund which could be
holes, lease acquisitions and other exploratory costs of non-pro-
more beneficially used to explore for and develop oil and gas.
ductive leases from which there is no profit. This format will thus
152
153
result in the elimination of any prospective tracts from bid con-
received from the Director of the Office of Management and Budget,
sideration with the accompanying depression of production and
along with supporting documentation, are reprinted below:
reserves.
Under the existing bidding system, a bidder's evaluation of the
U.S. SENATE,
reserve potential is the principal factor in determining the
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,
amount of bonus bid for a given tract. Under the proposed net
Washington, D.C., August 14, 1974.
profits sharing system, it is possible that the level of bidding will
Mr. FRANK ZARB,
be keyed more to a minimum earning requirement and minimum
Deputy Director, Office of Management and Director, Executive Office
expenditure level. This could result in less development at a slower
Building, Washington, D.C.
pace. The goal for the Outer Continental Shelf is to maximize
DEAR FRANK: As you know, the Senate Interior & Insular Affairs
production through full and accelerated development.
Committee has reported S. 3221, the so-called Energy Supply Act
Many tracts awarded under a net profits leasing format would
which deals with Outer Continental Shelf (OCS).
not be fully developed and would be abandoned earlier in their
Section 25 (Committee Print 2 attached) calls for a creation of a
producing life in view of added cost burdens, resulting in a waste
Coastal State Fund which would provide for 200 million dollars
of natural resources.
per year for payment to coastal states which are adjacent to the Fed-
The recognized problem areas associated with a net profit sys-
eral OCS on which oil and gas exploration and production activities
tem leasing format both at a fixed and variable bid rate fully
are to be conducted.
warrants a detailed and complete review by the Department of
This fund is little more than another form of the OCS revenue shar-
the Interior and that the results be keenly analyzed before this
ing concept. It is my understanding that the current administration,
applicable section of the OCS Lands Act is further considered for
and for that matter, every administration since the Outer Continental
amendment. For the same reasons other alternative methods of
Shelf Lands Act of 1953 was passed, has been opposed to a revenue
bidding should be reviewed and a report thereon filed with
sharing measure. The false premise for a Coastal State Fund is that
Congress.
activities of oil and gas companies conducted on the outer continental
J. Failure to comply with the development plans prescribed in Sec-
shelf constitutes an adverse economic or social impact on the adjacent
tion 206 would result in termination of the lease, regardless of whether
coastal state. It does not appear to me that such activities are in fact
such failure was caused by events beyond the control of the lessee.
detrimental to the economy of the adjacent coastal state.
In the event of the termination of a lease, no provision in this
Furhermore, I question if as a matter of public policy the U.S.
section is made for notice or a hearing for the lessee or for a re-
Government should "buy" the acceptance of leasing activities to be
bate of any part of the payments made for the leases.
implemented in the federal offshore areas. It is unfair for land-locked
The ten problems described in detail above are but a few of the
states to subsidize the coastal states, especially since coastal states
many provisions of the bill which would cause serious delays and
have already been allowed jurisdiction over and revenue of adjacent
inequities in expanding OCS leasing, exploration and production pro-
coastal water inside the Federal OCS.
grams, thereby frustrating rather than expediting the achievement of
To my regret, the Committee chose to ignore the position expressed
domestic energy self-sufficiency.
by the Department of Interior on behalf of the Administration. As
6. The coastal State fund created by the bill would implement an un-
quoted on Page 24, Committee Print 2, the Department of Interior
conscionable bribery of coastal States not to resist OCS leasing
wrote:
programs on Federal lands adjacent to their coast at the expense
"Coastal State Fund. We are opposed to provisions of the bill which
of all U.S. taxpayers and particularly to the detriment of the
would create a new program of grants to adjacent coastal States and
citizens of inland States
thereby divert revenues from the U.S. Treasury. Receipts under the
The creation of a program for granting OCS revenues to adjacent
OCS Lands Act from OCS oil and gas leases belong to the Federal
Government and currently make a substantial contribution to Federal
coastal states under Section 25 is an unwarranted diversion of reve-
income. If such revenues were diverted to coastal States, as new section
nues from the U.S. Treasury. Such a diversion of funds would be
25 of the Act would provide, the Federal Government would need to
inflationary, inequitable, and constitute a poor budgetary practice.
increase its income from other sources. In effect, the bill increases Fed-
In addition, OCS receipts belong to all the people of the country who
currently receive benefits through congressional appropriation from
eral expenditures outside the normal budget and appropriation proc-
ess, which is both bad management and inflationary. It results in an
the Treasury. Diverting these revenues for coastal states only, with-
inflexible allocation of funds to such States without regard to need or
out requirement for need, would give coastal stataes windfalls and
resources and also fractionates efforts to address the environmental,
would require increased taxation to make up for diverted revenues.
social and economic problems of OCS energy development."
Senator Dewey F. Bartlett, aware of this inequity, wrote to the
I propose to offer an amendment on the Senate floor which would
Office of Management and Budget on August 14 to solicit Adminis-
delete Section 25. The bill is likely to be called up for floor action
tration views specifically on this section. His letter and the reply he
154
155
early next week. If you agree with my position on this issue, could you
Should any Federal assistance be needed, the existing programs for
furnish me with additional information to be circulated to my col-
community development provided by Commerce, HEW, HUD, Agri-
leagues in an effort to obtain their support of this amendment?
culture, Labor and EPA should be used rather than establishing over-
Sincerely,
lapping and conflicting new programs.
DEWEY F. BARTLETT,
Regarding environmental damage from potential oil spills, it does
U.S. Senator, Oklahoma.
not appear equitable for the Federal Government to provide compen-
sation when spills do not occur. When accidents do occur, the com-
panies are liable for proven environmental damages. Only companies
that can bear this liability are permitted to lease. In addition, the
EXECUTIVE OFFICE OF THE PRESIDENT,
possibility of spills is reduced by providing strict regulations and then
OFFICE OF MANAGEMENT AND BUDGET,
enforcing them.
Washington, D.C., August 16, 1974.
Hon. DEWEY F. BARTLETT,
CHAPTER 6.¹ SHARING OCS REVENUES WITH ADJACENT STATES
U.S. Senate,
Washington, D.C.
INTRODUCTION
DEAR SENATOR BARTLETT: I certainly appreciate your proposal to
offer an amendment to delete section 25 of S. 3221. We agree with your
This paper examines the possibility of sharing Federal collection
position on this issue and are happy to provide you with additional
from Outer Continental Shelf (OCS) mineral production with ad-
information on why we strongly oppose earmarking OCS receipts.
jacent states. It considers various justifications which have been ad-
The Office of Management and Budget also agrees with the viewpoint
vanced for such sharing, examining the evidence in support of each,
of the Department of the Interior as quoted in your letter.
the type of sharing each suggests, and the adjacent states for which
We are providing you with two papers. The first, which should
a rationale seems to be particularly appropriate. The paper also con-
be useful for your general circulation, gives in abbreviated form the
siders the effect of different means on Federal revenues.
reasons for opposing payments to coastal States from OCS receipts.
The second is a copy of part of a paper prepared by a work group
JUSTIFICATIONS FOR SHARING OCS REVENUES WITH ADJACENT STATES
studying OCS problems, chaired by Dr. William A. Vogely and pre-
pared in 1972. This paper presents the counter arguments to the rea-
Sharing OCS revenues with adjacent states has been supported for
sons usually presented by those who propose sharing OCS receipts
the following three reasons: (1) to compensate adjacent states for
with coastal States.
the adverse fiscal impact of OCS activity; (2) to compensate adjacent
We have not had an opportunity to examine the bill as reported by
states for the adverse environmental impact of OCS activity; and
the Committee, but will do SO as soon as it is available. If we can be
(3) to mitigate state opposition to OCS activity. Each of these ra-
tionales is considered below.
of further help, please feel free to call on Frank Zarb or myself.
Sincerely,
(1) The argument has been made that OCS activity has an adverse
Roy L. Ash, Director.
fiscal impact on the adjacent state(s). Mineral production from the
Enclosures.
OCS does not yield any royalties or severance taxes to state govern-
ments. Yet the governments of adjacent states and localities must
REASONS FOR OPPOSING SHARING OCS RECEIPTS WITH COASTAL STATES
provide public services to OCS workers and their families. To help
states. pay for these services, OCS revenues should be shared with adjacent
The OCS recepts are from Federal lands and therefore belong to all
the American people, not just those living in the coastal States.
This argument, while making the accurate point that OCS mineral
Payments to coastal States would be inflationary by adding to Gov-
production does not yield any royalties or severance taxes to adjacent
ernment outlays or would force the Government to either raise taxes
states, ignores the fact that OCS activity currently provides consider-
and other revenue or reduce expenditures of priority programs.
able revenues to adjacent states at present. Employees engaged in the
Legislation of this kind violates the spirit of the just passed Con-
various aspects of OCS activity are subject to state income tax, state
gressional Budget and Impoundment Control Act of 1974. In doing SO
general and selective sales taxes, state license fees, and state and local
it reduces the ability in future years of the Executive and the Con-
property taxes. Businesses located onshore serving offshore facilities
gress in allocating funds to the highest needs.
are subject to state corporate income taxes, state sales taxes, and state
It is doubtful that there are serious adverse economic impacts on the
and local property taxes.
