**1998 Year of the Ocean**

**OCEAN ENERGY AND MINERALS: RESOURCES FOR THE FUTURE**

**Contents**

1\. EXECUTIVE SUMMARY D-2

2\. INTRODUCTION D-3

3\. ENERGY RESOURCES D-6

4\. MINERAL RESOURCES D-12

5\. ISSUES ASSOCIATED WITH OCEAN ENERGY AND

MINERAL RESOURCES DEVELOPMENT D-15

6\. THE NEW PARADIGM: MOVING BEYOND CONFLICT TO

CONSENSUS D-18

7.  REFERENCES D-20

8.  DOMESTIC LEGAL REGIME D-21

9.  LIST OF ACRONYMS D-30

This Year of the Ocean document was prepared as a background discussion
paper and does not necessarily reflect the policies of the U.S.
Government or the U.S. Government agencies that participated in its
preparation.

**EXECUTIVE SUMMARY**

A resolution adopted by the members of the United Nations proclaims 1998
as the International Year of the Ocean. The objective of this resolution
is to focus the attention of the general public, governments, and
decision makers on the importance of the ocean and marine environments
as resources for sustainable development. In keeping with this focus,
the Ocean Principals Group, an *ad hoc* group of federal government
agencies with ocean research and management responsibilities,
established three primary goals:

1\. Promote public awareness and understanding of the value of the
ocean, its resources, and marine activities to the national welfare;

2\. Ensure that government does all it can and should to promote the
exploration, sustainable use, and conservation of the ocean; and

3\. Cherish the national heritage associated with the ocean.

The purpose of this paper is to highlight the importance of domestic
ocean energy and mineral[^1] resources to the national economy and
welfare. For example, although technological advances continue to
enhance cost-effective recovery of ocean oil and gas resources,
long-term development should be considered within a national energy
policy that balances concern for the environment with energy security
for present and future generations. Many resource development issues
remain to be discussed among all stakeholders---federal, state, and
local governments, industry, and the general public. Among these issues
are Outer Continental Shelf leasing moratoria, royalty relief, revenue
sharing with and impact assistance to coastal states, marine mineral
mining, and environmental protection. It is important that stakeholders
be actively involved in the process so that these important ocean
resources are developed in a reliable, safe, and environmentally sound
manner.

During this Year of the Ocean, it is important to evaluate the role of
ocean energy and mineral resources to the United States and its
citizens. To maintain a reliable and cost-effective supply of oil,
natural gas, and other minerals from the ocean, the United States must
move from conflict to consensus among all stakeholders. This paper
presents issues and ideas for discussion at Year of the Ocean symposia
and is intended to serve as a catalyst for important policy decisions
that need to be made to ensure a sound energy future and economical and
environmentally safe recovery of energy and non-energy mineral resources
from the seafloor.

**INTRODUCTION**

The United States has sovereign rights over the exploration and
development of non-living resources, including oil and gas, found in the
seabed and subsoil of the continental shelf, which is defined to extend
to 200 nautical miles from its coast or, where the continental margin
extends beyond that limit, to the outer edge of the geological
continental margin. This claim, made under the Truman Declaration of
1945, is confirmed in the 1982 Convention on the Law of the Sea.
Currently, about 27 percent of the natural gas and 18 percent of the oil
produced in the United States is from the federally managed Outer
Continental Shelf (OCS).

The development of the OCS is projected to increase substantially over
the next few years. Oil production in the Gulf of Mexico is expected to
reach a level of 1.9 million barrels per day by the year 2000, with
natural gas production at between 12 and 17.2 billion cubic feet of gas
per day. Meanwhile, the federal government collects an average of \$3 to
4 billion annually in bonuses, rents, and royalties from oil and
gas-producing companies for OCS oil and gas leases. These funds are
distributed to the general treasury, the Land and Water Conservation
Fund and the National Heritage Fund. These conventional hydrocarbon
resources will continue to be an important source of energy, revenue,
and employment for the United States well into the next century.

The offshore oil and gas industry, in operation since 1947, has made
significant progress in establishing a strong human and environmental
safety record. Approximately 85,000 Americans are employed directly in
the offshore oil and gas industry, with an equal number employed in
supporting jobs. Technological advancements have substantially reduced
hazardous working conditions and environmental impacts over what they
were a few decades ago. Additionally, new technologies have enabled
industry to identify and develop new reserves, both in shallow and deep
water. In 1995, Congress passed the Deepwater Royalty Relief Act, which
provided new economic incentives to industry to develop deep water areas
in the Gulf of Mexico. The Act has contributed to a significant increase
in the number of tracts leased and aggregate bonuses received, and it
has spurred a surge in employment in the OCS oil and gas industry and
supporting services.

The U.S. offshore energy resources are now being produced in water as
deep as 5,376 feet using subsea systems. By the turn of the century,
this production capability will extend to even greater water depths.
However, development of these deep water resources presents new
challenges, both technologically and environmentally. These include
working under harsh conditions, geohazards, and dealing with irregular
ocean bottom relief features. Moreover, deep water resource development
places increased demands on coastal ports and communities for facilities
and services.

In terms of potential alternative energy resources from the ocean, the
vast deposits of methane hydrates found in deeper oceanic areas offer
the greatest hope for future economical recovery and production. While
technology exists for harnessing renewable and non-hydrocarbon energy
sources such as tidal and wave power or thermal stratification, these
energy sources are not now economically viable. However, they may become
sources of energy in the future as technology advances, conventional
hydrocarbons become depleted, and concerns for global climate change
continue.

The ocean seafloor contains vast deposits of sand and gravel,
phosphorites, and other minerals that are usefulboth for public works
and commercially. In recent years, severe coastal storms have caused
rapid erosion of beaches and barrier islands. Maintaining beaches for
tourism is an economic necessity for many coastal communities. Nearshore
and offshore sand deposits are becoming important sources for beach
renourishment by eastern seaboard coastal communities, and such
resources are also being considered for barrier island restoration.
Around the world, sand and gravel (marine aggregate) find extensive use
in construction and account for the largest tonnage of minerals produced
from the ocean. Industry is looking more and more to the ocean for these
critical building materials as land supplies of sand and gravel are
depleted. Marine aggregate is also used for capping contaminated
sediments in estuaries, harbors, and waste dumps. As demand for these
resources increases, policies and procedures must be developed to ensure
their timely availability in a manner consistent with sound
environmental practices.

Marine mining of strategic minerals such as manganese, gold, titanium,
and other metals has not been economically viable in the United States.
However, mineral extraction in marine areas is expected to begin long
before land deposits become exhausted because of issues surrounding
land‑use priorities, clean‑water requirements, and environmental
considerations. Technology to extract these minerals economically is
being developed, and policies for ocean mining will need to be
considered.

**Federal Authorities**

The appendix to this paper provides an extensive overview of the federal
laws and authorities for ocean energy and mineral resources. A more
cursory presentation will be provided here. ""It should be noted at the
outset that the term "Outer Continental Shelf" (OCS) is a legal
delineation created by federal statute and is not the same as the
continental shelf that is defined in the 1958 Geneva Convention on the
Continental Shelf. Legally, the OCS comprises that part of the
continental margin adjacent to the United States that remained subject
to federal jurisdiction and control after enactment of the Submerged
Lands Act of 1953.

**Submerged Lands Act, 1953**

The Submerged Lands Act established state jurisdiction over offshore
lands within 3 miles of shore (or 3 marine leagues for Texas and the
Gulf coast of Florida). The Act also reaffirmed the federal claim to the
OCS, which consists of those submerged lands seaward of state
jurisdiction, and limited states' claims to inside the landward boundary
of the OCS.

