"Kenneth Dupont, Avondale vice-president and head of the company's Bayou Black Division, says:

"Many peoples' memories are short-lived regarding the proposed early 1969 sale and the postponements that led to the situation in 1970. There was a shortage of work that is almost indescribable, and it all stemmed from the failure to hold an orderly and timely lease sale.'

"FIRE AND SPILL

"The early 1969 lease sale was first postponed because of the Santa Barbara incident and the situation became more aggravated by the Chevron Oil Co. fire. Some say there were serious political implications connected to the moratorium.

"When the moratorium continued,' explains Dupont, 'we noticed our work starting to decrease gradually, and we could see a real economic slump coming.'

"The sale was finally held in December, 1970, but in the 12 months preceding the sale the fabricating plants had suffered because of a severe shortage of work.

"It was the Spring of 1971 before the plants were able to begin construction stemming from the 1970 sale, and that construction now is almost all completed and delivered.

"FORCE DECREASES

"Because of the industry-wide slump for fabricating plants in 1970, the Bayou Black Division work force dropped from an average high of 560 just prior to 1970 to some 390, a reduction of over 30 percent in personnel.

“It was such a shock that we have tried to diversify the nature of the type work we were doing, but it is not easy to take facilities designed primarily for the offshore oil industry and convert them.'

To bridge the gap between the slowing down to work generated by the December, 1970 sales, and what was expected to be the peaking of work generated by the proposed December, 1971 sale, Avondale bidded on and was awarded contracts for the three semi-submersible self-propelled drilling platforms. Now, because of the postponement of last December's sale, the long-range picture changes somewhat.

"Dupont agrees that new sizable jobs for bidding are off as much. as 75 percent.

"Speaking of the industry, he says that if the lease sale is further postponed into 1973, fabricating yards will be competing 'for every bread crumb.'

"Competition would become fierce, he adds, as companies weighed how badly they wanted to retain employes versus margin of profit.

"Without timely and orderly sales, he said, a yo-yo policy develops in which businesses tend to gamble with investments and then try to recoup their investment and make a profit as soon as possible. This, in turn, drives costs up, and in the oil industry, the higher costs paid by the oil producers are passed on, as in any industry, to the consumer. "As there are about 2,500 products currently produced wholly or in part from petroleum, what goes on in a fabricating yard in this south Louisiana offshore oil center as far as costs are concerned can ultimately affect the pocketbooks of people all over the country.”

[From the Times-Picayune, Apr. 8, 1972]

"SOUTH LOUISIANA WORKING MAN HAS STAKE IN LEASE SALES

("By Clarence Doucet)

"To the working man in South Louisiana who earns his living from the offshore oil industry, environmental efforts that affect or threaten his family's finances are difficult to equate with being in his interest. "One industry official put it this way:

"I think we have to pursue a rational course, and this means developing our resources in an orderly, timely fashion in accordance with our environment. But we must maintain economic stability, and the economic progress we've made should not have to come to a screeching halt.'

"On the environmental question, another man who earns his living from the offshore oil industry said:

""The fish and fur people go to bat for us. Edible and sports fish are being caught in greater numbers, and a lot of the increase in fishing is due to the better transportation into the oil field canals because that's where the fish are. There may be some ecology problems related to commercial fishing, but on the whole the fishing industry supports us.” "An oysterman in Terrebonne Parish says there have been some changes to the ecology of the marshlands, but he says he is confident the two industries-fishing and oil-can co-exist.

"We are constantly learning more and more about how to operate without creating real problems,' says another offshore oil industry official.

"In the end, irregular sales of offshore oil leases affect the working man whose livelihood depends on the industry.

"The oil companies look for stability that comes from regularly scheduled lease sales, but as one oil company official said:

"No matter how irregular the sales may be, we can't afford to stay out despite the problems. When the sale is held we will be there and after the sale, exploration and development drilling will take place. even if it means hauling in equipment from all over the world. These things will be done. A real problem with this on-again off-again policy is the impact it has on the South Louisiana working man who is cast in an economy of feast and famine.'

"The point is. he explains, that the more than 67.000 people who are dependent on the offshore oil industry in South Louisiana want stability and security.

"What becomes important is not so much what he pockets this year as what are his expectations about next year,' the official said.

"The working man who wants to buy a new car or purchase a home must base his decision on the stability of his paycheck. If the lease sales are not held regularly, then the working man does not have that security.

"Another factor that enters the picture because of the irregularity of recent sales is it causes a lot of workers to look elsewhere for jobs,

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 Morgan 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 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.

ALLOCATIONS TO STATES AND THE RECLAMATION FUND FROM THE MINERAL LEASING ACT AND ALASKA STATEHOOD ACT RECEIPTS, 1961-71

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 á 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