States from OCS leasing activities. Employees working on energy de-
The question thus become one of determining whether the addi-
velopment are highly paid and thus bring a larger than average share
tional state and local revenues attributable to OCS activity exceed or
of revenues through State income and other taxes. In addition, the
OCS related businesses with high values will be subject to State and
1 Reproduced from "Report of the Economic Working Group Outer Continental Shelf
Task Force," May 1972 by Dr. William A. Vogley, Chairman, OSC Economic Work Group.
local taxes and will provide a large contribution to the tax base.
156
157
are equal to additional state and local expenditures because of OCS
In particular circumstances, states may be able to prove a net bur-
activity, and, if not, whether this provides a rationale for sharing OCS
den. If so, payments corresponding to the net burden could be paid to
revenues to make up the difference. For the average state, it is likely
affected states and localities. This, however, does not provide any argu-
that revenues will exceed or equal expenditures for the following
ment to sharing a fixed percentage of OCS revenues with adjacent
reasons. Offshore workers and onshore workers in support of offshore
states.
facilities have incomes at average to above-average levels compared to
(2) The argument has been made that OCS production poses the
average per capita and family income in the adjacent states off which
threat of potential environmental damage to adjacent states. OCS
OCS activity has occurred. Subsequently, they, on average, pay more
revenues should therefore be shared with adjacent states to provide
capita in state sales and income taxes than the average resident of the
compensation for these damages.
state (these taxes accounted for 84% of all state tax collections in
This argument only supports impact payments as needed. It does
1970). They will, also on average, pay more personal property tax to
not provide a rationale for regular sharing of a fixed percentage of
local governments. Onshore facilities serving OCS activity are major
OCS revenues. OCS production poses only a threat, not a certainty,
components of the property tax base of the communities where they
of environmental damage. Compensation for damages is made only
are located. Hence, OCS activity provides, in most cases, greater than
after damages have occurred, not whether they occur or not occur.
average shares of state and local revenues.
However, it is doubtful whether compensatory impact payments
The expenditure picture on the whole is more cloudy since the im-
for enviornmental damage to adjacent states from OCS revenues is
pact of OCS activity on various state and local function varies widely.
the appropriate means to handle potential problems here. Payments
Additional expenditures per capital for education for OCS-associated
to states only are not likely to compensate all parties suffering dam-
employees and their families are likely to be slightly greater than the
ages. Moreover, if the liability for damages is borne by the Federal
statewide average, given a preponderance of OCS-associated em-
government, the incentives to operating companies to minimize the
ployees with children of school age. Additional expenditures per capita
probability of occurrence of damage-causing accidents would be
for transportation for OCS activities could be more or less depending
reduced.
on location. With the exception of most of the Alaskan OCS areas, the
An alternative approach to the problem would be to concentrate
OCS areas of the nation having a high potential for oil and gas pro-
on minimizing the possibility of damage-causing accidents occurring
duction have well-developed transportation networks in the coastal
bv maintaining strict. adequately enforced Federal regulation of
regions of the adjacent states. Additional expenditure per capita for
OCS exploration and production and by permitting only companies
welfare programs attributable to OCS activity is likely to be substan-
which can demonstrate an adequate technical and financial capability
tially less than the statewide average. Additional total expenditures
to explore and operate OCS leases. When accidents do occur, the
per capita attributable to OCS activity is therefore not likely to be
company responsible should be liable for proven damages. Only
significantly greater than average state expenditure per capita.
those companies which have the capability to bear such liabilities
On average, OCS activity would therefore not be likely to impose a
should be permitted to lease OCS lands.
net fiscal burden upon adjacent states. The likely single exception to
(3) The argument has been made that sharing of OCS revenues
this would come in those states which depend upon royalties and sev-
with adjacent states is necessary to overcome political objections to
erance taxes for substantial proportions of state revenue. States ad-
OCS exploration and production. Current or proposed OCS activity
jacent to current or potential OCS activity in this category are Louisi-
has occasioned state suits for a variety of reasons. Sharing is seen as
ana, Texas, and Alaska (once North Slope production begins). Since
a way of overcoming these.
tax collections attributable to OCS activities would not include royal-
The impact of sharing here depends on the sources and direction of
ties and severance taxes. the additional revenues may be less than addi-
state objections. States have gone into court with the Federal govern-
tional expenditures. If this situation occurs and is attributable to state
ment claiming rights to OCS production. But, this has not been a
dependence upon royalties and severance taxes, it does not seem to be
source of opposition to OGS exploration and production, only to the
a strong argument for sharing OCS revenues. Those states which by
sharing of revenues from it. This question is amenable to settlement,
the good fortune of natural endowment have substantial mineral pro-
in the courts with OCS revenues held in escrow while exploration
duction on which they can levy royalties and severance taxes have a
and production continue.
source of revenue not available to most states. This enables them to
Several adjacent states (particularly Alaska, Louisiana, and Texas)
have either greater expenditures with identical sales, income, and prop-
have feared that offshore exploration and production will draw capi-
erty taxes per $1,000 of personal income (a typical measure of revenue
tal away from onshore exploration and production, thus having a
effort) or the same amount of expenditures with lower sales, income,
long-term negative impact on state severance tax income. From the
and property taxes per $1,000 of personal income than those states
point of view of the nation as a whole, it is desirable that investment
which by reason of natural endowment cannot levy a severance tax. On
in exploration goes where it is likely to be most profitable (which,
the basis of equal revenue efforts on those tax sources available to all
in the petroleum industry, generally means where production is likely
states for similar levels of expenditure, there would be little empirical
to be most prolific). Moreover, given the substantial revenues which
evidence for a net fiscal burden resulting from OCS activity.
158
159
these states still receive from onshore activity, this is not likely to
CONCLUSION
provide a substantial source of opposition.
State and groups within states have objected to OCS activity for
The six major arguments detailed above, while too numerous and
fear of environmental damage. This has been the major reason for
lengthy to repeat here, should present our colleagues with a compelling
opposition to OCS exploration and production, particularly off the
rationale to cast their vote against S. 3221.
Atlantic Coast and off the California coast. It may also prove to be a
PAUL FANNIN.
source of opposition for Gulf of Alaska exploration as well. It is un-
CLIFFORD P. HANSEN.
known whether the sharing of OCS revenues with adjacent states
JAMES BUCKLEY.
could overcome this opposition. Essentially, it depends on the charac-
JAMES McCLURE.
teristics of the political coalition opposing OCS leasing. Such a
DEWEY BARTLETT.
measure is not likelv to sway conservationist groups. It may produce
some changes in position among state and local office-holders. probably
in inverse proportion to the size of the opposing coalition. Alternative
measures, such as those suggested under the discussion of the second
argument, plus the establishment of a record of several years of explo-
ration and production free from major accidents is likely to be more
effective in overcoming opposition from this quarter.
In short, revenue sharing for this purpose may not be effective or
may be less effective than other means. Moreover, unlike criteria based
on need, this purpose offers no guidelines for selecting the appropriate
percentage of OCS revenues to be shared with the adjacent states.
MEANS OF SHARING AND THEIR EFFECTS
The preceding discussion has indicated two basic means of sharing
OCS revenues: compensatory impact payments and sharing a fixed
proportion of OCS revenues. If compensatory impact payments were
to be made, their overall impact on Federal revenues is likely to be
relatively insignificant. Since compensatory payments would be only
for net fiscal burdens and for damages not covered by company
liability, they would not likely be more than 5% on average of Federal
revenues from OCS activity.
Any program to share a fixed proportion (ranging from 5% to
50%) of OCS revenues with the adjacent states would have propor-
tionally greater effects on Federal revenues. Such methods of sharing
with adjacent states would encounter some problems in defining what
constitutes the adjacent state. For OCS areas off Alaska, the Pacific
Coast states, and the states bordering the Gulf of Mexico (with the
possible exception of Louisiana-Mississippi-Alabama), this presents
no problem. For the states on the Atlantic Coast north of Chesapeake
Bay, the whole matter is highly problematical. The extension of state
boundaries seaward results in many intersections in potential OCS
areas (such as the Georges Bank and the Baltimore Canyon Trough).
In some cases, three states could legitimately make a claim to be the
adjacent state. Unless some distributive formula were developed which
was acceptable to all parties (such as equal shares where multiple
claims can be established), sharing programs based on the premise of
automatic sharing with the adjacent state are likely to occasion
considerable litigation.
For the reasons set forth in the above correspondence and supporting
documentation, we question the wisdom, practicality and equity of
Section 26.
September 18, 1974
CONGRESSIONAL RECORD-SENATE
16987
The Department should weigh those con-
Senator from New York (Mr. BUCKLEY),
TITLE HI--MISCELLANEOUS PROVISIONS
sequences against the benefits to be obtained
the Senator from Kentucky (Mr. Cook),
Sec. 301. Pipeline safety and operation.
and develop standards for governing such
the Senator from Nebraska (Mr. CURTIS),
Sec. 302. Review of shut-in or flaring wells.
disclosure.
the Senator from Colorado (Mr. DOM-
Sec. 303. Oil spill liability study.
