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Outer Continental Shelf, 1976: Leasing Legislation (2)
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Outer Continental Shelf, 1976: Leasing Legislation (2)
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The original documents are located in Box 33, folder "Outer Continental Shelf, 1976:
Leasing Legislation (2)" of the Glenn R. Schleede 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
MAY 11, 1976
ADMINISTRATION AMENDMENTS
TO
H.R. 6218
FORD & GERALD LIBRARY
#1
*Amendment: Suspension, cancellation of lease, disapproval of development
plan, and compensation
Strike Section (a) (2), page 58 line 18 through page 59 line 4, and substitute
therefor the following:
(2) for the cancellation of any lease by the Secretary in his discretion,
if (because of a high probability of severe harm or damage unan-
ticipated in kind or degree by the Secretary at the time such lease was
issued, arising from exceptional geologic conditions in the lease area,
exceptional resource values in the marine or coastal environment, or
other exceptional circumstances) the Secretary determines that operations
under the lease would cause harm or damage sufficiently severe to be
unacceptable after taking into consideration the advantages of continuing
such operations, provided that no lease shall be cancelled under this
paragraph unless operations under such lease shall have been under
suspension by the Secretary, with due extension of lease term,
continuously for a period of ten years, or for a lesser period upon
request of the lessee, and provided further, that upon cancellation the
lessee shall be entitled to receive such compensation as he shows to
the Secretary is equal to the lesser of (A) the fair value of the cancelled
rights as of the date of cancellation, taking account of both anticipated
revenues from the lease and anticipated costs, including costs of
compliance with all applicable regulations and operating orders, liability
for clean-up or damages in the case of oil spill, and all other costs
reasonably anticipated on the lease, or (B) the excess, if any, over the
lessee's revenues from the lease, (plus interest thereon from date of
receipt to date of reimbursement) of all consideration paid for the lease
and all direct expenditures made by the lessee after the date of issuance
of such lease and in connection with exploration or development pursuant
to the lease (plus interest on such consideration and such expenditures
from date of payment to date of reimbursement). The amount of such
compensation shall be as agreed to by the lessee and the Secretary, or,
if no such agreement can be reached, as determined by the United States
Court of Claims in judicial proceedings pursuant to 28 U.S.C. 1491;
Strike Section 25(g)(1)(C), lines 13-24 on page 111, and substitute therefor
the following:
(C) if (because of a high probability of severe harm or damage
unanticipated in kind or degree by the Secretary at the time such lease
was issued, arising from exceptional geologic conditions in the lease
area, exceptional resource values in the marine or coastal environment,
GERALD FORD LIBRARY
or other exceptional circumstances) the Secretary determines that the
plan cannot be modified to reduce the potential for harm or damage
sufficiently to make it acceptable after taking into consideration
the advantages of development and production from the lease. If a
plan is disapproved under subparagraph (C) of this paragraph, the term
of the lease shall be duly extended, and at any time within ten years
after said disapproval the lessee may reapply for approval of the same
or a modified plan, and the Secretary shall approve, disapprove, or
require modifications of the plan in accordance with this subsection.
Upon expiration of such ten year period or at an earlier time upon
request of the lessee, if the Secretary has not approved a plan, the
Secretary may in his discretion cancel the lease, and the lessee shall
be entitled to receive such compensation as he shows to the Secretary
is equal to the lesser of (i) the fair value of the cancelled rights
as of the date of cancellation, taking account of both anticipated
revenues from the lease and anticipated costs, including costs of
compliance with all applicable regulations and operating orders,
liability for clean-up or damages in the case of an oil spill, and all
other costs reasonably anticipated on the lease, or (ii) the excess,
if any, over the lessee's revenues from the lease (plus interest
thereon from date of receipt to date of reimbursement) of all consider-
ation paid for the lease and all direct expenditures made by the lessee
after the date of issuance of such lease and in connection with
'exploration or development pursuant to the lease (plus interest on
such consideration and such expenditures from date of payment to date
of reimbursement). The amount of such compensation shall be as agreed
to by the lessee and the Secretary, or, if no such agreement can be
reached, as determined by the United States Court of Claims in judicial
proceedings pursuant to 28 U.S.C. 1491. The Secretary may, at any
time within the ten year period described in subparagraph (C), require
the lessee to submit a plan of development for approval, disapproval
or modification; if the lessee fails to submit a required plan
expeditiously and in good faith, the Secretary shall find that the
lessee has not been duly diligent in pursuing his obligations under
the lease, and shall cancel such lease forthwith, without compensation,
under the provisions of Section 5(c) of this Act.
Rationale
This amendment adds Secretarial authority to set the period of suspension
of a lease and makes four key changes in the provisions now in the bill for
lease cancellation, development plan disapproval, and compensation. (1) A
lease may be cancelled only if operations have been under suspension, or
the development plan under disapproval, for ten years, or a shorter period
on request of the lessee. (2) The test for cancellation or disapproval
allows a comparison of the hazard with the advantages of continued
operations. (3) The hazards must have been unanticipated by the Secretary
at the time the permit or lease was issued. (4) Compensation is for the
value of the rights lost by the lessee, or restitution of the excess of his
GERALD FORD LIBRARY
costs over his revenues, whichever is less, rather than return of his expenses
on the lease. Each of these four changes corrects an unacceptable deficiency
in the provisions now in the bill.
First, a lease should be cancelled only in an extreme case, after it has
been clearly demonstrated by the passage of time that a hazard is unacceptable
and that it cannot be reduced or removed. Under the provisions in the bill
cancellation could be immediate, under the pressures of the moment, before
any substantial period for consideration of remedies.
Second, no lease should be cancelled, or development plan disapproved,
without full consideration of both the advantages and disadvantages of doing
so. The provisions now in the bill would permit consideration of only the
advantages.
Third, a lease should not be in jeopardy of cancellation because of a hazard
which was anticipated at the time the lease was issued. Under the provisions
now in the bill, a lease could be cancelled even though no new information
had appeared, and even though a decision had been made to issue the lease
in full anticipation of the hazard.
