OUTER CONTINENTAL SHELF REVENUE

SHARING PROPOSALS

WEDNESDAY, SEPTEMBER 1, 1982

U.S. SENATE,

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION,

NATIONAL OCEAN POLICY STUDY,
Coos Bay, Oreg.

The committee met, pursuant to notice, at 2:45 p.m., in Eden Hall, Southwestern Oregon Community College, Coos Bay, Oreg., Hon. Bob Packwood (chairman of the committee) presiding.

OPENING STATEMENT BY THE CHAIRMAN

The CHAIRMAN. The hearing will come to order.

This is a hearing of the Senate Commerce Committee on two bills involving the allocation to the States of funds derived from Outer Continental Shelf leasing revenues.

There are two different approaches. One is a bill introduced by Senator Stevens of Alaska and myself which would allocate to the States on a formula basis moneys more or less in the form of revenue sharing. It is a perpetual process, not subject to annual appropriations. Under this, Oregon would get about $8 million a year at a minimum. If oil and gas were discovered off of our coast, we would get more. But, every coastal State gets a certain amount. Oregon gets slightly more than the minimum because there is a bonus if the State has a coastal zone management plan. Oregon does, a number do not.

The other approach is that of Senator Weicker. His bill is oriented more toward fisheries specifically, and it is subject to the annual appropriations process, which means you do run the risk from time to time of the money being there or not being there, depending upon the vagaries of the appropriations process.

In the hearing in Astoria this morning it became very clear that when this bill was drafted, we left out "ports." Not intentionally. We just assumed that no one would think of allocating money to coastal communities without allocating it to ports. We did not think it was necessary to say so. But I can assure you that when the bill is finally drafted and presented, "ports" will be mentioned prominently, in all capital letters, and we will make it clear in the conference report that we certainly intended ports as well as cities and counties to be counted as part of the municipalities of local government on the coast.

Under the bill of Senator Stevens and myself, the $8 million would be allocated roughly 40 percent passthrough to the local

communities-coastal communities only. Sixty percent would remain at the State level at the discretion of the Governor, but to be used for coastal purposes only. He cannot use it for other purposes.

There was some testimony this morning that percentage was not right, or it should be varied. Let me say to begin with we do not have any of the money yet, the bill has not passed. So when you are talking about changing the formula, at the moment you are talking about changing a percentage of nothing, although I think the chances of passage through the Congress are pretty good, better than 50-50, this year. The administration is in opposition. I think we can pass the bill anyway. The question is, if we pass it whether or not the administration will sign it or veto it.

Governor Atiyeh and I were both in Astoria for the hearing this morning, and found it most helpful. Changes will be made in the bill from what we heard.

We are here this afternoon to again find out from this end of the coast suggestions you may have for the improvement of either of the bills, or which you prefer, or what approaches you would like to take.

We will have Governor Atiyeh speak first, and then I will change the order of the witnesses slightly so that Ed Zajonc, the director of State lands for Oregon, can speak second, because I believe the Governor and Mr. Zajonc have to leave and get back to Salem. That will enable them to get back on the same plane together.

With that, I am delighted to call the Governor of the State of Oregon as a witness. I want to say that of all the Governors of all the coastal States, all of them ought to have an interest in this, but Governor Atiyeh is the one who has pushed and prodded and helped on this. If this bill passes, he will deserve more credit than any other Governor in the Nation, although every coastal State will get some money and they all ought to be beholden to Vic Atiyeh. Oregon certainly will be, because without his help this bill would not be where it is today.

Governor Atiyeh.

STATEMENT OF HON. VICTOR ATIYEH, GOVERNOR, STATE OF OREGON

Governor ATIYEH. Thank you, Senator, for your kind words. I appreciate that.

But I want to thank you for bringing this field hearing on S. 2792 directly to the communities which, depending on the fate of the Federal legislation, can be helped or hurt by Outer Continental Shelf oil and gas leasing.

I also appreciate the opportunity to be with you during the course of these hearings. The manner in which you and your staff have worked and consulted with my office, State agencies, and local governments on this issue has been both considerate, and I would tell you very effective. We thank you for your leadership and your cooperation.

I must also add that you have shown considerable political courage in cosponsoring S. 2792 at a time when Federal revenue shar

ing, regardless of what is fair and right, is not a comforting prospect to the U.S. Treasury.

As Governor, I am proud to be your strong ally in urging Congress to approve this legislation.

Benjamin Franklin once said, "A part of everything you earn is yours to keep." He was talking about prudence and thrift, but his words drive to the heart of this issue. Oregon, more than any other coastal State in this Nation, has taken extraordinary measures that reflect the special reverence we have for a magnificent natural resource; 98 percent of our ocean shoreline is and forever shall be open and free to the public. By comparison, an average of only 2 percent of other coastal States' shorelines is open to the public.

I recall back in our days when we were in the legislature together, members of the 1967 Oregon Legislature, supporting the historic beach bill that represents Oregonians' everlasting commitment to preserve and protect an irreplaceable resource. The beach bill was an important and unprecedented statement of public policy. It assured the vitality of Oregon's third largest income-producing industry, tourism, which even in these hard times is the Oregon coast's most reliable economic cornerstone.

But the task of assuring a broad and long-term economic viability for coastal communities cannot be accomplished independently by those communities, or by the State, or by the Federal Government. All three must work together.

The establishment of an effective local-State-Federal partnership is in the best interest of all three entities, and Congress in the past has made sincere efforts to forge those alliances.

Under the Coastal Zone Management Act, States have prepared coastal zone management programs designed to accommodate national, regional, and State interests. Oregon was the second State to receive Federal approval of its coastal management program 5

years ago.

