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SUBMISSION OF THE ATOMIC ENERGY COMMISSION

U.S. ATOMIO ENERGY COMMISSION,

Washington, D.O., August 7, 1972. Hon. HENBY M. JACKSON, Chairman, Committee on Interior and Insular Affairs, U.S. Senate, Washington, D.C.

DEAR SENATOR JACKSON : In response to the request in your letter of June 1, 1972, concerning leasing and disposal policies for energy resources on the public lands, we are pleased to enclose herewith for the record answers to those questions in Attachment A and B to your letter that are within the areas of competence or concern of the Atomic Energy Commission.

If we may be of any further help or supply any additional information, please let us know. Sincerely,

EDWARD B. GILLER,

(For the General Manager). Enclosure.

ATTACHMENT A GENERAL ISSUES OF ENERGY RESOURCE MANAGEMENT ON U.S. PUBLIC LANDS

(1) Which energy resources on the public lands (a) are now, or (6) could be, made available in the foreseeable future, as a major element in the nation's energy supply?

Answer. Uranium is now available as a major element in the nation's energy supply. Approximately 60% of the known reserves and estimated additional uranium resources are on public and Indian lands.

The Commission is also working on a nuclear explosion method of stimulating natural gas production from tight formations. Assuming continued success in this effort and public acceptance of the technology, a trillion or more cubic feet of natural gas could be made available in this way each year beginning in the late 1970's. Up to two or three hundred trillion feet of gas in formations on public lands are potentially amenable to production by the nuclear method.

In FY 1973, under expanded authority of a recent amendment to the Atomic Energy Act, the Commission has also begun support of non-nuclear energy applications aimed at “the preservation and enhancement of a viable environment by developing more efficient methods to meet the Nation's energy needs.” It is expected that part of the Commission's support will be directed to new methods of exploiting geothermal energy, oil shale, coal and other resources on public lands. The Commission's interest in these resources, is in the technical side of resource management, up to and including the pilot project or demonstration stage. The Commission, while interested in and affected by leasing and disposal policies as they impact on recovery of such resources from the public lands, is not responsible for the development and management of those policies. In specific cases, the Commission makes known its views to the Department of the Interior on policy matters affecting the Commission's work.

(2) What are the principal goals and objectives of the government with respect to management of each resource!

Answer. Uranium, although used primarily as a fuel, is a metal and occurs in nature like other metals. It is, therefore, subject to the mining laws and other pertinent legislation. While the management of mineral resources is in general the responsibility of the Department of the Interior, the AEC is very much interested, pursuant to its statutory authority (42 USC 2097), in the development of uranium resources and their availability to provide the fuel for the development of nuclear power as a viable energy option. For this reason, the AEC maintains a close review of uranium exploration, resource development, and production capability.

1 42 U.S.C. 2051a (6).

The AEC also has broad powers under the Atomic Energy Act of 1954, as amended (42 USC 2091-99), to issue licenses for and to distribute source material which includes uranium (42 USC 2014 (2)) ; to issue rules and regulations, or orders requiring reports of ownership, possession, extraction, etc., of uranium; to purchase, take, requisition, condemn, or otherwise acquire any interest in real property containing uranium. The Commission is also authorized, subject to certain limitations, to issue permits for prospecting, exploration, and mining on lands belonging to the United States.

Except for the period (1947 to 1966) when the primary use of uranium was for defense purposes, and except for certain lands (approximately 40 square miles located primarily in western Colorado) acquired during the early part of that period for government exploration, which the AEC now proposes to lease for private mining operations, the Commission has not considered it necessary to exercise its statutory authority relating to uranium on the public lands other than by the licensing of processing (milling) operations.

(a) To what extent is each goal or objective specifically set out in law, or adopted at the discretion of the Department?

Answer. The AEC's statutory authority is set out in the Atomic Energy Act of 1954, as amended (42 USC 2011 et seq.).

(b) To what extent is each goal or objective compatible with other objectires for the management of individual resources? (For erample, how are encouragement of current development, conservation of supplies for future use, and masimization of government revenues reconciled?)

