the lease. Producing leases may be canceled for such failure only by judicial proceedings.

We believe the Department presently has ample authority to suspend operations and/or cancel a lease.

(d) The net effects of strengthened environmental laws has been an increase in the time required to implement operational steps which necessarily precede and lead up to an OCS sale and some reduction in the acreage offered for lease.

In order for the Department to fully comply with the requirements of NEPA as it has been interpreted in recent court decisions, a further increase of this time frame has been necessary.

Onshore minerals. Under 43 CFR 23.5(a) (1) departmental regulations and BLM manual procedures, before a permit for exploratory activity is issued, a technical examination is made to determine the probable effect of prospecting activity on the environment.

The examination takes into consideration the need for the:

preservation and protection of other resources including recreational, scenic, historic, and ecological values; the control of erosion, flooding and pollution of water; the isolation of toxic materials; the prevention of air pollution: the reclamation by revegetation, replacement of soil, or by other means, or lands affected by the exploration or mining operations; the prevention of slides; the protection of fish and wildlife and their habitat; and the prevention of hazards to public health and safety.

Stipulations to protect the environment are incorporated in the permit. If the technical examination reveals that operations cannot feasibly be conducted to avoid certain specified damages to the environment, operations may be prohibited or restricted in the area under application.

For onshore oil and gas, a BLM manual 3109/3509 prescribes that the same type procedures followed under 43 CFR 23 for other minerals will also be followed before the issuance of oil and gas leases.

With respect to those nuclear, uranium and thorium, deposits which are subject to the location-patent system, the Mining Law of 1872 does not provide for the Government's control of environmental impacts. The authority of the Secretary to impose environmental controls on activities under the mining law is now under study by the Department. Mining operations would be subject to applicable State water and air quality and surface restoration controls and to various surface management authorities of the Federal resources management agencies.

AEC, in its procedures to license uranium ore processing plants, requires as part of the NEPA section 102 environmental impact statement a description of the environmental impact of associated mining operations.

(a) The above described procedures for controlling environmental impacts for leasable minerals are within the discretionary authority of the Secretary.

However, the Mineral Leasing Act states in 30 U.S.C. 187 as a general principle, that leases shall contain provisions for exercising care in the operation of properties and for safeguarding the public.

Moreover, the National Environmental Policy Act specifically requires that all other statutes and regulations be administered and interpreted "to the fullest extent possible" in accordance with its policies.

(b) The leasing acts provide that the Secretary shall prescribe such rules and regulations as he may deem appropriate to carry out the provisions of the acts, including bonding requirements for environmental protection or performance. For nuclear minerals, the mining law does not make provisions for bonding requirements.

(c) The Department does not have the authority to cancel leases, except geothermal steam and nonproducing oil and gas leases, for violations or default of contract provisions regarding protection of other resources, environmental quality, or land reclamation. Nonproducing oil and gas and geothermal steam leases can be cancelled administratively for violations by the Department.

Other leases can be cancelled only by Federal courts. The Department does have the authority to cancel all permits for noncompliance with the terms and conditions.

Additional authority is not not needed with respect to the cancellation of any permit. However, the Department does need the authority to cancel all leases administratively for noncompliance with the terms and conditions.

(d) For nuclear minerals which are subject to location under the mining laws, there have been no requirements for environmental protection except for requirements under applicable State laws or various surface management authorities of the Federal resource management agencies.

The effect is not known at this time of the AEC's requirement for a description of the associated mining operations prior to the licensing of uranium ore processing plants.

For the minerals subject to lease, the environmental laws, regulations, and requirements have caused some delay in the levels of exploration and will probably continue to delay issuance of new leases and permits.

Question 7. What safeguards in the preparation of a new 5-year leasing schedule will protect against, and provide relief from, anticipated recurring delays due to litigation and other foreseeable resistance to continuing regularly held OCS lease sales?

