OCS activity; however, these revenue increases would occur after fiscal year 1982, which is outside the scope of this estimate. The estimated impact of this section during fiscal years 1978-82 is as follows:

Title III establishes an Offshore Oil Production Compensation Fund within the Department of Transportation. The Secretary of Transportation and the Secretary of the Treasury would collect a fee of 3 cents per barrel of oil obtained from OCS production until the account totals at least $100 million, which is not projected to occur until after fiscal year 1982.

Money is to be disbursed from the fund for administrative and personnel expenses, cleanup costs, and payment of certain claims. The incidence of such costs is highly unpredictable, and may vary greatly from year to year. In addition, some of the cleanup costs and damage claims are recoverable, though it is not likely that substantial recoveries will be made during the period covered by this estimate. For the purpose of this estimate, it is projected that an average of $10 million per year will be disbursed from the fund for the specified purposes. The bill authorizes the appropriation of $10 million in fiscal year 1978, $5 million in fiscal year 1979, and $5 million in fiscal year 1980 for the administration of this title. It also authorizes the appropriation to the fund of such additional sums as may be necessary to carry out the provisions of this title. In addition, the fund is authorized to borrow up to $500 million from the Treasury to cover its necessary expenses.

The estimated costs and revenues associated with title III are summarized below:

The costs of this title fall within budget function 300.

Title IV Amendments to the Coastal Zone Management Act

This title would amend the Coastal Zone Management Act of 1972 (specifically section 308 (b)) by providing grants to coastal states for the purpose of ameliorating adverse impacts resulting from exploration, development or production of energy resources. The authorization level is that stated in the bill; the net additional authorization is the amount authorized in this bill less the amount previously authorized. Outlays were estimated on the basis of the similar ongoing program.

The costs of this title fall within budget function 300.

Net cost by function

The net cost of this bill, by budget function, is summarized in the table below:

7. Estimate comparison: None.

8. Previous CBO estimate: On June 21, 1977, CBO prepared a cost estimate for S. 9, a similar bill, as reported by the Senate Committee on Energy and Natural Resources. In that hill, the estimated revenue loss was based on 33.3 percent experimental leasing requirement that was subsequently changed as the result of floor action to 50 percent. 9. Estimate prepared by: Leslie Wilson. 10. Estimate approved by:

C. G. NUCKOLS, for JAMES L. BLUM, Assistant Director for Budget Analysis.

X. DEPARTMENTAL REPORTS

H.R. 1614 was the subject of reports from the Departments of the Interior, Commerce, Army, the Office of Management and Budget, and Office of Technology Assessment. The reports follow herewith:

U.S. DEPARTMENT OF THE INTERIOR,
OFFICE OF THE SECRETARY,
Washington, D.C., March 21, 1977.

Hon. JOHN M. MURPHY,

Chairman, Ad Hoc Select Committee on Outer Continental Shelf, House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: This responds to your request for the views of this Department on H.R. 1614, the "Outer Continental Shelf Lands Act Amendments of 1977."

We support the enactment of legislation to amend the Outer Continental Shelf Lands Act subject to the comments set forth below. We strongly believe that both environmental and energy considerations require modernization of the Outer Continental Shelf Lands Act of 1953.

H.R. 1614 seeks to accomplish a number of desirable objectives, including:

Facilitation of exploration and development of the OCS to provide needed additional domestic sources of oil and natural gas;

Enhancement of the opportunity for participation by the Coastal States and other affected regions;

Provision of more specific environmental guidelines for OCS exploration and development;

Enhancement of competition for leases to assure a fair return to the public for its resources.

H.R. 1614 would provide a revised legislative framework for the exploration, development and production of the mineral resources of the Outer Continental Shelf. The bill would:

Provide a comprehensive new leasing program with revised procedures for bidding and lease administration;

Authorize a number of specific bidding systems and require at least one-third of all acreage leased in each frontier area under the new program be leased under the specified systems, other than cash bonus bidding;

Authorize and direct exploratory drilling under Federal contract outside of areas included in the Interior leasing program and require the Department to offer permits for the drilling of on structure wells at least once in each frontier area;

Transfer authority for environmental baseline studies to the Commerce Department;

Provide new rules concerning health, safety and environmental protection;

Establish explicit procedures for enforcement and public participation, including new provisions for citizen lawsuits; and

Establish Coastal State and Regional Advisory Board participation in the leasing and development decisions.

Several provisions of the bill could, however, needlessly impair the efficiency of the OCS program, increase consumer and taxpayer costs, or produce other results not in the public interest. Our major concerns

are:

1. Alternative bidding systems.-We concur in the bill's explicit authorization of new bidding systems and agree that substantial leasing should be undertaken to test and develop systems other than the cashbonus bid system currently in use. We are concerned, however, that H.R. 1614 would not permit experimentation with either new systems not specified by the bill, or variations of systems which are specified. To allow such flexibility, we recommend the following new subsection be added to section 205 on page 27, line 6: "(I) any modification of bidding systems authorized in (A) through (H) and any other svstems of bid variables, terms and conditions which the Secretary determines to be useful to accomplish the purposes and policies of this section."