The Council also endorsed the per-
INICK), and the Senator from Maryland
Sec. 304. Fuel stamp study.
formance regulations and safety stand-
(Mr. MATHIAS) are necessarily absent.
Sec. 305. Relationship to existing law.
Sec. 306. Severability.
ards in S. 3221 as follows:
I also announce that the Senator from
TITLE I--FINDINGS AND PURPOSES
We have purposely called for the develop-
Illinois (Mr. PERCY) is absent on official
FINDINGS
ment of performance requirements which
business.
will encourage the development and early
The result was announced-yeas 64,
SEC. 101. The Congress finds and declares
adoption of safer equipment and facflities,
that-
nays 23, as follows:
rather than lock the industry into a static
(1) the demand for energy in the United
technology.
[No. 412 Leg.]
States is increasing and will continue to
Specifically, we have called for the use of
YEAS-64
increase for the foreseeable future;
the best commercially available technology
(2) domestic production of oil and gas
Abourezk
Hathaway
Nelson
in critical Outer Continental Shelf opera-
Allen
Nunn
has declined in recent years;
Hollings
tion and, at the same time, we encourage the
Beall
Huddleston
Packwood
(3) the United States has become increas-
industry to do better.
Bible
Hughes
Pell
ingly dependent upon imports of oil from
The technology assessment and technical
Biden
Humphrey
Proxmire
foreign nations to meet domestic energy
recommendations in our report cover most
Brooke
Inouye
Randolph
demand;
Burdick
Jackson
Ribicoff
of the research and development topics iden-
(4) increasing reliance on imported oil is
Byrd.
Javits
Roth
tified in S. 3221.
Harry F., Jr.
Johnston
Schwelker
not inevitable, but is rather subject to sig-
CEQ also supported a Federal liabil-
Byrd, Robert C.
Long
Scott, Hugh
nificant reduction by increasing domestic
Cannon
Magnuson
Sparkman
sources of energy supply;
ity system for Outer Continental Shelf
Case
Mansfield
Stafford
(5) consumption of natural gas in the
oil spills and damages and expressly en-
Church
McClellan
Stennis
United States has greatly exceeded addi-
dorsed inclusion of a citizen suit provi-
Clark
McGee
Stevenson
tions to domestic reserves in recent years,
Cranston
McGovern
Symington
sion in the Outer Continental Shelf
Eagleton
McIntyre
Talmadge
so that currently available supplies are less
Lands Act.
Eastland
Metcalf
Thurmond
than demand;
I was disappointed that the minority's
Ervin
Metzenbaum
Tunney
(6) technology is or can be made avail-
Fulbright
Mondale
Weicker
able which will allow sufficient production
opening statement on the floor continued
Gravel
Montoya
Williams
and consumption of domestic energy supply
to employ misleading quotations. For ex-
Haskell
Moss
Young
to meet demands consistent with national
ample, they cited objections raised by the
Hatfield
Muskie
environmental policies;
administration to provisions of S. 3221
NAYS-23
(7) the Outer Continental Shelf contains
which are no longer in the bill. They also
Alken
Domenici
Hruska
significant quantities of petroleum and natu-
cited administration objections which
Baker
Fannin
McClure
ral gas, which are a vital national reserve
Bartlett
Fong
Pearson
were specifically directed at other bills
that must be carefully managed in the public
Bellmon
Goldwater
Scott,
interest; and
before the committee which contain pro-
Brock
Griffin
William L.
visions which are not now and have never
Chiles
Gurney
Stevens
(8) there presently exists a variety of tech-
Cotton
Hansen
Taft
nological, economic, environmental, admin-
been in S. 3221.
Dole
Helms
Tower
istrative, and legal problems which tend to
All this seems, Mr. President, to be a
retard the development of the oil and natural
NOT VOTING-13
desperate effort by the industry, the ad-
gas resources of the Outer Continental Shelf;
ministration, and my Republican friends
Bayh
Curtis
Kennedy
(9) it is the national policy to preserve,
Bennett
Dominick
Mathias
to maintain the status quo. Those of us
Bentsen
Hart
Pastore
protect, and develop the resources of this
who support S. 3221 believe that the
Buckley
Hartke
Percy
Nation's coastal zone, and to provide for the
status quo tips the scales heavily in
Cook
orderly siting of energy facilities therein;
(10) the development, processing, and dis-
favor of the oil industry and against the
So the bill (S. 3221) was passed, as
tribution of the oil and gas resources of the
interest of the American people who own
follows:
Outer Continental Shelf, and the siting of
these resources. Mr. President, we believe
S. 3221
related energy facilities, may cause adverse
that the time has come to tip the scales
An act to increase the supply of energy in the
impacts on the coastal zones of the various
in the other direction and to help the
United States from the Outer Continental
coastal States; and
people regain control of their resources.
Shelf; to amend the Outer Continental
(11) the Coastal Zone Management Act of
We believ that S. 3221 balances the
Shelf Lands Act; and for other purposes
1972 provides policy, procedures, and pro-
grams designed to anticipate such adverse
scales.
Be it enacted by the Senate and House
impacts and in part prevent them by ap-
The PRESIDING OFFICER. Is all time
of Representatives of the United States of
propriate planning and management of land
yielded back?
America in Congress assembled, That this
and water resources in the costal zone.
Mr. JOHNSTON. I yield back my time.
Act may be cited as, the "Energy Supply of
PURPOSES
Mr. JACKSON. I ask for the yeas and
1974"
TABLE OF CONTENTS
SEC. 102. The purposes of this Act are to
nays.
(1) increase d nestic production of oil
The yeas and nays were ordered.,
Sec. 1. Short title and table of contents.
and natural gas in order to assure material
The PRESIDING OFFICER. All time
TITLE I-FINDINGS AND PURPOSES
prosperity and national security, reduce de-
is yielded back. The question is, Shall the
Sec. 101. Findings.
pendence on unreliable foreign sources, and
bill pass, The yeas and nays have been
Sec. 102. Purposes.
assist in maintaining a favorable balance of
payments;
ordered and the clerk will call the roll.
TITLE II-INCREASED PRODUCTION OF
(2) make oil and natural gas resources in
The legislative clerk called the roll.
OUTER CONTINENTAL SHELF ENERGY
the Outer Continental Shelf available as
RESOURCES
Mr. ROBERT C. BYRD. I announce
rapidly as possible consistent with the need
that the Senator from Indiana (Mr.
Sec. 201. National policy for Outer Conti-
for orderly resources development, and pro-
nental Shelf.
tection of the environment, in a manner con-
BAYH), the Senator from Texas (Mr.
Sec. 202. New sections of Outer Continental
sistent with the Mining and Mineral Policy
BENTSEN), the Senator from Michigan
Shelf Lands Act.
Act of 1970 and designed to insure the public
(Mr. HART), the Senator from Indiana
Sec. 203. Revision of lease terms.
a fair market return on disposition of public
Mr. HARTKE), the Senator from Massa-
Sec. 204. Disposition of Federal royalty oil.
resources;
chusetts (Mr. KENNEDY), and the Sena-
Sec. 205. Annual report.
(3) encourage development of new and Im-
tor from Rhode Island (Mr. PASTORE) are
Sec. 206. Insuring maximum production
proved technology for energy resource pro-
necessarily absent.
duction that will increase human safety and
from oil and gas leases.
eliminate or reduce risk of damage to the
I further announce that, if present
Sec. 207. Geological and geophysical explo-
environment; and
and voting, the Senator from Massa-
ration.
(4) provide States which are directly im-
chusetts (Mr. KENNEDY), and the Sena-
Sec. 208. Enforcement
pacted by Outer Continental Shelf oil and
tor from Rhode Island (Mr. PASTORE),
Sec. 209. Laws applicable to Outer Conti-
gas exploration and development with com-
nental Shelf.
would each vote "yea."
prehensive assistance in order to assure ade-
Sec. 210. Authority of Governor of adjacent
quate protection of the onshore social, eco-
Mr. GRIFFIN. I announce that the
State to request postponement of
nomic, and environmental conditions of the
Senator from Utah (Mr. BENNETT), the
lease sales.
coastal zone.
16988
CONGRESSIONAL RECORD
September 18, 1974
TITLE II-INCREASED PRODUCTION OF
other information needed to decide the or-
ernmental authorities in conducting such
OUTER CONTINENTAL SHELF ENERGY
der in which areas are to be scheduled for
study. The Secretary shall report to the Con-
RESOURCES
lease, to make the analyses required prior to
gress by January 1, 1976 the results of such
NATIONAL POLICY FOR OUTER CONTINENTAL
offering tracts for lease, and to supervise
study.
