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    "title": "Outer Continental Shelf, 1976: Leasing Legislation (2)",
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    "ocrText": "The original documents are located in Box 33, folder \"Outer Continental Shelf, 1976:\nLeasing Legislation (2)\" of the Glenn R. Schleede Files at the Gerald R. Ford Presidential\nLibrary.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nMAY 11, 1976\nADMINISTRATION AMENDMENTS\nTO\nH.R. 6218\nFORD & GERALD LIBRARY\n#1\n*Amendment: Suspension, cancellation of lease, disapproval of development\nplan, and compensation\nStrike Section (a) (2), page 58 line 18 through page 59 line 4, and substitute\ntherefor the following:\n(2) for the cancellation of any lease by the Secretary in his discretion,\nif (because of a high probability of severe harm or damage unan-\nticipated in kind or degree by the Secretary at the time such lease was\nissued, arising from exceptional geologic conditions in the lease area,\nexceptional resource values in the marine or coastal environment, or\nother exceptional circumstances) the Secretary determines that operations\nunder the lease would cause harm or damage sufficiently severe to be\nunacceptable after taking into consideration the advantages of continuing\nsuch operations, provided that no lease shall be cancelled under this\nparagraph unless operations under such lease shall have been under\nsuspension by the Secretary, with due extension of lease term,\ncontinuously for a period of ten years, or for a lesser period upon\nrequest of the lessee, and provided further, that upon cancellation the\nlessee shall be entitled to receive such compensation as he shows to\nthe Secretary is equal to the lesser of (A) the fair value of the cancelled\nrights as of the date of cancellation, taking account of both anticipated\nrevenues from the lease and anticipated costs, including costs of\ncompliance with all applicable regulations and operating orders, liability\nfor clean-up or damages in the case of oil spill, and all other costs\nreasonably anticipated on the lease, or (B) the excess, if any, over the\nlessee's revenues from the lease, (plus interest thereon from date of\nreceipt to date of reimbursement) of all consideration paid for the lease\nand all direct expenditures made by the lessee after the date of issuance\nof such lease and in connection with exploration or development pursuant\nto the lease (plus interest on such consideration and such expenditures\nfrom date of payment to date of reimbursement). The amount of such\ncompensation shall be as agreed to by the lessee and the Secretary, or,\nif no such agreement can be reached, as determined by the United States\nCourt of Claims in judicial proceedings pursuant to 28 U.S.C. 1491;\nStrike Section 25(g)(1)(C), lines 13-24 on page 111, and substitute therefor\nthe following:\n(C) if (because of a high probability of severe harm or damage\nunanticipated in kind or degree by the Secretary at the time such lease\nwas issued, arising from exceptional geologic conditions in the lease\narea, exceptional resource values in the marine or coastal environment,\nGERALD FORD LIBRARY\nor other exceptional circumstances) the Secretary determines that the\nplan cannot be modified to reduce the potential for harm or damage\nsufficiently to make it acceptable after taking into consideration\nthe advantages of development and production from the lease. If a\nplan is disapproved under subparagraph (C) of this paragraph, the term\nof the lease shall be duly extended, and at any time within ten years\nafter said disapproval the lessee may reapply for approval of the same\nor a modified plan, and the Secretary shall approve, disapprove, or\nrequire modifications of the plan in accordance with this subsection.\nUpon expiration of such ten year period or at an earlier time upon\nrequest of the lessee, if the Secretary has not approved a plan, the\nSecretary may in his discretion cancel the lease, and the lessee shall\nbe entitled to receive such compensation as he shows to the Secretary\nis equal to the lesser of (i) the fair value of the cancelled rights\nas of the date of cancellation, taking account of both anticipated\nrevenues from the lease and anticipated costs, including costs of\ncompliance with all applicable regulations and operating orders,\nliability for clean-up or damages in the case of an oil spill, and all\nother costs reasonably anticipated on the lease, or (ii) the excess,\nif any, over the lessee's revenues from the lease (plus interest\nthereon from date of receipt to date of reimbursement) of all consider-\nation paid for the lease and all direct expenditures made by the lessee\nafter the date of issuance of such lease and in connection with\n'exploration or development pursuant to the lease (plus interest on\nsuch consideration and such expenditures from date of payment to date\nof reimbursement). The amount of such compensation shall be as agreed\nto by the lessee and the Secretary, or, if no such agreement can be\nreached, as determined by the United States Court of Claims in judicial\nproceedings pursuant to 28 U.S.C. 1491. The Secretary may, at any\ntime within the ten year period described in subparagraph (C), require\nthe lessee to submit a plan of development for approval, disapproval\nor modification; if the lessee fails to submit a required plan\nexpeditiously and in good faith, the Secretary shall find that the\nlessee has not been duly diligent in pursuing his obligations under\nthe lease, and shall cancel such lease forthwith, without compensation,\nunder the provisions of Section 5(c) of this Act.\nRationale\nThis amendment adds Secretarial authority to set the period of suspension\nof a lease and makes four key changes in the provisions now in the bill for\nlease cancellation, development plan disapproval, and compensation. (1) A\nlease may be cancelled only if operations have been under suspension, or\nthe development plan under disapproval, for ten years, or a shorter period\non request of the lessee. (2) The test for cancellation or disapproval\nallows a comparison of the hazard with the advantages of continued\noperations. (3) The hazards must have been unanticipated by the Secretary\nat the time the permit or lease was issued. (4) Compensation is for the\nvalue of the rights lost by the lessee, or restitution of the excess of his\nGERALD FORD LIBRARY\ncosts over his revenues, whichever is less, rather than return of his expenses\non the lease. Each of these four changes corrects an unacceptable deficiency\nin the provisions now in the bill.\nFirst, a lease should be cancelled only in an extreme case, after it has\nbeen clearly demonstrated by the passage of time that a hazard is unacceptable\nand that it cannot be reduced or removed. Under the provisions in the bill\ncancellation could be immediate, under the pressures of the moment, before\nany substantial period for consideration of remedies.\nSecond, no lease should be cancelled, or development plan disapproved,\nwithout full consideration of both the advantages and disadvantages of doing\nso. The provisions now in the bill would permit consideration of only the\nadvantages.\nThird, a lease should not be in jeopardy of cancellation because of a hazard\nwhich was anticipated at the time the lease was issued. Under the provisions\nnow in the bill, a lease could be cancelled even though no new information\nhad appeared, and even though a decision had been made to issue the lease\nin full anticipation of the hazard.