Fourth, compensation should be for the value of rights of which the lessee
is deprived, or restitution of the excess of costs over revenues, whichever
is less. In this way the lessee is held harmless from cancellation at minimum
cost to the Treasury.
The compensation provisions now in the bill for cancellation following
development plan disapproval are seriously defective, in that they would
pay the lessee an amount which bears no relation whatever to either the
values of which he is being deprived by cancellation, or the amount of just
restitution for his operations on the lease. Furthermore, these provisions
are inconsistent with those in the general cancellation clause of Section 5(a)(2).
GERALD FORD LIBRARY
#2
*Amendment : Congressional action on waiver of limitation on bonus bidding.
Section 205 (Section 8(a) (6) (C) (ii)) line 13, page 70
after the word "limitation" strike the words "if both the Senate and House
of Representatives pass a resolution of approval" and insert in lieu thereof
the words "unless disapproved by joint resolution of Congress."
On page 70, after line 16, add a new subparagraph (iii) as follows:
"(iii) The Secretary shall experimentally offer tracts for lease
under the systems authorized in subparagraphs (B), (C), (D), (E),
(F), (G) or (H) of paragraph (1) of this section as necessary
to gain information on the merits of these systems, provided
that in the case of each experimental offering he determines
that the value of the information expected to be gained is
sufficient to warrant any likelihood of inefficient exploration
or production, delay of development, reduction of return to the
treasury, or addition to administrative cost."
Rationale
This amendment would permit the Secretary to exceed the 90 percent limit
on use of the bonus-bid, fixed-royalty system unless, by joint resolution,
Congress disapproved. At the same time, it would direct the Secretary
to experiment with other authorized bidding systems, provided he determined
that the value of the information to be gained was sufficient to warrant
the risks involved.
Interior has no objection to being directed to experiment with new bidding
systems, provided it is not forced to do so when the risks are excessive in
comparison to the information to be gained. However, the present language of
the bill would compel the offer of half-a-million acres or more per year
under novel systems whose effectiveness is unproven, and it would offer no
reasonable chance that the Secretary could obtain Congressional, waiver of the
requirement if later evidence made it appear unwise. The outcome of
experiments is always uncertain, otherwise they would not be experiments.
The costs of leasing a tract worth $100 million or more under an experimental
system that turns out badly could be very high, and it is a serious mistake
to take risks of this kind in the absence of a case-by-case finding that they
are warranted.
The defect in the bill is especially serious in light of the likelihood that
in Conference the 90 percent limitation could be reduced in compromise with
the Senate provision, which is 50 percent.
GERALD FORD LIBRARY
#3
* Amendment
: Information concerning lands within three miles of the seaward
boundary of a State.
Section 205(f)(1)(B), lines 22 and 23, page 74
Strike subparagraph (B) and substitute therefor the following:
"(B) all relevant information in his possession concerning the
geographical and geological characteristics of such lands,
subject to the provisions of Section 26 of this Act."
Rationale
The purpose of subsection 205(f) is to resolve problems created by possible
drainage of oil and gas from under State lands. This amendment restricts
the provision of information to the Governor under this subsection to data
relevant to that purpose, and it conforms the section to the confidentiality
requirement of Section 26. As presently written, the subsection requires
that "all information" be provided, regardless of its relevance, whether
the Secretary has it in his possession, or whether its provision is barred
'under the confidentiality rules of Section 26.
FORD & LIBRARY GERALD
#4
* Amendment
: Transmittal of information processed, analyzed, and
interpreted by the Secretary
Section 26(d)(1)(B)
Page 115, line 21, insert after the word "section" the words:
", provided that the Secretary determines that such transmittal
would not unduly damage the competitive position of the lessee
or permittee who provided to the Secretary the information which
the Secretary had processed, analyzed, and interpreted pursuant
to Subsection (b)"
Rationale
This amendment applies the test of undue damage to the competitive position
of lessee or permittee to information processed, analyzed, and interpreted
by the Secretary after receipt from such lessees or permittees. The data
received by the Secretary may be protected by the confidentiality
provisions of subsection (c). The data produced by the Secretary by
processing, analyzing, or interpreting such received information does not
appear to be protected under subsection (c), even though transmittal of
'such secondary products could seriously compromise the confidentiality of
the data received by the Secretary. The Secretary could protect the
received data only by not doing processing, analysis or interpretation
which if released, would compromise the received data. This amendment
gives his discretion to protect the received data, so that he may, for
purposes of carrying out his duties under the Act, do any processing,
analysis, or interpretation without being required to transmit it if it
would be damaging to the lessee's or permittee's competitive interest.
FORD & LIBRARY GERALD
#5
* Amendment
: State inspection of privileged information
Section 26(d) (2), page 116, lines 3-10
Strike all but the final sentence of paragraph (2) and substitute the
following:
"(2) The Secretary shall permit inspection by an appropriate State
official designated by the Governor of any adjacent coastal State,
at a regional location which the Secretary shall designate, of any
privileged information received by the Secretary about leased lands
and regarding any activity adjacent to such State, provided the
Secretary determines that such inspection would not unduly damage
the competitive position of a lessee."
Rationale
This amendment applies the test of undue damage to the competitive position of
a lessee to the inspection of privileged information by States. This test was
originally in Committee Print No. 2. The current language of the bill would
provide no discretion to the Secretary concerning such inspection. This is
particularly undesirable in the case of geological interpretations which the
Secretary may have received from lessees, the confidentiality of which is of
great importance, since they reveal information not merely about the lease
tract, but in particular about the interpretive techniques practiced by the
lessee. These interpretive techniques are trade secrets of extreme value, and
the Secretary should be granted discretion to withhold them from inspection
if he feels such inspection would be unduly injurious to the lessee's
competitive position.
FORD & LIBRARY GERALD
#6
*Amendment: Federal leases potentially draining State lands
Section 205 (f), page 75, line 4 through page 76 line 3.
