$5 million for the second fiscal year, and another $5 million for the third fiscal year are authorized. These funds are to be used to implement the various provisions of this title and to establish and institute the procedures for clean-up, notification, damage settlement, and other activities necessary to implement this title. These funds are also to be used for the administration of the fund itself until the fund collects enough money to pay its own administrative costs.

Also authorized to be appropriated to the fund are such amounts as may be periodically necessary to implement the provisions of this title. These amounts are to pay for contracts, disbursements, issuance of notes and other obligations. The authority to spend money under various provisions of this title is effective only if provided for in appropriation acts.

The appropriation section has been carefully drafted after consultation with the Budget and Appropriations Committees of the House, and is designed to comply with the requirements of the Congressional Budget Act of 1974. The committee intends that the initial appropriations will set in operation the administrative mechanisms necessary to implement this title. Once the fund builds up a substantial balance, it should cover its own administrative expenses, as well as any other administrative expenses necessary to implement this title. The committee also intends that the appropriations legislation covering the Fund and the revolving account will provide for the transactions specified in this title in language without fiscal year limitation. One appropriations bill should provide for the collection of the fee, the deposit of the fee in the revolving account, the availability of money in the revolving account to the fund for disbursement, the issuance of notes and other obligations by the fund, the placement of penalties, fines, reimbursement, investments, judgments, and other sums received under this title in the revolving account, and for any other transactions which may be necessary to fulfill the purposes of this title. The appropriations bill need not contain a monetary figure, but should provide for these transactions without fiscal year limitation.

Section 322.-Relationship to Other Law

With the exception of requirements as to financial responsibility, this title does not preempt the field of liability and does not prevent any state from imposing oil spill liability laws or additional requirements. Any state may impose requirements or liability for oil spills causing clean-up costs or damages within its jurisdiction. It is the expectation of the committee that as the new Federal scheme created by this title is implemented and gets into full scale operation, the states will find less and less of a need to enforce their own liability laws. Claimants cannot doubly recover and thus receive compensation for the same damages or cleanup costs under both Federal and State law. Anyone receiving compensation pursuant to this title cannot receive compensation for the same cleanup costs or damages pursuant to any state or other Federal law. Anyone receiving compensation pursuant to any other Federal or State law cannot receive compensation for the same cleanup costs and damages pursuant to this title.

TITLE IV-AMENDMENTS TO THE COASTAL ZONE MANAGEMENT ACT OF 1972

The Coastal Zone Management Act Amendments of 1976 (Public Law 94-370) were signed into law on July 26, 1976, and were intended to provide federal financial assistance to coastal States likely to be impacted by coastal energy activity.

The Coastal Energy Impact Program (CEIP), which was the major section of the 1976 amendments, is composed of three parts. Planning grants are provided to states if their coastal zones are being, or are likely to be, significantly affected by energy facilities. The 80percent grants are to be used by the States to study and plan for any economic, social, or environmental consequence which results from the location or operation of energy facilities in the coastal zone.

The second part of CEIP involves loans and bond guarantees to coastal States to assist them in financing public facilities and public services required as a result of coastal energy activity.

The third part, which is the provision reviewed and amended by the committee, is the formula grant section (308(b)). This measure provides grant moneys to coastal States impacted by OCS energy activity.

The Coastal Energy Impact Program, and in particular, the formula grants section, was intended to satisfy the States' requests for a portion of the revenues which accrue to the Federal Government from the sale of leases on the Outer Continental Shelf. The States argued that most of the social, economic, and environmental impacts from OCS development has occurred, and will continue to occur, in the coastal zone of the States.

Despite the enactment of the 1976 Coastal Zone Management Act Amendments, many of the coastal States, whose representatives testified before the committee, continued to express concerns about the need for funds to help finance the public facility, public service, and environmental protection requirements occasioned by OCS energy activity. Witnesses questioned the workability of the CEIP and, in particular, the OCS formula grants, specifically, on six major points: First the authorization level for the grants was not adequate to provide sufficient funds to impacted States. (The formula grants section is authorized at $50 million per year, from fiscal years 1978-84). Second, the statutory requirement that the grants are to be used to ameliorate the negative impacts from "new or expanded" OCS energy activity precludes the use of the money for present impacts occurring from past or ongoing OCS development. The Gulf of Mexico States felt that this provision discriminated against them because of their long history of involvement in the off-shore oil and gas industry.