\nFourth, compensation should be for the value of rights of which the lessee\nis deprived, or restitution of the excess of costs over revenues, whichever\nis less. In this way the lessee is held harmless from cancellation at minimum\ncost to the Treasury.\nThe compensation provisions now in the bill for cancellation following\ndevelopment plan disapproval are seriously defective, in that they would\npay the lessee an amount which bears no relation whatever to either the\nvalues of which he is being deprived by cancellation, or the amount of just\nrestitution for his operations on the lease. Furthermore, these provisions\nare inconsistent with those in the general cancellation clause of Section 5(a)(2).\nGERALD FORD LIBRARY\n#2\n*Amendment : Congressional action on waiver of limitation on bonus bidding.\nSection 205 (Section 8(a) (6) (C) (ii)) line 13, page 70\nafter the word \"limitation\" strike the words \"if both the Senate and House\nof Representatives pass a resolution of approval\" and insert in lieu thereof\nthe words \"unless disapproved by joint resolution of Congress.\"\nOn page 70, after line 16, add a new subparagraph (iii) as follows:\n\"(iii) The Secretary shall experimentally offer tracts for lease\nunder the systems authorized in subparagraphs (B), (C), (D), (E),\n(F), (G) or (H) of paragraph (1) of this section as necessary\nto gain information on the merits of these systems, provided\nthat in the case of each experimental offering he determines\nthat the value of the information expected to be gained is\nsufficient to warrant any likelihood of inefficient exploration\nor production, delay of development, reduction of return to the\ntreasury, or addition to administrative cost.\"\nRationale\nThis amendment would permit the Secretary to exceed the 90 percent limit\non use of the bonus-bid, fixed-royalty system unless, by joint resolution,\nCongress disapproved. At the same time, it would direct the Secretary\nto experiment with other authorized bidding systems, provided he determined\nthat the value of the information to be gained was sufficient to warrant\nthe risks involved.\nInterior has no objection to being directed to experiment with new bidding\nsystems, provided it is not forced to do so when the risks are excessive in\ncomparison to the information to be gained. However, the present language of\nthe bill would compel the offer of half-a-million acres or more per year\nunder novel systems whose effectiveness is unproven, and it would offer no\nreasonable chance that the Secretary could obtain Congressional, waiver of the\nrequirement if later evidence made it appear unwise. The outcome of\nexperiments is always uncertain, otherwise they would not be experiments.\nThe costs of leasing a tract worth $100 million or more under an experimental\nsystem that turns out badly could be very high, and it is a serious mistake\nto take risks of this kind in the absence of a case-by-case finding that they\nare warranted.\nThe defect in the bill is especially serious in light of the likelihood that\nin Conference the 90 percent limitation could be reduced in compromise with\nthe Senate provision, which is 50 percent.\nGERALD FORD LIBRARY\n#3\n* Amendment\n: Information concerning lands within three miles of the seaward\nboundary of a State.\nSection 205(f)(1)(B), lines 22 and 23, page 74\nStrike subparagraph (B) and substitute therefor the following:\n\"(B) all relevant information in his possession concerning the\ngeographical and geological characteristics of such lands,\nsubject to the provisions of Section 26 of this Act.\"\nRationale\nThe purpose of subsection 205(f) is to resolve problems created by possible\ndrainage of oil and gas from under State lands. This amendment restricts\nthe provision of information to the Governor under this subsection to data\nrelevant to that purpose, and it conforms the section to the confidentiality\nrequirement of Section 26. As presently written, the subsection requires\nthat \"all information\" be provided, regardless of its relevance, whether\nthe Secretary has it in his possession, or whether its provision is barred\n'under the confidentiality rules of Section 26.\nFORD & LIBRARY GERALD\n#4\n* Amendment\n: Transmittal of information processed, analyzed, and\ninterpreted by the Secretary\nSection 26(d)(1)(B)\nPage 115, line 21, insert after the word \"section\" the words:\n\", provided that the Secretary determines that such transmittal\nwould not unduly damage the competitive position of the lessee\nor permittee who provided to the Secretary the information which\nthe Secretary had processed, analyzed, and interpreted pursuant\nto Subsection (b)\"\nRationale\nThis amendment applies the test of undue damage to the competitive position\nof lessee or permittee to information processed, analyzed, and interpreted\nby the Secretary after receipt from such lessees or permittees. The data\nreceived by the Secretary may be protected by the confidentiality\nprovisions of subsection (c). The data produced by the Secretary by\nprocessing, analyzing, or interpreting such received information does not\nappear to be protected under subsection (c), even though transmittal of\n'such secondary products could seriously compromise the confidentiality of\nthe data received by the Secretary. The Secretary could protect the\nreceived data only by not doing processing, analysis or interpretation\nwhich if released, would compromise the received data. This amendment\ngives his discretion to protect the received data, so that he may, for\npurposes of carrying out his duties under the Act, do any processing,\nanalysis, or interpretation without being required to transmit it if it\nwould be damaging to the lessee's or permittee's competitive interest.\nFORD & LIBRARY GERALD\n#5\n* Amendment\n: State inspection of privileged information\nSection 26(d) (2), page 116, lines 3-10\nStrike all but the final sentence of paragraph (2) and substitute the\nfollowing:\n\"(2) The Secretary shall permit inspection by an appropriate State\nofficial designated by the Governor of any adjacent coastal State,\nat a regional location which the Secretary shall designate, of any\nprivileged information received by the Secretary about leased lands\nand regarding any activity adjacent to such State, provided the\nSecretary determines that such inspection would not unduly damage\nthe competitive position of a lessee.\"\nRationale\nThis amendment applies the test of undue damage to the competitive position of\na lessee to the inspection of privileged information by States. This test was\noriginally in Committee Print No. 2. The current language of the bill would\nprovide no discretion to the Secretary concerning such inspection. This is\nparticularly undesirable in the case of geological interpretations which the\nSecretary may have received from lessees, the confidentiality of which is of\ngreat importance, since they reveal information not merely about the lease\ntract, but in particular about the interpretive techniques practiced by the\nlessee. These interpretive techniques are trade secrets of extreme value, and\nthe Secretary should be granted discretion to withhold them from inspection\nif he feels such inspection would be unduly injurious to the lessee's\ncompetitive position.