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locales where they will have the security so vital to raising families and making decisions about the future.

“So the on-again off-again syndrome can create a drain in experienced manpower.

“An oil company official explains it this way:

“ 'It is closely in terms of resources because people are not able to build up their learning, and the more we learn the less things cost us. It's said that the first platform always costs the most, and that each subsequent platform costs less because the workers learn more with each platform they build. But when work becomes sporadic, you have a greater turnover and you get into a situation because of the turnover where you are always building your first platform.'

"As far as the oil company itself is concerned, it is in the business to produce the valuable liquid. If there is a curtailment in offshore Louisiana work because of postponed lease sale, the company will drill someplace else, and when the sale is rescheduled, it will be there ready to re-bid on the valuable tracts.

"But during the interim, it has been the South Louisiana resident who makes his living from the offshore industry who has suffered.

"Said an oil company official: “ 'It's not so much that we can invest elsewhere that's important, but what can we do here. I'm buying my home here and I want to stay here.

"His comment is shared by all those who earn their living from the industry that exists off Louisiana's coast.

"In Norgan City, where an estimated 95 percent of the population depends directly on the industry, a banker gave this summation:

"A few months delay in holding a scheduled sale doesn't seem to be beneficial to anyone. We would anticipate that the sale would be held in the near future. If not, we would be upset. The worker would be severely injured as far as pay is concerned; money to buy food and clothing. If we were to have unemployment in our area and there's no need for this.

" "There's a great demand for fuel, alone, and there's the shortage of oil that's been declared by the petroleum industry. We would just believe that our government wouldn't do that (postpone the sale even further). We would believe that our government would be more interested in the welfare of our people and the necessity of this fuel. I don't know of an oil company or a service company that is in favor I of pollution.'"

Question 56. Summarize, by state and by type for the last ten years. payments to the states and to the Reclamation Fund from Federal onshore mineral lease revenues, under terms of the Mineral Leasing Act, and the Alaska Statehood Act.

Answer 56. The following table summarizes for 1961–1971 payments to states and to the Reclamation Fund from Federal onshore mineral lease revenues under the terms of the Mineral Leasing Act and the Alaska Statehood Act.

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Question 57. Summarize the major alternatives considered by and the major findings and recommendations of the Public Land Law Review Commission and of the Commission's contractor reports with respect to sharing of revenues from OCS mineral leasing. What is the current position of the Administration on these recommendations ?

Answer 57. The PLLRC report, on page 193, states that “To the extent that adjacent states can prove net burden ... from the Outer Continental Shelf ... compensating impact payments should be authorized and negotiated.” However, the report continues by stating that payments in lieu of taxes are considered “inapplicable to the Outer Continental Shelf." The report presents the following conclusions:

(1) “We, therefore, conclude that adjacent states should not share in the revenues from Federal mineral leases on the Outer Continental Shelf.

No evidence has been developed in the studies performed for us, or presented to the Commission by any coastal state, which demonstrates that there is a net burden to the states as a result of activities on the Federal Outer Continental Shelf."

(2) “It may be that states can prove a net burden. But proof should lie with the states and the local units of government having jurisdiction over the area which is burdened.

The Commission rejects the suggestion that the states or their subdivisions be permitted to tax a possessory interest in facilities located on the Outer Continental Shelf as not being consistent

with maintaining exclusive Federal jurisdiction." Neither the contract studies nor the report provide any facts that support a conclusion that a state might prove that OCS operations develop burdens for those states which justify the need for impact payments, payments in lieu of taxes or revenue sharing.

We are unable to provide a basis for legislation which would provide for payments for one or more coastal states.

The Department would be willing to cooperate in analyzing any evidence that may be offered in the course of the Committee's review which might support the need of coastal states for impact payments, payments in lieu of taxes, or revenue sharing as a result of a net burden resulting from OCS operations.