Third, the existing CEIP formula, which provides a method for computing each State's share of the total grant money available in a given fiscal year, was confusing and based, in large measure, on the difficult concept of a State's "adjacency" to a lease sale. Because some States, particularly along the North Atlantic coast, have relatively small coastlines but may still be major support areas for OCS development, "adjacency" could be far removed from a determination of

actual impacts. Also, so-called "spillover" effects from OCS development may cover all, or portions of entire regions. Again, this is a particular concern to Atlantic coast States, although it may affect all coastal areas of the nation to some degree. Additionally, it is a problem which many felt would be addressed by the concept of state "adjacency" in the CEIP formula.

Fourth, the overall CEIP formula was directed heavily toward the production phase of OCS development. Only one-third of the formula was weighted for lease sales when a considerable amount of "start-up" costs would be incurred. Frontier States expressed reservations about the formula in this regard and were concerned that the vast proportion of grant moneys would be disbursed to one or two States already heavily involved in the production of offshore oil and gas. Additionally, the criteria on "new employment" has presented problems in acquiring accurate data.

Fifth, the restriction in the formula grant section that States may not use the formula grant money unless moneys in the loans and bond guarantee fund were "unavailable" was seen as particularly onerous.

Finally, the timing and method of disbursing the grant money was a matter of significant dispute. Ambiguity caused many coastal States to feel that the proceeds of the formula grants would not be transmitted to them immediately after the Secretary had made the calculations under the formula.

Witnesses before the committee divided on an approach to resolve these problems. Some argued for a straight revenue-sharing amendment to the Outer Continental Shelf Lands Act, while other argued for modification of the CEIP. The committee decided to amend the CZMA. It felt that a revenue-sharing proposal attached to the Outer Continental Shelf Lands Act, with little or no reference to the planning and management work presently being carried out by coastal States might devastate those coastal management efforts.

The coastal zone management program is at a critical stage nationally and our coastal States should not be encouraged to abandon the strenuous efforts they have made so far to establish balanced management programs for the use of their coastal resources. Only within the framework of a comprehensive management program will Federal OCS funds be utilized in a reasonable and effective manner. Section 308 (b) of the Coastal Zone Management Act was, therefore, amended as follows:

1. The authorization level for formula grants was raised to $125 million for fiscal year 1979-84. The fiscal year 1978 authorization was maintained at the present $50 million figure to keep the amendment within the requirements of section 402 (a) of the Congressional Budget and Impoundment Control Act of 1974 (88 Stat. 297, Public Law 93-344).

2. The CEIP formula was changed to one composed of a 50 percent weighted criterion for States adjacent to OCS acreage newly leased and a 50 percent weighted criterion for OCS oil and gas first landed. The first criterion will assist in providing more funds early in the OCS process for planning and management purposes. The second is more directly related to impact and infrastructure needs. The element related to new OCS employment in the existing CEIP was dropped. 3. A 30 percent ceiling on the amount that any single State may

obtain in a fiscal year was established. This ceiling percentage is to be applied to the total amount available to the Secretary for payment under this section in any fiscal year.

4. A 2 percent minimum "floor" for each State in a region of a State which is adjacent to OCS acreage newly leased or is landing OCS oil and gas was established. This provision is intended to address the problem of possible "regional spillover effects". The "floor" is to be applied to those States that may not fulfill either or both of the formula criteria in any fiscal year but which are located in the region of one or more States that do. The regions are broadly defined as Alaska and the Atlantic, Gulf, and Pacific coastal States.