SHELF
operations under every lease in the manner
"FEDERAL OUTER CONTINENTAL SHELF OIL AND
necessary to assure compliance with the re-
SEC. 201. Section 3 of the Outer Continental
GAS SURVEY PROGRAM
quirements of the law, the regulations, and
Shelf Lands Act is revised by adding the fol-
"Sec. 19. (a) The Secretary is authorized
the lease.
lowing new subsection (c) and (d)
and directed to conduct a survey program
"(d) The environmental impact statement
"(c) It is hereby declared that the Outer
regarding oil and gas resources of the Outer
on the leasing program prepared in accord-
Continental Shelf is a vital national resource
ance with section 102(2) (C) of the National
Continental Shelf. This program shall be de-
reserve held by the Federal Government for
signed to provide information about the
Environmental Policy Act of 1969, shall in-
all the people, which should be made avail-
probable location, extent, and characteristics
clude, but shall not be limited to, an as-
able for orderly development, subject to
of such resources in order to provide a basis
sessment by the Secretary of the relative sig-
environmental safeguards, consistent with
for (1) development and revision of the leas-
nificance of the probable oil and gas re-
and when necessary to meet national needs.
sources of each area proposed to be offered
ing program required by section 18 of this
"(d) It is hereby recognized that develop-
for lease in meeting national demands, the
Act, (2) greater and better informed com-
ment of the oil and gas resourcs of the Outer
most likely rate of exploration and develop-
petitive interest by potential producers in the
Continental Shelf will have significant im-
oil and gas resources of the Outer Continen-
ment that is expected to occur if the areas
pact on coastal zone areas of adjacent States
are leased, and the relative environmental
tal Shelf, (3) more informed decisions re-
and that, in view of the national interest in
hazard of each area. Such environmental im-
garding the value of public resources and
the effective management of the coastal zone,
pact statement shall be based on considera-
revenues to be expected from leasing them,
such States may require assistance in pro-
tion of the following factors, without being
and (4) the mapping program required by
tecting their coastal zone insofar as possible
subsection (c) of this section.
limited thereto: geological and geophysical
from the adverse effects of such impact."
"(b) The Secretary is authorized to con-
conditions, biological data on existing ani-
tract for, or purchase the results of or, where
NEW SECTIONS OF OUTER CONTINENTAL SHELF
mal, marine, and plant life, and commercial
the required information is not available
LANDS ACT
and recreational uses of nearby land and
from commercial sources, conduct seismic,
SEC. 202. The Outer Continental Shelf
water areas.
Lands Act is hereby amended by adding the
(e) The Secretary shall, by regulation,
geomagnetic, gravitational, geophysical, or
geochemical investigations, and to contract
following new sections:
establish procedures for receipt and consid-
eration of nominations for areas to be offered
for or purchase the results of stratigraphic
"DEVELOPMENT OF OUTER CONTINENTAL SHELF
drilling, needed to implement the provisions
for lease or to be excluded from leasing, for
LEASING PROGRAM
of this section.
public notice of and participation in develop-
"SEC. 18. (a) Congress delares that it is
"(c) The Secretary, in cooperation with
ment of the leasing program, for review by
the policy of the United States that Outer
the Secretary of Commerce, is directed to
State and local governments which may be
Continental Shelf lands determined to be
prepare and publish and keep current a series
impacted by the proposed leasing, and for
both geologically favorable for the accumu-
of detailed bathymetric, geological, and geo-
coordination of the program with manage-
lation of oil and gas and capable of support-
physical maps of and reports about the Outer
ment program being developed by any State
ing oil and gas development without undue
Continental Shelf, based on nonproprietary
for approval pursuant to section 305 of the
environmental hazard or damage should be
data, which shall include, but not necessarily
Coastal Zone Management Act of 1972 and
made available for leasing as soon as prac-
be limited to, the results of seismic, gravita-
with the management program of any State
ticable in accordance with subsection (b)
tional, and magnetic surveys on an appropri-
which has been approved pursuant to section
of this section.
ate grid spacing to define the general bathy-
306 of such Act. These procedures shall be
"(b) The Secretary is authorized and di-
metry, geology, and geophysical characteris-
applicable to any revision or reapproval of
rected to prepare and maintain a leasing pro-
tics of the area. Such maps shall be pre-
the leasing program.
gram to implement the policy set forth in
pared and published no later than six months
"(f) The Secretary shall publish a pro-
subsection (a) The leasing program shall
prior to the last day for submission of bids
posed leasing program in the Federal Reg-
indicate as precisely as possible the size,
for any areas of the Outer Continental Shelf
ister and submit it to the Congress within
timing, and location of leasing activity that
scheduled for lease on or after January-
two years after enactment of this section.
will best meet national energy needs for the
1978.
"(g) After the leasing program has been
ten-year period following its approval or re-
"(d) Within six months after enactment
approved by the Secretary or after January
approval in a manner consistent with sub-
of this section, the Secretary shall develop
1, 1978, whichever comes first, no leases under
section (a) above and with the following
and submit to Congress a plan for conduct-
this Act may be issued unless they are for
principles:
ing the survey and mapping programs re-
areas included in the approved leasing pro-
(1) management of the Outer Continental
quired by this section. This plan shall in-
Shelf in a manner which considers all its
gram.
clude an identification of the areas to be
resource values and the potential impact of
"(h) The Secretary may revise and re-
surveyed and mapped during the first five
oil and gas exploration and development on
approve the leasing program at any time
years of the programs and estimates of the
other resource values of the Outer Conti-
and he must review and reapprove the leas-
appropriations and staffing required to im-
nental Shelf and the marine environment;
ing program at least once each year.
plement them.
"(2) timing and location of leasing to dis-
"(1) The Secretary is authorized to obtain
(e) The Secretary shall include in the
tribute exploration, development, and pro-
from public sources, or to purchase from
annual report required by section 15 of this
duction of oil and gas among various areas
private sources, any surveys, data, reports,
Act, information concerning the carrying
of the Outer Continental Shelf, considering:
or other information (excluding interpreta-
out of his duties under this section, and
"(A) existing information concerning their
tions of such data, surveys, reports, or other
shall include as a part of each such report
geographical, geological, and ecological char-
information) which may be necessary to as-
a summary of the current data for the period
acteristics;
sist him in preparing environment impact
covered by the report.
"(B) their location with respect to, and
statements and making other evaluations
"(f) No action taken to implement this
relative needs of, regional energy markets;
required by this Act. The Secretary shall
section shall be considered a major Federal
"(C) their location with respect to other
maintain the confidentiality of all proprie-
action for the purposes of section 102(2) (C)
uses of the sea and seabed including but not
tary data or information for such period of
of the National Environmental Policy Act of
limited to fishing areas, access to ports by
time as is agreed to by the parties.
1969.
vessels, and existing or proposed sea lanes;
"(J) The heads of all Federal departments
"(g) There are hereby authorized to be ap-
"(D) interest by potential oil and gas pro-
or agencies are authorized and directed to
propriated such sums as are necessary to
ducers in exploration and development as
provide the Secretary with any nonproprie-
carry out the purposes of this section during
indicated by tract nominations and other
tary information he requests to assist him
fiscal years 1975 and 1976, to the Secretary
representations;
in preparing the leasing program. In addi-
and to appropriate Federal agencies having
tion, the Secretary is authorized and directed
"(E) an equitable sharing of develop-
responsibilities under this section.
to utilize the existing capabilities and re-
mental benefits and environmental risks
"(h) The Secretary shall, by regulation, re-
sources of other Federal departments and
among various regions of the United States;
quire that any person holding a lease issued
agencies by appropriate agreement.
pursuant to this Act for oil or gas explora-
"(3) timing and location of leasing so that
"(k) The program developed pursuant to
tion or development on the Outer Contin-
to the maximum extent practicable areas
this section shall include the reservation of
ental Shelf shall provide the Secretary with
with less environmental hazard are leased
an appropriate area or areas as a National
any existing data (excluding interpretation
first; and
Strategic Energy Reserve. The Secretary shall
of such data) about the oil or gas resources
"(4) receipt of fair market return for pub-
confer with appropriate Federal officials to
in the area subject to the lease. The Secre-
lic resources,
determine the extent and locations of such
tary shall maintain the confidentiality of
"(c) The program shall include estimates
reserves. The Secretary shall study the most
all proprietary data or information until
of the appropriations and staffing required of
appropriate means of developing and main-
such time as he determines that public avail-
all existing Federal programs necessary to
taining such reserves in the national interest.
ability of such proprietary data or informa-
prepare the required environmental impact
The Secretary shall consult with other Fed-
tion would not damage the competitive posi-
statements, obtain resource data and any
eral agencies and departments and nongov-
tion of the lessee.
September 18, 1974
CONGRESSIONAL RECORD-SENATE
16989
"SAFETY REGULATIONS FOE OIL AND GAS
"(7) subsea production systems.