\nFORD & LIBRARY GERALD\n#6\n*Amendment: Federal leases potentially draining State lands\nSection 205 (f), page 75, line 4 through page 76 line 3.\nStrike paragraphs (2), (3) and (4) of subsection (f), and insert in\nlieu thereof the following:\n(2) In the case of any lease issued after the date of enactment of\nthis Section on which production may in the Secretary's judgment drain\noil or gas from State lands, the Secretary shall either\n(A) seek to establish an agreement for unitary development and\nproduction of the Federal and State properties, whenever such State\nproperties have been or are about to be leased or otherwise committed\nto development and production by the affected State; or,\n(B) whenever the State has not or is not about to so commit such\nproperties to development and production, (i) include a term in the\nlease making the lessee a party to any suit for equitable division\nof proceeds from the lease among the lessee, the State, and the\nFederal government, and (ii) initiate such suit whenever he finds\nthat drainage from State lands is occurring, except that no such\nterm shall be included, or suit initiated, unless the State agrees\nto insert a similar term and to initiate similar suits concerning\nits own properties, where oil or gas operations on State lands may\ndrain Federal lands.\nRationale\nThis amendment fully protects States from loss of revenue by drainage, and\nat the same time, avoids the serious difficulties inherent in the \"joint lease\"\nconcept now in the bill. For a State to become \"lessor\" of OCS lands, it would\nhave to acquire rights over those lands, rights which it does not now possess\nunder the Act. The joint lease concept therefore is tantamount to extending\nState jurisdiction beyond three miles. Furthermore, as now written, the\nprocedure for joint leasing would have the effect of granting a State veto\nover leasing in the first three miles of Federal waters. A State could\nexercise this veto by (1) accepting the Secretary's offer to lease jointly\nand then (2) refusing to find the lease terms \"mutually acceptable.\" In any\ncase, since the lease is to wholly Federal lands, its terms should be a\nwholly Federal decision.\nGERALD FORD LIBRARY\n#7\n* Amendment\n: Recommendations of Governors and Advisory Boards\nSection 19(d), page 89\nStrike lines 7-20 of page 89, and substitute therefor the following:\n\"the Secretary shall fully consider such recommendations in light of\nnational security, the desirability of obtaining oil and gas supplies\nin a balanced manner, and the policies, findings, and purposes of this\nAct. If the Secretary finds that he cannot accept such recommendations,\nhe shall communicate, in writing, to such Board or such Governor the\nreasons therefor.\"\nRationale\nThe present language of the bill assumes that except in case of conflicts with\nnational security or overriding national interst, wherever there is a\ndisagreement between a Governor and the Secretary over the size, timing\nor location of a lease sale or over a development plan, the Governor is always\nright and the Secretary is always wrong. This is a fundamentally dangerous\nassumption for development decisions regarding a federally owned resource\nwhose benefits are nationally distributed and which does not lie within the\nterritorial boundaries of any State. It is the Secretary, responsible to the\nPresident, who has a National, not a regional viewpoint which enables him to\nbalance the benefits and costs of one region against those of others. No\nGovernor or regional group of Governors can be expected to judge such issues\nin a National perspective. Therefore, there should be no presumption that,\nafter giving them full consideration in light of Federal policy as embodied\nin the Act, the Secretary must accept Governors' recommendations.\nGiven the protections available to coastal States under the Coastal Zone\nManagement Act, which are reaffirmed and strengthened in this bill, and\ngiven Governors' full opportunity at important points to comment on OCS\ndecisions, there is no need for the language this amendment removes.\nFORD LIBRAR j GERALD Y\n#8\n*Amendment : Baseline and monitoring studies.\nSection 20, pages 89-92\nStrike the following:\npage 89, (a) (1), line 22 and 23, \"of Commerce, in cooperation with the\nSecretary\"\npage 90, (a) (2), lines 10 and 11, \"of Commerce\"\n(a) (3) in its entirety\npage 91, (b), line 8, \"of Commerce\"\npage 91, (c), line 19, \"of Commerce\"\nline 25, \"of Commerce\"\npage 92, line 2, \"of Commerce\"\nline 6, \"of Commerce\"\npage 92, (d), lines 11 and 12, \"of Commerce, and \"to the Secretary and\"\nAt the end of Section 20, add the following new subsection:\n\"(f) In executing his responsibilities under this section the\nSecretary is authorized and directed, to the maximum extent\npracticable, to enter into appropriate arrangements to utilize\non a reimbursable basis the capabilities of the Department of\nCommerce. In carrying out such arrangements the Secretary of\nCommerce is authorized to enter into contracts or grants with\nany person, organization or entity with funds appropriated to\nthe Secretary of the Interior pursuant to this act.\"\nRationale\nThis amendment provides that responsibility for design and direction of\nbaseline and monitoring studies would remain where it is now, in the\nDepartment of the Interior. However, it also directs the Secretary\nwhere practicable to execute such studies through the Department of Commerce.\nThe Committee's intent in this Section appears to be to utilize the\nscientific expertise of NOAA for baseline and monitoring studies. However,\nthe present language of the bill does so at the cost of depriving the\nSecretary of the Interior of control over the content, timing, and\ncoordination of those studies. Since the purpose of the studies is\nprimarily to provide information for Interior's decision-making needs\nGERALD FORD LIBRARY\nit would be a serious mistake to remove them from Interior's control.\nThis amendment would provide both for utilizing NOAA's scientific\nexpertise and for control of content, coordination and timing by Interior.\nThe amendment would also make clear that the Secretary of, Commerce would\nutilize the expertise of its contractors in carrying out the studies if\nappropriate, and would clarify the Department of Commerce's authorization\nto do so under the Economy Act.\nGERALD R FORD LIBRARY\n#9\n*\nAmendment\n:\nSafety and health\nSection 208 should be amended so as to delete the proposed new\nSection 21 of the Outer Continental Shelf Lands Act and to\nsubstitute the following:\n\"Section 21 Safety Regulations\n(a) Upon the date of enactment of this section, the Secretary\nand the Secretary of the Department in which the Coast Guard is\noperating shall, in consultation with each other and other agency\nheads as appropriate, promptly commence a study of the adequacy of\nexisting safety regulations, and of the technology, equipment, and\ntechniques available for the exploration, production and development\nof natural resources, with respect to the Outer Continental Shelf.\nThe results of this study shall be submitted to the Congress, together\nwith a plan of action which each Secretary proposes to take, working\nalone and in consultation with the other, under their respective\nauthorities under this or other Acts, to promote safety and health\nin the exploration, production and development of natural resources\nof the Outer Continental Shelf.