We are also concerned that sections 8(b) (4) of H.R. 1614 together with sections 8(g) and 9 of the present Act would not permit experimentation with dual leasing systems. For example, one option which is under study in the Department and which may prove useful, is to have the exploratory firms share the costs of drilling under exploration

leases in return for a limited share of the benefits of subsequent development leases. We are reviewing the desirability of authorizing such arrangements and will make a recommendation to the Congress shortly with amendments to carry out any such recommendation.

2. Federally contracted exploration. We agree that the Department should have the authority to contract for exploratory drilling and should exercise that authority in the national interest. Because of the great potential for government expenditures in OCS exploration, however, it is important to ensure that the new statutory authority include sufficient flexibility for achieving efficient exploration.

To clarify and to make more flexible the authority to contract for exploratory drilling, we recommend the following changes:

Section 206 delete section 11 (h) on page 43, and substitute the following: "(h) The Secretary is authorized to contract for exploratory drilling on geological structures which the Secretary determines should be explored by the Federal Government for national security or environmental reasons or for the purpose of expediting efficient exploration, the sale of oil and gas leases, and development."

In addition, the Secretary should be given discretion to seek qualified applicants to conduct geological exploration, rather than be required to do so at least once in each frontier area as provided by new section 11 (g) which would be added by § 206 of the bill. To accomplish this, lines 1 and 2 on page 43 should be amended to read: "(g) The Secretary may seek qualified applicants to conduct geological explora-"

3. State and Regional Advisory Board recommendations.-Participation by the States in development and execution of the OCS leasing program is highly desirable. Past arrangements for this participation and Interior response to State and regional concerns have not been satisfactory to the States. In general, the bill's provisions are well designed to remedy this defect.

The bill does, however, require the Secretary to follow recommendations of the Governor of an adjacent state or the Regional Advisory Board, unless they "are not consistent with the national security or the overriding national interest." The provision makes unnecessarily adversary a process which should be as cooperative as possible. Also, unnecessary confusion may result if responsibility for such recommendations is given to both the Governors and Regional Advisory Boards. The Governors, of course, would be free to establish whatever advisory or consultative mechanisms they deem useful and necessary.

We recommend that the Regional Advisory Boards not be specifically authorized by statute and that the Secretary be required to consider the Governor's recommendations in light, not only of the national interest, but also of the well-being of the citizens of affected States. The Secretary should also be required to consult with Governors making recommendations and to inform them, in writing, of the reasons. for his decisions. Section 19 (d) beginning at line 15 on page 54, therefore should be amended to read:

"(d) (1) Any Governor of any affected State may submit recommendations to the Secretary regarding the size, timing, or location of a proposed lease sale or with respect to a proposed development and production plan.

"(2) Such recommendations shall be submitted within sixty days after notice of such proposed lease sale or receipt of such development and production plan.

"(3) The Secretary shall accept such recommendations if he determines, after having provided the Governor the opportunity for full consultation, that they provide for a reasonable balance between the national interest and the well-being of the citizens of the affected State. For the purposes of this subsection, a determination of the national interest shall be based on the desirability of obtaining oil and gas supplies in a balanced manner and on the findings, purposes and policies of this Act. The Secretary shall communicate to the Governor, in writing, the reasons for his determination to accept or reject such Governor's recommendations, or to implement any alternative means identified in consultation with the Governor to provide for a reasonable balance between the national interest and the well-being of the citizens of the affected State."

Conforming amendments would also be needed to delete Regional Advisory Boards in section 19 and in other sections of the bill where Advisory Boards are mentioned.

4. Cooperative Agreements with affected Coastal States. We believe clear authority for necessary cooperative agreements between affected Coastal States and the Department is desirable. We, therefore, recommend the addition in section 19, page 55, of the following new subsection (e): "(e) The Secretary is authorized to enter into cooperative agreements with affected Coastal States for purposes which are consistent with this Act, and applicable Federal law. Such agreements may include the sharing of information, the joint utilization of available expertise, the facilitating of permitting procedures, joint planning and review, and the formation of joint surveillance and monitoring arrangements to carry out applicable Federal and State laws, regulations and stipulations relevant to OCS operations both on and offshore."

5. Lease cancellation and development plan disapproval for environmental reasons.-We support provisions of the bill authorizing lease cancellation of development plan disapproval because of harm or damage to the environment. When such strong action is taken, however, ing of harm or damage which outweighs the advantages of continued operations as well. We recommend that these provisions be amended to provide that the criteria for cancellation and disapproval be a showing of harm or damage which outweighs the advantages of continued activity. Since disapproval of a development plan can ultimately lead to lease cancellation, the criteria for both decisions should be consistent. Therefore, we recommend the following amendments:

In section 25(g) (1), page 77, delete line 16 through line 3 on page 78, and substitute:

"The Secretary shall disapprove a plan :

"(A) if the lessee fails to demonstrate that he can comply with the requirements of this Act or other applicable Federal law;

"(B) if those activities described in the plan which affect land use and water use of the coastal zone of a State with a coastal zone management program approved pursuant to section 306 of the Coastal