Strike paragraphs (2), (3) and (4) of subsection (f), and insert in
lieu thereof the following:
(2) In the case of any lease issued after the date of enactment of
this Section on which production may in the Secretary's judgment drain
oil or gas from State lands, the Secretary shall either
(A) seek to establish an agreement for unitary development and
production of the Federal and State properties, whenever such State
properties have been or are about to be leased or otherwise committed
to development and production by the affected State; or,
(B) whenever the State has not or is not about to so commit such
properties to development and production, (i) include a term in the
lease making the lessee a party to any suit for equitable division
of proceeds from the lease among the lessee, the State, and the
Federal government, and (ii) initiate such suit whenever he finds
that drainage from State lands is occurring, except that no such
term shall be included, or suit initiated, unless the State agrees
to insert a similar term and to initiate similar suits concerning
its own properties, where oil or gas operations on State lands may
drain Federal lands.
Rationale
This amendment fully protects States from loss of revenue by drainage, and
at the same time, avoids the serious difficulties inherent in the "joint lease"
concept now in the bill. For a State to become "lessor" of OCS lands, it would
have to acquire rights over those lands, rights which it does not now possess
under the Act. The joint lease concept therefore is tantamount to extending
State jurisdiction beyond three miles. Furthermore, as now written, the
procedure for joint leasing would have the effect of granting a State veto
over leasing in the first three miles of Federal waters. A State could
exercise this veto by (1) accepting the Secretary's offer to lease jointly
and then (2) refusing to find the lease terms "mutually acceptable." In any
case, since the lease is to wholly Federal lands, its terms should be a
wholly Federal decision.
GERALD FORD LIBRARY
#7
* Amendment
: Recommendations of Governors and Advisory Boards
Section 19(d), page 89
Strike lines 7-20 of page 89, and substitute therefor the following:
"the Secretary shall fully consider such recommendations in light of
national security, the desirability of obtaining oil and gas supplies
in a balanced manner, and the policies, findings, and purposes of this
Act. If the Secretary finds that he cannot accept such recommendations,
he shall communicate, in writing, to such Board or such Governor the
reasons therefor."
Rationale
The present language of the bill assumes that except in case of conflicts with
national security or overriding national interst, wherever there is a
disagreement between a Governor and the Secretary over the size, timing
or location of a lease sale or over a development plan, the Governor is always
right and the Secretary is always wrong. This is a fundamentally dangerous
assumption for development decisions regarding a federally owned resource
whose benefits are nationally distributed and which does not lie within the
territorial boundaries of any State. It is the Secretary, responsible to the
President, who has a National, not a regional viewpoint which enables him to
balance the benefits and costs of one region against those of others. No
Governor or regional group of Governors can be expected to judge such issues
in a National perspective. Therefore, there should be no presumption that,
after giving them full consideration in light of Federal policy as embodied
in the Act, the Secretary must accept Governors' recommendations.
Given the protections available to coastal States under the Coastal Zone
Management Act, which are reaffirmed and strengthened in this bill, and
given Governors' full opportunity at important points to comment on OCS
decisions, there is no need for the language this amendment removes.
FORD LIBRAR j GERALD Y
#8
*Amendment : Baseline and monitoring studies.
Section 20, pages 89-92
Strike the following:
page 89, (a) (1), line 22 and 23, "of Commerce, in cooperation with the
Secretary"
page 90, (a) (2), lines 10 and 11, "of Commerce"
(a) (3) in its entirety
page 91, (b), line 8, "of Commerce"
page 91, (c), line 19, "of Commerce"
line 25, "of Commerce"
page 92, line 2, "of Commerce"
line 6, "of Commerce"
page 92, (d), lines 11 and 12, "of Commerce, and "to the Secretary and"
At the end of Section 20, add the following new subsection:
"(f) In executing his responsibilities under this section the
Secretary is authorized and directed, to the maximum extent
practicable, to enter into appropriate arrangements to utilize
on a reimbursable basis the capabilities of the Department of
Commerce. In carrying out such arrangements the Secretary of
Commerce is authorized to enter into contracts or grants with
any person, organization or entity with funds appropriated to
the Secretary of the Interior pursuant to this act."
Rationale
This amendment provides that responsibility for design and direction of
baseline and monitoring studies would remain where it is now, in the
Department of the Interior. However, it also directs the Secretary
where practicable to execute such studies through the Department of Commerce.
The Committee's intent in this Section appears to be to utilize the
scientific expertise of NOAA for baseline and monitoring studies. However,
the present language of the bill does so at the cost of depriving the
Secretary of the Interior of control over the content, timing, and
coordination of those studies. Since the purpose of the studies is
primarily to provide information for Interior's decision-making needs
GERALD FORD LIBRARY
it would be a serious mistake to remove them from Interior's control.
This amendment would provide both for utilizing NOAA's scientific
expertise and for control of content, coordination and timing by Interior.
The amendment would also make clear that the Secretary of, Commerce would
utilize the expertise of its contractors in carrying out the studies if
appropriate, and would clarify the Department of Commerce's authorization
to do so under the Economy Act.
GERALD R FORD LIBRARY
#9
*
Amendment
:
Safety and health
Section 208 should be amended so as to delete the proposed new
Section 21 of the Outer Continental Shelf Lands Act and to
substitute the following:
"Section 21 Safety Regulations
(a) Upon the date of enactment of this section, the Secretary
and the Secretary of the Department in which the Coast Guard is
operating shall, in consultation with each other and other agency
heads as appropriate, promptly commence a study of the adequacy of
existing safety regulations, and of the technology, equipment, and
techniques available for the exploration, production and development
of natural resources, with respect to the Outer Continental Shelf.
The results of this study shall be submitted to the Congress, together
with a plan of action which each Secretary proposes to take, working
alone and in consultation with the other, under their respective
authorities under this or other Acts, to promote safety and health
in the exploration, production and development of natural resources
of the Outer Continental Shelf.