\n(b) In exercising their respective responsibilities for floating,\ntemporarily fixed or permanently fixed structures for the exploration,\nproduction and development of the natural resources of the Outer\nContinental Shelf, the Secretary, and the Secretary of the Department\nin which the Coast Guard is operating, shall require the use of the\nbest available and safest technology which the respective Secretary\ndetermines to be economically achievable, taking into account the\nincremental costs and benefits of utilizing such technology, wherever\nfailure of equipment would have a significant effect on safety, health,\nor the environment, on all new drilling and production operations\nand, wherever practicable, on existing operations.\n(c) Nothing in this section shall affect the authority provided\nby law to the Secretary of Labor for the protection of occupational\nsafety and health, the authority provided by law to the Administrator\nof the Environmental Protection Agency for the protection of the\nenvironment, or the authority provided by law to the Secretary of\nTransportation with respect to pipeline safety.\"\nSection 208 should be further amended so as to delete the proposed\nnew Section 22 of the Outer Continental Shelf Lands Act and to\nsubstitute the following:\nGERALD FORD LIBRARY\n\"Section 22 Enforcement of Environmental and Safety Regulations\n(a) The Secretary and the Secretary of the Department in which\nthe Coast Guard is operating shall consult with each other regarding\n-1-\nthe enforcement of environmental and safety regulations promulgated\npursuant to this Act, and each may by agreement utilize, with or without\nreimbursement, the services, personnel, or facilities of any Federal\nagency, for the enforcement of their respective regulations.\n(b) The Secretary and the Secretary of the Department in which\nthe Coast Guard is operating shall individually, or jointly if they\nso agree, promulgate regulations to provide for -\n(1) scheduled onsite inspection at least once a year of\neach facility on the Outer Continental Shelf which is\nsubject to any environmental or safety regulation promulgated\npursuant to this Act, which inspection shall include all\nsafety equipment designed to prevent or ameliorate blowouts,\nfires, spillages, or other major accidents; and\n(2) periodic onsite inspection without advance notice to\nthe operator of such facility to assure compliance with\nsuch environmental or safety regulations.\n(c) The Secretary, the Secretary of the Department in which\nthe Coast Guard is operating or their authorized representatives,\nupon presenting appropriate credentials to the owner or operator\nof a facility subject to Subsection (b), shall be authorized -\n(1) to enter without delay any part of the facility; and\n(2) to examine such documents and records as are pertinent\nto such an inspection.\n(d) (1) The Secretary or the Secretary of the Department in\nwhich the Coast Guard is operating, as applicable, shall make an\ninvestigation and public report on each major fire and major oil\nspillage occurring as a result of operations conducted pursuant\nto this Act. For the purpose of this subsection, the term 'major\noil spillage' means any discharge from a single source of more than\ntwo hundred barrels of oil over a period of thirty days or of more\nthan fifty barrels over a single twenty-four-hour period. In addition,\nsuch Secretary may make an investigation and report of any lesser\noil spillage.\n(2) In any investigation conducted pursuant to this subsection,\nthe Secretary of the Department in which the Coast Guard is operating\nshall have the power to subpoena witnesses and to require the production\nof books, papers, documents, and any other evidence relating to such\ninvestigation.\"\nSection 208 should be further amended, in conformity with the above\namendments, as follows:\npage 100, lines 3 and 4 - strike the present text and insert\n\"his own behalf against any person, including the United\"\nGERALD FORD LIBRARY\n-2-\npage 100, lines 10-13, delete\npage 100, lines 14 and 15 - delete the present text and insert\n(2) No action may be commenced under subsection (a) (1) of\nthis section - \"\npage 101, lines 1-9 - delete\npage 104, line 16 - strike the words \"Secretary of Labor\"\npage 105, line 5 - strike the words \"Secretary of Labor\"\npage 105, line 13 - delete the words \"occupational or public\"\nRationale\nSection 21 and 22 of the reported bill contain a number of provisions\nwhich are objectionable and the proposed amendment includes the\nchanges necessary to make these sections acceptable.\nFirst, the present allocation of agency responsibility for safety\nand health on the OCS has been developed over time and is fundamentally\nsatisfactory. This bill would alter in either undesireable or uncertain\nmanner the present jurisdictional pattern. The amendment makes clear\nthat present Labor, Coast Guard, Environmental Protection Agency and\nInterior responsibilities would continue.\nSecond, section 21 (c) (1) of the bill provides that no new safety\nregulation shall reduce the degree of safety or protection to the\nenvironment afforded by safety regulations previously in effect.\nEnvironmental regulations frequently must be promulgated on the basis\nof incomplete information. This provision as written would not\nallow revision based on better information, if the revision would\nreduce the degree of protection. If applied to new regulations,\nsuch a provision might discourage promulgation of desireably strong\nGERALD FORD LIBRARY\nregulations based on incomplete information. In any event, the fact\nthat the increment of protection provided by existing regulations was\nextremely costly to the Nation, if that were the case, could not be\nconsidered. The proposed amendment permits the Secretary to consider\nwhether the incremental costs incurred are buying enough additional\nprotection to make them worthwhile.\nThe amendment also makes clear that the appropriate Secretary's\njudgment is to be determinative on the question of economic achievability\nof technology required by section 21 (a) (2) (which has been included\nin the proposed amendment as section 21(b)). The Administration is of\nthe view the appropriate Secretary should consider the cost to the\nlessee and indirectly to others of requiring the technology, in relation\nto the advantage of the increased safety resulting from its use.\nThe legislative history should clearly reflect that this is intended.\nSeveral serious problems occur in the section 22 enforcement provisions.\nSection 22 (g) contains detailed requirements which are both extremely\n=3-\nburdensome and inconsistent with section 15, which requires an\nannual report calling for only a summary of enforcement activities.\nTraditional oversight procedures can provide sufficient check on\nenforcement activities, if the summary in the annual report is\ninsufficient. There is no need for reporting the number of violations\nalleged by a particular person. The meaning of \"proven violations\"\nis unclear.\nSection 22 (c) (1) requires physical observations at least twice a year\non all installations. The proposed amendment changes this to once\na year, which is adequate for regular visits in view of the provision\nfor periodic inspections in section 22(c)(3) of the bill (section 22 (c) (2),\nof the proposed amendment) and of current and planned Coast Guard\nregulations for facilities.