**Outer Continental Shelf Lands Act, 1953**

The Outer Continental Shelf Lands Act established federal jurisdiction
over submerged lands on the OCS and gave the Secretary of the Interior
responsibility for administering energy and non-energy mineral
exploration and development on the OCS. Additionally, it gave the
federal government a mandate to develop OCS resources, explicitly
stating that there was "an urgent need for further exploration and
development of the oil and gas deposits of the submerged lands of the
Outer Continental Shelf." It authorized the Secretary to lease the
federal OCS for mineral exploration, development, and production and
provided for limited state involvement.

**Outer Continental Shelf Lands Act Amendments of 1978**

The Outer Continental Shelf Lands Act amendments of 1978 included many
new provisions such as consultation with coastal states and other
interested parties, environmental assessment, studies programs,
planning, remedies and penalties, and a process for developing leasing
schedules in 5-year increments. While they include requirements for
coordination and consultation with state and local governments
concerning OCS activities, the amendments retained the Secretary of the
Interior's broad discretion in managing OCS resources. The national
purposes and policies set forth in the 1978 amendments recognize the
dual goals of environmental protection and expedited exploration and
development.

**Presidential Proclamation Creating the Exclusive Economic Zone**

On March 10, 1983, U.S. President Ronald Reagan signed Proclamation
5030, which established the U.S. Exclusive Economic Zone. This consists
of those areas adjoining the territorial sea of the United States, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana
Islands, and U.S. overseas territories and possessions. The U.S.
Exclusive Economic Zone extends up to 370 km from the U.S. coastline.
About 15 percent of this area lies on the geologic continental shelf and
is shallower than 200 meters.

**Outer Continental Shelf Lands Act Amendments of 1985**

The 1985 OCS Lands Act amendments resolved a dispute over how the
federal government shares nearshore revenues with affected states, as
required in section 8(g) of the OCS Lands Act. The amendments mandated
that 27 percent of all revenues from production within 3 miles seaward
of the federal-state boundary be given to the states. They also set a
schedule for distribution on revenues placed in escrow pending
settlement of any jurisdictional disputes between the federal and state
governments.

**Outer Continental Shelf Lands Act Amendments of 1994**

The 1994 OCS Lands Act amendments authorized the Secretary of the
Interior to negotiate agreements (rather than conduct a competitive
lease sale) for sand, gravel, and shell resources for use in projects
undertaken by federal, state, or local governments for shore protection
and beach or coastal wetlands restoration, or for use in other types of
construction projects that are wholly or partly funded, or authorized,
by the federal government.

Access to OCS hard minerals for purposes other than those specified in
the amendments continues to be addressed through the competitive bidding
process by granting a lease to the highest bidder for the extraction and
use of any mineral.

**Federal Agency Responsibilities**

The Secretary of the Interior designated the Minerals Management Service
(MMS) as the regulatory agency for managing mineral resources on the
OCS. One of MMS's goals is to ensure safe, environmentally sound
operations during the production of oil, gas, and minerals from the OCS.
This agency accomplishes that goal through a strong regulatory program
while supporting research in offshore safety, oil-spill containment and
cleanup, structural integrity, and blowout prevention. The continuation
of these responsibilities plays a key role in protecting the ocean and
ensuring safe, environmentally sound oil and gas development from the
OCS.

**ENERGY RESOURCES**

**History of Ocean Oil and Gas Development**

This year marks the 51st anniversary of offshore oil and gas production.
In November 1947, a discovery was made off the Louisiana coast, 12 miles
from shore in water 16 feet deep. This represented the first successful
commercial development to be made out of sight of land. It was also the
first offshore well drilled from a mobile platform, thus initiating the
technology that has subsequently been used to drill more than 20,000
offshore oil and gas wells in the submerged lands off the coasts of the
United States. Previously, nearshore development was an extension of
onshore fields and technology. The earliest nearshore production in the
United States was off Summerland, California, in 1896, and was part of
an onshore field. These early nearshore wells were drilled from wooden
piers extending out from the shoreline. The next milestone occurred in
the Gulf of Mexico in 1938 when a discovery in the Creole field, 1.5
miles from shore in 26 feet of water, marked the petroleum industry's
first successful venture into open, unprotected waters.

The need for production capability in deeper water depths further
offshore has pushed the industry to develop new and better equipment and
techniques. Conventional steel-jacketed production platforms stand in as
much as 1,198 feet of water off the coast of southern California and in
1,350 feet off the Louisiana coast. In 1984, the drillship Discover
Seven Seas drilled an exploratory well in 6,952 feet of water off the
coast of New Jersey. In the often ice-bound waters of the Arctic,
drilling units have evolved from single use artificial gravel islands to
specially designed multi-use caisson-retained islands and ice-resistant
mobile units of more conventional design. Historically, the 1,000 feet
water depth barrier for installation of production platforms was broken
in the Gulf of Mexico in 1976; recently, an exploration well in the Gulf
has been drilled in 7,600 feet of water.

Since the enactment of the OCS Lands Act in 1953, outer continental
shelf oil and gas production has increased greatly and contributes
significantly to the total U.S. domestic production. In 1996, this
production reached 18 percent of total domestic oil production and 27
percent of gas production. Between 1953 and 1995, the outer continental
shelf has generated more than \$110 billion in federal revenues. These
contributions may be expected to continue to increase since the OCS is
estimated to contain about 19 percent of the nation's proven gas
reserves, 15 percent of the proven oil reserves, and more than 50
percent of the nation's remaining undiscovered oil and gas resources.

**Value to the Nation**

The federal OCS oil and gas program has provided significant benefits to
the United States by helping to address its energy needs, contributing
to its economic well-being, and by providing an important source of
revenues for the U.S. Treasury. It is estimated that more than half of
the nation's undiscovered oil and gas lies on the outer continental
shelf; thus, offshore energy resources may play an even more important
role in meeting U.S. energy needs in the future. Currently, the United
States imports about one-half of the petroleum necessary to meet its
energy needs, and the Department of Energy projects this level will
reach 61 percent by 2015.

The success of deep water exploration and development in the Gulf of
Mexico, largely due to advances in 3-dimensional seismic and production
technology, is reversing the long-term decline in domestic oil
production. By the end of 1996, there were 26 rigs drilling in water
depths greater than 1,000 feet, which compares with 9 such rigs in 1990.
Oil production from the Gulf of Mexico increased by 10 percent in 1995,
and most of the U.S. oil and gas reserve additions from new field
discoveries (79 percent and 70 percent, respectively), and from new
reservoir discoveries in old fields (91 percent and 68 percent), were in
the Gulf.

The oil and gas industry employs tens of thousands of American workers.
The average salary and benefits for workers of producing companies
employed as a direct result of activity in the Gulf of Mexico was
estimated to be \$52,580 in 1992. Since then, a shortage of skilled
labor due to the recent boom in industry activity has pushed earnings
even higher. In addition to payroll expenditures, producers pay several
billion dollars each year to vendors and contractors who support OCS
activities. Expenditures by producing companies on employees, equipment,
and support services in turn result in additional spending in
communities near outer continental activities and throughout the nation.
To cite some specific examples, Shell's Auger project involved
contractors in 30 states, and work on the Rowan No. 4 jack-up drilling
rig involved contractors in 43 states.