(b) In exercising their respective responsibilities for floating,
temporarily fixed or permanently fixed structures for the exploration,
production and development of the natural resources of the Outer
Continental Shelf, the Secretary, and the Secretary of the Department
in which the Coast Guard is operating, shall require the use of the
best available and safest technology which the respective Secretary
determines to be economically achievable, taking into account the
incremental costs and benefits of utilizing such technology, wherever
failure of equipment would have a significant effect on safety, health,
or the environment, on all new drilling and production operations
and, wherever practicable, on existing operations.
(c) Nothing in this section shall affect the authority provided
by law to the Secretary of Labor for the protection of occupational
safety and health, the authority provided by law to the Administrator
of the Environmental Protection Agency for the protection of the
environment, or the authority provided by law to the Secretary of
Transportation with respect to pipeline safety."
Section 208 should be further amended so as to delete the proposed
new Section 22 of the Outer Continental Shelf Lands Act and to
substitute the following:
GERALD FORD LIBRARY
"Section 22 Enforcement of Environmental and Safety Regulations
(a) The Secretary and the Secretary of the Department in which
the Coast Guard is operating shall consult with each other regarding
-1-
the enforcement of environmental and safety regulations promulgated
pursuant to this Act, and each may by agreement utilize, with or without
reimbursement, the services, personnel, or facilities of any Federal
agency, for the enforcement of their respective regulations.
(b) The Secretary and the Secretary of the Department in which
the Coast Guard is operating shall individually, or jointly if they
so agree, promulgate regulations to provide for -
(1) scheduled onsite inspection at least once a year of
each facility on the Outer Continental Shelf which is
subject to any environmental or safety regulation promulgated
pursuant to this Act, which inspection shall include all
safety equipment designed to prevent or ameliorate blowouts,
fires, spillages, or other major accidents; and
(2) periodic onsite inspection without advance notice to
the operator of such facility to assure compliance with
such environmental or safety regulations.
(c) The Secretary, the Secretary of the Department in which
the Coast Guard is operating or their authorized representatives,
upon presenting appropriate credentials to the owner or operator
of a facility subject to Subsection (b), shall be authorized -
(1) to enter without delay any part of the facility; and
(2) to examine such documents and records as are pertinent
to such an inspection.
(d) (1) The Secretary or the Secretary of the Department in
which the Coast Guard is operating, as applicable, shall make an
investigation and public report on each major fire and major oil
spillage occurring as a result of operations conducted pursuant
to this Act. For the purpose of this subsection, the term 'major
oil spillage' means any discharge from a single source of more than
two hundred barrels of oil over a period of thirty days or of more
than fifty barrels over a single twenty-four-hour period. In addition,
such Secretary may make an investigation and report of any lesser
oil spillage.
(2) In any investigation conducted pursuant to this subsection,
the Secretary of the Department in which the Coast Guard is operating
shall have the power to subpoena witnesses and to require the production
of books, papers, documents, and any other evidence relating to such
investigation."
Section 208 should be further amended, in conformity with the above
amendments, as follows:
page 100, lines 3 and 4 - strike the present text and insert
"his own behalf against any person, including the United"
GERALD FORD LIBRARY
-2-
page 100, lines 10-13, delete
page 100, lines 14 and 15 - delete the present text and insert
(2) No action may be commenced under subsection (a) (1) of
this section - "
page 101, lines 1-9 - delete
page 104, line 16 - strike the words "Secretary of Labor"
page 105, line 5 - strike the words "Secretary of Labor"
page 105, line 13 - delete the words "occupational or public"
Rationale
Section 21 and 22 of the reported bill contain a number of provisions
which are objectionable and the proposed amendment includes the
changes necessary to make these sections acceptable.
First, the present allocation of agency responsibility for safety
and health on the OCS has been developed over time and is fundamentally
satisfactory. This bill would alter in either undesireable or uncertain
manner the present jurisdictional pattern. The amendment makes clear
that present Labor, Coast Guard, Environmental Protection Agency and
Interior responsibilities would continue.
Second, section 21 (c) (1) of the bill provides that no new safety
regulation shall reduce the degree of safety or protection to the
environment afforded by safety regulations previously in effect.
Environmental regulations frequently must be promulgated on the basis
of incomplete information. This provision as written would not
allow revision based on better information, if the revision would
reduce the degree of protection. If applied to new regulations,
such a provision might discourage promulgation of desireably strong
GERALD FORD LIBRARY
regulations based on incomplete information. In any event, the fact
that the increment of protection provided by existing regulations was
extremely costly to the Nation, if that were the case, could not be
considered. The proposed amendment permits the Secretary to consider
whether the incremental costs incurred are buying enough additional
protection to make them worthwhile.
The amendment also makes clear that the appropriate Secretary's
judgment is to be determinative on the question of economic achievability
of technology required by section 21 (a) (2) (which has been included
in the proposed amendment as section 21(b)). The Administration is of
the view the appropriate Secretary should consider the cost to the
lessee and indirectly to others of requiring the technology, in relation
to the advantage of the increased safety resulting from its use.
The legislative history should clearly reflect that this is intended.
Several serious problems occur in the section 22 enforcement provisions.
Section 22 (g) contains detailed requirements which are both extremely
=3-
burdensome and inconsistent with section 15, which requires an
annual report calling for only a summary of enforcement activities.
Traditional oversight procedures can provide sufficient check on
enforcement activities, if the summary in the annual report is
insufficient. There is no need for reporting the number of violations
alleged by a particular person. The meaning of "proven violations"
is unclear.
Section 22 (c) (1) requires physical observations at least twice a year
on all installations. The proposed amendment changes this to once
a year, which is adequate for regular visits in view of the provision
for periodic inspections in section 22(c)(3) of the bill (section 22 (c) (2),
of the proposed amendment) and of current and planned Coast Guard
regulations for facilities.
The Administration opposes compensation to lessees whose leases are
cancelled after repeated violations of safety regulations. Section 22 (h)
of the bill is unclear in this regard. In deleting section 22 (h),
it is intended that cancellation be in accordance with revised
section 5 (c) and (a) of the OCS Lands Act (which would be added by
section 204 of the bill) which do not provide for compensation.
If this amendment is adopted, amendments 10, 11, 12, 13 and 14 are
unnecessary.
