surface scars, fires, and stream pollution by acid and mineralized drainage. The occurrence and extent of these effects depend on such factors as the method of extraction, physical and chemical geologic setting, topography, and climate. Unlike most industrial side effects, those from coal mining often appear as ancillary resource damages after cessation of mining. Millions of dollars in property damage have occurred through coal mining, and the threat of subsidence or cave-ins exists in more than 250 communities throughout 28 States. Uncontrolled mine and refuse bank fires have resulted in the death of 50 people and the destruction of property valued at more than 2 billion dollars. Eighteen thousand miles of streams have been either intermittently or permanently damaged. Several million acres of deteriorating mined lands contribute to land and water pollution and aesthetic degradation. The physical potential for increasing the legacy of these problems is evident when one considers that proven remaining recoverable reserves of coal in the United States are estimated at 380 billion tons. Many of the most significant abuses have been in the East on privately owned land. However, in search of large, low-sulfur deposits, industry is turning its eyes West. Development of giant scale stripping technology has made economic many low-grade, low-sulfur Western coal deposits that were not considered commercial a decade ago. This technology creates potential large-scale environmental problems of water pollution and erosion, and the need for reclamation. The generally semi-arid climate of many sections of the West increases the difficulties of devising and implementing sound reclamation of mined-out areas. This points out the need for Federal legislation setting guidelines for coal mining operations at an early date. Such legislation should consider the option of withholding from strip mining lands that are not susceptible to effective reclamation. It is clear that in order to provide for orderly development of coal and other resources on the public lands, it is necessary to have information about their nature and extent, so that in formulation of comprehensive land use development plans, sufficient attention will be given to the safeguarding of environmental values. Section 10 of the Federal Water Pollution Control Act is the most pertinent EPA authority here, although the Clean Air Act also applies. Geothermal power The utilization of geothermal resources as a source of power has potential as a substitute for other fuel sources. Within the United States, present installed geothermal power plants have a capacity of 193 megawatts; and additional 318 megawatts capacity is either in the design stage or under construction. In addition to the commitment of extensive land areas required by the increase in capacity, principal environmental aspects of concern are: disposal of the geothermal brines, noise associated with production operation, non-condensible gases in the geothermal fluids, disposal of waste heat, and seismic hazards and land subsidence. Any sizeable geothermal resource development requires the commitment of large acreages, needed mostly for the proper placement of geothermal wells. As an example, the land needed to develop a geothermal well field adequate to supply a 1,000 megawatt power plant amounts to about 10 square miles. The attendant problems during site exploration and development, production operations, and production cessation require careful consideration of the best and proper use of the land resource. Geothermal fluids are concentrated saline fluids and pose a threat to surface and ground water quality unles adequate handling and disposal precautions are taken. Specific substances in the fluids such as hydrogen sulfide, boron, mercury, and radon and its decay products, require special attention when present in significant concentrations. Geothermal wells can be the source of objectionable noise which may require noise abatement techniques. Any large-scale geothermal resource development must consider noise as a potential adverse environmental impact. The withdrawal and the reinjection of geothermal fluids also have the potential for causing seismic activity as well as land movement, particularly subsidence. These phenomena require special consideration because of their serious, irreversible manifestations. With expanded interest in developing geothermal resources, the environmental risks need to be evaluated during all phases of the operations and prior to the initiation of a large-scale industry. In the initial phases of geothermal resource development, it appears that existing regulatory authority, combined with the authority to be exercised by the resource-managing agency, will be adequate to deal with the issue. Further experience with the technology will be needed to know whether additional authority would be required for adequate regulation. Attachment B, Question 6 What discretionary authority, if any, has the Department of the Interior to lease or not to lease, or otherwise to open or close lands to development of each resource? The conditions to which the Department of the Interior and its contractors should adhere in leasing and disposal activities, so far as the Environmental Protection Agency is concerned, are set out in the laws and regulations discussed above. These considerations enter two phases of leasing and disposal activities before the Federal or federally-sponsored activity is undertaken, and while it is being conducted. The former enters Environmental Protection Agency review of environmental impact statements prepared by the Department of the Interior as required by Section 102 of the National Environmental Policy Act. The Agency receives drafts of such statements from the Department of the Interior in many energyrelated areas, which include leasing and disposal of resources as well as production of energy. We have at that time an opportunity to comment on the effects of proposed major Federal actions. In numerous cases involving energy, we have pointed out to the Department of the Interior or other agencies possible detrimental effects on the environment and/or violations of laws or regulations administered by the Environmental Protection Agency which the proposed action could cause. We have found that the Department has considered second- and third- as well as first-order effects of their actions and alternatives, taken a closer and harder look at proposed actions, and in some cases revised the draft statements in light of EPA comments. EPA is currently in the process of studying, through