"(d) In any investigation directed by this
OPERATIONS
"(b) The Secretary, with the concurrence
section the Secretary or the Secretary of the
"SEC. 20. (a) POLICY.-It is the policy of
of the Secretary of the department in which
department in which the Coast Guard is op-
this section to insure, through improved
the Coast Guard is operating, shall estab-
erating shall have power to summon before
techniques, maximum precautions, and max-
lish equipment and performance standards
them or their designees witnesses and to re-
imum use of the best available technology
for oil spill cleanup plans and operations.
quire the production of books, papers, doc-
by well-trained personnel, the safest possible
Such standards shall be coordinated with
uments, and any other evidence. Attendance
the National Oil and Hazardous Substances
operations in the Outer Continental Shelf.
of witnesses or the production of books,
Safe operations are those which minimize
Pollution Contingency Plan, and reviewed by
papers, documents, or any other evidence
the Administrator of the Environemental
the likelihood of blowouts, loss of well con-
shall be compelled by a similar process as in
trol, fires, spillages, or other occurrences
Protection Agency, and the Administrator
the United States district court. In addition,"
of the National Oceanic and Atmospheric
which may cause damage to the environ-
they or their designees shall administer all
Administration.
ment, or to property, or endanger human life
necessary oaths to any witnesses summoned
"(c) The Secretary of Commerce, in co-
before said investigation.
or health.
operation with the Secretary of the Navy,
"(b) REGULATIONS; STUDY.-(1) (A) The
"LIABILITY FOR OIL SPILLS
the Secretary of the department in which
Secretary. with the concurrence and advice
the Coast Guard is operating, and the Di-
"SEC. 23. (a) Any person in charge of any
of the Administrator of the Environmental
rector of the National Institutes of Occupa-
operations in the Outer Continental Shelf, as
Protection Agency and the Secretary of the
tional Safety and Health, shall conduct
soon as he has knowledge of a discharge or
Department in which the Coast Guard is
studies of underwater diving techniques and
spillage of oil from an operation, shall im-
operating, shall develop, from time to time
equipment suitable for protection of human
mediately notify the appropriate agency of
revise, and promulgate safety regulations for
the United States Government of such dis-
safety.
operations in the Outer Continental Shelf,
charge.
"ENFORCEMENT OF SAFETY REGULATIONS;
to implement as fully as possible the policy
(b) (1) Notwithstanding the provisions of
INSPECTIONS
of subsection (a) of this section. Within
any other law, the holder of a lease or right-
one year after the enactment of this section,
"SEC. 22. (a) (1) The Secretary and the
of-way issued or maintained under this Act
the Secretary shall complete a review of
Secretary of the department in which the
and the Offshore Oil Pollution Settlements
existing safety regulations, consider the re-
Coast Guard is operating shall jointly en-
Fund (hereinafter referred to as "the fund")
sults and recommendations of the study
force the safety and environmental pro-
established by this subsection shall be strict-
authorized in paragraph (2) of this sub-
tection regulations promulgated under this
ly liable without regard to fault and without
section, and promulgate a complete set of
Act. They shall regularly inspect all opera-
regard to ownership of any adversely affected
safety regulations (which may include Outer
tions authorized pursuant to this Act and
lands, structures, fish, wildlife, or biotic or
Continental Shelf orders) applicable to oper-
strictly enforce safety regulations promul-
other natural resources relied upon by any
ations in the Outer Continental Shelf or any
gated pursuant to this Act and other appli-
damaged party for subsistence or economic
region thereof. Any safety regulations in
cable laws and regulations relating to public
purposes, in accordance with the provisions
health, safety, or environmental protection.
effect on the date of enactment of this sec-
of this subsection for all damages, sustained
All holders of leases under this Act shall
by any person as a result of discharges of oil
tion which the Secretary finds should be
allow promptly access at the site of any
or gas from any operation authorized under
retained shall be repromulgated according
operations subject to safety regulations to
this Act if such damages occurred (A) within
to the terms of this section, but shall remain
any inspector, and provide such documents
the territory of the United States, Canada,
in effect until so repromulgated. No safety
and records that are pertinent to public
or Mexico or (B) in or on waters within two
regulations (other than field orders) pro-
health, safety, or environmental protection,
hundred nautical miles of the baseline of the
mulgated pursuant to this subsection shall
as such Secretaries or their designees may
United States, Canada, or Mexico from which
reduce the degree of safety or protection
request.
the territorial sea of the United States,
to the environment afforded by safety regu-
'(2) The Secretary, with the concurrence
Canada, or Mexico is measured, or (C)
lations previously in effect.
of the Secretary of the department in which
within one hundred nautical miles of any
"(B) In promulgating regulations under
the Coast Guard is operating, shall promul-
operation authorized under this Act. Claims
this section, the Secretary shall require on
gate regulations within ninety days of the
for such injury or damages may be deter-
all new drilling and production operations
enactment of this section to provide for-
mined by arbitration or judicial proceedings.
and, wherever practicable on already exist-
(A) physical observation at least once each
"(2) Strict liability shall not be Imposed
ing operations, the use of the best available
year by an inspector of the installation or
under this subsection on the holder or the
technology wherever failure of equipment
testing of all safety equipment designed to
fund if the holder or the fund proves that
would have a substantial effect on public
prevent or ameliorate blowouts, fires, spill-
the damage was caused by an act of war.
health, safety, or the environment.
ages, or other major accidents; and
Strict liability shall not be imposed under
"(2) Upon the enactment of this section,
"(B) periodic on site inspection without
this subsection on the holder if the holder
the National Academy of Engineering shall
advance notice to the lessee to assure com-
proves that the damage was caused by the
conduct a study of the adequacy of existing
pliance with public health, safety, or en-
negligence of the United States or other gov-
safety regulations and technology, equip-
vironmental protection regulations.
ernmental agency. Strict liability shall not be
ment, and techniques for operations in the
"(3) The Secretary of the department in
imposed under this subsection with respect
Outer Continental Shelf, including but not
which the Coast Guard is operating shall
to the claim of a damaged person if the holder
limited to the subjects listed in subsection
make an investigation and public report on
or the fund proves that the damage was
(a) of this section. Not later than nine
all major fires and major oil spillage occur-
caused by the negligence or intentional act
months after the enactment of this section,
ring as a result of operations pursuant to this
of such person.
the results of the study and recommenda-
Act. For the purposes of this subsection, a
"(3) Strict liability for all claims arising
tions for improved safety regulations shall
major oil spillage is any spillage in one in-
out of any one incident shall not exceed
be submitted to the Congress and to the
stance of more than two hundred barrels of
$100,000,000. The holder shall be liable for the
Secretary.
oil over a period of thirty days: Provided,
first $7,000,0000 of such claims that are al-
"RESEARCH AND DEVELOPMENT
That he may, in his discretion, make an in-
lowed. The fund shall be liable for the bal-
vestigation and report of lesser oil spillages.
"SEC. 21. (a). The Secretary is authorized
ance of the claims that are allowed up to
All holders of leases under this Act shall co-
and directed to carry out a research and
$100,000,000. If the total claims allowed ex-
operate with him in the course of such in-
development program designed to improve
ceed $100,000,000, they shall be reduced pro-
vestigations.
portionately. The unpaid portion of any claim
technology related to development of the
"(4) For the purposes of carrying out their
oil and gas resources of the Outer Conti-
may be asserted and adjudicated under other
responsibilities under this section, the Sec-
applicable Federal or State law.
nental Shelf where similar programs are not
retary or the Secretary of the department in
'(4) In any case where liability without
presently being conducted by any Federal
which the Coast Guard is operating may by
regard to fault is imposed pursuant to this
department or agency and where he deter-
agreement utilize with or without reimburse-
subsection, the rules of subrogation shall
mines that such research and development
ment the services, personnel, or facilities of
apply in accordance with the laws of the
is not being adequately conducted by any
any Federal agency.
State in which such damages occurred: Pfo-
other public or private entity including but
"(b) The Secretary shall include in his
vided, however, That in the event such dam-
not limited to-
annual report to Congress required by sec-
ages occurred outside the jurisdiction of any
"(1) downhole safety devices,
tion 15 of this Act the number of violations
State, the rules of subrogation shall apply
"(2) methods for reestablishing control of
of safety regulations found, the names of the
in accordance with the laws applicable pursu-
blowing out or burning wells,
violators, and the action taken thereon.
ant to section 4 of this Act.
"(3) methods for containing and cleaning
"(c) The Secretary shall consider any al-
"(5) The Offshore Oil Pollution Settle-
up oil spills,
legation from any person of the existence of
ments Fund is hereby established as a non-
"(4) improved drilling bits,
a violation of any safety regulations issued
profit corporate entity that may sue and
"(5) improved flaw detection systems for
under this Act. The Secretary shall answer
be sued in its own name. The fund shall be
undersea pipelines,
such allegation no later than ninety days
administered by the holders of leases issued
"(6) new or improved methods of develop-
after receipt thereof, stating whether or not
under this Act under regulations prescribed
ment in water depths over six hundred
such alleged violations exist and, if so, what
by the Secretary. The fund shall be subject
meters, and
action has been taken.
to an annual audit by the Comptroller Gen-
16990
CONGRESSIONAL RECORD-SENATE
September 18, 1974
eral, and a copy of the audit shall be sub-
developing interim agreements which will al-
Island Sound, including Puerto Rico, the
mitted to the Congress. Claims allowed
low energy resource development prior to
Virgin Islands, Guam, and American Samoa.
against the fund shall be paid only from
final judicial resolution of the dispute.
"CITIZEN SUITS
moneys deposited in the fund.
