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19. What, if any, major modifications of systems or management policy have been put into effect either by legislation, regulation or operating decision since 1969?

20. What major modifications of the manner of developing these resources are incorporated into legislation currently proposed by the Administration?

21. For which energy resources are the Department's decisions regarding execution of particular leases, permits, or sales, or regarding the opening or closing of lands to exploration or location part of an overall schedule of development related to national energy needs (like the OCS five-year leasing schedule)? Please summarize the principles, schedule and strategy of development in each instance. (Special attention is requested to the oil shale and geothermal energy resources.)

C. QUANTITATIVE AND HISTORICAL INFORMATION

22. Please provide the best available estimates of proved reserves, and probable and potential resources (or some other appropriate classification according to certainty and/or recoverability) on the U.S. public lands, of each of the energy resources listed at the beginning of Part I. In each of these instances, the reserves or resources on U.S. public lands should be compared with total U.S. reserves or resources. Estimates of coal and oil reserves and resources should, to the extent available, be subdivided by state, according to a measure of sulphur and ash content (i.e., distinguish between "clean and dirty" resources), and as mined or mineable by (a) underground methods, and by (b) surface mining methods. 23. In the case of each energy resource indicate:

a. the acreage of lands classified as containing, or suitable for production of that resource;

b. the number of acreage of leases, permits, claims or patents newly filed or issued, and averages outstanding in the years 1953-1972 [In the case of oil and gas, and coal, new leases and acreage should be subdivided into competi tive and noncompetitive (or preference) leases];

c. the names of the ten persons or companies (including affiliated or subsidiary companies) holding the greatest (chargeable or other) acreage of leases, permits, or claims in each of these energy resources and the percentage of total lands under lease, permits, sales or claims by these persons or companies;

d. the estimated proved reserves, and probable and potential resources on lands now under lease, permit, or claim (Indicate these as proportions of total reserves or resources on U.S. public lands and in the U.S.);

e. what proportion of the total number and acreage of leases, permits, or claims, is actually under commercial production; and,

f. the number and acreage, by kind, of permits or leases expiring or subject to review in each of the next ten years.

Where data requested in the foregoing are not available, present the the best substitute information and indicate what action would be necessary to make the requested data available.

24. For each energy resource, for the years 1953-1971 and by region (for coal, subdivide by state), summarize the production and value of production from U.S. public lands. Compare these amounts of total production and value of production in the U.S.

25. For each resource for the years 1953-1971 and by region (for coal, subdivide by state), summarize the receipts of the Federal Government from royalties, bonuses, minimum royalties, rentals, filing fees and other landowner remittances.

PART II. COAL LEASING ISSUES

The questions in Part I should be answered fully here with respect to coal resources, and these answers should be summarized in the general answers to Part I of this list. Responses are requested to the following additional questions and issues.

26. What are the criteria and procedures for determining royalties and other charges on a preference right lease obtained through a prospecting permit? How do these charges compare with "fair market value"?

27. If the terms and conditions of an existing lease are not modified except at 20-year periods, and part 23 of 43 CFR does not apply to existing leases.

a. What environmental control does the Department (or the agency with jurisdiction over the surface, if other than Interior) presently have over the leased land?

b. Under what circumstances must the United States as lessor initiate court action to cancel a lease?

28. What other minerals can be mined under a coal lease? And how does the Department obtain fair market value for any such minerals, comingled or otherwise?

29. What limitations of right of surface utilization and exclusive possession for the surface of the leased land and the adjoining Federal lands are imposed upon lessees?

30. What criteria, methods and procedures are used to determine the timing of sales, issuance of pemits and issuance of coal leases? Are these the same as for OCS oil and gas leases? If not, why not?

31. What, if any analysis or assumption regarding the demand from public lands influences the Department's decisions regarding issuances of leases or permits?

a. To what extent does the Department's coal leasing strategy depend upon, and relate to, the Department's assessment of the national energy situation?

b. To what extent do the Department's decisions on specific applications for coal permits or leases reflect an assessment of regional coal demand, and the possibility of meeting that demand from existing federal coal leases or from state or privately owned resources in the same region?

32. What was the average time elapsed after application in obtaining a prospecting permit, and in obtaining a preference right lease in 1971? in 1961?

33. Does the Department have, or is it preparing or considering, a coal leasing schedule or strategy comparable to the five-year leasing schedule for Outer Continental Shelf oil and gas?