its Energy Policy Committee, thirty inter-related issues in the energy-environmental area. Though these and other related investigations have not been completed, we believe that certain EPA laws and regulations, primarily in the air quality field, may have a considerable impact on leasing of some energy resources. Once leasing has been concluded, subsequent production activities are subject to the laws and regulations set out in the cover letter and in the answer to question A-6. Attachment B, Question 13 For each resource, what conditions regarding protection of other resources, land reclamation, or environmental quality, are currently required for permissive exploration or in a lease or sale contract, permit, claim or patent? The authorities which the Environmental Protection Agency has in this regard are detailed for the most part in the response to Question A-6, above. With respect to both onshore and offshore oil and gas facilities, the conditions outlined under "Certificating and Permitting Responsibilities," on page 2, above, apply. Although the Clean Air Act does not contain a provision analogous to Section 21 of the Federal Water Pollution Control Act, it does require the States to have authority to prevent the construction of any source, which would violate ambient air quality standards and, under the New Source Performance Section of the Act, Federal restrictions on emissions from certain industry categories. Through the environmental impact statement review process and other consultations carried out pursuant to Section 102 of NEPA, EPA has an opportunity to point out environmental problems which may result from energy resource development and possible solution to these problems. Attachment B, Question 14 Describe the existing procedure for complying with Section 102 of the National Environmental Policy Act with respect to leasing or disposition of each energy resource. The Environmental Protection Agency reviews environmental impact statements prepared by the Department of the Interior pursuant to Section 102(2) (C) of the National Environmental Policy Act in connection with the leasing or disposition of energy resources. Generally, EPA has delegated the responsibility for impact statement review to its Regional Offices. These offices can obtain any necessary technical assistance for impact statement review from EPA headquarters. components. The Office of Federal Activities has managerial responsibility for the impact statement review process within EPA. This office also has responsibility for coordinating the review and submitting comments to other Federal agencies on impact statements prepared for regulations, and for projects which include more than one Federal region or are highly controversial. In its comments on energy resource impact statements, EPA addresses the adequacy of the consideration of the environmental factors within its areas of jurisdiction or special expertise. For example, in our comments on the draft environmental statement for Exploratory Drilling Operation in the Santa Barbara Channel, EPA suggested that further consideration be given to the impact of the disposal of drilling muds and other drilling fluid constituents. We also suggested that oil pollution contingency plans be described in the final environmental impact statement for this action. The impact statement review process and other consultations which have occurred in connection with Section 102 of NEPA have provided a forum for EPA to express its concern regarding the environmental effects of the leasing and disposition of energy resources and have provided the Department of the Interior with technical information useful in carrying out these activities with maximum protection of environmental factors. Attachment B, Question 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 controll does the Department (or the agency with jurisdiction over the surface, if other than Interior) presently have over the leased land? The enforcement authorities contained in section 10 of the Federal Water Pollution Control Act and sections 111 and 113 of the Clean Air Act would apply to violations caused by coal leasing and disposal activities. As indicated in the response to Question A-6, above, section 10 of the Federal Water Pollution Control Act applies primarily to situations of interstate water pollution although, at the request of the Governor, it may be brought to bear in intrastate situations as well. Pollution is subject to abatement by either a 180day notice issued by the Administrator to the violator of the standards, or an enforcement conference convened by the Administrator at the request of a Governor or of a municipality. Under the conference mechanism, if the situation is not ameliorated following a conference, the Administrator may serve the company or jurisdiction involved with a notice giving (a minimum of) 180 days to rectify the violation, following which a hearing may be held and legal action taken. Under the direct 180-day notice procedure, a hearing must be held, following which suit may be brought (by the Department of Justice for EPA). A Federal license or permit with respect to which certification has been obtained under paragraph (1) of Section 21 may be revoked or suspended if a court judges under section 10(h) that there has been a violation of applicable water quality standards. Facilities whose construction commenced before April 3. 1970, may operate for three years without such certification; their operation may be continued after that period if they have obtained it. For projects begun within one year of April 3, 1970, there is a similar provisions but operation with out certification is limited to one year. No certification is required in the absencs of water quality standards. Enforcement of regulations to meet ambient air quality standards, like water quality standards, is up to the States in the first instance. However, the Administor may enforce if the State fails to do so. In the area of coal mining leases, however, this Act is not as likely to be applicable as the Federal Water Pollution Control Act. SUBMISSION OF THE FEDERAL POWER COMMISSION Hon. HENRY M. JACKSON, FEDERAL POWER COMMISSION, Chairman, Committee on Interior and Insular Affairs,, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: With reference to your letter of June 1, 1972 to me regarding hearings before your Committee on "leasing and disposal policies for energy resources on the public lands", I am enclosing ten copies of my responses to your Question 12 of Attachment A and Question 51 of Attachment B. Sincerely, Enclosure. JOHN N. NASSIKAS, Chairman. RESPONSES TO SENATE COMMITTEE ON INTERIOR AND INSUlar Affairs QUESTIONS (12) What are the advantages and disadvantages, in terms of the criteria set forth below, as applied to OCS oil and gas leasing of a (1) cash bonus bid-fixed royalty system; (2) deferred bonus bid-fixed royalty system (payments of onethird of the bonus bid successively upon award of lease, discovery, and production); and (3) fixed bonus-royalty bid system? (a) Competition (1) Cash bonus bid-fixed royalty system.