"DETERMINATION OF BOUNDARIES
"(6) There is hereby imposed on each bar-
"SEC. 27. (a) Except as provided in subsec-
rel of oil produced pursuant to any lease
"SEC. 25. Within one year following the
tion (b) of this section, any person having
issued or maintained under this Act a fee
date of enactment of this section, the Presi-
an interest which is or may be adversely
2½ of cents per barrel. The fund shall collect
dent may establish procedures for settling
affected may commence a civil action on his
the fee from the lessees or their assignees.
any outstanding boundary disputes. includ-
own behalf-
Costs of administration shall be paid from
ing international boundaries between the
"(1) against any person Including-
the money collected by the fund, and all sums
United States and Canada and between the
"(A) the United States, and
not needed for administration and the satis-
United States and Mexico, and establish
"(B) any other governmental instrumen-
faction of claims shall be invested prudently
boundaries between adjacent States, as di-
tality or agency to the extent permitted by
in income producing securities approved by
rected in section 4 of this Act.
the eleventh amendment to the Constitu-
the Secretary. Income from such securities
"COASTAL STATE FUND
tion who is alleged to be in violation of the
shall be added to the principal of the fund.
"SEC. 26. (a) There is hereby established
provisions of this Act or the regulation
(7) Subject to the limitation contained
in the Treasury of the United States the
promulgated thereunder, or any permit or
in subparagraph (3) of this subsection, if
Coastal State Fund (hereinafter referred to
lease issued by the Secretary: or
the fund is unable to satisfy a claim as-
as the "fund"). The Secretary shall manage
"(2) against the Secretary where there is
serted and finally determined under this sub-
and make grants from the fund according to
alleged a failure of the Secretary to perform
section, the fund may borrow the money
the regulations established pursuant to sub-
any act or duty under this Act which is not
needed to satisfy the claim from any com-
sections (b) and (c) to the coastal States
discretionary with the Secretary.
mercial credit source, at the lowest avail-
impacted by anticipated or actual oil and
"(b) No action may be commenced-
able rate of interest, subject to the approval
gas production.
"(1) under subsection (a) (1) of this sec-
of the Secretary.
"(b) The purpose of such grants shall be
tion-
"(8) No compensation shall be paid under
to assist coastal States Impacted by antici-
"(A) prior to sixty days after the plain-
this subsection unless notice of the damage
pated or actual oil and production to
tiff has given notice in writing under oath
is given to the Secretary within three years
ameliorate adverse environmental effects
of the violation (1) to the Secretary. and
following the date on which the damage
and control secondary social and economic
(ii) to any alleged violator of the provisions
occurred.
impacts associated with the development of
of this Act or any regulations promulgated
"(9) Payment of compensation for any
Federal energy resources in, or on the Outer
thereunder, or any permit or lease issued
damage pursuant to this subsection shall be
Continental Shelf adjacent to the sub-
thereunder;
subject to the holder or the fund acquiring
merged lands of such States. Such grants
"(B) if the Secretary has commenced and is
by subrogation all rights of the claimant to
may be used for planning, construction of
diligently prosecuting a civil action in a
recover from such damages from any other
public facilities, and provision of public
court of the United States to require com-1
person.
services, and such other activities as may be
pliance with the provisions of this Act or
"(10) The collection of amounts for the
prescribed by regulations promulgated pur-
the regulations thereunder, or the lease, but
fund shall cease when $100,000,000 has been
suant to subsection (c) of this section. Such
in any such action in a court of the United
accumulated, but shall be renewed when the
regulations shall, at a minimum, (1) pro-
States any person may intervene as a matter
accumulation in the fund falls below $85,-
vide that such regulations be directly re-
of right; or
000,000. The fund shall insure that collec-
lated to such environmental effects and so-
"(2) Under subsection (a) (2) of this sec-
tions are equitable to all holders of a lease
cial and economic impacts; (2) take into
tion prior to sixty days after the plaintaiff
or right-of-way.
consideration the acreage leased or proposed
has given notice in writing under oath of
"(11) The several district courts of the
to be leased and the volume of production
such action to the Secretary, in such manner
United States shall have jurisdiction over
of oil and gas from the Outer Continental
as the Secretary shall by regulation prescribe,
claims against the fund.
Shelf off the adjacent coastal State; and (3)
except that such action may be brought im-
"(c) If any area within or without a lease
require each coastal State, as a requirement
mediately after such notification in the case
granted or maintained under this Act is pol-
of eligibility for grants from the fund, to
where the violation complained of, consti-
luted by any discharge or spillage of oil
establish pollution containment and clean-
tutes an imminent threat to the health or
from operations conducted by or on behalf
up systems for pollution from oil and gas
safety of the plaintiff or would immediately
of the holder of such lease, and such pollu-
development activities on the submerged
affect a legal interest of the plaintiff.
tion damages or threatens to damage aquatic
lands of each such State.
"(c) In any action under this section, the
life, wildlife, or public or private property,
"(c) The Secretary of Commerce, in ac-
Secretary, if not a party, may intervene as a
the control and removal of the pollutant
cordance with the provisions of subsection
matter of right.
shall be at the expense of such holder, in-
(b), and this subsection, shall, by regulation,
"(d) The court, in issuing any final order
cluding administrative and other costs in-
establish requirements for grant eligibility:
in any action, brought pursuant to subsec-
curred by the Secretary or any other Federal
Provided, That it is the intent of this sec-
tion (a) of this section, may award costs
or State officer or agency. Upon failure of
tion that grants shall be made to impacted
of litigation including reasonable attorneys
such holder to adequately control and re-
coastal States to the maximum extent per-
fees to any party, whenever the court deter-
move such pollutant, the Secretary in co-
mitted by subsection (d) of this section and
mines such award is appropriate. The court
operation with other Federal, State, or local
that grants shall be made to impacted
may, if a temporary restraining order or
agencies, or in cooperation with such holder,
coastal States in proportion to the effects
prelimlnary injunction is sought, require the
or both, shall have the right to accomplish
and impacts of offshore oil and gas ex-
filing of a bond or equivalent security in ac-
the control and removal at the expense of
ploration, development and production on
cordance with the Federal Rules of Civil
the holder.
such States. Such grants shall not be on a
Procedure.
"(d) The Secretary shall establish require-
matching basis but shall be adequate to
"(e) Nothing in this section shall restrict
ments that all holders of leases issued or
compensate impacted coastal States for the
any right which any person or class of per-
maintained under this Act shall establish
full costs of any environmental effects and
sons may have under this or any statute or
and maintain evidence of financial responsi-
social and economic impacts of offshore oil
common law to seek enforcement of any of
bility of not less than $7 million. Financial
and gas exploration, development, and pro-
the provisions of this Act and the regulations
responsibility may be established by any
duction. The Secretary shall coordinate all
thereunder, or to seek any other relief, in-
one of, or a combination of, the following
grants with management programs estab-
cluding relief against the Secretary.
methods acceptable to the Secretary: (A)
lished pursuant to the Coastal Zone Man-
"PROMOTION OF COMPETITION
evidence of insurance, (B) surety bonds,
agement Act of 1972.
"SEC. 28. Within one year after the date of
(C) qualification as a self-insurer, or (D)
"(d) Notwithstanding any other provision
other evidence of financial responsibility.
enactment of this section, the Secretary
of law, 10 per centum of the Federal reve-
shall prepare and publish a report with
Any bond filed shall be issued by a bonding
nues from the Outer Continental Shelf Lands
company authorized to do business in the
recommendations for promoting competition
Act, as amended by this Act, or the equiv-
and maximizing production and revenues
United States.
alent of forty ($.40) cents per barrel from
from the leasing of Outer Continental Shelf
"(e) The provisions of this section shall
the Federal revenues from the Outer Conti-
lands, and shall include a plan for im-
not be interpreted to supersede section 311
nental Shelf Act, whichever is greater, shall
plementing recommended administrative
of the Federal Water Pollution Control Act
be paid into the fund: Provided, That the
changes and drafts of any proposed legisla-
Amendments of 1972 or preempt the field of
total amount paid into the fund shall not
tion. Such report shall include consideration
strict liability or to enlarge or diminish the
exceed $200,000,000 per year for fiscal 1976
of the following
authority of any State to impose additional
and 1977.
requirements.