Answer. With respect to its proposed limited leasing program, the Commis. sion hopes to maximize both conservation of resources and Government revenues by procedures, including competitive bidding and appropriate royalty rates. which will encourage the orderly development and maximum economic recorers of the total uranium resources in the area.

(c) What is the basis for any differences in goals or objectives with respect to different energy resources?

Answer. Although AEC has a basic concern over the maximum effective development of all energy resources to meet the energy needs of the country, its primary responsibility under the act is in the area of nuclear resources.

(a) To what ertent do the goals and objectives of the principal legal authorities under which individual energy resources are managed require review to determine if they are consistent with today's energy requirements and environmental gogisi

Answer. The Commission believes that the energy requirements of the nation are of such magnitude that the management of energy resources should be kept under continual review in the light of current energy requirements and goals. The AEC has a program of review and assessment of nuclear fuel resources includ. ing general assessment of foreign resources.

(3) How do you relate the Mining and Minerals Policy Act to Department of Interior policy regarding federal leasing of energy minerals!

Answer. Not applicable.

(4) For which energy resources does your Department (or agency) have a long-term schedule, plan, or strategy for leasing or disposal? To what ertent, and how, dloes each take into account national and regional demand and alternative 80urces of supply (including outstanding inactive, nonproducing federal leaset, private and state lands, etc.)? In particular, what are the Department of INterior's policies for leasing coal, Outer Continental Shelf oil and gas, oil shale, and geothermal resources ?

Answer. The Commission is intensely interested in the long-term availability of uranium and is supporting a vigorous reactor development program, with the objective of making more efficient use of uranium resources, and a uranium resource eraluation program to assess the long-term availability of uranium and to provide information for long-range planning and for establishing public policy.

(5) In view of the large acreage and probable quantities of some energy resources in private ounership. or under current federal lease, what is your position on the need to issue additional leases or prospecting permits? Consider especially coal and oil shale.

Answer. Not generally applicable. However, for programmatic reasons not directly related to the question, the Commission does propose to lease on a competitive basis the limited area of uranium-bearing lands which it controls.

(6) For each resource, what conditions regarding land reclamation, protection of other resources, or environmental quality, are currently required for exploration or energy resources production on the public lands?

Answer. Inasmuch as uranium is a locatable mineral, the mining laws in effect give a locator possessory rights to the claim. Requirements regarding land reclamation, protection of other resources, or environmental quality stem from relatively recent environmental legislation, such as the National Environmental Policy Act of 1969 (PL 91-190, 42 USC 4321 et seq.), the Clean Air Act (42 USC 1857) and the Water Pollution Control Act (33 USC 451).

(a) To what extent are such conditions prescribed or proscribed by law, or within the discretionary authority of the Interior Department?

Answer. The use of its licensing authority to impose environmental requirements on persons and enterprises engaged in uranium mining operations would be at the discretion of the Commission in non-agreement states.

(b) In what instances, if any, does the law permit or require bonding or other assurance of financial responsibility for environmental protection or performance?

Answer. The Mining laws do not require bonding. The Commission might impose such a requirement as a condition of its issuance or continuance of a license to transfer source material from a mine (42 USC 2092).

(c) What, if any, recourse or enforcement authority has the Interior Department (or your agency) with respect to violations or default of contract provisions regarding protection of other resources or environniental quality, or land reclamation? Does the Federal government have authority to cancel a lease, permit, or other resource right in such an instance? Is additional authority needed at this time? If so, what provisions would such new authority contain?

Answer. In connection with its own limited uranium leasing program, the leases will include provisions for environmental protection and AEC will have full enforcement authority with respect to a lessee's failure to comply with lease provisions, including those relating to protection of other resources, environmental quality and land reclamation. It will also have the authority to cancel leases in such instances (10 CFR 60.8(s)). No additional authority is required at this time.

(d) What has been the specific effect of environmental laws, regulations, and requirements on the level of exploration and production of energy minerals on the public lands?