Bonus bids, rents, royalties, and other revenues paid to the federal
government for the rights to explore for and produce OCS energy
resources average between \$3-4 billion annually. Total revenues
(unadjusted for inflation) are well above \$110 billion since passage of
the OCS Lands Act in 1953. Of the OCS revenues collected each year, up
to \$900 million is deposited in the Land and Water Conservation Fund
(for state and federal projects); \$150 million goes to the national
Historic Preservation Fund; roughly \$500-600 million is distributed to
coastal states (in accordance with section 8(g) of the OCS Lands Act;
and the remainder goes to the U.S. Treasury. Additional revenue is
generated from taxes on industry profits and wages.

**The Human and Environmental Safety Record**

There are significant risks associated with oil and gas development.
With respect to possible risks to humans, some major safety concerns are
blowouts, explosions, fires, and vessel and helicopter accidents.
Exploration, development, and production of oil and gas also may impact
the marine, coastal, and human environments in several ways:

-   physical disruption of the seafloor habitat and benthic communities;

-   discharge of chemicals, drilling muds and cuttings, and produced
    waters;

-   hydrocarbon air emissions from facilities, supply vessels, and
    helicopters;

-   exploration and production noise impacts on marine mammals and
    fisheries stocks;

-   impacts of explosive platform removals on fish species;

-   socioeconomic impacts on coastal communities and ports---of special
    concern in Alaska are potential impacts on native Alaskan
    subsistence culture; and

-   accidental oil spills.

    Routine permitted activities are carefully monitored to minimize the
    risk of significant effects on the environment. Spills generally are
    viewed as much more threatening to the environment due to the
    immediate damage and disruption a large release can cause to
    ecological resources and to coastal livelihoods and activities that
    depend on those resources. The number of significant spills from oil
    production in state and federal waters has been low and the volume
    of oil spilled has, in general, continuously decreased over the
    years. There has not been a spill larger than 1,000 barrels from an
    OCS platform or rig since 1980. In fact, since 1980, OCS operators
    have produced some 5.5 billion barrels of oil of which only 61,500
    barrels (or 0.001 percent) has been spilled. Natural seeps introduce
    about 100 times more oil into U.S. marine waters than have spills
    from OCS oil and gas activities. Increased precautions by industry,
    enhanced safety technology (e.g., blowout preventors and shut‑in
    valves), and adherence to strict governmental regulations have all
    contributed to minimizing the risk of oil spills from offshore
    activities.

    The MMS diligently strives to diminish environmental and human risks
    through its regulatory program, which places stringent environmental
    and human protection requirements on all OCS operators.

    **Environmental Safeguards**

    Through a broad range of environmental laws, the federal government
    has the responsibilityeither on its own or in cooperation with
    statesto prevent or eliminate damage to the environment; to
    regulate pollution to restore and maintain the chemical, physical,
    and biological integrity of waterways; to protect and enhance air
    quality; and to protect and promote conservation of plants and
    animals listed as endangered or threatened.

    With respect to development on the OCS, environmental impacts may
    vary in intensity due to such factors as different methods of
    transportation (pipeline or tanker) and distances from the
    shoreline. To address this and protect workers and the environment,
    the MMS tailors special stipulations as required into leases sold to
    companies developing the resources. Concerns raised by coastal
    states and communities, fishing groups, and other federal agencies
    are likewise addressed. Some concerns may require a study of the
    impact on local marine life. Studies may lead to requirements for
    special operating procedures covering such areas as training of
    personnel and the handling of waste discharges of mud and cuttings.
    Making existing regulations clearer is yet another approach used to
    safeguard the environment.

    **Technological Improvements**

    Over the last half century, significant technological improvements
    in operational safety on the OCS have occurred. Today, for example,
    computer systems monitor platform operations. Advances in blowout
    preventors and increased safety inspections have allowed the search
    for oil and gas to continue into deeper water without compromising
    safety.

    Nevertheless, major concerns about operational maintenance and
    oil-spill prevention and clean-up remain. Continuous inspections and
    replacement of platform components and safety equipment are helping
    to relieve these concerns and ensure efficient and safe operation.
    Updated training and oil-spill contingency plans now allow for quick
    response and effective cleanup of a spill if it occurs. Remote
    sensing technology is being used to monitor oil slick movements more
    accurately.

    Another way human and environmental safety has improved for OCS
    operations is through the implementation of the MMS's Safety and
    Environmental Management Program (SEMP) and the U.S. Coast Guard's
    Prevention Through People program. The SEMP advocates a voluntary,
    but systematic approach, to safety management by every company
    operating on the OCS and uses the American Petroleum Institute's
    Recommended Practice 75 as the operating standard. This program
    supplements the traditional, compliance-based regulations of the MMS
    and further enhances its ability to prevent accidents that cause
    human injury and illness or environmental damage. Through SEMP, the
    MMS is working collaboratively with the offshore industry to refocus
    efforts on company safety and environment performance in addition to
    regulatory compliance. The Prevention Through People program
    initiated by the U.S. Coast Guard is intended to help elevate worker
    awareness of human involvement in accidents and to reduce the human
    error factor. This program differs from SEMP because it deals with
    vessels that are not stationary or fixed. Through these two
    programs, the federal government can better identify problem areas
    and heighten safety for both workers and the environment.

    **New Frontiers for Conventional Hydrocarbons**

    Exploration and development have been moving to remote areas such as
    deep water provinces, Arctic areas, and isolated natural gas fields,
    where there has been limited drilling. Interest in OCS deep water
    areas has increased in recent years, especially in water depths
    greater than 800 meters, because of better technology, new
    discoveries in deep water, and the passage of the Deep Water Royalty
    Relief Act.

    While the Arctic presents unique engineering and environmental
    challenges, there is potential for significant new discoveries on
    the North Slope of Alaska and in the Beaufort Sea. Proposed
    development of past discoveries has created an optimistic outlook
    for the future. Meanwhile, it must not be forgotten that oil and gas
    are being produced from the OCS offshore southern California. And
    although there is a current halt on leasing off the Pacific coast,
    the area holds vast reserves of oil and gas that may prove important
    to the nation in the future.

    **New Technologies for Finding and Recovering Oil and Gas**

    Three-dimensional seismic acquisition, modeling, and interpretation
    have greatly increased the efficiency of oil and gas exploration. As
    a result, fewer wildcat wells are being drilled, and more of them
    are discoveries. The renewed interest in deep water areas is being
    credited to better technology including three-dimensional seismic
    and horizontal drilling. For example, computers are now used to
    process geological and geophysical data and to create
    three-dimensional subsurface interpretations. This allows companies
    to identify reservoirs in progressively deeper water. Extended-reach
    or horizontal drilling has increased in the last 5 years due to
    higher production rates and greater recoveries from both new and
    existing wells. Horizontal drilling brings a larger portion of the
    reservoirs into contact with the wellbore, thereby increasing the
    flow rates. Besides the ability to increase recovery in borderline
    fields and protect environmentally sensitive areas, horizontal wells
    can provide geological information for sidelong distances up to
    5,000 feet in a single formation. It is estimated that over the next
    5 years, from one-third to two-thirds of all new wells will be
    horizontally drilled.

    **Methane Hydrates: Unconventional Hydrocarbons**

    Within the last decade, research has shown that most continental
    margins are reservoirs for an unconventional energy deposit. Immense
    amounts of gas are concentrated in frozen, ice-like gas hydrates
    within the top several hundred meters of sediment in deep water on
    the continental margins of the United States, from the Gulf of
    Mexico to the Alaska arctic. The worldwide amount of methane in gas
    hydrate deposits is conservatively estimated to be the equivalent of
    at least 1 x 10^4^ gigatons of carbon. This is about twice the
    amount of carbon held in all conventional fossil fuels on earth. Gas
    hydrates may prove to be the only hydrocarbon resource that could
    significantly affect the future world energy mix. The production
    history of the Russian Messoyakha gas hydrate field demonstrates
    that gas hydrates can be produced by conventional methods. Gas from
    hydrate deposits may become a major energy resource if economically
    profitable techniques are devised to extract the methane.