\nThe Administration opposes compensation to lessees whose leases are\ncancelled after repeated violations of safety regulations. Section 22 (h)\nof the bill is unclear in this regard. In deleting section 22 (h),\nit is intended that cancellation be in accordance with revised\nsection 5 (c) and (a) of the OCS Lands Act (which would be added by\nsection 204 of the bill) which do not provide for compensation.\nIf this amendment is adopted, amendments 10, 11, 12, 13 and 14 are\nunnecessary.\nFORD & LIBRARY GERALD\n-4-\n#10\n* Amendment\n: No reduction in safety or protection to the environment\nSection 21(c)(1)\npage 94, on line 16\nDelete the period at the end of the sentence and add \", unless the Secretary\nshall compare the two regulations and find that the difference between them\nin costs to the Nation is sufficient to justify the difference between them\nin the degree of safety or protection to the environment.\"\nRationale\nThe current language of the bill says that no new safety regulation shall\nreduce the degree of safety or protection to the environment afforded by\nsafety regulations previously in effect. Environmental regulations\nfrequently must be promulgated on the basis of incomplete information.\nThis provision as writtenwould not allow revision based on better information,\nif the revision would reduce the degree of protection. The fact that the\nincrement of protection provided by the existing regulations was extremely\ncostly to the Nation, if that were the case, could not be considered. The\nproposed amendment permits the Secretary to consider whether the incremental\ncosts incurred by the Nation are buying enough additional protection to make\nthem worthwhile.\nIf amendment #9 is adopted, this amendment is unnecessary.\nFORD & LIBRARY GERALD\n#11\n*Amendment: Best available technology\nSection 21 (a) (2), on page 93, line 12, before the words \"economically\nachievable\" insert the words \"which the Secretary determines to be\".\nRationale\nThis amendment will make it clear that the Secretary's judgment is to be\ndeterminative on the question of economic achievability. The Administration\nhas a further concern, however, that conflicting interpretations of that term\nmay exist. It is therefore the Administration's position that it will oppose\nenactment of this provision unless Conference Committee report language clearly\nindicates that the Secretary may consider the cost to the lessee and indirectly\nto others of requiring the technology, in relation to the advantage of the\nincreased safety resulting from its use.\nIf amendment #9 is adopted, this amendment is unnecessary.\nFORD & LIBRARY GERALD\n#12\nAmendment: Report of safety violations\nStrike subsection 22(g), pages 98 and 99.\nRationale\nThe annual report required by Section 15 calls for only a summary of\nenforcement activities. The detailed requirements of Section 22 (g)\nare inconsistent with Section 15, and in addition would be extremely\nburdensome. The traditional oversight procedure can provide sufficient\ncheck on enforcement activities, if the summary in the annual report is in-\nsufficient. There is no need for reporting the number of violations\nalleged by a particular person. The meaning of \"Proven violations\" is\nunclear. Proven by whom, an agency finding or by successful collection\nof a penalty?\nIf amendment #9 is adopted, this amendment is unnecessary.\nGERALD R FORD LIBRARY\n#13\nAmendment: Enforcement of regulations\nSection 22, page 96, lines 20-22.\nStrike existing paragraph (1) and insert in lieu thereof\n(1) physical observation, at least once each year, of all\nfixed installations\nRationale\nMobile drilling rigs are currently regulated by the Coast Guard and are\nsubject to periodic inspection as vessels. The Coast Guard is currently\npreparing regulations for other types of semi-permanent drilling rigs,\nsuch as jack-up rigs. With the provision for periodic, unannounced\ninspection in clause (3), once a year is adequate for regular visits.\nIf amendment #9 is adopted, this amendment is unnecessary.\nFORD & LIBRARY GERALD\n#14\nAmendment\n: Compensation for lease cancelled because of safety violations\nSection 22(h)\npage 93, line 23\nAdd the following sentence after the period of line 23:\n\"Cancellation of a lease pursuant to this subsection shall not\nentitle a lessee to any compensation.\"\nRationale\nNo compensation should be provided for any lease cancelled after\nrepeated violations of safety regulations. Although, that appears to\nbe the intent, the subsection should explicitly so provide.\nIf amendment #9 is adopted, this amendment is unnecessary.\nGERALD P LIBRARY FORD\n#15\n*Amendment: Secretarial authority to regulate\nSection 5(a). On line 10, page 57, between the first and second sentences\nof the subsection, insert the following sentence:\nThe Secretary may at any time prescribe and amend such rules and\nregulations as he determines to be necessary and proper in order\nto provide for the prevention of waste and conservation of the\nnatural resources of the Outer Continental Shelf, and the pro-\ntection of correlative rights therein, and, notwithstanding any\nother provisions herein, such rules and regulations shall apply to\nall operations conducted under a lease issued or maintained\nunder the provisions of this Act.\nRationale\nThe sentence to be inserted comes verbatim from the present OCS Lands\nAct, Section 5 (a) (1). It forms the primary basis on which, over the\npast 22 years, judicial and regulatory action have defined the authority\nof the Secretary to regulate leasing operations for environmental pro-\ntection of the OCS. Retaining the sentence will provide assurance that\nno loss of previous regulatory authority will occur, and in particular\nwill prevent large-scale automatic application of State law which might\notherwise occur.\nGERALD, FORD LIBRARY\n#16\n* Amendment\n: Leasing program consistency with State coastal zone programs\nSection 208, Section 18(e) (5)\npage 87, line 1\nInsert after \"consistency\" the words \"to the maximum extent practicable\"\nRationale\nThe Coastal Zone Management Act requires that Federal agency programs\nbe consistent \"to the maximum extent practicable\" with approved State\nCZM programs. The proposed amendment would make it clear that the OCS\nleasing program is to have applied to it the same consistency requirement\nto which other Federal programs affecting the Coastal Zone are subject.\nThis amendment conforms the language of Section 18(e)(5) to that used in\nSection 25 concerning development plans.\nFORD LIBRARY & CERALD\n#17\n* Amendment\n: Coast Guard authority to mark obstructions\nSection 203(f)\npage 56, line 14\nstrike \"shall\" and insert in lieu thereof, \"may\"\nRationale\nThis will restore the status quo, leaving the Coast Guard with\ndiscretionary authority to mark obstructions to navigation. This\nis consistent with existing Coast Guard authority for all other aids\nto navigation. In many cases, due to the close proximity of OCS\nstructures, not all such structures need be marked. In fact, marking\nthem all can confuse the navigator. In addition, a mandatory duty\nto mark will expose the government to damage claims under the FTCA.