Other Federal programs, including the national sea grant college program, the coastal energy impact program, and research programs under the Anadromous Fish Act and the Commercial Fisheries Research and Development Act, have reinforced the notion that mutual benefits are the products of cooperation and shared responsibility.

Now, however, the administration is ready to pull the plug on those partnerships. At the same time, it intends to accelerate Outer Continental Shelf oil and gas leasing. The dissolution of these Federal-State partnership programs is a hard left jab. Accelerated Outer Continental Shelf oil and gas leasing is a hard right cross. S. 2792 is our best and perhaps our only defense against the knockout punch.

Historically, Federal and State resource management partnerships have honored State entitlements to keep a share of revenues earned from Federal leasing programs in those States. For example, affected States receive one-half of all mineral leasing revenues. Since the beginning of this fiscal year, 23 States have received direct Federal payments of $272 million under the Mineral Leasing Act.

The national forest receipts program shares 25 percent of revenues from Federal timber sales. In Oregon, Federal timber revenue sharing is major source of funding for counties and schools.

Public law authorizes Federal payments in lieu of taxes when a Federal presence imposes burdens on local jurisdictions. Shared revenues is a long-standing national policy, established both by tradition and law. Revenue sharing recognizes Ben Franklin's adage, "Part of everything we earn is ours to keep," as well as the Federal Government's reparative obligations to local jurisdictions which must absorb the impacts of Federal activities.

As it now stands, the Outer Continental Shelf Lands Act totally ignores precedence, equity, obligation, and, worst of all, commonsense. The law says that regardless of the pressures and adverse impacts of offshore oil and gas leasing on coastal States and their communities, those States and communities alone must pay the price. In a word, Senator, that policy is unacceptable.

I do not oppose Outer Continental Shelf leasing, as long as the State of Oregon is consulted in advance and our concerns are given proper consideration. What I do oppose is the Federal Government and the oil and gas companies playing a billion dollar ball game in our front yard and not paying for any windows they break. You know as well as I that the Oregon coast does not need any more broken windows.

Despite the several Federal resource management programs that have helped Oregon fisheries and other ocean and coastal resources, we have had to scratch and scramble just to maintain the status quo. Now even those programs are to be abandoned, leaving coastal communities to face unknown new pressures at a time of record unemployment, business failures, and depression-era budget deficits.

I support the theory of New Federalism. I do not, however, believe that New Federalism means that the economy of coastal Oregon must be destroyed in order to save it.

Senator, a lot of oil and gas companies are going to get very, very rich developing Outer Continental Shelf resources. The potential earnings for the Federal Treasury are huge. But we need to ask the question, what about the Coos Bay-North Bend area? What about Tillamook? What about Siuslaw? What about Florence, Reedsport, Salmon Harbor, the ports of Curry County, and the central and north coast, and Astoria, where we were this morning?

When shared receipts under the inland leasing programs are at record high levels, is the Federal Government ready to write off our battered coastal communities as expendable?

Congressional approval of S. 2792 will offer some reasonable compensation for the severe stresses Outer Continental Shelf activities will place on public facilities, roads, schools, hospitals, parks, moorages, and the possible degradation of living marine and estuarian

resources.

Under this bill, Oregon will receive at least $6 million annually in block grants, 40 percent of which is to be automatically passed through to coastal jurisdictions for a broad range of eligible programs, including capital improvements that promote economic development. The balance of the block grant is to be allocated in Oregon's coastal zone at the discretion of the Governor.

The bill provides maximum deference to the State to determine the appropriate use of the grant. That process must be simple and responsive, and I assure you and all those who hear this message that private and public sector representatives of the Oregon coastal zone will participate in that decisionmaking.

In a moment several heads of State agencies will offer their testimony in support of S. 2792, and I concur in the recommendations they will make. But I want to put special emphasis on two points which are vital to the effectiveness of the ocean and coastal development impact assistance fund.

First, because the economy of Oregon's coastal counties is so utterly dependent on forces far beyond our control, part of the formula for disbursement of these shared resources should be tied to the rate of unemployment in each county.

Second, to take advantage of the planning we have done, and to be assured that those plans can be carried out, the bill must provide a clear certainty-a guarantee, if you will-that the long-term integrity of the fund is assured.

Senator, you and I know personally dozens of people in the room today and those that we met earlier today. These are the people who intend to live, to work, and to prosper on the Oregon coast. They are fishermen, loggers, farmers, lumbermen, merchants, and locally elected public officials. They neither seek nor want charity, and neither do I.

What we seek and what your legislation will deliver is a fair shake.

I thank you for your perceptiveness and becoming a major part of this legislation, and I thank you on behalf of Oregonians for offering us an opportunity to help ourselves.

Thank you.

The CHAIRMAN. Governor, thank you not only for your kind words and help, but also for the suggestion on the unemployment as a factor in the distribution formula. None of us had thought about it. Governor Atiyeh was the one who suggested it.

Needless to say, with the unemployment rate on the Oregon coast, it would increase the amount of money Oregon would get, and I am working with Senator Stevens to see if we can incorporate that factor in the distribution formula.

Governor ATIYEH. Thank you, Senator.

The CHAIRMAN. Thank you.

Let us take Ed Zajonc next, the director-—

Governor ATIYEH. If I may, I would like to excuse myself as soon as we finish. They need me in Salem.

The CHAIRMAN. I understand. That is a signal, Mr. Zajonc, for you to speak fast.

STATEMENT OF ED ZAJONC, DIRECTOR, DIVISION OF STATE LANDS, STATE OF OREGON, SALEM, OREG.

Mr. ZAJONC. Yes, I took that immediately.

It is truly a pleasure to have the opportunity to address not only my current boss, the Governor of the State of Oregon, but also my former boss, whom I now have the pleasure of calling chairman after so many years of calling Mr. Packwood and Senator Pack