Honorable J. Bennett Johnston, Jr.

September 28, 1987

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If you wish further details on this estimate, we will be pleased to provide them.

REGULATORY IMPACT EVALUATION

In compliance with paragraph 11(b) of Rule XXVI of the Standing Rules of the Senate, the Committee makes the following evaluation of the regulatory impact which would be incurred in implementing S. 1730. The Act is not a regulatory measure in the sense of imposing Government established standards or significant economic responsibilities on private individuals and businesses.

No personal information would be collected in administering the program. Therefore, there would be no impact on personal privacy. Little, if any, additional paperwork would result from the enactment of S. 1730, as amended.

EXECUTIVE COMMUNICATIONS

The pertinent legislative reports and communications received by the Committee from the Office of Management and Budget and from the Department of the Interior setting forth Executive agency recommendations relating to legislation to reform the Federal onshore oil and gas leasing program are set forth below.

This responds to your request for our views on S. 66, a bill "To amend the Act of February 25, 1920, to provide for competitive leasing of oil and gas for onshore Federal lands, and for other purposes."

We support enactment of S. 66 but believe it would be improved by the adoption of the six amendments discussed herein.

S. 66 would be cited as the "Federal Onshore Competitive Oil and Gas Leasing Act of 1987." Section 2(a) of S. 66 would amend section 17(b)(1) of the Act of February 25, 1920 (the Mineral Leasing Act), to direct the Secretary of the Interior to lease all lands, including those in Alaska, to the highest responsible qualified bidder by competitive oral bidding in units of not more than 2,560 acres, except in Alaska, where units could not exceed 5,120 acres. Lease sales would be held for each State, where appropriate, not less than quarterly. A lease would be conditioned upon payment of a royalty of 12.5 percent in amount or value of the production removed or sold from the lease. The Secretary of the Interior would establish a minimum acceptable price which would be at least $20 per acre. minimum acceptable price would be established without evaluation of the lands proposed for lease. Lands receiving no bids or bids less than the minimum acceptable price would become available for leasing to the person first making application within a period not to exceed one year, without competitive bidding. Following this period, if no lease has been issued and no lease application is pending, the lands would be available only by competitive bidding as previously described.

The

Section 2(b) of S. 66 would amend section 17 (c) of the Mineral Leasing Act to state that if lands to be leased are not leased by competitive bidding or are not subject to competitive leasing under section 17(b)(2) of the Mineral Leasing Act (tar sands), the person first making application for the lease who is qualified would be entitled to such

lease without competitive bidding. Section 2(c) of S. 66 would provide that any lease issued under section 17(c)(1) or section 17(b)(1) (as it would be amended by S. 66) that terminates, expires, is cancelled or is relinquished would again be available for leasing only in accordance with section 17(b)(1). Section 2(d) of S. 66 would provide that a minimum royalty of not less than $1 per acre in lieu of rental would be payable at the expiration of each lease year beginning on or after a discovery of oil or gas in paying quantities on the lands leased.

Section 3 of S. 66 would allow the Secretary to disapprove an assignment or sublease only for lack of qualification of the assignee or sublessee or for lack of sufficient bonds. However, the Secretary could disapprove an assignment of a separate zone of deposit, of a part of a legal subdivision, or of less than 640 acres outside Alaska or of less than 2,560 acres in Alaska, unless the assignment constitutes the entire lease or is demonstrated to further the development of oil and gas.

Section 4 of S. 66 would amend section 3(b) of the Mineral Leasing Act to provide that any lease issued after August 21, 1935, under section 17 of the Mineral Leasing Act would be subject to cancellation by the Secretary of the Interior after 30 days notice upon the failure of the lessee to comply with any of the provisions of the lease unless the leasehold contains a well capable of production in paying quantities or the lease is committed to an approved cooperative or unit plan or communitization agreement which contains a well capable of production of unitized substances in paying quantities.

Section 5 of S. 66 would amend section 1008 of the Alaska National Interest Lands Conservation Act (ANILCA) to make leasing in Alaska consistent with that of other States. Subsections 1008 (c) and (e) of ANILCA would be deleted in their entirety, and the second sentence of subsection (d) would be deleted, thereby eliminating "favorable petroleum geological provinces" in Alaska.

Section 6 of S. 66 contains "grandfather" provisions for lease applications pending at the time S. 66 is enacted. All noncompetitive lease applications filed under the simultaneous oil and gas leasing system and pending on the date of enactment would be processed and leases would be issued under the Mineral Leasing Act as in effect before its amendment by S. 66. If the date of enactment occurred during a simultaneous filing period, applications filed during that period would be considered filed prior to the date of enactment of S. 66. All noncompetitive lease offers filed under the over-the-counter leasing system prior to

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January 1, 1987, would be processed and leases issued under the Mineral Leasing Act as in effect before its amendment by S. 66. If the Secretary posts for competitive sale tracts containing lands in an over-the-counter noncompetitive lease offer filed between January 1, 1987, and the date of enactment of S. 66, and if any such tracts do not receive bids greater than or equal to the minimum acceptable price established by the Secretary at the sale, the Secretary would be required to reinstate the noncompetitive lease offers for the tracts and to issue leases in accordance with section 17 (c) of the Mineral Leasing Act. All competitive bids pending on the date of enactment of S. 66 would be processed, the high bid for each tract accepted without further evaluation of the value of the tract and leases issued under the Mineral Leasing Act as in effect before its amendment by S. 66. No noncompetitive lease applications or offers pending on the date of enactment of S. 66 for lands within the Shawnee National Forest, Illinois; the Ouachita National Forest, Arkansas; Fort Chaffee, Arkansas; or Eglin Air Force Base, Florida, would be processed until the lands are posted for competitive bidding in accordance with section 2 of S. 66. If a tract receives no bid from a qualified bidder, then the noncompetitive applications or offers pending for the tract would be reinstated and noncompetitive leases would be issued under the Mineral Leasing Act as in effect before enactment of S. 66. If competitive leases are issued on the tract, the noncompetitive application or offer would be rejected.

Section 7 of S. 66 would direct the Secretary to issue final regulations within 180 days after the date of enactment of the bill. The Secretary would be further directed to hold at least one competitive lease sale pursuant to section 2 of S. 66 prior to issuing the required regulations. The sale would include tracts which, but for the enactment of S. 66, would have been posted for the filing of simultaneous lease applications. The Secretary could also include tracts which would otherwise have been posted for competitive sale and tracts which received over-the-counter noncompetitive lease offers between January 1, 1987, and the date of enactment of S. 66. If tracts which, before enactment of S. 66, would have been posted for the filing of simultaneous applications do not receive bids greater than or equal to the minimum acceptable price at a competitive sale, they would then be posted for the filing of simultaneous applications if the Secretary has not issued the regulations required in S. 66. If no competitive or noncompetitive leases are issued under section 7(c), the Secretary would have to lease the tracts in accordance with the regulations issued under section 7(b) of S. 66.