Answer 7. In the preparation of a new 5-year OCS leasing schedule, adequate time, based on our most recent experiences, is being allowed for preparation of environmental impact statements and public hearings in compliance with NEPA.

Contracts have been made with agencies whose expertise in environmental analyses and alternative energy sources enables them to make substantial contributions to our planning and analytical efforts.

BLM has strengthened its staff working on the environmental analysis of OCS development. Environmental impact statements prepared for each proposed OCS lease sale are increasingly comprehensive, and every effort is being made in the preparation of these statements to comply with the requirements of NEPA as interpreted by the courts. I might say here, Mr. Chairman, once having prepared a full environmental statement, which satisfies the requirements of the court, if we are able to do that, we shouldn't have to repeat that work, the major part of that work, for each site.

The alternative sections and a large amount of the material that is included in a full scale environmental statement will be useful

with compartively minor revisions for successive sales. It is largely, I think, the question of getting the proper format to begin with.

Turning now to question 8, does the present system of leasing or disposal for each energy resource provide sufficient incentive for early energy resource provide sufficient incentive for early exploration and development?

Do the current size of lease tracts for the various energy minerals, acreage limitations on lease holdings, and length of lease terms deter exploration and/or development of any energy resource on public lands?

There are strong indications that the present OCS leasing system of cash bonus bidding and fixed royalty have provided sufficient incentive for early exploration and development of leases.

The large cash bonuses that companies pay represent immediate, sunk, costs that stimulate early exploration. However, the Department is presently studying alternative bidding systems, and one of the purposes of these studies is to determine the relative effects of various bidding systems on providing incentives for early exploration.

Some of the pros and cons of the various systems as applied to exploration and development are discussed in the answer to question 12.

We believe that the current size of lease tracts, usually 5,760 acres, and length of OCS leases. 5 years and so long thereafter as production occurs, do not normally have deterrent effects on exploration and/or development.

There may be some merit in providing for longer primary terms in new areas, that, because of adverse weather conditions, such as in the Gulf of Alaska, result in short field seasons.

Although the current sizes of lease tracts for the various leasable. onshore energy minerals do not generally deter exploration and/or development of any energy resource on public lands, consideration should be given to revising the reserve limitation system to a system of quantity and/or quality of recoverable resource instead of the present acreage system.

Obviously, for example, the 46,080 acres of coal limitation per State does not provide a meaningful starting point to limit the coal holdings. That is, there is a tremendous reserve difference between 46.080 acres of a 4-foot coal bed and 46,080 acres for a 100-foot coal bed.

Any limitation of coal reserve holdings should therefore be based on the estimated quantity and/or quality of the recoverable reserve and related to the appropriate quantity and/or quality needed by industry for development. A quantity-quality reserve limitation system would equally be applicable to oil shale.

The mining law imposes, by its very nature, an economic limitation on the locatable nuclear mineral reserve holding and an economic incentive for exploration and development. Mining claims for such minerals, for example, would be valid only where the claimant has made a discovery of valuable mineral within the meaning of the mining law.

Generally, the past lease terms for the onshore leasable energy minerals do not deter exploration and/or development of any energy resource. On the other hand, the terms have not generally provided for early exploration and development for coal.

We have, for example large acreages and reserves of coal deposits under lease that are not yet being developed. However, many of these deposits are the basis for the planning of large powerplants or gasification projects.

The Department has under consideration a variety of alternatives in management procedures that will aid the resource manager in coal lease and permit management decisions, including diligent development and minimum production requirements, advance royalty periods, lease term adjustment periods, escalating rentals, minimum development requirements, bidding procedures, sealed bidding versus oral auction, schedule of production plans, and criteria needed to define situations (1) when and where prospecting permits are needed, and (2) whether development, if desired, should be accomplished only through competitive leasing.

Question 9. In which cases, if any, do elements of the present system encourage speculative nonproducing holding of resources on the public lands? Consider particularly

(a) Noncompetitive leasing of onshore oil and gas;

(b) The system of prospecting permit and preference right leases for coal;

(c) The identifinite term and 20-year review of coal leases; and (d) The location-patent system for uranium ore.