    **Outlook for Development of Renewable Ocean Energy Resources**

    The time scale to renew fossil fuels by geochemical processes is
    long compared to the time in which the modern world can consume
    known fossil fuel reserves. Consequently, the world's supply of
    fossil fuels is non-renewable for all practical purposes, and many
    nations are looking seriously at other alternative energy sources to
    provide part of their expanding energy needs. Many of the
    alternative energy sources are derived directly or indirectly from
    the radiant energy of the sun. The heat content of the world's ocean
    and the mechanical energy manifested by the various ocean water
    motions (e.g., surface waves, tides, and mean currents) are among
    the renewable energy sources available to many countries. This
    section examines some of these oceanic alternative energy resources.

    One way of using the abundant heat content of the surface ocean is
    to exploit the temperature difference between the warm surface layer
    of the ocean and the colder, deeper ocean lying below the
    penetration depth of sunlight. Engines operate between temperature
    differences by extracting heat from a higher temperature "reservoir"
    and ejecting "waste" heat into a lower temperature reservoir. The
    upper and lower layers of the ocean could function as the reservoirs
    for an engine that could, for example, power an electric generator.
    In this fashion, the heat of the surface ocean could be converted
    into a more usable form of energy (e.g., electricity).

    The mechanical motions of the ocean such as surface waves and mean
    currents are indirect manifestations of solar energy and, like the
    heat content of the ocean, constitute a large source of energy
    potentially available for human use. This likewise applies to the
    gravitationally driven tidal motion of the sea. Engineers in many
    countries have developed various devices for generating electricity
    from these forms of mechanical energy. Specially designed turbines
    mounted in dams or on moorings can capture some of the energy
    manifested in elevated sea level or strong currents. Other
    mechanical devices move under the influence of surface waves and
    capture some of their energy. All of these modern devices are
    coupled with electric generators.

    Coastal areas having large amplitude tides and narrow channels or
    embayments that can be dammed or support moorings with turbines are
    candidates for practical ocean energy conversion. Devices moored in
    persistent and strong ocean currents like the Gulf Stream could, in
    principle, also extract useful energy. Other coastal areas where the
    tidal energy may be small, but where high wave action is common, are
    candidates for wave energy conversion.

    There are practical problems with mechanical energy converters. Not
    all coastal areas have the high tidal amplitudes or the frequency of
    high waves necessary to provide the needed amount of energy for
    conversion. Tides are periodic with quiescent periods one or two
    times per day, and high wave activity is not always present even in
    frequently windy areas. Energy storage thus becomes an important
    consideration for using some of these devices but also increases
    operating costs.

    In addition, damming bays and straits significantly alters the
    circulation of water with possible adverse environmental
    consequences, and rapidly rotating turbines can kill fish, mammals,
    and freely floating marine invertebrates. Mooring turbines in open
    water rather than attaching them to dams, and placing streamlined
    protective housings around the turbine blades, greatly reduces these
    adverse environmental impacts. The consequent reduction in energy
    efficiency adds to their cost; nonetheless, many engineers still
    believe that these systems are commercially viable.

    **MINERAL RESOURCES**

    A wide variety of mineral resources are found on the seafloor. These
    resources fall into four general categories:

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-   granular sediments

-   placer minerals

-   hydrothermal deposits

-   hydrogenetic minerals

Granular sediments are transported to the sea by rivers and glaciers and
are sorted according to size by wave action on the coastline. They
include quartz-rich sand and gravel, carbonate-rich sand, shell, silt,
and clay. Gold, diamonds, platinum, tin, and titanium are among the most
common placer minerals, as well as concentrations of heavy minerals and
ores such as titanium oxide. Hydrothermal minerals are associated with
volcanic activity and include sulfide deposits rich in copper, zinc,
lead, gold, and silver. Hydrogenetic deposits form by precipitation from
seawater under various conditions and host minerals such as phosphorite,
salt, barite, and iron-manganese nodules, and crusts rich in cobalt,
platinum, nickel, copper, and rare earth elements.

Both coarse sand and gravel and finer sand are extremely abundant on
most continental shelves, with the coarsest materials (gravels)
occurring closest to the coast and finer grained materials dominating
the outer shelves and slopes. The thickest sand and gravel deposits are
those formed as a result of glacial action in the northern and southern
thirds of the globe. Placer minerals are also found nearest to the
coast, usually in association with present or former river systems.
Marine hydrothermal minerals are found in the deep ocean volcanos on
oceanic ridges and island arc systems. Hydrothermal deposits form in
association with underwater vents of mineral-rich hot water called
"smokers.". Hydrothermal deposits also include phosphorite and barite
accumulations on the continental shelves. The cobalt-rich manganese
crusts found on the flanks of most of the 50,000-plus extinct volcanic
seamounts in the Pacific Ocean are hydrogenetic deposits.

**Sand and Gravel**

Sand and gravel, used primarily for construction aggregates, constitute
the largest tonnage of any ocean mineral produced. These materials are
essential resources for the expanding populations of coastal areas.
Aggregates are used in nearly all residential and commercial
construction and in most public works projects such as roads and
streets, dams, airports, bridges, and tunnels. The exhaustion of
existing reserves, zoning, government regulations, and competing land
uses are increasingly restricting the production of construction
aggregate from the land, and thus encouraging the use of offshore
aggregate sources close to coastal population centers.

The greatest use in the United States of offshore sand and gravel is for
beach renourishment and coastal restoration and protection. With
increased development adjacent to or near the coastline, and the natural
processes of landward migration over time, there has been a steady
increase in the number and size of beach renourishment projects.
Traditional approaches to prevent coastal erosion (e.g., jetties and
groins) are no longer acceptable in many areas, having become too
expensive, ineffective, or damaging to the environment. Beach
renourishment, although expensive and short-lived in some cases, is now
a widely accepted method of restoring an eroded coastline.

Recent changes in wetland regulation sometimes mandate the building of
new wetlands to offset those that have been destroyed and much of the
material to construct coastal wetlands will be supplied by offshore
dredging. Marine sand may also be used for capping both recent and
former offshore dump sites.

Portions of the OCS areas surrounding the United States, especially in
the northeast, contain an abundant supply of sand and gravel, much of it
near growing metropolitan areas where demand is greatest. The detailed
distribution and characteristics of these resources is known in only a
few areas. Resource characterization studies are needed to better
understand the potential development of resources in specific
localities.

Environmental and physical oceanographic studies are needed to better
understand the possible impacts of dredging to ocean and seafloor life
and the coast. Costs are generally greater for mining offshore sand and
gravel than for onshore deposits, but these costs may be offset by lower
transportation costs for the delivered product and by a possible
reduction in environmental impacts onshore. These advantages have
prompted commercial interests to examine further the feasibility of
developing marine sand and gravel resources.

**Current Uses of Offshore Sand and Gravel**

Offshore sand and gravel use is an established industry in several
countries, most notably Japan, the United Kingdom, Denmark, and the
Netherlands. Japan obtains most of its construction aggregates from
offshore deposits, and the offshore dredging industry in the United
Kingdom is growing steadily. The technology developed and the experience
gained by these countries in dealing with economic and environmental
issues should prove useful for future development of U.S. offshore sand
and gravel resources. Major technological developments in dredging,
coming largely from the Netherlands and Japan, have occurred over the
past 10 years. Innovations include high-capacity underwater pumps and
multiple-booster pumps, which enable operation in deeper water and the
pumping of sand as far as 7 miles from the dredge to the shoreline.