\nFORD LIBRARY & GERALD\n#18\n* Amendment\n: Modifications of development and production plans\nSection 25(g), page 111. On lines 2, 3 and 4 and again on lines 11 and\n12, delete the phrase \"or with any valid exercise of authority by the\nState involved or any political subdivision thereof\"\nRationale\nThis deletes language conditioning modification or disapproval of a\nD&P plan with \"any valid exercise of authority by the State involved or\nany political subdivision thereof. = This language was incorporated from\nthe Senate bill. It is inappropriate in the House bill, because the D&P\nplan as voted by the Committee contains no information on facilities outside\nFederal jurisdiction. (Such information is to be included in an accompanying\nstatement, not in the plan itself). Therefore, the plan or modifications\nof the plan cannot be inconsistent with an exercise of State or local authority\nsince no such authority exists on the OCS. Retaining this language could\nonly create a question of whether the intent of Congress was to grant State\nand local authority outside the 3-mile line.\nFORD LIBRARY & GERALD\n#19\n*Amendment: Impact aid\nStrike Title IV of the bill in its entirety, and substitute the Administration\nbill, H.R. 11792, or such provisions as are found acceptable by the President\nin Amendments to the Coastal Zone Management Act already in conference.\nRationale\nThe Administration has proposed a comprehensive impact aid bill for all Federal\nenergy developments. Its provisions should be enacted instead of those in\nH.R. 6218, unless the President finds acceptable the bill resulting from\nconference committee action now proceeding on H.R. 3981.\nFORD LIBRARY & GERALD r\n#20\nAmendment\n:\nRetroactivity of development and production plan provisions\nSection 25(a) (1), line 19, page 106\nAfter the word \"Act\" insert the words \"in a region of the Outer Continental\nShelf in which no oil or gas development or production took place before\nJanuary 1, 1975\"\nRationale\nThe clear intent of the Committee was to make the provisions of Section 25\nretroactive to undeveloped leases in all frontier areas, but as now worded,\nthey are also retroactive to hundreds of leases issued in recent years in\ndeveloped regions of the Gulf of Mexico. This amendment would limit\nretroactivity to frontier areas, and avoid a large unnecessary workload\nof plan submission and review.\n1 GERALD R: LISTARY FORD\n#21\nAmendment\n: Prohibition of leasing of areas not included in the\nleasing program.\nSection 18(c)(4), line 21, page 85\nStrike \"June 30, 1977\" and insert in lieu thereof \"a date eighteen months\nfollowing the enactment of this Section\"\nRationale\nThe procedures in the bill for drawing up and approving the leasing program\nmay take well over a year to complete. The date of June 30, 1977, after\nwhich leasing could not proceed without an approved program, was incorporated\nwithout discussion from the Senate bill, and is now clearly impractical.\nIf not changed, it would cause substantial delays in the leasing schedule.\nGERALD\nFORD LIBRARY &\n#22\nAmendment\n: Principles for preparation of the OCS leasing program\nSection 208, Section 18(a), page 82, line 3\nOn line 3, after the word \"which\" insert the words \"he determines.\"\nSection 208, Section 18(a)(1), page 82, lines 9 and 10\nOn lines 9 and 10 strike the words \"all of the.\"\nP. 83 insert on line 14 after the word \"states\" and also on line 17 before\nthe semicolon the words: \"which have been specifically identified by the\nGovernors of such States as relevant matters for the Secretary's consideration\nP. 83, line 22, insert after the word \"has\" the words: \"or is likely to have\"\nRationale\nThe leasing program required by the bill is primarily informational in nature.\nIt is intended to inform Congress, the States and the general public of the\nlong-range plans of the Secretary. The changes in wording in this amendment\nremove possible sources of delaying litigation based on alleged failure\nto present the program that will \"best\" meet national energy needs, or to\nconsider \"all of the\" environmental values of the OCS. It is impossible to\ndetermine what plan is absolutely \"best,\" or to agree on a list of economic,\nsocial and environmental values that includes them \"all.\"\nThe amendment is also intended to:\n- Make it clear that while a perfectly equitable sharing of benefits\nand risks among regions is impossible, given the distribution of\noil and gas deposits among OCS regions, the distribution of those\nrisks and benefits should be examined in determining the leasing\nprogram.\n- Provide that the Secretary need not review all laws, goals, and\npolicies of affected States nor all policies and plans promulgated\nby States pursuant to the Coastal Zone Management Act. He would have\nto consider these laws, goals, policies, and plans identified by\nGovernors as relevant.\n- Provide that potential capability as well as current capability in the\nindustry to expeditiously explore, develop and produce shall be\nconsidered.\nFORD LIBRARY is CERRAL\n#23\nAmendment: Regulations required to be prescribed by the Secretary\nStrike paragraphs 5 (a) (6), (7) and (8) on page 59, and renumber subsequent\nparagraphs accordingly.\nRationale\nParagraphs 5 (a) (6), (7) and (8) require issuance of regulations for annual\nreports, safety regulations, and the leasing program. Such regulations\nare unnecessary. The bill obliges the Secretary himself to issue the\nreports and the program; he need exert no regulatory authority to do SO.\nIt is not clear why he should be directed to issue regulations for the\nissuance of regulations, as (7) requires.\nFORD LIBRARY & GERALD r\n#24\nAmendment: Attorney General and FTC review\nSection 205 (c), page 74, line 4.\nAfter the word \"information\" insert the words \"available to the Secretary\".\nRationale\nThis section of the bill requires thirty-day notice to the Attorney\nGeneral and FTC of proposed lease issuance or extension, along with\ntransmission of such information as they may require. If this require-\nment is to delay leasing for no more than 30 days in the normal case,\nthe information should be limited to that information available to the\nSecretary.\nFORD LIBRARY & DERALD\n#25\n*Amendment: Issuance or extension of leases under due diligence requirement\nStrike Section 205(d), page 74, lines 9-11.\nRationale\nSection 205 (d) bars issuance or extension of a lease if the applicant has\nnot been duly diligent on other leases. This provision is unnecessary,\nsince other provisions require diligence on each lease individually.\nIn addition, it is unworkable, since it may lead to cancellation of a\nlease held jointly by several parties, one of whom was not duly diligent\non a different lease held by himself or with entirely different partners.\nThis presents constitutionality problems with respect to those part-owners\nof the cancelled lease who have been guilty of no lack of diligence\nelsewhere.\nDiligence requirements should be applied only lease-by-lease, not\nlessee-by-lessee.\nFORD LIBRARY is GERALD\n#26\nAmendment: Required Regulations for Subsurface Storage\nSection 5 (a) (12) , page 60 ------\nLine 3, Delete the semicolon at the end of the line and\nadd \"other than by the United States Government;\"\nRationale\nStorage in salt domes on the OCS is one alternative being\nconsidered in connection with the Strategic Petroleum\nReserve program mandated by sections 151 to 166 of the\nEnergy Policy and Conservation Act and administered\nby the FEA. Obviously no such venture would be undertaken\nwithout extensive review by, and the continuing cooperation\nof, the Department of the Interior. However, it may not\nbe desirable to have government storage facilities subject\nto regulations which will presumably be designed for private\nparties, as would seem to be the case in the absence of this\namendment.