FORD & LIBRARY GERALD
-4-
#10
* Amendment
: No reduction in safety or protection to the environment
Section 21(c)(1)
page 94, on line 16
Delete the period at the end of the sentence and add ", unless the Secretary
shall compare the two regulations and find that the difference between them
in costs to the Nation is sufficient to justify the difference between them
in the degree of safety or protection to the environment."
Rationale
The current language of the bill says that no new safety regulation shall
reduce the degree of safety or protection to the environment afforded by
safety regulations previously in effect. Environmental regulations
frequently must be promulgated on the basis of incomplete information.
This provision as writtenwould not allow revision based on better information,
if the revision would reduce the degree of protection. The fact that the
increment of protection provided by the existing regulations was extremely
costly to the Nation, if that were the case, could not be considered. The
proposed amendment permits the Secretary to consider whether the incremental
costs incurred by the Nation are buying enough additional protection to make
them worthwhile.
If amendment #9 is adopted, this amendment is unnecessary.
FORD & LIBRARY GERALD
#11
*Amendment: Best available technology
Section 21 (a) (2), on page 93, line 12, before the words "economically
achievable" insert the words "which the Secretary determines to be".
Rationale
This amendment will make it clear that the Secretary's judgment is to be
determinative on the question of economic achievability. The Administration
has a further concern, however, that conflicting interpretations of that term
may exist. It is therefore the Administration's position that it will oppose
enactment of this provision unless Conference Committee report language clearly
indicates that the Secretary may consider the cost to the lessee and indirectly
to others of requiring the technology, in relation to the advantage of the
increased safety resulting from its use.
If amendment #9 is adopted, this amendment is unnecessary.
FORD & LIBRARY GERALD
#12
Amendment: Report of safety violations
Strike subsection 22(g), pages 98 and 99.
Rationale
The annual report required by Section 15 calls for only a summary of
enforcement activities. The detailed requirements of Section 22 (g)
are inconsistent with Section 15, and in addition would be extremely
burdensome. The traditional oversight procedure can provide sufficient
check on enforcement activities, if the summary in the annual report is in-
sufficient. There is no need for reporting the number of violations
alleged by a particular person. The meaning of "Proven violations" is
unclear. Proven by whom, an agency finding or by successful collection
of a penalty?
If amendment #9 is adopted, this amendment is unnecessary.
GERALD R FORD LIBRARY
#13
Amendment: Enforcement of regulations
Section 22, page 96, lines 20-22.
Strike existing paragraph (1) and insert in lieu thereof
(1) physical observation, at least once each year, of all
fixed installations
Rationale
Mobile drilling rigs are currently regulated by the Coast Guard and are
subject to periodic inspection as vessels. The Coast Guard is currently
preparing regulations for other types of semi-permanent drilling rigs,
such as jack-up rigs. With the provision for periodic, unannounced
inspection in clause (3), once a year is adequate for regular visits.
If amendment #9 is adopted, this amendment is unnecessary.
FORD & LIBRARY GERALD
#14
Amendment
: Compensation for lease cancelled because of safety violations
Section 22(h)
page 93, line 23
Add the following sentence after the period of line 23:
"Cancellation of a lease pursuant to this subsection shall not
entitle a lessee to any compensation."
Rationale
No compensation should be provided for any lease cancelled after
repeated violations of safety regulations. Although, that appears to
be the intent, the subsection should explicitly so provide.
If amendment #9 is adopted, this amendment is unnecessary.
GERALD P LIBRARY FORD
#15
*Amendment: Secretarial authority to regulate
Section 5(a). On line 10, page 57, between the first and second sentences
of the subsection, insert the following sentence:
The Secretary may at any time prescribe and amend such rules and
regulations as he determines to be necessary and proper in order
to provide for the prevention of waste and conservation of the
natural resources of the Outer Continental Shelf, and the pro-
tection of correlative rights therein, and, notwithstanding any
other provisions herein, such rules and regulations shall apply to
all operations conducted under a lease issued or maintained
under the provisions of this Act.
Rationale
The sentence to be inserted comes verbatim from the present OCS Lands
Act, Section 5 (a) (1). It forms the primary basis on which, over the
past 22 years, judicial and regulatory action have defined the authority
of the Secretary to regulate leasing operations for environmental pro-
tection of the OCS. Retaining the sentence will provide assurance that
no loss of previous regulatory authority will occur, and in particular
will prevent large-scale automatic application of State law which might
otherwise occur.
GERALD, FORD LIBRARY
#16
* Amendment
: Leasing program consistency with State coastal zone programs
Section 208, Section 18(e) (5)
page 87, line 1
Insert after "consistency" the words "to the maximum extent practicable"
Rationale
The Coastal Zone Management Act requires that Federal agency programs
be consistent "to the maximum extent practicable" with approved State
CZM programs. The proposed amendment would make it clear that the OCS
leasing program is to have applied to it the same consistency requirement
to which other Federal programs affecting the Coastal Zone are subject.
This amendment conforms the language of Section 18(e)(5) to that used in
Section 25 concerning development plans.
FORD LIBRARY & CERALD
#17
* Amendment
: Coast Guard authority to mark obstructions
Section 203(f)
page 56, line 14
strike "shall" and insert in lieu thereof, "may"
Rationale
This will restore the status quo, leaving the Coast Guard with
discretionary authority to mark obstructions to navigation. This
is consistent with existing Coast Guard authority for all other aids
to navigation. In many cases, due to the close proximity of OCS
structures, not all such structures need be marked. In fact, marking
them all can confuse the navigator. In addition, a mandatory duty
to mark will expose the government to damage claims under the FTCA.
FORD LIBRARY & GERALD
#18
* Amendment
: Modifications of development and production plans
Section 25(g), page 111. On lines 2, 3 and 4 and again on lines 11 and
12, delete the phrase "or with any valid exercise of authority by the
State involved or any political subdivision thereof"
Rationale
This deletes language conditioning modification or disapproval of a
D&P plan with "any valid exercise of authority by the State involved or
any political subdivision thereof. = This language was incorporated from
the Senate bill. It is inappropriate in the House bill, because the D&P
plan as voted by the Committee contains no information on facilities outside
Federal jurisdiction. (Such information is to be included in an accompanying
statement, not in the plan itself). Therefore, the plan or modifications
of the plan cannot be inconsistent with an exercise of State or local authority
since no such authority exists on the OCS. Retaining this language could
only create a question of whether the intent of Congress was to grant State
and local authority outside the 3-mile line.