"(1) other competitive bidding systems
"(e) There is hereby authorized to be ap-
permitted under present law as compared to
"NEGOTIATIONS WITH STATES
propriated to the fund $100,000,000.
the bonus bidding system;
"SEC. 24. The Secretary is authorized and
"(f) For the purpose of this Act, 'coastal
"(2) evaluation of alternative bidding sys-
directed to negotiate with those coastal
State' means a State of the United States in,
tems not permitted under present law;
States which are asserting jurisdiction over
or bordering on, the Atlantic, Pacific, or
"(3) measures to ease entry of new com-
the Outer Continental Shelf with a view to
Arctic Ocean, the Gulf of Mexico, or Long
petitors; and
16992
CONGRESSIONAL RECORD-SENATE
September 18, 1974
in the degree of detail established in reg-
(B) provide for a shorter postponement
transport facilities and regulations to fa-
ulations issued by the Secretary, specific
than requested provided that such period of
cilitate distribution of oil and gas resources
work to be performed, environmental pro-
time is adequate for study and provision to
of the Outer Continental Shelf. The report
tection and health and safety standards
ameliorate any adverse economic or environ-
shall include recommendations for changes
to be met, and a time schedule for perform-
mental effects or other damage and for con-
in existing legislation or regulations to fa-
ance. The development plan may apply to
trolling secondary social or economic impact
cilitate such distribution.
all leases included within a production unit.
associated with the development of Federal
REVIEW OF SHUT-IN OR FLARING WELLS
"(3) With respect to permits and leases
energy resources in, or on, the Outer Con-
outstanding on the date of enactment of this
SEC. 302. (a) Within six months after en-
tinental Shelf adjacent to the submerged
section, a proposed development plan must
actment of this Act the Secretary shall sub-
lands of such State; or
be submitted to the Secretary within six
mit a report to Comptroller General and the
"(C) deny the request for postponement
months after the date of enactment of this
Congress listing all shut-in oil and gas wells
if he finds that such postponement would
section. Failure to submit a development
and wells flaring natural gas on leases is-
not be consistent with the national policy
plan or to comply with an approved develop-
sued under the Outer Continental Shelf
as expressed in section 3 of this Act.
ment plan shall terminate the permit or
Lands Act. The report shall indicate why
"(3) The Governor of a State aggrieved by
lease.
each well is shut-in or flaring natural gas,
the action of the Secretary shall have ten
"(4) The Secretary may approve revisions
and whether the Secretary intends to require
days to appeal directly to the National
of development plans if he determines that
production or order cessation of flaring.
Coastal Resources Appeals Board established
revision will lead to greater recovery of the
(b) Within six months after receipt of the
pursuant to paragraph (4) of this subsection.
oil and gas, improve the efficiency of the
Secretary's report, the Comptroller General
Such Board shall hear the appeal within
shall review and evaluate the reasons for al-
recovery operation, or is the only means
fifteen days of its receipt and shall render
available to avoid substantial economic
lowing the wells to be shut-in or to flare
a final decision within forty-five days of such
hardship on the lessee or permittee.
natural gas and submit his findings and
hearing. The Board shall overrule the action
"(e) After the date of enactment of this
recommendations to the Congress.
of the Secretary if it finds that (A) the
section, holders of oil and gas leases issued
OIL SPILL LIABILITY STUDY
State is not adequately protected from ad-
to this Act shall not be permitted to flare
verse environmental and economic impacts
SEC. 303. (a) The Attorney General, in
natural gas from any well unless the Sec-
and other damages pursuant to subpara-
consultation with the Administrative Con-
retary finds that there is no practicable way
ference of the United States and the Office of
to obtain production or to conduct testing
graph (3) of paragraph (2) of this subsec-
or workover operations without flaring.".
tion; or (B) the request of the Governor for
Technology Assessment, is authorized and
postponement is consistent with the na-
directed to study methods and procedures for
GEOLOGICAL AND GEOPHYSICAL EXPLORATION
implementing a uniform law providing lia-
tional policy as expressed in section (3) of
SEC. 207. Section 11 of the Outer Conti-
bility for damage from oil spills from Outer
this Act.
nental Shelf Lands Act is hereby amended to
Continental Shelf operations, tankers, deep-
"(4) (a) There is hereby established, in
water ports, and other sources. The study
read as follows:
the Executive Office of the President, the Na-
"Sec. 11. No person shall conduct any type
shall give particular attention to methods of
tional Coastal Resources Appeals Board
of geological or geophysical explorations in
adjudicating and settling claims as rapidly,
(hereinafter called the 'Board'), which shall
the Outer Continental Shelf without a per-
economically, and equitably as possible.
be composed of the following, or their des-
mit issued by the Secretary. Each such per-
(b) The Attorney General shall report the
ignees-the Vice President, who shall be
mit shall contain terms and conditions de-
results of his study to the Congress within
Chairman of the Board, the Secretary of the
six months after the date of enactment of
signed to (1) prevent interference with ac-
Interior, the Administrator of the National
this Act.
tual operations under any lease maintained
Oceanic and Atmospheric Administration,
FUEL STAMP STUDY
or granted pursuant to the Act; (2) pre-
the Administrator of the Environmental Pro-
vent or minimize environmental damage;
Sec. 304. The Administrator of the Federal
tection Agency, and the Chairman of the
and (3) require the permittee to furnish the
Energy Administration and the Secretary of
Council on Environmental Quality.
Secretary with copies of all data (including
the Department of Health, Education, and
"(b) The Board shall-
geological, geophysical, and geochemical
Welfare are authorized and directed to carry
data, well logs, and drill core analyses) ob-
"(1) transmit a written report to the ap-
out a study to determine the feasibility of
propriate committees of Congress as to the
tained during such exploration. The Secre-
establishing a fuel stamp program. The pro-
tary shall maintain the confidentiality of
basis for any decision rendered; and
gram would utilize coupons to assist those
all data so obtained until after the areas
"(2) conduct such hearings pursuant to
on low and fixed incomes in purchasing home
involved have been leased under this Act or
section 554 of title 5, United States Code.
heating fuels in the winter months. The Ad-
until such time as he determines that making
"(5) For the purposes of this section, an
ministrator of the Federal Energy Adminis-
the data available to the public would not
aggrieved State is defined as being one which
tration and the Secretary of Health, Educa-
damage the competitive position of the per-
has requested a postponement of a lease sale
tion, and Welfare are directed to report to the
mittee, whichever comes later.".
but has been denied such postponement or
Congress the results of such study, together
provided a shorter period of time in which to
ENFORCEMENT
with their recommendations with respect
ameliorate adverse impacts associated with
thereto, within sixty days of the effective date
SEC. 208. Subsection 5(a) (2) of the Outer
development of the Outer Continental Shelf
of this Act.
Continental Shelf Lands Act is hereby
and the Governor has determined that such
amended by deleting the first sentence.
RELATIONSHIP TO EXISTING LAW
period of time is not adequate.
LAWS APPLICABLE TO OUTER CONTINENTAL
"(6) This section shall take effect immedi-
SEC. 305. Except as otherwise expressly
SHELF
ately upon enactment of this Act.".
provided herein, nothing in this Act shall be
construed to amend, modify, or repeal any
SEC. 209. Paragraph (2) of subsection (a)
TITLE IHI-MISCELLANEOUS
of section 4 of the Outer Continental Shelf
provision of the Coastal Zone Management
PROVISIONS
Act of 1972.
Lands Act is amended by deleting the fol-
PIPELINE SAFETY AND OPERATION
SEVERABILITY
lowing words: "as of the effective date of this
Act".
SEC. 301. (a) The Secretary of Transpor-
SEC. 306. If any provision of this Act, or
tation, in cooperation with the Secretary of
the application of any such provision to any
AUTHORITY OF GOVERNOR OF ADJACENT STATE
the Interior, is authorized and directed to
TO REQUEST POSTPONEMENT OF LEASE SALES
person or circumstance, shall be held invalid,
report to the Congress within sixty days after
the remainder of this Act, or the application
SEC. 210. Section 8 of the Outer Continen-
enactment of this Act on appropriations and
of such provision to persons or circumstances
tal Shelf Lands Act, as amended by this Act,
staffing needed to monitor pipelines on Fed-
other than those as to which it is held in-
is further amended by inserting at the end
eral lands and the Outer Continental Shelf
valid, shall not be affected thereby.
thereof the following:
so as to assure that they meet all applicable
"(i) (1) The Secretary shall give notice
standards for construction, operation, and
Mr. JOHNSTON. Mr. President, I move
of the sale of each lease pursuant to this
maintenance.
to reconsider the vote by which the bill
Act to the Governor of the adjacent State.
(b) The Secretary of Transportation, in CO-
was passed.
At any time prior to such sale the Governor
operation with the Secretary of the Interior,
Mr. ROBERT C. BYRD. I move to lay
may request the Secretary to postpone such
is authorized and directed to review all laws
that motion on the table.
sale for a period of not to exceed three years
and regulations relating to the construction,
following the date proposed in such notice
operation, and maintenance of pipelines on
The motion to lay on the table was
if he determines that such sale will result
Federal lands and the Outer Continental
agreed to.
in adverse environmental or economic im-
Shelf and report to Congress within one year
TRIBUTE TO SENATOR JOHNSTON
pact or other damage to the State or the
after enactment of this Act on administra-
Mr. MANSFIELD. Mr. President, with
residents thereof. In the event of any such
tive changes needed and recommendations
request, the Secretary shall postpone the
for new legislation.
the passage of the Outer Continental
sale until proceedings under this subsection
Shelf measure, the Senate has witnessed
(c) One year after the date of the enact-
are completed.
ment of this Act, the Interstate Commerce
as superb and skillful a job of legislative
"(2) The Secretary shall, not later than
Commission and the Secretary of Transporta-
ability as has ever been performed in the
thirty days from the receipt of such request:
tion shall submit to the President and the
Senate. It is to Senator BENNETT JOHN-
"(A) grant the request for postponement;
Congress a report on the adequacy of existing
STON that I pay this tribute and to the
September 18, 1974
CONGRESSIONAL RECORD-SENATE
16991
"(4) measures to increase supply to in-
areas involved in a manner designed to pro-
deep water or adverse weather conditions,
dependent refiners and distributors.
