OUTER CONTINENTAL SHELF REVENUE SHARING PROPOSALS THURSDAY, AUGUST 12, 1982 U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, D.C. The committee met, pursuant to notice, at 9:50 a.m., in room 235, Russell Building, Hon Ted Stevens presiding. Staff members assigned to these hearings: Dennis W. Barnes and William J. McClusky, Jr., professional staff members; and Deborah J. Stirling, minority staff counsel. OPENING STATEMENT BY SENATOR STEVENS Senator STEVENS. My apologies to all concerned for being late. It could not be avoided. Gentlemen, do you have an opening statement? I have an opening statement for the record. Outer Continental Shelf [OCS] revene sharing is an idea whose time has arrived. Recently the Secretary of the Interior, James Watt, announced his 5-year plan to lease over 1 billion acres of the OCS nationwide. Over 40 lease sales will be conducted over the next 5 years affecting coastal areas throughout the lower 48 and Alaska. These leases are expected to generate between $10 and $20 billion annually for the Federal Treasury. However, it is my fear that this revenue, and more importantly, the needed domestic production which it represents will be severely delayed if our coastal States are convinced they are not part of the leasing process and will be faced by substantial onshore costs a a result of this program. States must be guaranteed financial participation at least to the extent necessary to evaluate the risks each faces-this means costly research and planning, and the development of facilities to handle population growth, and generally provide for mitigation of onshore impacts arising from development. Over the years a number of us in Congress have offered legislation that would install the States as true partners in OCS development. In fact, in 1973 I introduced such legislation. In other resource areas this concept has successfully been employed through the Mineral Leasing Act, the National Forest Revenue Act, and the Taylor Grazing Act, all of which are direct examples of specific revenue sharing. Additionally the Federal Government funds States for land acquisition and maintenance of parks under the land and (1) water conservation fund. Through the payment in lieu of taxes program States are partially reimbursed for loss of tax base due to nontaxable Federal lands within a State. It is clear the Federal Government has a long history of sharing revenue with the States when its activities directly affect specific State. It is equally clear that OCS development will impose dramatic socioeconomic impacts on coastal communities. Nor is there any doubt that OCS development presents potential environmental risks to other ocean and coastal resources. The States must have the wherewithal to effectively evaluate and cope with these potential problems. Federal suport will assist in needed facilities development, impact mitigation, and required scientific research to accomplish this objective. It will provide incentive for a more cooperative State/Federal relationship that can transform a program currently offering only disadvantage to States into one of balanced development and benefit. This is the approach that must be adopted to reduce friction among the States and the Federal Government and launch a unified OCS leasing program. The bill which I and my colleagues have introduced contains the components which I believe are necessary to address the issue before us. Our bill provides: First, an assured source of State funding; second, allocation of funds based upon contribution to production and recognition of other elements that determine coastal impact; third, funds to be used to deal exclusively with OCS and coastal development and planning problems; fourth, great flexibility for States and local governments to distribute funds for projects they feel the need for; fifth, passthrough of funds to local governments, and sixth, recognition of the national nature of the ŎCS by distributing minumum funding to all coastal States and territories. All of these elements are key to a bill that will make a difference in the implementation of this administration's OCS development plan. For an investment of less than 5 percent of the total OCS fund we can assure that States become active partners in the development of these vital resources. By insuring State and local discretion in the use of these funds, we can institutionalize coastal development and planning decisions at the appropriate level. In sharing this small fraction of the OCS fund, we can truly practice New Federalism. This is a small investment to make in a partnership with such great potential yield to the Nation. Alaska alone holds upward of 40 percent of OCS production potential and over 55 percent of the acreage to be offered in the 5-year plan. Opposition from the States to specific provisions in the plan is rooted in the paucity of scientific knowledge, the lack of coastal infrastructure, and insufficient planning that this bill is designed to remedy. This hearing is the first step which I hope will convince the Senate, the Congress as a whole, and the executive branch that revenue sharing is the only way to develop the partnership required to assure exploration, development and production of this vital resource area. Without this partnership, we will continue to experience the frustration and delays associated with litigation based upon fear-a fear which can be eliminated by a properly funded State program designed to develop the facts necessary to formulate a program in which the States are truly partners. I do think that it is important to know that this is not the first time we have examined the concept of revenue sharing, and I think this proposal is a very modest proposal. Do you have any opening statement, either of you? OPENING STATEMENT BY SENATOR GORTON Senator GORTON. I do, but I would be delighted to put it in the record. Senator STEVENS. No, I have kept you waiting. Go ahead and make your statement. Senator GORTON. Mr. Chairman, I am pleased today to be present at this hearing to consider bills containing different approaches to revenue sharing with the States to receive a percentage of the receipts from Outer Continental Shelf oil and gas leasing activities. Each of these approaches contemplates the establishment of a fund, the contents of which would be allocated among coastal States and territories for Outer Continental Shelf and coastal development activities. Although the concept of revenue sharing is by no means new, the logic of applying the concept in the situation of Outer Continental Shelf oil and gas revenues