FORD LIBRARY & GERALD
#19
*Amendment: Impact aid
Strike Title IV of the bill in its entirety, and substitute the Administration
bill, H.R. 11792, or such provisions as are found acceptable by the President
in Amendments to the Coastal Zone Management Act already in conference.
Rationale
The Administration has proposed a comprehensive impact aid bill for all Federal
energy developments. Its provisions should be enacted instead of those in
H.R. 6218, unless the President finds acceptable the bill resulting from
conference committee action now proceeding on H.R. 3981.
FORD LIBRARY & GERALD r
#20
Amendment
:
Retroactivity of development and production plan provisions
Section 25(a) (1), line 19, page 106
After the word "Act" insert the words "in a region of the Outer Continental
Shelf in which no oil or gas development or production took place before
January 1, 1975"
Rationale
The clear intent of the Committee was to make the provisions of Section 25
retroactive to undeveloped leases in all frontier areas, but as now worded,
they are also retroactive to hundreds of leases issued in recent years in
developed regions of the Gulf of Mexico. This amendment would limit
retroactivity to frontier areas, and avoid a large unnecessary workload
of plan submission and review.
1 GERALD R: LISTARY FORD
#21
Amendment
: Prohibition of leasing of areas not included in the
leasing program.
Section 18(c)(4), line 21, page 85
Strike "June 30, 1977" and insert in lieu thereof "a date eighteen months
following the enactment of this Section"
Rationale
The procedures in the bill for drawing up and approving the leasing program
may take well over a year to complete. The date of June 30, 1977, after
which leasing could not proceed without an approved program, was incorporated
without discussion from the Senate bill, and is now clearly impractical.
If not changed, it would cause substantial delays in the leasing schedule.
GERALD
FORD LIBRARY &
#22
Amendment
: Principles for preparation of the OCS leasing program
Section 208, Section 18(a), page 82, line 3
On line 3, after the word "which" insert the words "he determines."
Section 208, Section 18(a)(1), page 82, lines 9 and 10
On lines 9 and 10 strike the words "all of the."
P. 83 insert on line 14 after the word "states" and also on line 17 before
the semicolon the words: "which have been specifically identified by the
Governors of such States as relevant matters for the Secretary's consideration
P. 83, line 22, insert after the word "has" the words: "or is likely to have"
Rationale
The leasing program required by the bill is primarily informational in nature.
It is intended to inform Congress, the States and the general public of the
long-range plans of the Secretary. The changes in wording in this amendment
remove possible sources of delaying litigation based on alleged failure
to present the program that will "best" meet national energy needs, or to
consider "all of the" environmental values of the OCS. It is impossible to
determine what plan is absolutely "best," or to agree on a list of economic,
social and environmental values that includes them "all."
The amendment is also intended to:
- Make it clear that while a perfectly equitable sharing of benefits
and risks among regions is impossible, given the distribution of
oil and gas deposits among OCS regions, the distribution of those
risks and benefits should be examined in determining the leasing
program.
- Provide that the Secretary need not review all laws, goals, and
policies of affected States nor all policies and plans promulgated
by States pursuant to the Coastal Zone Management Act. He would have
to consider these laws, goals, policies, and plans identified by
Governors as relevant.
- Provide that potential capability as well as current capability in the
industry to expeditiously explore, develop and produce shall be
considered.
FORD LIBRARY is CERRAL
#23
Amendment: Regulations required to be prescribed by the Secretary
Strike paragraphs 5 (a) (6), (7) and (8) on page 59, and renumber subsequent
paragraphs accordingly.
Rationale
Paragraphs 5 (a) (6), (7) and (8) require issuance of regulations for annual
reports, safety regulations, and the leasing program. Such regulations
are unnecessary. The bill obliges the Secretary himself to issue the
reports and the program; he need exert no regulatory authority to do SO.
It is not clear why he should be directed to issue regulations for the
issuance of regulations, as (7) requires.
FORD LIBRARY & GERALD r
#24
Amendment: Attorney General and FTC review
Section 205 (c), page 74, line 4.
After the word "information" insert the words "available to the Secretary".
Rationale
This section of the bill requires thirty-day notice to the Attorney
General and FTC of proposed lease issuance or extension, along with
transmission of such information as they may require. If this require-
ment is to delay leasing for no more than 30 days in the normal case,
the information should be limited to that information available to the
Secretary.
FORD LIBRARY & DERALD
#25
*Amendment: Issuance or extension of leases under due diligence requirement
Strike Section 205(d), page 74, lines 9-11.
Rationale
Section 205 (d) bars issuance or extension of a lease if the applicant has
not been duly diligent on other leases. This provision is unnecessary,
since other provisions require diligence on each lease individually.
In addition, it is unworkable, since it may lead to cancellation of a
lease held jointly by several parties, one of whom was not duly diligent
on a different lease held by himself or with entirely different partners.
This presents constitutionality problems with respect to those part-owners
of the cancelled lease who have been guilty of no lack of diligence
elsewhere.
Diligence requirements should be applied only lease-by-lease, not
lessee-by-lessee.
FORD LIBRARY is GERALD
#26
Amendment: Required Regulations for Subsurface Storage
Section 5 (a) (12) , page 60 ------
Line 3, Delete the semicolon at the end of the line and
add "other than by the United States Government;"
Rationale
Storage in salt domes on the OCS is one alternative being
considered in connection with the Strategic Petroleum
Reserve program mandated by sections 151 to 166 of the
Energy Policy and Conservation Act and administered
by the FEA. Obviously no such venture would be undertaken
without extensive review by, and the continuing cooperation
of, the Department of the Interior. However, it may not
be desirable to have government storage facilities subject
to regulations which will presumably be designed for private
parties, as would seem to be the case in the absence of this
amendment.