Although there are no commercial sand and gravel mining operations
seaward of the 3-mile federal-state line, on the U.S. outer continental
shelf, there have been a number of such operations in rivers, bays, and
harbors over the years. One company currently produces construction
aggregate from deepening and maintaining the Ambrose Channel across New
York Bay, and the State of New York has prepared an Environmental Impact
Statement addressing sand mining in other parts of the bay. The same
company is seeking leases to dredge sand and gravel in federal waters
off the northern New Jersey coast, an indication that economic
conditions are favorable for a commercial operation in the New York-New
Jersey area.

Sand from offshore deposits has been used for beach renourishment since
1922, when Coney Island Beach in New York City was rebuilt. Since then,
hundreds of millions of cubic yards of marine sand have been placed on
U.S. beaches. The offshore sand used for beach renourishment projects is
generally from deposits within state waters but occasionally it comes
from the federal OCS as far as 8 miles from the coast. Project sizes
range from hundreds of thousands of cubic yards to 15-20 million cubic
yards. To support publicly beneficial projects, a 1994 amendment to the
OCS Lands Act (P.L. 103-426) authorized a negotiated agreement process
in lieu of competitive bidding for governmental use of OCS sand, gravel,
or shell. The amendment authorized fees to be assessed for use of these
resources based on their value and the public interest served from their
development. Each request to use OCS resources under a negotiated
agreement is handled individually. To assist government agencies needing
OCS resources, MMS developed procedures and guidelines to explain the
National Environmental Policy Act and OCS Lands Act requirements, and
the development of terms and conditions for removal of the resource. The
MMS guidelines on assessing fees outlines the approach that will be used
to determine appropriate fees that balance resource value with other
public benefits for governmental shore protection and restoration
projects.

To date, two coastal communities have obtained federal OCS sand through
this new process, and several more negotiated agreements are in
progress. Completed projects using federal sand include Duval County,
Florida, where 1.2 million cubic yards of sand were placed on a 10-mile
stretch of shoreline, and the U.S. Navy's Fleet Combat Training Center
at Dam Neck, Virginia, where 900,000 cubic yards were placed on the
beach to protect the facility. New projects are being planned with the
City of Myrtle Beach, South Carolina, for Surfside Beach; the State of
Louisiana for restoration of the Isles Dernieres and Timbalier Island
(two of the most rapidly eroding sections of the nation's coast); the
National Park Service for the northern end of the Assateague Island
National Seashore in Maryland; and the City of Virginia Beach, Virginia,
for Sandbridge Beach.

**Development of Other Minerals**

While offshore development of other hard minerals currently is not a
significant activity in U.S. waters, active offshore mining of minerals
other than sand and gravel worldwide include diamond recovery off the
southwestern coast of Africa, tin offshore of Indonesia, and titanium
offshore of western Australia. Diamond mining offshore Africa began in
1961 and has become a major contributor to the diamond market. Several
companies, including the diamond giant De Beers, are operating offshore
both Namibia and South Africa with very large dredges and at-sea
processing plants. Diamonds are now dredged in water as deep as 180
meters and remotely operated bulldozers with large suction hoses
connected to a processing ship have been tested for mining in even
deeper water. A fleet of over 30 bucket-line dredges are currently
working off Indonesia, processing over 40 million cubic meters a year of
sediments to recover tin ore. Although no development of the metals-rich
manganese nodule deposits has occurred to date, mining exploration
licenses have been held since 1984 by several multinational companies in
an area of the Pacific Ocean between Hawaii and Central America. There
has also been recent interest by Japanese and Chinese firms in manganese
nodules off the Cook Islands and other areas in the Pacific.

Mineral deposits in U.S. waters (other than sand and gravel) include
massive phosphate beds beneath the continental shelf from North Carolina
to northern Florida, titanium-rich heavy mineral sands off the East
Coast from New Jersey to Florida, gold-bearing sand and gravel deposits
offshore Alaska, barite deposits offshore southern California, manganese
nodules on the Blake Plateau offshore South Carolina and Georgia, and
the cobalt and platinum-rich crusts in the Hawaiian Exclusive Economic
Zone area. Gold was recovered in state waters off Nome, Alaska, from
1986 to 1990 by the WestGold Corporation using the Bima, a converted
Indonesian tin mining dredge. Despite the relatively rich deposits, the
operation was closed mainly due to steadily declining gold prices.

**ISSUES ASSOCIATED WITH OCEAN ENERGY AND**

**MINERAL RESOURCES DEVELOPMENT**

**Energy Issues**

*Public Perception*

From its beginning, the OCS program of the United States has faced
controversy over the ownership and management of offshore oil and gas
resources. Some of the controversy predates the inception of the federal
program in 1954, as both the federal government and individual coastal
states vied for jurisdiction over the nation's offshore area, with the
former eventually gaining title to the great majority of the continental
shelf. Additional controversy has arisen over the years as concerns
about the program's environmental and socioeconomic impacts have
increased. Some of this concern is attributable to a perceived imbalance
in governmental and community benefits and costs occasioned by OCS
development. In addition, the full range of benefits and costs---and
those of alternatives, such as importing oil by supertanker---are not
easily or readily identifiable.

The 1989 Exxon Valdez tanker oil spill that occurred in Prince William
Sound, Alaska, profoundly affected the public's perception of the OCS
program even though the spill was not caused by OCS oil and gas
drilling. That event, which rekindled concerns first raised after the
Santa Barbara OCS oil spill in 1969, received intense and lengthy media
coverage. This heightened concern about the possibility of similar
accidents and strengthened negative perceptions about offshore oil
development. Despite arguments that development of domestic resources is
necessary and beneficial, as well as reassurances about the
environmental soundness of the OCS program, a large segment of the
population remains unconvinced.

While there is some OCS production activity offshore California, the OCS
program at this time is mainly concentrated in the Central and Western
Gulf of Mexico, with limited leasing and exploration activity offshore
Alaska. Although Louisiana has expressed some concern and reservation
about shouldering the bulk of the nation's energy needs, offshore oil
and gas are still viewed as important and integral parts of that
region's economy, relatively few residents are opposed to it, and
extensive infrastructure and technological progress has led to a recent
boom in activity in the Gulf.

*Multiple Use Conflicts*

Oil and gas activities on the OCS occur along with many other activities
in the ocean, including commercial and sports fishing, tourism and
recreation, vessel traffic, military and NASA operations, and non-energy
marine mineral extraction. There also are areas of special concern, such
as parks and sanctuaries and, in Alaskan areas, subsistence hunting and
fishing activities. In addition to the "competition" for space, there is
concern from many ocean and coastal user groups that routine oil and gas
activities such as seismic surveys, drilling, and discharge of effluent
waters and cuttings, may have adverse effects on the coastal and marine
habitats and biota.

*Moratoria*

In the 1980s, state and local governments, dissatisfied with OCS
policies that gave primary authority to the federal Executive branch,
turned to the U.S. Congress to check this authority. Congress responded
by adding "moratoria" riders to annual appropriations legislation
prohibiting the use of funds for OCS leasing and related activities in
much of the outer continental shelf .