34. How many applications for prospecting permits and coal leases are currently pending and what acreage is involved, by state?

a. What are the proved coal reserves, and probable and potential coal resources, on the lands under application for lease?

b. In each state where permit or lease applications are pending, what are the proved coal reserves, and probable and potential coal resources currently on private lands, and under federal lease, and under state, local or private lease? What was coal production in the most recent year of record? Subdivide these items, to the extent possible, into coal mined or mineable by underground, and by surface methods.

c. Which, if any, of these applications are under active consideration by the Department for issuance of permits or leases?

d. Upon what specific analyses regarding the supply and demand for coal in each region would any permits or leases be granted?

Where data requested in the foregoing are not available, present the best available information and indicate what action would be necessary to make the requested data available?

35. Under what circumstances can the Secretary waive the general production requirements of continuous operation and diligent development set forth in the Mineral Leasing Act (30 USC sec. 207) ?

a. Under what circumstances has the Secretary waived or suspended or reduced minimum royalties and rentals?

b. Since only minimum rental requirements are set by Statute, what procedure, short of effecting a change in the regulation can be used to change the rental requirements?

c. Are leases now being renewed that have gone 20 years or more without production? If so, why?

36. What methods are used to determine actual tons of coal produced on a given lease?

37. What are the ratios of inspectors to leases and lease acreage by States?

PART III. OUTER CONTINENTAL SHELF OIL AND GAS LEASING ISSUES

The questions in Part I should be answered fully here with respect to Outer Continental Shelf Oil and Gas resources, except where they have been answered

in connection with the March 23 and 24 hearing. Both sets of responses should be summarized in the general answers to Part I of this list. Responses are requested to the following additional questions and issues.

A. OCS LEASING SYSTEM AND BIDDING PROCEDURES ALTERNATIVES

(The following question is an elaboration of question 17.)

38. What, if any, in-house or contractor studies or analyses have been undertaken or completed by the Department since 1969, concerning management of onshore or OCS oil and gas, including but not necessarily limited to:

The manner of bidding and payment for resource rights;

The frequency, size and configuration of lease sales;

The size and configuration of lease tracts;

The term of leases; or,

Limitations on acreage, joint bidding, assignment of leases, etc.

(The following question is an elaboration of questions 18 and 20.)

39. Summarize briefly the principal findings and recommendations regarding OCS oil and gas leasing in each of the studies or analyses referred to in response to questions 17 and 38, in the Public Land Law Review Commission report and contractor reports to the Commission. Summarize the Department's position on each recommendation.

(The following question is related for OCS oil and gas, to question 3 in Part I.) 40. How does the Department interpret the objective of receiving fair market value in the disposition of OCS oil and gas? Specifically:

a. What is fair market value and how is it measured?

b. What is net public resource value and how is it measured?

c. Does obtaining fair markets value from oil and gas leases result in maximization of Federal revenues?

d. From what point in time (e.g., time of lease, or of production) is fair market value estimated?

e. Is a discounted cash flow analysis used? What discount rate is employed?

f. Is there any difference in definitions or appraisal methods between onshore an OCS resources?

41. What, if any, conflicts are there in the choice of a leasing system or in leasing strategies between the objectives of:

a. obtaining a maximum return to the government (or fair market value); b. maximizing the early development of OCS oil and gas resources to meet anticipated energy demands, and

c. obtaining a proper balance of production overtime?

To the extent conflicts exist among these objectives, how are they resolved? 42. What options are being considered with respect to Outer Continental Shelf leasing system changes, and what are the Department's preliminary views regarding the comparative advantages and disadvantages of each in the context of achieving Departmental OCS leasing objectives? What would be the impact of each such option on:

a. Competition;

b. Incentive to rapid exploration and development;

c. Conservation of energy resources for future use;

d. Proportion of oil and gas ultimately recovered;

e. Efficiency of resource allocation;

f. Possible bias toward any one class of lessee (Ease of entry, etc.);

g. Timing and amount of revenue to Government;

h. Costs and difficulties of administration;

i. Ability to implement within the authority of the Act (i.e. would it require amendment of the OCS Lands Act)?

Specifically deal with the advantages and disadvantages, compared to the present system and to each other. What, under the foregoing criteria, are the Department's current views with regard to:

Lump sum (bonus only) bidding;

Deferred bonus bidding (with fixed royalty);

Royalty bidding (with fixed bonus);

Profit share bidding, and,

Work-program bidding (as used, for example, in the U.K.)?

43. Are there any plans to test one or more of the alternatives identified in question 42 in the future OCS lease sale? If so:

a. At what sale?

b. How will the experiment be implemented?

c. What will be the specific measures of success or failure?

44. To what extent is the Department's choice among leasing system options dictated or influenced by the government's desire to maximize immediate revenues (as opposed to the present value of expected long-term revenues)?