5. A system for the proportional reduction in each State's allotment if sufficient funds are not available in any fiscal year was included. This provision was necessary because the two percent "floor" requirement in the amendment may, under certain circumstances, lead to an inadequate amount of funds being available to provide the full amount to which each State is eligible under the formula. The "proportionate reduction" mechanism provides that, when this situation obtains, each State's share will be reduced in accordance with its proportion of any fiscal year's allotment.

6. The provision that now prevents a coastal State from using its formula grant moneys (for public facilities and services) unless loan and bond guarantee funds are unavailable was deleted. Thus, formula grant money could be used directly and immediately for OCS impacts without reference to the credit assistance section.

7. The present requirement in the formula grant section which stipulates that the moneys may be used for impacts resulting from "new or expanded" OCS energy activity was deleted. Formula grant funds could then be used by State and local governments for past, present, and future OCS-related impacts.

8. The chronological order of disbursing grants to coastal States was clarified. A coastal State would receive its portion of the funds available in any fiscal year after providing the Secretary of Commerce with adequate assurances that it can return any funds which are not expended or committed in accordance with the provisions of the section. Additionally, the grants would have to be spent or committed by the end of the fiscal year following the fiscal year in which the grants were received. After receiving such assurances, the Secretary is directed to disburse the proceeds to eligible coastal States. The States may use these moneys after the Secretary determines that the expenditure or commitment of the funds is in accordance with the requirements of the section. The United States is entitled to recover any moneys not properly expended or committed.

It is the belief of the committee that title IV of H.R. 1614, should result in a better balance in the distribution of formula funds between States presently engaged in OCS development and frontier areas beginning to move into production. It maintains the use of the money within existing coastal management programs of States and is considered a reasonable and balanced response to the needs of coastal States to address OCS-related public facility, public service, and environmental requirements.

TITLE V-MISCELLANEOUS PROVISIONS

Section 501.-Review of Shut-in or Flaring Wells

The committee was concerned about the loss of energy because of shut-in and flaring wells. Section 501 directs the Secretary of the Interior to report to the Comptroller General and to the Congress within 6 months, and in his annual report thereafter, on all shut-in oil and gas wells and all wells flaring natural gas. The Comptroller General is to review and evaluate the methods already used by the Secretary in allowing the wells to be shut in or to flare natural gas. The committee is aware that the Secretary of the Interior and the Federal Power Commission have already collected data on this subject. It is not intended that this work be repeated as long as existing reports contain the information needed by the Comptroller General, and by the Congress.

Section 502.-Review and Revision of Royalty Payments

The committee was concerned that the United States was not getting its fair value for the leasing of its resources in the Outer Continental Shelf, as some lessees have not been promptly paying their royalties. In order to allow review of this problem, section 502 directs the Secretary of the Interior, within 90 days, and annually, thereafter, to submit a report on delinquent royalty accounts and to detail what new procedures including auditing and accounting procedures had been or should be adopted to assure accurate and timely payment of any royalty or net profit share in the future.

Section 503.-Natural Gas Distribution

As indicated in a discussion of the disposition of Federal royalty, net profit share, or purchased oil and gas, the committee was concerned with the serious dislocation of natural gas in the United States. In addition, as indicated in the requirements for new bidding systems, and comments and recommendations to be made by the Attorney General and the Federal Trade Commission as to certain decisions, the committee, was also concerned with the possible lack of competition in the awarding of leases on the Outer Continental Shelf. One way to alleviate both of these problems is to provide procedures and incentives for natural gas distributing companies to bid on, and then explore, develop, and produce Outer Continental Shelf leases.

Testimony presented to the committee indicated that one reason that such companies had not been involved in OCS activities to any large extent was because of regulatory limitations in their States. Specifically, such companies must justify to their State regulators the expenditure of any money for the obtaining of gas. The regulators would not authorize such expenditures if there were not guarantees that the gas obtained through such expenditures would come to geographic areas served by such distributing company. Allocation of interstate gas is determined, through its curtailment and transportation certificate power, by the Federal Power Commission, under the Natural Gas Act; and therefore, permission must be obtained from the Federal Power Commission to allow any natural gas distributing company which finds, and then produces, gas on a lease in the Outer