Answer. Environmental laws, regulations, and requirements have probably had the effect recently of reducing the level of exploration and production of uranium, primarily as a result of delaying and increasing the cost of reactor and mill construction.

(7) What safeguards in the preparation of a new five-year leasing schedule icill protect against, and provide relief from, anticipated recurring delays due to litigation and other foreseeable resistance to continuing regularly held OCS lense sales?

Answer. Not applicable.

(8) Does the present system of leasing or disposal for each energy resource provide sufficient incentive for early exploration and development? Do the current size of the 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?

Answer. The present system of disposal for uranium (location of mining claims) appears to provide sufficient incentive for early exploration and development, given the requisite levels of prospective markets and prices.

(9) In which cases, if any, do elements of the present system encourage speculative nonproductive holding of resources on the public lands? Consider particularly:

(a) Noncompetitive leasing of onshore oil and gas. Answer. Not applicable.

b) The system of prospecting permit and preference right leases for coal. Answer. Not applicable. (c) The indefinite term and twenty-year review of coal leascs. Answer. Not applicable. (d) The location patent system for uranium ore.

Answer. The present system requires that $100 worth of labor per year per unpatented uranium mining claim be performed. This is approximately a $5-peracre holding cost. Compared to the advance royalties and/or rentals typically paid for private lands, this figure is very low, and probably does encourage speculative non-productive holding of uranium resources.

(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 bene fit docs the public receive from leasing or disposal programs in which receipt of fair market value is not a principal objective?

Answer. Disposal of uranium is primarily by location under the mining laws and does not provide for receipt of fair market value (or any direct value) by the government for the resource. The public benefits received from such a disposal program are indirect. These include the employment of people in exploration, development, mining, transporting, and processing activities and the added federal, state, and local taxes engendered by such activities.

(11) What is the experience to date with respect to classes of enterprise engag. ing 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 erample, large integrated firms)! What is the relationship between classes of enter. prises 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. If land controllers are broadly classed as "large" or "small" in terms of their financial resources, AEC's experience indicates that more than 90% of uranium production has been by "large” companies, most of which are integrated in that they own not only mining properties but also ore processing plants. Of the presently known low-cost uranium reserves, about 98% are directly or indirectly (through subsidiaries and joint ventures) controlled by some 30 corporations or partnerships classed as large in varying degree.

The remaining 2% of uranium reserves are controlled by more than 1000 : all companies, partnerships and by individuals.

Acquisition of uranium lands by various means, including staking the public domain and other methods, has evidently been widespread in all classes of enterprise. The effectiveness of exploration and of reaching the production stage has, however, as in any industry, been greatest for those having considerable financial resources.

Uranium not being a so-called "leasable" mineral, the location-patent system applies to it on the public domain. A number of major uranium deposits have been developed, however, on leased Indian Lands (e.g., the Laguna, Navajo and Spokane reservations). Since such leases involve rather large cash bids for desirable tracts, as well as substantial performance requirements, they are usually out of the reach of financially weak parties.

Location on the public domain is the lowest cost method of obtaining mineral rights. It is therefore available to numerous small companies and individuals having limited resources. It is also available to larger companies, which are financially able to bear the expenses of locating and performing the labor requirements on numerous claims. The problems and expense of taking such claims to patent are significant. The larger companies are in a better position in this respect, and small locators have frequently chosen to sell their location rights, particularl; if they have succeeded in finding showings of a promising ore deposit. However, it must be said that the location-patent system does not in itself favor any particular class of enterprise.

(12) What are the advantages and disadvantages, in terms of the criteria set forth below, as applied to OCS oil and gas leasing of (1) cash bonu8 bid-fired royalty system; (2) deferred bonus bid-fixed royalty system (payments of one third of the bonus bid successively upon award of lease, discovery, and production); and (3) fixed bonus-royalty bid system!

Answer. Not applicable.

(13) How adequate for purposes of planning and management is the informa. tion available to your Department or Agency on energy resources of the public lands? Consider particularly:

(a) Geological and geophysical information relevant to OC 8 oil and gas leasing. Answer. Not applicable.

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