definitions that have come to us from the courts and substantive Federal action.

But at any rate, it seems clear to us also that for proper development of the resources, for meeting energy needs, we have to consider coal development on at least a basin-wide basis, along with all the other factors which are going to affect the environment in that area.

Such as, just for one important example, the installation of large power stations and the installation of substantial high voltage transmission lines.

Senator Moss. As I understand it, the term "coal leases" are now designated as indeterminate and I wonder how you would cancel a lease, short of court action, after 20 years?

Mr. LOESCH. Well, I don't believe coal leases are indeterminate. However, they are for a 20-year term with successive 20-year renewals. In the past the renewal has been absolutely automatic if the lessee desired renewal. He got it. And, of course, at a very low annual rental

rate.

Throughout the forties, fifties, and early sixties, these leases went for a maximum of $1 an acre, after the initial 5 years or more of the lease the rental escalated to $1. To a company or an individual, for that matter, desiring to hold such a lease for speculation, the cost is minimal. It is written off taxwise as the cost of doing business and from a corporate standpoint, of course, that cuts it in half forthwith. Our policies, of late, have been an escalated rental based on appraisals jointly arrived at by the Bureau of Land Management and U.S. Geological Survey providing for rather substantial escalation at the end of the fifth year of the lease.

Now, if such escalated rentals rise high enough, they certainly would discourage long-term speculative holdings. We have a question in our mind as to whether they would discourage it enough and whether there should not also be built in a minimum production requirement as well as the escalated rental.

Senator Moss. Is the Department now developing a general policy and plan on these coal leases?

Mr. LOESCH. Yes, sir; it is. We have tried it experimentally, as a matter of fact, in nearly-2 years ago, 18 months ago.

We held a coal sale in Wyoming which represented our initial cut at an escalated rental. I can't remember the name of the lessee, but it was a company which had a plan to use the low-sulfur coal in utilities plants in Iowa. I believe it was the Iowa Power Co. who purchased at this sale.

I believe-John, can you recall what the escalated rental on that was in the 5 years?

Mr. SPRAGUE. No.

Mr. LOESCH. I think we went to $9, if memory serves me on that one. Senator Moss. Well, when can we count on this policy being settled upon and followed?

Mr. LOESCH. In all honesty, Mr. Chairman, I couldn't guarantee you a date.

You understand in addition to thrashing out the policies within the Department, it will necessarily have to be cleared around the executive branch. I hestitate to speculate on when that might be.

I can tell you this. In my shop, by the looks of things today, I don't think we are going to have another coal sale for at least 6 months. We haven't had one for 18 months and I doubt very much if we will have one in the next 6.

The reasons for this are manifold, including our attempt to get the new policy off the ground, but in addition the requirements of NEPA, as expressed by the courts in connection with the offshore sale of last December, have required us to go back to the drawing board.

Senator Moss. In May of this year the Bureau of Reclamation issued an appraisal report on the Montana-Wyoming aqueduct. This was a reconnaissance report to deliver water by pipeline primarily for the development of an electric power generating complex, utilizing the billions of tons of strippable coal deposits in that area and the projected water requirements are estimated to be 2.6 million feet annually. Senator Metcalf of this committee expressed great interest in this matter and asked if I could find out from you some additional detail. How much of the coal involved in this potential development would be on public land; do do you know?

Mr. LOESCH. I don't know offhand, but I think it would be at least 50 percent. We have massive coal reserves in Montana, Wyoming, Colorado, and Utah, perhaps other places, your State, too, for that matter, Mr. Chairman, although not quite so much in Utah as in Montana and Wyoming.

Senator Moss. What is the status of leasing these reserves that would be affected by this project?

Mr. LOESCH. I don't know the answer to that question. I can say as I said a minute ago, that we don't propose, as a general policy, and this is without regard to how we come out on minimum production requirements and escalated rental, we don't propose to hold these sales unless we are able to guarantee prompt development in some

way.

Senator Moss. Considering the current Federal task force study of a similar energy complex in the southwest, will the Department view its role differently in encouraging assistance as provided to the advantage of the Montana-Wyoming development?

Mr. LOESCH. No, I don't think we will view our role differently. We are presently investigating the necessity, and we think it is a necessity, of rather comprehensive study and planning efforts in the large coal basin areas of Montana and Wyoming.

This whole question, too, Mr. Chairman, is wrapped up with the land use planning bill which your committee has passed out.

The environmental questions are going to be as troublesome-that is the balance is going to be as troublesome up there as it is in the southwest and I think it is going to require some kind of equal treatment.