\nFORD LIBRARY is GERALD\n#27\nAmendment: Limitations on Export\nSection 28, pages 122-123 ---\nLine 8, Delete subsections (b),(c) and (d) and strike\n\" (a) \" from line 3.\nRationale\nWhile it may be desirable to apply the Export Administration\nAct of 1969 to exports of oil and gas, additional requirements\nsuch as the requirement of findings by the President described\nin subsection (b) and Congressional review thereof as\nallowed by subsection (c) constitute an undesirable restriction\non the exercise of executive powers and normal operation of\nthe Export Administration Act of 1969.\nFORD LIBRAR i GERALD\n#28\n*\nAmendment: Citizens Suit Provision\nSection 23 (a) (1), page 100 ----\n1. lines 1-2, Delete the words \"or can be\".\n2. line 6, Between the words \"agency\" and \"for\", insert\n\" (to the extent permitted by the Eleventh Amendment\nto the Constitution)\"\n3. lines 7-9, Strike the comma at the end of line 7 and\nchange the remainder of this phrase to read \"the\nissuance of which by the Secretary under this Act\nis not discretionary; and\".\nRationale\nThis section is apparently modelled after similar provisions\nin the Clean Air Act, the Safe Drinking Water Act and the\nFederal Water Pollution Control Act.\nPoint 1. None of the citizen's suit provisions in the\nthree aforementioned acts contains the phrase \"or can be\".\nIts inclusion here may raise questions on the issues of\nstanding and ripeness which could lead to nuisance suits.\nPoint 2. All three of the aforementioned acts contain the\nsuggested parenthetical phrase. Its omission here could\nsupport an inference which is presumably not intended.\nPoint 3. The effect of this change is to omit the reference\nto permits and leases and limit the reference to regulations\nto those which are not discretionary. Inclusion of permits\nand leases could be read to suggest that third parties have\na private cause of action as a result of an alleged viola-\ntion in some provision in a permit or lease. While it may\nbe desirable to allow private citizens to sue on the basis\nof, or to prevent a violation of, the Act or regulations\nrequired by the Act, it appears unwise and unnecessary to\ntreat leases and permits in the same fashion. An adversely\naffected plaintiff can presumably sue on the basis of the\nfacts creating that situation whether or not the action\ncausing such harm is also a violation of a permit, lease or\ndiscretionary regulation.\nGERALD FORD LIBRARY\n#29\n* Amendment : On-structure stratigraphic testing\nSection 206, Section 11 (g)\nStrike subsection 11 1(g), page 79\nRationale\nThis amendment would strike the subsection directing the Secretary to offer\npermits for on-structure stratigraphic tests in frontier areas. The\nAdministration strongly opposes this requirement. Such tests, whenever\nallowed, should be carried out in the locations which, all things considered,\nbest serve the purposes of the oil and gas leasing program. Requiring them\nto be placed on-structure would increase unacceptably the pressure for\nfollow-on government exploration in the event of a discovery, which would\nnot be in the public interest. It also ignores the success of the past\nprogram of off-structure drilling, which has attracted industry applicants and\nhas served the interests of all parties in enhancing the level of pre-sale\ngeologic knowledge.\nGERALD\nFORD LIBRARY &\n# 30\nAmendment\n: Lease period extension\nNew Section 8(b) (2)\npage 72, lines 10 and 11, strike \"be extended\" and insert in lieu\nthereof \"if the Secretary so provides in the terms of the lease, be subject\nto extension.\"\nRationale\nExtension for a second 5-year period would be allowed only if necessary\nto encourage exploration and development in areas of usually deep water\nor adverse weather conditions. Both of those situations are known\nprior to offering the leases. The present language makes any lease\nwhich can meet these undefined criteria subject to such extension,\npotentially leading to many applications likely to be acted upon by\nOCS area supervisors acting under delegation from the Secretary.\nSince the situations permitting extension can be known in advance of lease\noffering the proposed amendment provides that the Secretary, prior to a\nlease sale, will decide which leases will include terms allowing later\nextension for a second 5-year period if the area supervisor acting under\nSecretarial delegation later finds that the lessee has exercised due\ndiligence.\nFORD LIBRARY & GERALD\n#31\nAmendment\n: Precluding development plan approval because baseline\nand monitoring study incomplete\nSection 20(a)(3)\npage 90, line 21, strike \"in itself,\" line 22, strike the period at the\nend of the sentence and add: \", unless the Secretary, in his discretion,\nshall find such failure to be an appropriate basis for such preclusion.\nRationale\nThe required studies are, to the extent practicable, to be designed to\npredict biological impacts of the development and production activities.\nTherefore, they will require substantial study efforts, going far beyond\nestablishing and monitoring baselines, leading to predictive capabilities.\nThese new study requirements are likely to lead to substantial delays\nin OCS development unless it is clear that not completing them is not a\nground for delaying development by litigation. On the other hand, the\nSecretary should have discretion to delay approval temporarily if he thinks\nthat more baseline information should be available before initiating\ndevelopment. As now worded, the bill would appear to prohibit the\nSecretary from delaying D&P plan approval if the only reason were an\nunfinished baseline study, even if the Secretary felt that the study\nwas important enough to wait for.\nFORD LIBRARY & CERAÇO\n#32\nAmendment\n:\nCompensation for development plan disapproved\nbecause of failure to demonstrate compliance\nwith applicable Federal law\nSection 25(g) (1)\npage 111 line 7 after \"law,\" add:\n\"Provided, that the lessee shall not be entitled to compensation\nbecause of such disapproval.\"\nRationale\nCompensation should not be provided in instances in which a lessee's\ndevelopment plan is disapproved because he fails to demonstrate that\nhe can comply with the requirements of the Act and other applicable\nFederal law. The proposed amendment makes this point explicitly.\nFORD LIBRARY & GERALD\n#33\nAmendment\n:\nRevision of development plans\nSection 25 (h)\npage 112 in line 13 strike \"or\" and in line 15 after the comma insert\n\"or is otherwise not inconsistent with the provisions of this Act.\"\nRationale\nThe current language does not allow the Secretary to approve revisions\nwhich are merely for the convenience of the lessee or which are in\nthe lessee's economic interest although short of \"avoiding substantial\neconomic hardship\". The Secretary should have discretion to make any\nsuch revisions which are consistent with protection of the marine and\ncoastal environments so long as they are not contrary to the public\ninterest.