Question 58. What are the implications, including the advantages and disadvantages, of legislation authorizing the coastal states to levy and collect a severance tax at a rate no higher than that applicable to on-shore production within the state, on mineral production from the adjacent Outer Continental Shelf?

Answer 58. This question is related to 14.

The taxing authority of the States is set forth in the Constitution. As a general rule Federal lands and property may not be taxed nor may articles produced in one state be exported to another.

A severance tax usually occurs after title to the product or material has passed from the Federal to the private owner. Where severance taxes are used, for example in the case of timber or minerals, the tax is universal in the state.

In the case of OCS mineral production, the energy resource is produced on Federal land outside the boundary of the State and a tax, as such, could constitute a state import tax or duty. Under Art. I, Sec. 10, para. 2 of the Constitution taxing authority would require an act of Congress.

ART. I, SEC. 10. PARA. 2

"No State shall without the consent of Congress, lay any Im posts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspections Laws: and the net Produce of all Duties and Imposts, Laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision

and Control of the Congress. Also Article IV, Sec. 3, para. 2 gives exclusive jurisdiction to the United States over all Federal Territory: "The Congress shall have the Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States:..."

The issue of where the "boundaries" between the states would lie offshore would pose certain technical problems that could be solved objectively but would be subjectively tested.

The question poses issues not unlike the Tidelands controversy but more complex.

On the one hand, at present any resource produced within a state is subject to its taxation. On the other hand, the entire revenue from the OCS is deposited in the Treasury and generally available for the whole range of Federal activities with special and general values to each of the 50 States.

There is no equity to the historical accidents that created each State's size and shape, its wealth vis a vis another's and its fiscal capacity to meet the many needs its people share in common with the residents of other States or those needs peculiar to its residents. Twenty-two of the 50 States border the OCS (Connecticut and Pennsylvania are considered to have Tidal Coast line, not General Coast Line). Five of these States have less than 50 miles of General Coast line, and one only 53 miles. Out of 12,400 miles of Coast Line, two States (Alaska 6,610 mi., Florida 1,350 mi.) have 23 of the Coast line. The General Coast line of New Ilampshire is but 13 miles while adjacent Maine. with which it is not too dissimilar, has 228 miles and neighboring and greatly similar Vermont has none.

The potential wealth in the sea and the depth, breadth, and availability of the Shelf for production bears little relation to Coast line or any concept of taxation.

None of these elements bear any relation to the revenue needs of the Coastal States.

States with a sparse population scattered over a large area can cite these as reasons why road, school, police, fire and other service costs are liigh. States with a concentrated population can cite density as a factor that raises costs. States whose commodities are exported can cite this situation.

We know of no reason why a coastal state should be permitted to tax oil that originates outside its boundaries, whether it be in adjacent coastal waters or in an adjacent state, simply because it is landed in that state.

The Administration has proposed a comprehensive system of Federal revenue sharing which seeks to distribute Federal revenues in a manner advantageous to the 50 States so as to better equip them to meet their particular needs. These proposals leave untouched all of the present shared revenue and payment-in-lieu of tax systems involving Federal lands and resources. However, both as a result of PLLRC and other studies, suggestions have been made that the shared revenues and PILT better conform to the tax contributions from similar lands and resources within the several states. The major disadvantage of the proposal implied by Que. 58 is that it would, in effect, create a nem inequitable revenue sharing system. It would immediately benefit a few coastal states, probably never benefit some coastal states, and be relatively detrimental to at least 28 States.

A second disadvantage is that it would provide cash benefits to a few States but create no obligation to provide governmental service to the revenue producing Shelf area.

A third disadvantage is that it is bottomed on the concept that geographic proximity is a sound rationale for Federal revenue sharing.

The advantages in the proposal are thus highly limited to those States whose Shelf can and will produce revenue. In those few cases substantial revenues well beyond any burdens would be derived.


Requested statements for the Hearing Record of June 19, 1972 on

Federal Leasing and Disposal Policies

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