Senator Moss. What efforts are now underway to insure adequate advanced planning in this area?

Mr. LOESCH. Right now the Bureau of Land Management is doing its own study on the Powder River Basin, one of the major coal areas in Wyoming and Montana.

We presently have a question as to whether we should attack in this area with the task force system that we used in the southwest or

whether we can do it within the context of the Bureau's expertise
without setting up such a team.

Based on our experience in the southwest, the southwest energy
study, I don't think it will take us near this long to do the job in
Montana and Wyoming.

Senator Moss. Is that because of greater uniformity of the terrain
and the deposit up there?

Mr. LOESCH. Well, yes; but also equally significant because of the
experience we have gained in the southwest energy study.

Senator Moss. Turning to oil and gas leases, do you have any figures
on the number of noncompetitives oil and gas leases that achieve com-
mercial production?

Mr. LOESCH. I don't, Mr. Chairman. We can furnish that for the
record.

Senator Moss. Yes, if you would, please.

Mr. LOESCH. We will do it.

(Subsequently the following response was received for the record:)

U.S. GEOLOGICAL SURVEY-CONSERVATION DIVISION

COMPETITIVE AND NONCOMPETITIVE PRODUCIBLE AND NONPRODUCIBLE OIL AND GAS LEASES PUBLIC AND
ACQUIRED LANDS, UNDER SUPERVISION DEC. 31, 1971

Note: Percent based upon total number and acreage under supervision. The number and acreage shown for producible
competitive and noncompetitive oil and gas eases are computed by multiplying the percentages of the number and
acreage of competitive and noncompetitive royalty accounts under automatic data processing times the producible leases.

Senator Moss. Would a small oil and gas operator be forced out of
business on a system of all competitive leases, could they compete with
the majors under such a system?

Mr. LOESCH. I believe it would probably tend that way. I don't think
the small independent would be forced entirely out of business.

If we handle the competitive leasing onshore in a broader way, there
would be great areas where I don't think the majors would be much
interested.

It seems to me the independents would continue to do the really wildcat type exploration they have done in the past.

Senator Moss. Do you think, then, if we went to all competitive leases that this would increase exploration in the Rocky Mountain area, for example?

Mr. LOESCH. I don't have an opinion on that, Mr. Chairman, myself. I have a feeling that any time you build in another cost, you lower to some degree the interest that people have in engaging in that activity.

So, if any all competitive system caused every lease to be bid on and the bonus to be substantial, I would believe that it would lower competitive interest and keep some people out of the field.

Senator Moss. What precipitated the new terms and conditions that you discussed for coal leases and could you provide a new lease form for the record for us? I think in your statement you talked about new terms and conditions in coal leasing.

Mr. LOESCH. Yes.

Well, what precipitated it, as far as I know was, when I took my seat, I was rather shocked when it first came to my attention that we had so much coal leased in Wyoming, Colorado, and Montana by major oil companies on which no action had taken place for periods ranging from 10 to 25 years.

It didn't seem to me to be the way to run a railroad. So I discussed early and found that I wasn't alone in this thought by any means. I began to discuss what we could do about it. There is always a certain amount of inertia, you know, in trying to change things.

I first found a great deal of resistance to even escalating the rentals. This we have gotten over and have put into practice, but we are still trying to find a proper format for a minimum production requirement that doesn't have a grave risk of unduly hurting the environment. For the reason I suggested a minute ago in giving you an illustration on the proposed Colorado sale. I don't know whether that fully answers your question or not, Mr. Chairman, but it is really, as far as I know, what prompted this.

Senator Moss. Well, has the language and terms and conditions in the lease been modified recently?

Mr. LOESCH. Yes, I can't say that we have settled upon an overall format. What we did, the last two or three lease sales that we had, was on an ad hoc basis, sort of, drafted a lease form and a notice of a sale that included our new concept. I will be very glad to furnish that for the record.

(The lease sales referred to and submitted by Secretary Loesch follow :)

NOTICE OF COMPETITIVE COAL LEASE OFFERING BY SEALED BID AND PUBLIC ORAL AUCTION

U.S. Department of the Interior, Bureau of Land Management, State Office, Division of Technical Services, Billings, Montana, Notice is hereby given that the lands hereinafter described, in two leasing units, will be offered for competitive coal leasing by sealed bids followed by public oral auction to qualified bidders of the highest bid per acre, or fraction thereof, as a bonus for the privilege of leasing the lands in accordance with the provisions of the Mineral Leasing Act of February 25, 1920 (30 U.S.C. sec. 181, et seq.), as amended, and the regulations 43 CFR 3521.2–2(c) (1) and 3521.2-3. The sale will be held at 1:00 p.m., M.D.T., on October 27, 1971, in Room 1033, Federal Office Building, 316

North 26th Street, Billings, Montana, when bids will be opened and read. Oral auction bids from those persons present will be received thereafter.