\nFORD LIBRARY & GERALD\n#34\nAmendment\n: Reimbursement for data reproduction\nSection 26(a)(1)(C)(i)\npage 113, line 22, insert \"or permittee\" after the word \"lessee\"\npage 113, line 23, insert \"or permittee\" after the word \"lessee\"\nRationale\nPermittees as well as lessees are required to provide the Secretary\nwith access to all data obtained. They should receive reimbursement\nfor reproducing such data, if lessees are to receive such reimbursement.\nCORRALO FORD LIBRARY\n#35\nAmendment\n: Price at which leases under so-called \"Phillips System\"\nare awarded\nSection 205(a) Section 8(a)\npage 64, lines 21 through 24, and page 65, lines 5 through 8, delete\nthe words \"at a price which is equal to the average price per share\nof the highest responsible qualified bids tendered for not more than\n100 per centum of the lease area\" in each case where they occur and\ninsert in their place \"on the basis of the value of the bid per share\"\nDelete all from line 10, page 66 through line 2, page 68 and insert in\nlieu thereof: (5) (A) In the event bids are accepted for less than\n100 per centum of the lease area offered under such subparagraph (G)\nor (H), the Secretary may re-offer the unleased portion for such period\nof time as he determines to be reasonable.\"\npage 68, line 3, change (C) to (B)\npage 68, line 8, change (D) to (C)\nRationale\nRequiring bidders to pay more than they bid, if they bid less than\nthe average, could cause serious administrative problems for this bidding\nsystem. Many such bidders would drop out. Re-offer of the remaining\nshares at the average price might or might not result in sale of 100\npercent of the working interest. While this problem could also arise\nunder the Phillips plan as originally conceived, it is far less likely\nto do so.\nThe Committee apparently felt, in adopting the average-price language,\nthat it was somehow unfair to lessees to sell a one percent interest\nto different people at different prices. However, this is a business\nphenomenon that occurs regularly, and is a generally accepted practice\nwherever auctions or bargaining take place. No unfairness, either\nactual or apparent, exists as long as participants are aware of the\nrules by which the sale will be conducted, and can adjust their bidding\nstrategies accordingly.\nThe Phillips plan, as originally conceived, is promising enough to\nwarrant experimentation. However, the bill as now written would\nhandicap it seriously.\nGERALD FORD LIBRARY\n#36\nAmendment: Requiring an EIS on any structure where there has been\nno previous development\nSection 25 (d) (2)\nPage 109, line 5, strike \"structure, area, or region\" and insert in\nlieu thereof \"frontier area\"\nRationale\nThe bill would require preparation of one EIS prior to major development\nin any structure, area, or region of the OCS where there has been no\nprevious development. The existing language of the bill could be\ninterpreted to require preparation of an EIS on each and every structure\nexcept those where development could clearly not be called \"major\".\nIn an OCS area with many small structures this could involve many EIS's.\nThis amendment would clarify the Committee's intent that at least one\nEIS per frontier area be written at the D&P plan stage.\nFORD i LIBRARY GERALD r\n#37\nAmendment\n:\nDefinition of \"affected State\"\nSection 201 (g) (5)\npage 47, line 16\ninsert \"which was extracted from the outer Continental Shelf\"\nfollowing \"oil or gas\"\nRationale\nThis amendment is intended to make it clear that the risk of serious\ndamage from an oilspill has to be associated with OCS development,\nsimilar to the limitations in the previous clauses. As written it\ncould include risk of damage from oil from other sources.\nFORD & LIBRARY GERALD\n#38\nAmendment : Use of proper term for \"structures\"\nSection 203(a)\npage 53, line 6\nstrike out \"structures\" and insert in lieu thereof \"installations\nand other devices\" so that the proposed bill will read \", and all\ninstallations and other devices permanently or temporarily attached\nto the seabed,\"\nRationale\nAlthough the use of the term \"structures\" improves on existing language,\nthe term used in article 5 of the 1958 Convention on the Continental\nShelf is \"installations and other devices\" . This change will clarify\nthat the United States is asserting the broadest authority over mobile\nrigs, semi-submersibles etc., while they are in the drilling mode, and\nwill clarify the Coast Guard's authority over foreign vessels used for\nOCS work.\nNOTE:\nIf adopted, conforming amendments should be made as follows:\npage 53, line 23\npage 55, line 10\npage 55, line 23\npage 56, line 3\npage 56, line 8\npage 56, line 15\npage 56, line 17 - insert \"installation\" in lieu of \"structure\"\nFORD & LIBRARY GERALD\n#39\nAmendment\n: Requiring increased production in shortage or emergency\nNew Section 8(b) (5)\nDelete page 73, lines 5 through 11\nThis subsection requires leases to \"contain a provision that the\nSecretary shall, in the absence of any applicable rule or order issued\nby the President and under conditions defined in applicable regulations\nprescribed by the Secretary, have the right to require increased\nproduction under such lease for purposes of dealing with emergency\nshortages of oil and gas or other national emergencies.\"\nRationale\nThe language neither provides for compensation nor makes it clear that\ncompensation is not to be provided for lost production resulting from\nproducing under Secretarial order. Since the new Section 5(f) (2) requires the\nlessee to produce at rates which assure the \"maximum rate of production which\nis efficient and safe,\" production under this provision would presumably\nbe beyond that rate, causing reservoir damage or diminished production over\nthe life of the reservoir. Including this provision in the lease term may\nperhaps avoid the constitutional problem of taking without compensation since\nthe rights transferred in the lease would be limited by the lessee's\nacceptance in advance of the Secretary's right to require such production.\nHowever, legality aside, lessees damaged by the exercise of such authority\ncould argue that it is inequitable to impose such damages on them while not\nsimilarly treating oil and gas producers on onshore Federal lands, oil and\ngas producers on private or State lands, or coal or other energy producers\nwhose products could be substituted for oil or gas in shortages or emergencies.\nWithout compensation, all lessees will discount lease bids to reflect\nthe uncertain probabilities and costs of this power being exercised.\nWith compensation the Government, if it were to exercise the authority,\nwould be enmeshed in thousands of suits seeking to recover damages which\nwould be very hard to fairly determine.\nof GERALD LIBRAR FORD\nOFFICE OF MANAGEMENT AND BUDGET\nROUTE SLIP\nGlenn Schleede\nTake necessary action\nTO\nApproval or signature\nComment\nPrepare reply\nDiscuss with me\nFor your information\nSee remarks below\nFROM\nNorman Hartness\nMSR\nDATE 6/2/76\nREMARKS\nThis is the document we discussed over\nthe telephone. Please note that the\namendments preceded by asterisk are\nrequired amendments in the Administration's\nview. Those not so preceded are other\namendments which we think are desirable.\nDC\nFORD & LIBRARY GERALD\nOMB FORM 4\nREV AUG 70"
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