FORD LIBRARY is GERALD
#27
Amendment: Limitations on Export
Section 28, pages 122-123 ---
Line 8, Delete subsections (b),(c) and (d) and strike
" (a) " from line 3.
Rationale
While it may be desirable to apply the Export Administration
Act of 1969 to exports of oil and gas, additional requirements
such as the requirement of findings by the President described
in subsection (b) and Congressional review thereof as
allowed by subsection (c) constitute an undesirable restriction
on the exercise of executive powers and normal operation of
the Export Administration Act of 1969.
FORD LIBRAR i GERALD
#28
*
Amendment: Citizens Suit Provision
Section 23 (a) (1), page 100 ----
1. lines 1-2, Delete the words "or can be".
2. line 6, Between the words "agency" and "for", insert
" (to the extent permitted by the Eleventh Amendment
to the Constitution)"
3. lines 7-9, Strike the comma at the end of line 7 and
change the remainder of this phrase to read "the
issuance of which by the Secretary under this Act
is not discretionary; and".
Rationale
This section is apparently modelled after similar provisions
in the Clean Air Act, the Safe Drinking Water Act and the
Federal Water Pollution Control Act.
Point 1. None of the citizen's suit provisions in the
three aforementioned acts contains the phrase "or can be".
Its inclusion here may raise questions on the issues of
standing and ripeness which could lead to nuisance suits.
Point 2. All three of the aforementioned acts contain the
suggested parenthetical phrase. Its omission here could
support an inference which is presumably not intended.
Point 3. The effect of this change is to omit the reference
to permits and leases and limit the reference to regulations
to those which are not discretionary. Inclusion of permits
and leases could be read to suggest that third parties have
a private cause of action as a result of an alleged viola-
tion in some provision in a permit or lease. While it may
be desirable to allow private citizens to sue on the basis
of, or to prevent a violation of, the Act or regulations
required by the Act, it appears unwise and unnecessary to
treat leases and permits in the same fashion. An adversely
affected plaintiff can presumably sue on the basis of the
facts creating that situation whether or not the action
causing such harm is also a violation of a permit, lease or
discretionary regulation.
GERALD FORD LIBRARY
#29
* Amendment : On-structure stratigraphic testing
Section 206, Section 11 (g)
Strike subsection 11 1(g), page 79
Rationale
This amendment would strike the subsection directing the Secretary to offer
permits for on-structure stratigraphic tests in frontier areas. The
Administration strongly opposes this requirement. Such tests, whenever
allowed, should be carried out in the locations which, all things considered,
best serve the purposes of the oil and gas leasing program. Requiring them
to be placed on-structure would increase unacceptably the pressure for
follow-on government exploration in the event of a discovery, which would
not be in the public interest. It also ignores the success of the past
program of off-structure drilling, which has attracted industry applicants and
has served the interests of all parties in enhancing the level of pre-sale
geologic knowledge.
GERALD
FORD LIBRARY &
# 30
Amendment
: Lease period extension
New Section 8(b) (2)
page 72, lines 10 and 11, strike "be extended" and insert in lieu
thereof "if the Secretary so provides in the terms of the lease, be subject
to extension."
Rationale
Extension for a second 5-year period would be allowed only if necessary
to encourage exploration and development in areas of usually deep water
or adverse weather conditions. Both of those situations are known
prior to offering the leases. The present language makes any lease
which can meet these undefined criteria subject to such extension,
potentially leading to many applications likely to be acted upon by
OCS area supervisors acting under delegation from the Secretary.
Since the situations permitting extension can be known in advance of lease
offering the proposed amendment provides that the Secretary, prior to a
lease sale, will decide which leases will include terms allowing later
extension for a second 5-year period if the area supervisor acting under
Secretarial delegation later finds that the lessee has exercised due
diligence.
FORD LIBRARY & GERALD
#31
Amendment
: Precluding development plan approval because baseline
and monitoring study incomplete
Section 20(a)(3)
page 90, line 21, strike "in itself," line 22, strike the period at the
end of the sentence and add: ", unless the Secretary, in his discretion,
shall find such failure to be an appropriate basis for such preclusion.
Rationale
The required studies are, to the extent practicable, to be designed to
predict biological impacts of the development and production activities.
Therefore, they will require substantial study efforts, going far beyond
establishing and monitoring baselines, leading to predictive capabilities.
These new study requirements are likely to lead to substantial delays
in OCS development unless it is clear that not completing them is not a
ground for delaying development by litigation. On the other hand, the
Secretary should have discretion to delay approval temporarily if he thinks
that more baseline information should be available before initiating
development. As now worded, the bill would appear to prohibit the
Secretary from delaying D&P plan approval if the only reason were an
unfinished baseline study, even if the Secretary felt that the study
was important enough to wait for.
FORD LIBRARY & CERAÇO
#32
Amendment
:
Compensation for development plan disapproved
because of failure to demonstrate compliance
with applicable Federal law
Section 25(g) (1)
page 111 line 7 after "law," add:
"Provided, that the lessee shall not be entitled to compensation
because of such disapproval."
Rationale
Compensation should not be provided in instances in which a lessee's
development plan is disapproved because he fails to demonstrate that
he can comply with the requirements of the Act and other applicable
Federal law. The proposed amendment makes this point explicitly.
FORD LIBRARY & GERALD
#33
Amendment
:
Revision of development plans
Section 25 (h)
page 112 in line 13 strike "or" and in line 15 after the comma insert
"or is otherwise not inconsistent with the provisions of this Act."
Rationale
The current language does not allow the Secretary to approve revisions
which are merely for the convenience of the lessee or which are in
the lessee's economic interest although short of "avoiding substantial
economic hardship". The Secretary should have discretion to make any
such revisions which are consistent with protection of the marine and
coastal environments so long as they are not contrary to the public
interest.