In 1990, following analysis and recommendations by an interdepartmental
OCS Oil and Gas Leasing Task Force, President Bush announced a series of
decisions intended to balance energy production and environmental
protection and to allow the OCS program to continue in the less
controversial areas. Areas offshore California, southern Florida, the
North Atlantic states, Washington, and Oregon were withdrawn from
leasing consideration until after 2000. However, Congress continued to
enact moratoria for the areas withdrawn by Presidential Order and even
expanded prohibitions to some areas and activities that had not
previously been restricted. The Clinton Administration has supported a
continuation of most moratoria while underlying conflicts are resolved
through consultation and negotiation among affected parties.

*Coastal Impact Assistance*

In 1990, President Bush also directed the Secretary of the Interior to
prepare a legislative initiative that would provide coastal communities
directly affected by OCS development with a greater share of the
financial benefits of new development and with a larger voice in
decision making. In 1992, the Department of the Interior developed and
submitted to the 102nd Congress a proposal for providing impact
assistance to coastal states and communities located near OCS oil and
gas activities. That proposal was adopted in a modified form by the
Senate, but the energy legislation enacted by Congress in October 1992
excluded this and all other provisions relating to the OCS program.

Louisiana, along with some other coastal states and localities,
continues to support legislation to provide federal revenues to mitigate
onshore effects of OCS activities. The OCS Policy Committee, an advisory
committee formed to advise the Secretary of the Interior on policy
issues related to the OCS program, proposed an impact assistance plan in
1993. It renewed its support in 1997 and directed a working group to
develop an implementation plan for such a proposal. In October 1997, the
working group submitted to the full committee its report proposing a
detailed program for providing a portion of OCS revenues to affected
states and localities. The report was approved by the full OCS Policy
Committee and forwarded to the Secretary of the Interior.

*National Energy Policy*

The National Energy Policy Plan, issued in 1995 and entitled
*Sustainable Energy Strategy*, presents the Clinton Administration's
energy policy. The concept of sustainable development guides the energy
policy process and motivates three strategic goals:

1\. maximize energy productivity to strengthen the economy and improve
living standards;

2\. prevent pollution to reduce the adverse environmental impacts
associated with energy production, delivery, and use; and

3\. keep America secure by reducing vulnerability to global energy
market shocks.

The environmentally sound development of the nation's OCS resources will
help further the achievement of each goal. As noted above, investments
in and production of OCS oil and gas generate billions of dollars
annually in bonuses, royalties, and taxes, and create thousands of well
paying jobs throughout the U.S. economy. Offshore development under
proper environmental safeguards poses less risk of large oil spills than
does importing foreign oil in tankers. Expanded use of natural gas,
including that produced on the OCS, has substantial environmental
benefits over other fossil fuels. Production of oil and gas from the OCS
directly reduces the amount of oil that must be imported from abroad,
much of it from politically unstable regions, thereby lessening the
threat to the U.S. economy posed by supply disruptions.

The development of OCS oil and gas resources is a part of the
Administration's commitment to encourage the economically beneficial and
environmentally sound expansion of diverse domestic energy resources.
The National Energy Policy Plan promotes the production of oil and
natural gas resources in deep water in the Gulf of Mexico as one of the
nation's best opportunities for adding large new oil reserves, providing
new energy supplies for the future, spurring the development of new
technologies, and supporting thousands of jobs in the oil and gas and
affiliated industries.

**Minerals Issues**

Sand and gravel will continue to be the most sought after mineral
commodities from the OCS. As previously mentioned, sand has been
obtained from well beyond the 3-mile limit of state jurisdiction for
beach renourishment, and demands for offshore sand and gravel will
likely increase. Sand and gravel reserves on the OCS are immense, with
estimates of over 2 trillion cubic meters on the Atlantic shelf alone.
In spite of this large resource base, the higher costs and risks of
marine dredges are impediments to offshore mining, and conflicts over
access still occur. Because transportation cost is the largest factor in
sand and gravel extraction and distribution, there could be competition
for high quality deposits closest to the coast. Conflicts are also
likely to arise with other ocean users, such as fishermen and clammers.
However, the use of digital maps in geographic information systems
promises to aid in managing both seafloor and water column utilization
and minimize multiple-use conflicts.

**THE NEW PARADIGM: MOVING BEYOND CONFLICT TO CONSENSUS**

OCS oil and gas development has been a contentious issue since its
inception. Prior to the Submerged Lands Act of 1953, states and the
federal government argued over who had authority over the seabed and its
resources. After passage of the Act, states and other stakeholders
believed that the federal government functioned too independently and
was insensitive to state concerns when it came to holding offshore lease
sales and approving oil and gas development and production activities
off their coasts. Passage of the National Environmental Policy Act, the
Coastal Zone Management Act, and the Outer Continental Shelf Lands Act
Amendments gave states and other constituents a greater voice in
offshore oil and gas development. However, the level of discord
escalated in the mid-1970s, when concern over foreign oil embargoes and
rapid rises in the price of gasoline and heating oil led the federal
government to accelerate efforts to develop and produce offshore oil and
gas.

Areawide leasing, leasing in frontier areas, as well as several large
and highly publicized oil spills gave rise to the idea that human
safety, environmental protection, and the socioeconomic well-being of
coastal communities were being seriously jeopardized in favor of
maximizing oil and gas production. States and others therefore turned to
the political arena for relief in the form of Congressionally and
Presidentially mandated moratoria. This situation continues today. In
order to address public concerns, beginning in the late 1980s and
expanding in the early 1990s, the federal government implemented a
policy of involving the various stakeholders early in the planning
stages, maintaining a meaningful dialogue, and assuring that non-federal
concerns play an important and crucial role in the decision process.
This new way of doing business and interacting with constituents has
been characterized as "moving beyond conflict to consensus."

While disagreement and contention still exist today, involved parties
are talking and interacting in a positive manner, and a general
atmosphere of trust and respect is replacing the mistrust of only a few
years ago. There is a need to build upon this new paradigm so that as
the United States enters the 21st century, all parties will continue to
work toward a national consensus on development of offshore oil and gas
resources while being sensitive to regional and local issues and
concerns. This also applies to the relatively new arena of using
offshore sand and gravel resources for beach renourishment. As more and
more coastal communities look to OCS sand for replenishing beaches and
protecting property, and as the commercial sector becomes increasingly
interested in OCS aggregate for building materials, it is likely that
the issue will become highly contentious if the various stakeholders are
not involved early in the decision process.

In October 1993, the OCS Policy Committee's Subcommittee on OCS
Legislation offered the following specific recommendations for
forwarding the new paradigm of moving beyond conflict to consensus:

1\. Regional task forces representing all OCS program stakeholders
should be established to focus more on reaching consensus on OCS leasing
decisions in an effort to obviate the need for moratoria.

2\. A prompt and suitable resolution should be attained for the leases
that have been targeted for buyback and are subject to litigation.
Generally, section 5 of the OCS Lands Act, as amended, should be the
means for considering leases for cancellation and compensation, and
section 5 is not in need of amendment at this time.

3\. A portion of the revenues derived from OCS program activities should
be shared with coastal states, Great Lakes states, and U.S. territories.

4\. Economic and technical incentives should be thoroughly analyzed and
considered for implementation by the Department of the Interior to
encourage the U.S. oil and gas industry's continued participation in the
OCS program.

Implementation of these recommendations may go a long way toward
ensuring that the OCS program continues to be a reliable and significant
contributor to the energy supply and economic well-being of the United
States. Involvement of all stakeholders in the planning and decision
processes are important to ensure that development and production
activities are carried out in a manner consistent with the highest
standards of human safety and environmental protection. This approach
can also serve as a blueprint for establishing successful OCS mineral
programs.