vide time-series data which can be compared
and as long thereafter as oil or gas may be
"ENFORCEMENT AND PENALTIES
with previously collected data for the pur-
produced from the area in paying quantities,
"SEC. 29. (a) At the request of the Secre-
pose of identifying any significant changes.
or drilling or well reworking operations as
tary, the Attorney General may institute
"(c) In carrying out the provisions of this
approved by the Secretary are conducted
a civil action in the district court of the
section, the Secretary is directed to give pref-
thereon, and (3) contain such rental provi-
United States for the district in which the
erence to the use of Government owned and
sions and such other terms and provisions as
affected operation is located for a restrain-
Government operated vessels, to the maxi-
the Secretary may prescribe at the time of
ing order or injunction or other appropriate
mum extent practicable, in contracting for
offering the area for lease.".
work in connection with such environmental
remedy to enforce any provision of this Act
DISPOSITION OF FEDERAL ROYALTY OIL
or any regulation or order issued under the
baseline and monitoring studies. In order
SEC. 204. Section 8 of the Outer Continen-
authority of this Act.
to avoid needless duplications, the Secretary
shall coordinate all such activities with the
tal Shelf Lands Act as amended by this Act
"(b) If any person shall fail to comply
with any provision of this Act, or any reg-
Administrator of the National Oceanic and
as amended by this Act is further amended
Atmospheric Administration and shall, when-
by adding a new subsection (k) to read as
ulation or order issued under the authority
follows:
of this Act, after notice of such failure and
ever possible, utilize existing Government
expiration of any period allowed for correc-
owned and Government operated marine
"(k) Upon commencement of production
tive action, such person shall be liable for
research laboratories in conducting research
of oil from any lease, issued after the effec-
a civil penalty of not more than $5,000 for
authorized by this section.".
tive date of this subsection, the Secretary
each and every day of the continuance of
REVISION OF LEASE TERMS
shall offer to the public and sell by competi-
tive bidding for not less than its fair market
such failure. The Secretary may assess, col-
SEC. 203. Section 8 of the Outer Continen-
value, in such amounts and for such terms as
lect, and compromise any such penalty. No
tal Shelf Lands Act is amended by revising
penalty shall be assessed until the person
he determines, that proportion of the oil
subsections (a) and (b) to read as follows:
charged with a violation shall have been
produced from said lease which is due to the
"(a) The Secretary is authorized to grant
given an opportunity for a hearing on such
United States as royalty or net profit share
to the highest responsible qualified bidder
charge.
oil. The Secretary shall limit participation
by competitive bidding under regulations
in such sales where he finds such limitation
"(c) Any person who knowingly and will-
promulgated in advance, oil and gas leases
fully violates any provision of this Act, or
necessary to assure adequate supplies of oil
on submerged lands of the Outer Continental
any regulation or order issued under the
at equitable prices to independent refiners.
Shelf which are not covered by leases meeting
authority of this Act designed to protect pub-
In the event that the Secretary limits par-
the requirements of subsection (a) of section
lic health, safety, or the environment or
ticipation in such sales, he shall sell such oil
6 of this Act. The bidding shall be by sealed
conserve natural resources or knowingly and
at an equitable price. The lessee shall take
bids and, at the discretion of the Secretary,
willfully makes any false statement, repre-
any such royalty oil for which no acceptable
shall be either (1) on the basis of a cash
sentation, or certification in any application,
bids are received and shall pay to the United
bonus bid with a royalty fixed by the Sec-
record, report, plan, or other document filed
States a cash royalty equal to its fair mar-
retary at not less than 12½ per centum in
or required to be maintained under this
ket value, but in no event shall such royalty
amount or value of the production saved,
Act, or who knowingly and willfully falsifies,
be less than the highest bid.".
removed, or sold, (2) on the basis of a
tampers with, or renders inaccurate any
cash bonus bid with a fixed share of the
ANNUAL REPORT
monitoring device or method of record re-
net profits derived from operation of the
SEC. 205. Section 15 of the Outer Continen-
quired to be maintained under this Act or
tract of no less than 30 per centum reserved
tal Shelf Lands Act is amended to read as
knowingly and willfully reveals any data or
to the United States, or (3) on the basis of
follows:-
information required to be kept confiden-
a fixed cash bonus with the net profit share
"ANNUAL REPORT BY SECRETARY TO
tial by this Act, shall, upon conviction, be
reserved to the United States as the bid
CONGRESS
punished by a fine of not more than $100,000,
variable. The United States net profit share
or by imprisonment for not more than one
"SEC. 15. (a) Within six months after the
shall be calculated on the basis of the value
year, or both. Each day that a violation
end of each fiscal year, the Secretary shall
of the production saved, removed, or sold,
continues shall constitute a separate offense.
submit to the President of the Senate and
less those capital and operating costs directly
"(d) Wheneyer a corporation or other
the Speaker of the House of Representatives
assignable to the development and operation
entity violates any provision of this Act, or
(but not acquisition) of each individual oil
a report on the leasing and production pro-
any regulation or order issued under the au-
and gas lease issued under this Act to the
gram in the Outer Continental Shelf during
thority of this Act, any officer, or agent of
such fiscal year, including a detalling of all
lessee under a net profit sharing arrange-
such corporation or entity who knowingly
moneys received and expended, and of all
ment. No capital or operating charges for
and willfully authorized, ordered, or carried
materials or labor services not actually used
leasing, development, and production activi-
out such violation shall be subject to the
on an area leased for oil or gas under this
ties; a summary of management, supervision,
same fines or imprisonment as provided for
Act under a net profit-sharing arrangement;
and enforcement activities; a summary of
under subsection (c) of this section.
allocation of income taxes; or expenditure
grants made from the Coastal State Fund;
"(e) The remedies prescribed in this sec-
for materials or labor services used prior to
and recommendations to the Congress for
tion shall be concurrent and cumulative and
lease acquisition shall be permitted as a
improvements in management, safety and
the exercises of one does not preclude the
deduction in the calculation of net income.
amount of production in leasing and opera-
exercise of the others. Further, the remedies
The Secretary shall by regulation establish
tions in the Outer Continental Shelf and for
prescribed in this section shall be in addi-
accounting procedures and standards to gov-
resolution of jurisdictional conflicts or am-
tion to any other remedies afforded by any
ern the calculation of net profits. In the
biguities.
other law or regulation.
event of any dispute between the United
"(b) Section 313(a) of the Coastal Zone
"ENVIRONMENTAL BASELINE AND MONITORING
States and a lessee concerning the calcula-
Management Act of 1972 (86 Stat. 1280) is
STUDIES
tion of the net profits, the burden of proof
amended by striking the word 'and' after
"SEC. 30. (a) Prior to permitting oil and
shall be on the lessee. That part of the net
the word 'priority' in subsection (8); re-
gas drilling on any area of the Outer Con-
profit share due the United States which is
numbering existing subsection (9) as sub-
tinental Shelf not previously leased under
attributable to oil production may be taken
section (10); and inserting the following
this Act, the Secretary, in consultation with
in kind in the form of oil and disposed of
new subsection (9) 'an assessment of the
the Administrator of the National Oceanic
as provided in subsection (k) of this section.
onshore social, economic, and environmental
and Atmospheric Administration of the De-
That part of the net profit share due in
impacts in those coastal areas affected by
partment of Commerce, shall make a study
kind shall be determined by dividing the
Outer Continental Shelf oil and gas ex-
of the area involved to establish a baseline
net profit due the United States attribut-
ploration and exploitation; and'.".
of those critical parameters of the Outer
able to the product or products taken in
INSURING MAXIMUM PRODUCTION FROM
Continental Shelf environment which may
kind by the fair market value at the well-
OIL AND GAS LEASES
be affected by oil and gas development. The
head of the oil and/or gas (as the case may
SEC. 206. Section 5 of the Outer Continen-
study shall include, but need not be limited
be) saved, removed or sold. In determining
the attribution of profits as between oil and
tal Shelf Lands Act is amended by adding
to, background levels of hydrocarbons in
the following new subscetions:
water, sediment, and organisms; background
gas, costs shall be allocated proportionately
levels of trace metals in water, sediments,
to the value of their respective shares of
"Insuring Maximum Production From Oil
and organisms; characterization of benthic
production.
and Gas Leases
and planktonic communities; description of
"(b) An oil and gas lease issued by the
"(d) (1) After enactment of this section
sediments and relationships between orga-
Secretary pursuant to this section shall (1)
no oil and gas lease may be issued pursuant
nisms and abiotic parameters; and standard
cover a compact area not exceeding five
to this Act unless the lease requires that de-
oceanographic measurements such as salin-
thousand seven hundred and sixty acres, as
velopment be carried out in accordance with
ity, temperature, micronutrients, dissolved
the Secretary may determine, (2) be for a
a development plan which has been ap-
oxygen.
period of (1) in five years or (ii) for up to
proved by the Secretary, and provides that
"(b) Subsequent to development of any
ten years where the Secretary deems such
failure to comply with such development
area studied pursuant to subsection (a) of
longer period necessary to encourage explora-
plan will terminate the lease.
this section, the Secretary shall monitor the
tion and development in areas of unusually
"(2) The development plan will set forth,