is increasingly apparent. As we consider this legislation, coastal States are facing the prospect of locating funding for many important programs from other than Federal sources. At the same time, the Department of Interior is proceeding on a significantly accelerated 5-year oil and gas leasing program. The pressures on coastal communities, and the need for locating a source of funding that would not place additional burdens on either the Federal budget, or on individual taxpayers, has never been greater. I am pleased to be a part of this bipartisan effort to insure continued funding for important ocean and coastal development activities and to achieve equity for coastal States with inland States in terms of long-term, equitable compensation for the effects of federally generated resource exploration and development. The State of Washington, the first State with an approved coastal zone management program, has deep and longstanding interest in the programs which would be affected by this legislation, and will be submitting testimony for the record of this hearing. OPENING STATEMENT BY SENATOR MITCHELL Senator MITCHELL. I have an opening statement as well, Mr. Chairman, for the record. Mr. Chairman, I wish to begin by thanking you and Senator Hollings for seeing fit to schedule this hearing. As a cosponsor of S. 2792, one of the two bills on which we will hear testimony this morning, I am pleased that the subject of OCS revenue distribution has reached the hearing stage, and now stands at least a chance of being considered by the full Senate before the conclusion of this Congress. I am here this morning for several reasons. First, I believe that vital coastal planning and management activities, maritime education and research activities, and fisheries programs must be continued, and, if possible expanded. Second, I believe that the Congress has an obligation to those who are engaged in these important pursuits to provide a reliable funding source for their worthwhile efforts. Third, I believe that it makes perfect sense to devote a relatively small percentage of new Outer Continental Shelf [OCS] revenues to these activities. Last, I maintain that these programs will be enhanced by permitting states to play a greater role in determining which of these activities should be emphasized and deemphasized in their particular coastal areas. I look forward to receiving the comments of those who are scheduled to testify today. With the benefit of their views and their experience, this panel should be able to formulate a final proposal which will insure that the worthwhile coastal activities which have been conducted to date are carried on in a responsible manner. Thank you Mr. Chairman. Senator STEVENS. Senator Markowski, do you have a statement? OPENING STATEMENT BY SENATOR MURKOWSKI Senator MURKOWSKI. Mr. Chairman, 2 weeks ago today I sponsored legislation with 14 of my colleagues on the bill we have before us now, a bill to establish an ocean and coastal development impact assistance fund. The concept of OCS oil and gas revenue sharing with States is not new. It has been discussed for a number of years in Congress. What is new is the need and importance of this proposal to coastal States. The dynamics of ever-changing oil supply and price factors and the subsequent need for energy independence has led us to accelerate the development of our OCS. Simultaneouly, coastal and ocean related issues that have been recognized and funded over the years by Congress are now subject to cutbacks as a result of our budgetary problems and the general state of the economy. As we increase our utilization of the OCS in both the development of renewable and nonrenewable resources, it becomes imperative that funding for these programs continue. Furthermore, with increased development of the OCS, we can expect additional impact on the OCS and adjacent coasts, thus the importance of the presence of existing programs to mitigate undesirable impact and promote continued growth in productive areas. The approach taken in this bill is similar to an investment whereby a small portion of current revenues are invested in areas needed to solve existing problems and prepare for the future. It would help to insure timely and responsible development of all OCS resources and would result in a productive and cooperative State/Federal relationship. According to the Department of the Interior, some 34 percent of the undiscovered oil and 28 percent of the gas in the United States lies beneath the OCS. For the 5-year period beginning last month, close to 1 billion acres divided into 41 lease sales will be offered from the OCS. Although amibitious, the 5-year lease program is responsible to our need to approach energy supply stability and security. H The bill we are discussing today will be instrumental in assisting n OCS development by preparing for impact, not reacting to it. It an help remove obstacles to development and assure that chalenges to balanced and reasonable growth are met. The end effect of this "investment" can only be a more productive OCS. Two other areas that deserve brief mention are the concepts of federalism and equity. Obviously the bill embodies several aspects of federalism, or rather a State/Federal partnership. It combines Federal policy and fiscal support with State and local management and programmatic control. Responsiveness and responsibility will be heightened at the State and local level in conjunction with the determination of State priorities at a State's discretion, yet all within broad guidelines as outlined under Federal policy. It insures that all States will have sufficient resources to accomplish national goals with respect to coastal development. The issue of equity is also addressed in that the bill provides for revenue sharing similar to other Federal revenue sharing_programs, such as the Mineral Leasing Act of 1920. The Mineral Leasing Act shares approximately one-half of all Federal revenues derived from resource development on Federal lands with States. These funds are used to mitigate impacts from development within a State's borders. Although the percentage amounts shared under this bill are much less than the Mineral Leasing Act, the intent is the same since OCS development does have a direct coastal and onshore impact on nearby States. I am pleased to be here today and to be a cosponsor of this bill. I am also impressed with the interest expressed to date and look forward to working with all concerned parties to produce a balanced, well thought out bill this legislative session. [The bills follow:] |