Answer 9. (a) For onshore oil and gas leases, the lack of specific requirements to drill within a specified time could, in effect, encourage speculative nonproductive holding of the resource.

On the other hand, a noncompetitive oil and gas lease, by definition, is a speculative lease because the lands are not within a known geologic structure.

(b) The terms and conditions imposed in a coal prospecting permit specify certain exploration requirements within the 2-year life, with a 2-year renewal if justified, which effectively discourage long-term speculative holdings.

Under former preference right lease terms and conditions, the lack of minimum production requirements and sufficiently high escalating rentals encourage speculative nonproductive holding of the public land resources.

The net result was a low holding cost. The newer terms and conditions will specify high escalating rentals, and minimum production requirements are again under consideration.

(c) The new coal lease minimum production requirements and escalating rentals will discourage speculative nonproductive holdings of new or renewed leases regardless of the indefinite term and present 20-year renewal period.

The purpose of the renewal periods is to provide a timely adjustment of the terms and conditions. In the Department's proposal to reform the mineral leasing laws, a review at 10-year periods is proposed, after an initial term of 20 years.

The recent geothermal steam act authorizes the Secretary to adjust terms and conditions of the lease at not less than 10-year intervals beginning 10 years after the date geothermal steam is produced.

This, in effect, allows the lessee approximately 5 years to get into production with readjustment of terms every ten years thereafter. That arrangement could also be considered for coal.

(d) Although the mining law requires that the locator make a discovery of a valuable mineral deposit, it does not require production either before or after he proceeds to patent.

The administration's bill to reform the mining law would take positive steps to prevent the holding of mining claims for speculation. Question 10. Does the present system of leasing or disposal of each energy resource provide for receipt of fair market value by the Government for the resource?

Consider particularly the four instances named in question 9. In each instance where the Government generally receives less than fair market value, what benefit does the public receive from leasing or disposal programs in which receipt of fair market value is not a principal objective?

Answer 10. The present competitive system of cash bonus bidding for OCS leases is believed to provide a substantial safeguard for obtaining fair market value by the Government for offshore leases.

The receipt of fair market value is one of the principal objectives of all leasing or disposal programs. However, the law frustrates this objective in certain cases. Noncompetitive oil and gas leases are obtained without a bonus bid and at a minimal cost and, if a discovery is made, fair market value probably is not obtained. The royalty rate, for example, is less in most cases for a producing noncompetitive lease. I am sure you or the members of the committee will have some specific questions in that connection.

I think I will perhaps skip the rest of the answer on that question. Question 11. What is the experience to date with respect to classes of enterprise engaging in exploration and production operations involving energy minerals on public lands?

Does the present system of leasing or disposal for any of the major onshore and offshore energy resources unduly favor some classes of enterprise, for example, large integrated firms? What is the relationship between classes of enterprises presently engaged in development of energy resources on public lands and the rate of exploration and production with respect to the development of coal, oil shale, and geothermal energy?

Answer 11. Insofar as Outer Continental Shelf oil and gas leasing is concerned, the present system of cash bonus bidding, together with unlimited liability for pollution damage, favors the acquisition of leases by large integrated companies.

History shows that individual major companies have controlled 46 percent of the acreage and 63 percent of production; groups of majors hold 35 percent of the acreage and 34 percent of production, groups of independents have 17 percent of the acreage and 2 percent of production and individual independents control 2 percent of the acreage and 1 percent of production.

Most of the coal exploration and production operations on public lands are being accomplished by medium and large size firms. When large competitive coal leases are offered, the total bonus bids are generally very high and, therefore, tend to favor the large operator.

However, the small operator is not ruled cut because under the present system, he may request a small acreage offering. The system of disposal by prospecting permit favors no class of enterprise because permits, if issued, are granted to the first qualified applicant.