FORD LIBRARY & GERALD
#34
Amendment
: Reimbursement for data reproduction
Section 26(a)(1)(C)(i)
page 113, line 22, insert "or permittee" after the word "lessee"
page 113, line 23, insert "or permittee" after the word "lessee"
Rationale
Permittees as well as lessees are required to provide the Secretary
with access to all data obtained. They should receive reimbursement
for reproducing such data, if lessees are to receive such reimbursement.
CORRALO FORD LIBRARY
#35
Amendment
: Price at which leases under so-called "Phillips System"
are awarded
Section 205(a) Section 8(a)
page 64, lines 21 through 24, and page 65, lines 5 through 8, delete
the words "at a price which is equal to the average price per share
of the highest responsible qualified bids tendered for not more than
100 per centum of the lease area" in each case where they occur and
insert in their place "on the basis of the value of the bid per share"
Delete all from line 10, page 66 through line 2, page 68 and insert in
lieu thereof: (5) (A) In the event bids are accepted for less than
100 per centum of the lease area offered under such subparagraph (G)
or (H), the Secretary may re-offer the unleased portion for such period
of time as he determines to be reasonable."
page 68, line 3, change (C) to (B)
page 68, line 8, change (D) to (C)
Rationale
Requiring bidders to pay more than they bid, if they bid less than
the average, could cause serious administrative problems for this bidding
system. Many such bidders would drop out. Re-offer of the remaining
shares at the average price might or might not result in sale of 100
percent of the working interest. While this problem could also arise
under the Phillips plan as originally conceived, it is far less likely
to do so.
The Committee apparently felt, in adopting the average-price language,
that it was somehow unfair to lessees to sell a one percent interest
to different people at different prices. However, this is a business
phenomenon that occurs regularly, and is a generally accepted practice
wherever auctions or bargaining take place. No unfairness, either
actual or apparent, exists as long as participants are aware of the
rules by which the sale will be conducted, and can adjust their bidding
strategies accordingly.
The Phillips plan, as originally conceived, is promising enough to
warrant experimentation. However, the bill as now written would
handicap it seriously.
GERALD FORD LIBRARY
#36
Amendment: Requiring an EIS on any structure where there has been
no previous development
Section 25 (d) (2)
Page 109, line 5, strike "structure, area, or region" and insert in
lieu thereof "frontier area"
Rationale
The bill would require preparation of one EIS prior to major development
in any structure, area, or region of the OCS where there has been no
previous development. The existing language of the bill could be
interpreted to require preparation of an EIS on each and every structure
except those where development could clearly not be called "major".
In an OCS area with many small structures this could involve many EIS's.
This amendment would clarify the Committee's intent that at least one
EIS per frontier area be written at the D&P plan stage.
FORD i LIBRARY GERALD r
#37
Amendment
:
Definition of "affected State"
Section 201 (g) (5)
page 47, line 16
insert "which was extracted from the outer Continental Shelf"
following "oil or gas"
Rationale
This amendment is intended to make it clear that the risk of serious
damage from an oilspill has to be associated with OCS development,
similar to the limitations in the previous clauses. As written it
could include risk of damage from oil from other sources.
FORD & LIBRARY GERALD
#38
Amendment : Use of proper term for "structures"
Section 203(a)
page 53, line 6
strike out "structures" and insert in lieu thereof "installations
and other devices" so that the proposed bill will read ", and all
installations and other devices permanently or temporarily attached
to the seabed,"
Rationale
Although the use of the term "structures" improves on existing language,
the term used in article 5 of the 1958 Convention on the Continental
Shelf is "installations and other devices" . This change will clarify
that the United States is asserting the broadest authority over mobile
rigs, semi-submersibles etc., while they are in the drilling mode, and
will clarify the Coast Guard's authority over foreign vessels used for
OCS work.
NOTE:
If adopted, conforming amendments should be made as follows:
page 53, line 23
page 55, line 10
page 55, line 23
page 56, line 3
page 56, line 8
page 56, line 15
page 56, line 17 - insert "installation" in lieu of "structure"
FORD & LIBRARY GERALD
#39
Amendment
: Requiring increased production in shortage or emergency
New Section 8(b) (5)
Delete page 73, lines 5 through 11
This subsection requires leases to "contain a provision that the
Secretary shall, in the absence of any applicable rule or order issued
by the President and under conditions defined in applicable regulations
prescribed by the Secretary, have the right to require increased
production under such lease for purposes of dealing with emergency
shortages of oil and gas or other national emergencies."
Rationale
The language neither provides for compensation nor makes it clear that
compensation is not to be provided for lost production resulting from
producing under Secretarial order. Since the new Section 5(f) (2) requires the
lessee to produce at rates which assure the "maximum rate of production which
is efficient and safe," production under this provision would presumably
be beyond that rate, causing reservoir damage or diminished production over
the life of the reservoir. Including this provision in the lease term may
perhaps avoid the constitutional problem of taking without compensation since
the rights transferred in the lease would be limited by the lessee's
acceptance in advance of the Secretary's right to require such production.
However, legality aside, lessees damaged by the exercise of such authority
could argue that it is inequitable to impose such damages on them while not
similarly treating oil and gas producers on onshore Federal lands, oil and
gas producers on private or State lands, or coal or other energy producers
whose products could be substituted for oil or gas in shortages or emergencies.
Without compensation, all lessees will discount lease bids to reflect
the uncertain probabilities and costs of this power being exercised.
With compensation the Government, if it were to exercise the authority,
would be enmeshed in thousands of suits seeking to recover damages which
would be very hard to fairly determine.
of GERALD LIBRAR FORD
OFFICE OF MANAGEMENT AND BUDGET
ROUTE SLIP
Glenn Schleede
Take necessary action
TO
Approval or signature
Comment
Prepare reply
Discuss with me
For your information
See remarks below
FROM
Norman Hartness
MSR
DATE 6/2/76
REMARKS
This is the document we discussed over
the telephone. Please note that the
amendments preceded by asterisk are
required amendments in the Administration's
view. Those not so preceded are other
amendments which we think are desirable.
DC
FORD & LIBRARY GERALD
OMB FORM 4
REV AUG 70