1. The lands, in Unit No. 1 are located in Oliver County approximately twelve miles south and east of the town of Hazen, North Dakota; in Unit No. 2 are located in Mercer County with the town of Stanton, North Dakota located about four miles to the northwest, and are offered as follows: Unit No. 1-M 15811 (ND): T. 143 N., R. 84 W., 5th Principal Meridian, North Dakota, Sec. 6: Lots 4, 5, SW1⁄4NE, SENW, SE4, containing 311.34 acres. Unit No. 2-M 16257 (ND): T. 144 N., R. 84 W., 5th Principal Meridian, North Dakota, Sec. 20: SWNE, W2SE4; Sec. 28: NSW4; Sec. 30: N2NE14; Sec. 32: N2N2, containing 440.00 acres.

2. Sealed bids may be submitted to the Chief, Division of Technical Services, State Office, Bureau of Land Management, 316 North 26th Street, Billings, Montana 59101, on or before 1:00 p.m., M.D.T., October 27, 1971, which is the place, time and date of sale. Sealed bids received after that time and date will not be considered. Bids must be made on each unit separately, but no objection will be made to the award of each unit to the same successful bidder. Each envelope used for a sealed bid must be plainly marked that it is not to be opened before that hour and date, and must identify the unit and serial number. Sealed bids may not be modified or withdrawn unless the modifications or withdrawals are received before the date, time, and place set for the opening of such bids. 3. Bidders are warned against violation of Sec. 1860, Title 18 U.S.C. prohibiting unlawful combination or intimidation of bidders. No special form of sealed bid is required, but all bids must show the total amount bid, the amount bid per acre, the amount submitted with the bid, and be signed by the applicant or a person authorized to act for the applicant.

4. At 1:00 p.m., M.D.T., in Room 1033, Federal Building, 316 North 26th Street, Billings, Montana, on October 27, 1971, the authorized officer will open and read all of the sealed bids, if any, by unit. After all the sealed bids have been read and recorded, he will receive oral auction bids from those persons present. The amounts submitted by sealed bid by low bidders will be returned to them after the high bids are determined for each unit.

5. Each sealed bid must be accompanied by, and the highest qualified oral bidder on the day of the sale must submit the following: One fifth (%) of the amount bid in cash or by cashier's check, certified check, bank draft, or money order payable to the order of the Bureau of Land Management; a statement over the bidder's own signature with respect to citizenship and interests held similar to that prescribed in 43 CFR, Subpart 3502; and as to sole party of interest as specified in 3502.7. A completed and signed Form 1140-1, Equal Opportunity Compliance Report Certification, as required by 41 CFR 60-1.6 (b) and Executive Order No. 11246 of September 24, 1965, as amended. Failure to submit the executed Form 1140-1 may be cause for rejection of his bid as nonresponsive. Form 1140-3, Equal Opportunity in Employment Certification of Non-segregated Facilities in accordance with 41 CFR 60, as amended, and Executive Order No. 11246, as amended, will be made a part of any lease issued. Identical certifications must be obtained from proposed subcontractors prior to the award of subcontracts exceeding $10,000 which are not exempt from the provisions of the Equal Opportunity Clause. A statement in accordance with 43 CFR 7 as to whether he is an employee, the spouse of an employee, or agent of an employee of the Department of the Interior is required.

6. A lease, or leases, will be offered to the qualified bidder submitting the highest acceptable bid per acre, or fraction thereof. The Government reserves the right to reject any and all bids whether sealed or oral.

7. Leases issued as a result of this offering will provide for the payment of the following rents for each acre, or fraction thereof: $1.00 for each of the first five years, and $3.00 for the sixth and each succeeding lease year of the first 20-year period. Rental for any year shall be credited against the royalties as they accrue for that year. The royalty rate will be five percent (5%) of the gross value of the coal mined for each lease at the point of shipment to market, such point of shipment to be the mine or preparation plant as the case may be, but in no event will the royalty be less than fifteen (15) cents on every ton of 2,000 pounds of coal mined for the first ten (10) years and not less than seventeen and one-half (172) cents on every ton of 2,000 pounds of coal mined for the remainder of the first 20-year period of the lease. The lessee agrees that the Secretary of the Interior, for the purpose of determining the royalties due thereunder, may establish reasonable minimum values for the minerals mined,