RRR**REFERENCES**

Minerals Management Service. *An Assessment of the Undiscovered
Hydrocarbon Potential of the Nation's Outer Continental Shelf.* A
Resource Evaluation Program Report; 1996. MMS 96-0034; 40 pp.

"Coastal Impact Assistance. A Report from the Coastal Impact Assistance
Working Group to the Outer Continental Shelf Policy Committee." October,
1997; 23 pp.

"Environmental Studies in OCS Areas Under Moratoria: Findings &
Recommendations. Report of the Subcommittee on Environmental Information
for Select OCS Areas Under Moratoria."

May, 1997; 82 pp.

"Moving Beyond Conflict to Consensus. Report of the OCS Policy
Committee's Subcommittee on OCS Legislation." October, 1993; 71 pp.

*Sustainable Energy Strategy: Clean and Secure Energy for a Competitive
Economy.* July, 1995; National Energy Policy Plan, Department of
Energy,; ISBN 0-16-048183-X; 22 pp.

"U.S. Outer Continental Shelf Sand and Gravel Resources: Programs,
Issues and Recommendations. Final Report of the OCS Policy Committee's
Subcommittee on OCS Sand and Gravel Resources." April, 1993; 42 pp.

**DOMESTIC LEGAL REGIME**

**Contents**

Ocean Energy and Mineral Resources

Federal Authorities Relating to Energy Resources

-   Outer Continental Shelf Lands Act (43 U.S.C. § 1331 [et]{.underline}
    [seq]{.underline}.)

-   OCS Deep Water Royalty Relief Act (Pub. L. 104-58)

-   Ocean Thermal Energy Conversion Act (42 U.S.C. § 9101
    [et]{.underline} [seq]{.underline}.)

Federal Authorities Relating to Mineral Resources

-   Deep Seabed Hard Mineral Resources Act (30 U.S.C. § 1441
    [et]{.underline} [seq]{.underline}.)

State Authorities Relating to Energy and Mineral Resources

-   Under the Submerged Lands Act (43 U.S.C. § 1301 [et]{.underline}
    [seq]{.underline}.)

Improving Stakeholder Involvement

The legal regime covering this topic is based on a collection of
important federal statutory authorities. The following is a brief
description of some of those authorities relating to ocean energy and
mineral resources. The list is selective and is designed to illustrate
some major ocean energy and mineral resources acts. The list is not
meant to be comprehensive.

I. OCEAN ENERGY AND MINERAL RESOURCES

The oceans contain significant energy and mineral resources that will
become increasingly important as the availability of land-based sources
diminishes. There are a number of domestic legal authorities governing
ocean energy and mineral resources that involve responsibilities of
different federal and state agencies. These domestic legal authorities
often provide for a balancing of competing policy objectives. In
particular, offshore development that addresses domestic energy and
mineral needs must be balanced against the need to protect and conserve
ocean and coastal resources and ecosystems. Domestic legal authorities
also provide for consultation and coordination among stakeholders.
However, the development of ocean energy resources has been
controversial. Successful, sustainable development of ocean and mineral
resources requires that we move from conflict to consensus among all
stakeholders within the framework of a comprehensive management
strategy.

II\. FEDERAL AUTHORITIES RELATING TO ENERGY RESOURCES

The United States claims one of the world's largest and richest
continental shelves. The outer continental shelf (OCS) accounts for 15
percent of U.S. crude oil production and 25 percent of U.S. natural gas
output. The United States collected \$3.0 billion in royalties and other
revenues in 1994 (\$2.8 billion in 1995; \$4.3 billion in 1996
(preliminary)). Since 1954, the federal government has received more
than \$110 billion from the leasing and production of OCS oil and gas.
The OCS has served as a source of about 12 percent of domestic oil
production and more than 20 percent of domestic gas production. The
Secretary of the Interior has designated the Minerals Management Service
(MMS) as the agency responsible for the mineral leasing of submerged OCS
lands and for the supervision of offshore operations after lease
issuance. The principal federal legal authorities for the development of
ocean energy resources are the Outer Continental Shelf Lands Act and the
Deep Water Royalty Relief Act.[^2]

**[Outer Continental Shelf Lands Act (OCSLA)]{.underline}**, 43 U.S.C. §
1331 [et]{.underline} [seq]{.underline}

The Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1331
[et]{.underline} [seq]{.underline}., established federal jurisdiction
over submerged lands on the OCS seaward of state boundaries. Under the
OCSLA, the Secretary is responsible for the administration of mineral
exploration and development of the OCS. The OCSLA empowers the Secretary
to grant leases to the highest qualified responsible bidder(s) on the
basis of sealed competitive bids and to formulate such regulations as
necessary to carry out the provisions of the OCSLA. The OCSLA provides
guidelines for implementing an OCS oil and gas exploration and
development program, and authorities for ensuring that such activities
are safe and environmentally sound. The basic goals of the OCSLA include
the following:

\- to establish policies and procedures for managing the oil and natural
gas resources of the OCS that are intended to result in expedited
exploration and development of the OCS in order to achieve national
economic and energy policy goals, assure national security, reduce
dependence on foreign sources, and maintain a favorable balance of
payments in world trade;

\- to preserve, protect, and develop oil and natural gas resources of
the OCS in a manner that is consistent with the need (a) to make such
resources available to meet the nation's energy needs as rapidly as
possible; (b) to balance orderly resource development with protection of
the human, marine, and coastal environments; (c) to ensure the public a
fair and equitable return on the resources of the OCS; and (d) to
preserve and maintain free enterprise competition;

\- to encourage development of new and improved technology for energy
resource production, which will eliminate or minimize risk of damage to
the human, marine, and coastal environments; and

\- to provide opportunities for state and local government participation
in policy and planning decisions made by the federal government relating
to exploration for, and development and production of, minerals on the
OCS.

**[OCS Deep Water Royalty Relief Act]{.underline}** (Pub. L. 104-58)

The OCS Deep Water Royalty Relief Act (DWRRA), contained in Pub. L.
104-58, provides new incentives to lease and develop in certain Gulf of
Mexico deep water areas. Specifically, the DWRRA amends the Secretary of
the Interior's discretionary authority to grant royalty relief to
include producing and non-producing leases in order to promote
development, increase production, or encourage marginal production of
certain deepwater leases in the Gulf of Mexico. The DWRRA also contains
three other major provisions related to leases issued as a result of
sales held before and after the date of the DWRRA's enactment. The
following is a summary of these three other major provisions:

\- Section 303 establishes a new bidding system that allows the
Secretary to offer tracts with royalty suspensions for a period, volume,
or value of production.

\- Section 304 mandates that all tracts offered by November 22, 2000 in
deep water in certain areas of the Gulf of Mexico must be offered under
the new bidding system permitted by the DWRRA. The Secretary must offer
such tracts with a specific minimum royalty suspension volume based on
water depth.

\- Existing (pre-Act) leases may apply for royalty suspensions for new
production in deep water in certain areas of the Gulf of Mexico. This
production does not qualify for royalty suspensions if the Secretary
determines that the new production would be economic in the absence of
royalty relief. Otherwise, the Secretary must determine the volume of
production on which no royalty should be due in order to make the new
production economically viable.

There has been a revitalization of oil and gas exploration and
development in the Gulf of Mexico and, with the advent of new deep water
drilling technologies, a dramatic intensification of interest in
developing the frontier deep water areas. Oil production should increase
as much as 70-100 percent by the year 2000, with exploration pushing
beyond the exclusive economic zone and product pipeline networks
extending well off the continental shelf and down the continental slope.