45. What is the Department's analysis of its experience with respect to fair market value returns from:

a. The present cash bonus system on the Outer Continental Shelf?

b. Competitive leasing of onshore oil and gas?

c. Non-competitive leasing of onshore oil and gas?

46. What, if any, evidence or analysis exists to indicate whether the system of cash bonus bidding encourages or discourages exploration and development, in contrast to alternative methods of leasing? In particular, what evidence or analysis is there:

a. Whether bonuses paid by high bidders in competitive lease sales diminish the funds that otherwise would be available for exploration?

b. Whether high cash bonuses paid by winners discourage independent operators from participating and reduce the number of serious contenders for leases, above and in addition to the high costs of operation in such places as the Outer Continental Shelf and the Arctic?

c. Whether payment of a high cash bonus selects a qualified and responsible operator who is the best able or most willing to undertake early exploration?

d. Whether payment of a high cash bonus is a significant incentive that would be absent under another system, for the operator to accelerate exploration and production?

47. Summarize the assumptions and analysis that led to the Department's specific decisions regarding the frequency and size of lease sales in the first five-year leasing schedule. Include a discussion of the role of:

a. estimated demand for oil and gas, and the assumptions regarding the role of OCS resources in meeting this demand;

b. any analysis or assumptions regarding the acreage of OCS lands that industry is able and willing to explore in a given period, and the relationship of the total acregae offered and total government bonus receipts.

Provide, for each of the next twenty years, the estimated production of crude oil, gas and condensate expected from each of the sales proposed in the first five-year leasing schedule.

48. How has the cancellation of the December 1971 lease sale affected the remainder of the five-year schedule? (Has the whole schedule been set back or will the remainder of the sales be conducted according to the original schedule?) When will a new schedule be released?

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

50. What, in summary are the procedures for estimating the value of individual tracts considered for leasing, and what has been the experience with these procedures? Specifically:

a. How are pre-sale estimates of the minimum reasonable industry bid per tract calculated, by whom, and using data of what origin?

b. For the past three OCS sales, how many and what proportions of industry bids and high bids have been lower, and higher, than the Department's pre-sale estimates? For each of these three sales, what has been the ratio between the total pre-sale estimate and the total of high bids? How can this last relationship be explained?

c. Are individual OCS tracts reevaluated after opening of bids but prior to award of a lease? If so, what information goes into the reevaluation, and how is it used?

d. What avenues are available within the Department to companies which may wish to appeal Departmental rejection of bids for certain tracts, and what information related to the value of such tracts do Departmental personnel who are handling such appeals have available to them?

51. To what extent, and in what fashion, do estimates of the relative quantities of gas as compared to oil influence the choice of tracts for leasing?

B. The issue of entitlement of coastal states to receive federal funds as compensation for possible adverse impacts of OCS mineral producing activities in areas adjacent to their coasts.

52. What is the Department's tentative schedule for future OCS oil and gas lease sales, particularly in:

The Atlantic,

The Gulf of Alaska,

California, and other "new" areas?

53. What arguments have been advanced by representatives of coastal states that they should share in mineral leasing revenues?

54. What, if any, formal studies or analyses exist of the net social and economic benefits or costs to coastal states of OCS mineral exploration and production adjacent their coasts? Summarize the major findings of these studies or analyses. 55. What are the historical and expected impacts upon the economies and coastal states and communities from OCS exploration development and production activities:

a. Increases in local employment and payrolls; profits of local enterprise; local, and state business and personal taxes, etc.

b. Increased outlays of state and local governments for public safety, education and welfare; public works and environmental protection.

c. Desirable or undesirable secondary effects from location of refineries and other industries; population growth, etc.

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.

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?

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 onshore production within the state, on mineral production from the adjacent Outer Continental Shelf?

Senator Moss. I have several of my colleagues here and Senator Allott is on his way.

Senator Anderson, do you have any opening statement?

Senator ANDERSON. NO.

Senator Moss. Senator Jordan?

Senator JORDAN. I yield to Senator Hansen.

STATEMENT OF HON. CLIFFORD P. HANSEN, A U.S. SENATOR FROM THE STATE OF WYOMING

Senator IIANSEN. Mr. Chairman, that was a fine opening statement you made this morning. It outlined the major issues on which we have invited comment from the Department of the Interior and from other interested witnesses. I would only wish to elaborate briefly on the context in which these hearings are being held.

The hearing this morning on Federal leasing of public lands for energy resources is one of a series we have been conducting as part of our national fuels and energy study in response to the current energy crisis.

The energy crisis and its solution is a subject as complicated as it is controversial. It is complicated for reasons which I will discuss in a

moment.

It is controversial first because of the clashes of interests at stake in seeking a public policy responsive to the energy crisis, and secondly

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