-The cash bonus bid-fixed royalty system would provide the highest entry barriers, and thereby, the bidding would be the least competitive. The cash bid element presents a barriers to initial entry both through the size of the bid and the geological and geophysical research required to construct a winning bid. Companies without access to funds for preparing potentially effective bids and from the actual bidding will be unable to compete. (2) Deferred bonus-bid-fixed royalty system.-The deferred bonus bid-fixed royalty system permits easier entry and more competition; it also produces large rents for drilling leases. By deferring two-thirds of the bonus, much of the risk of development is passed on to the government. If the property proves to be unproductive, the final two-thirds of the bid are never paid. (3) Fixed bonus-royalty bid system.-The fixed bonus-royalty bid system could elicit the most competition, provided that the initial bonus is sufficiently small. Obviously, the larger the bonus the greater the anticompetitive influences of this system. (b) Incentive to rapid exploration and development (1) Cash bonus bid-fixed royalty system.-This system depletes the internal financing of producers at a time when funds are needed for exploration and development. (2) Deferred bonus bid-fixed royalty system.-The deferred bonus eases the producer's funding requirements since it is paid over a period which may extend several years. (3) Fixed bonus-royalty bid system. The royalty bid system minimizes demands on internal funds during the exploration and development period. (c) Conservation of energy resources for future use (1) Cash bonus bid-fixed royalty system. This system has no impediments to exploration and development after leasing except the fixed royalty. (2) Deferred bonus bid-fixed royalty system.--This system requires payments at time of discovery and production which encourages producers not to tap the resources unless these will be fully exploited. (3) Fixed bonus-royalty bid system.—A royalty bid raises the costs of production and hence encourages early abandonment of reserves. (d) Total amount of resources ultimately recovered under the lease (1) Cash bonus bid-fired royalty system. This system has a small fixed royalty, so it does not encourage early abandonment. (2) Deferred bonus bid-fixed royalty system.-This system's bid is a constant cost and the royalty is small so it does not encourage early abandonment. (3) Fixed bonus-royalty bid system.-The high royalty in this system reduces the amount of resources which may be recovered before production is no longer profitable. (e) Efficiency of allocation (1) Cash bonus bid-fixed royalty system.-This system has a constant cost, the bid, and a minimal variable cost, the royalty, so it should not distort producer decisions. (2) Deferred bonus bid-fixed royalty system.-Once production occurs, this system's royalty payments are small, so producer designs concerning production would not be affected. (3) Fixed bonus-royalty bid system.-The high variable cost of a royalty bid is not a real cost to a society, so it distorts producer development investment decisions. The high royalty can make measures to increase production no longer profitable. (f) Possible bias toward any one class of leases (ease of entry etc.) (1) Cash bonus bid-fired royalty system.-This system requires large initial funding which impedes bidding by independent producers. (2) Deferred bonus bid-fixed royalty system. This system eases the entry of independent producers by staggering payments and sharing the risk of a noncommercial lease. The deferred bonus is especially conducive to advance payments by interstate natural gas pipelines to producers, a measure the Federal Power Commission encourages for the purpose of acquisition, exploration and development of gas producing properties. (3) Fixed bonus-royalty bid system. This system eases the entry of independent producers due to its low initial capital requirement. (g) Timing and amount of revenue to the Government (1) Cash bonus bid-fixed royalty system.-This system provides large payments to the Government, but the payments are restrained by the risk that the lease will not have commercial reserves. (2) Deferred bonus bid-fixed royalty system. This system provides large payments to the Government earlier than the royalty bid system and allows higher bids since, unlike cash bonus bids, the Government shares the risk of no discovery or production. (3) Fixed bonus-royalty bid system.-This system provides payments over the life of the lease which may be large due to the government sharing the producer's risk concerning the volume of production. (h) Problems of administration and levels of Government personnel required to administer the leasing system (1) Cash bonus bid-fixed royalty system; (2) Deferred bonus bid-fixed royalty system; (3) Fixed bonus-royalty bid system. No difference in administration and personnel are foreseen between the different systems. (i) Ability to implement within the authority of the act (i.e., would it require amendment of the OCS Lands Act?) (1) It would appear that both the varying cash bonus fixed royalty and fixed cash bonus with varying royalty options could be utilized under the present law. Section 8(a) (1) (2) of the Outer Continental Shelf Lands Act states, "The bidding shall be (1) by sealed bids and (2) at the discretion of the Secretary, on the basis of a cash bonus with a royalty fixed by the Secretary at not less than 121⁄2 per centum in amount or value of the production saved, removed or sold, or on the basis of royalty, but at not less than the per centum above mentioned, with a cash bonus fixed by the Secretary." Implementation of Option #2, deferred bonus bid-fixed royalty system, might require an amendment to the Act, although Section 8(b) (4) of the Act prescribes that an oil and gas lease shall “contain . . . such other terms and provisions as the Secretary [of the Interior] may prescribe at the time of offering the area for lease". This provision may give sufficient latitude to allow deferred payment |