**[Ocean Thermal Energy Conversion Act]{.underline}**,(42 U.S.C. § 9101
[et]{.underline} [seq]{.underline}.)

With regard to alternative energy sources from the ocean, the Ocean
Thermal Energy Conversion Act (OTEC Act), 42 U.S.C. § 9101
[et]{.underline} [seq]{.underline}., established a licensing program for
facilities and plantships that would convert thermal gradients in the
ocean into electricity. The OTEC Act directed the Administrator of the
National Oceanic and Atmospheric Administration (NOAA) to establish a
stable legal regime to foster commercial development of OTEC. In
addition, the OTEC Act directed the Secretary of the department in which
the U.S. Coast Guard is operating to promote safety of life and property
at sea for OTEC operations, prevent pollution of the marine environment,
clean up any discharged pollutants, prevent or minimize any adverse
impacts from construction and operation of OTEC plants, and ensure that
the thermal plume of an OTEC plantship does no unreasonably impinge on
and thus degrade the thermal gradient used by any other OTEC plantship
or facility, or the territorial sea or area of national resource
jurisdiction of any other nation unless the Secretary of State has
approved such impingement after consultation with such nation. The OTEC
Act also assigned responsibilities to the Secretary of State and the
Secretary of Energy regarding OTEC plants.

There has been a low level of activity under the OTEC Act since its
passage in 1980. Following NOAA's initial environmental studies and
implementation of a licensing program, NOAA has not received any license
applications for OTEC facilities or plantships. The availability and
relatively low prices of fossil fuels, coupled with the risks to
potential investors, has limited the interest in commercial development
of OTEC projects. The need to protect the environmental quality of ocean
resources and ecosystems may outweigh the benefits of constructing OTEC
facilities in certain areas. Moreover, OTEC projects have offered an
unclear return on a significant investment.

III\. FEDERAL AUTHORITIES RELATING TO MINERAL RESOURCES

The oceans contain valuable deposits of sand, gravel, and other
minerals. Among other things, OCS sand deposits are important sources
for beach renourishment for many coastal communities. As land supplies
of sand and gravel become less available, industry is turning to the OCS
as an alternate source of these important building materials. The OCS
also contains deposits of strategic minerals such as gold, titanium and
other metals which will become more important as an alternate source to
land deposits.

The MMS' marine minerals program manages exploration and development
activities for federal offshore sand, gravel, and shell, and other
mineral resources found on the OCS. The program has focused on six
areas: (1) manganese crusts offshore Hawaii and Johnston Island (2)
phosphorites offshore North Carolina, (3) heavy mineral placers and
phosphorites offshore Georgia, (4) sand resources offshore the gulf
coast states and the Atlantic, (5) heavy mineral placers offshore
Alaska, and (6) black sand deposits offshore Oregon. The principal legal
authority for the development of these resources falls under the OCSLA.

Section 8(k) of the OCSLA Amendments authorizes the Secretary of the
Interior to lease minerals, other than oil, gas, and sulfur, on the OCS
on the basis of competitive bidding and under such terms and conditions
as may be prescribed at the time of the lease offering. Included within
this authority is the Secretary's responsibility to design, implement,
and manage the OCS minerals policy and development. The basic goals of
the MMS marine minerals program are to:

\- evaluate and achieve the potential of the OCS as a domestic supply
source for strategic and other non-energy mineral resources;

\- safeguard the ocean and coastal environments by ensuring that all OCS
mineral activity is environmentally sound and acceptable;

\- ensure that OCS mineral activities are fully coordinated and
compatible with other uses of the ocean; and

\- provide an effective consultation process for coastal states and the
federal government regarding offshore minerals.

The MMS established a three-tiered regulatory regime for offshore
minerals. These regulations govern prospecting activities, leasing
activities, and operations on offshore mineral leases. Together, these
rules outline the requirements for data and information gathering
ventures associated with prospecting and scientific research. These
regulations also establish leasing procedures, basic mineral lease
conditions, and general procedures to govern discovery, development, and
production activities on a lease.

With the cooperation of adjacent coastal states, joint federal-state
task forces assess leasing potential of an offshore area. If leasing is
determined to be economically feasible, resource and environmental
studies follow. The task forces recommend appropriate action to the
Secretary and the State Governor(s). Federal decisions to proceed to
lease sales are made by the Secretary of the Interior, with review and
comment from the Governor(s).

In addition, in 1994, Pub. L. 103-426 (Negotiated Agreements for OCS
Sand, Gravel, and Shell Resources), which amends OCSLA sections 8(k) and
20(a), was signed into law. 43 U.S.C. § 1337 (2)(A). This law authorizes
the Secretary of the Interior, through the MMS, to negotiate agreements
for use of OCS sand, gravel and shell resources in projects undertaken
by federal, state, or local governments for shore protection, beach or
coastal wetlands restoration, or certain other construction projects.
Once the MMS receives a request for OCS sand, gravel, or shell resources
and the necessary supporting information, it determines the project's
eligibility under Pub. L. 103-426. Once eligibility is established, the
conditions of the negotiated agreement are developed.

Coastal states and local communities have been generally supportive of
the MMS sand and gravel program and, in light of diminishing coastal and
nearshore resources, recognize the need for access to OCS sand for beach
nourishment and coastal restoration. The MMS sand and gravel program is
active in a number of coastal areas:

\- A negotiated agreement was completed with the City of
Jacksonville/Duval County, Florida, to use sand from a borrow site 7
miles offshore to renourish several local beaches. A stipulation was
attached to that agreement requiring that a benthic repopulation study
be conducted for the actual borrow area.

\- The Governor of Louisiana has requested initiation of the negotiated
agreement process for use of OCS sand from the Ship Shoal area for
barrier island restoration.

\- The Navy and the MMS entered into a memoranda of agreement to use OCS
sand from Sandbridge Shoal, offshore Virginia, to renourish a portion of
the federal beach at the Fleet Combat Training Center at Dam Neck near
Virginia Beach.

\- Plans were being made for a negotiated agreement to use OCS sand to
renourish Surfside and Garden City beaches in South Carolina.

\- The National Park Service initiated the planning process to renourish
a portion of Assateague Island in Maryland using sand from an OCS borrow
site.

With the passage of Pub. L. 103-426, the MMS anticipates an increase in
requests for negotiated agreements. A wide range of qualified projects
could emerge, including those congressionally authorized, federally
sponsored, or state/locally sponsored. In addition, requests for OCS
sand, gravel, and shell resources via competitive bidding could emerge
as OCS mining activities become more commonplace.

**[Deep Seabed Hard Mineral Resources Act (DSHMRA)]{.underline}**, 30
U.S.C. § 1441 [et]{.underline} [seq]{.underline}

With regard to minerals on the deep seabed, seabed nodules contain
nickel, copper, cobalt and manganese - minerals important to many
industrial uses. No commercial deep seabed mining is currently
conducted, nor is such activity anticipated in the near future. However,
four licenses have been issued under the Deep Seabed Hard Mineral
Resources Act (DSHMRA), 30 U.S.C. § 1441 [et]{.underline}
[seq]{.underline}., for exploration of seabed areas in the
Clarion-Clipperton zone of the south Pacific ocean.

The DSHMRA establishes an interim domestic legal regime for deep seabed
mining pending adoption of an acceptable international regime. The
Administration submitted the Convention and Agreement to the Senate for
consent to accession and ratification in October, 1994 and it is pending
in the Senate Committee on Foreign Relations. Since that time, the
Convention has come into effect and over 123 nations are Parties. The
Agreement addresses previously expressed concerns regarding the seabed
mining portions of the Convention. The DSHMRA establishes a licensing
regime that ensures protection of the marine environment, safety of life
and property at sea, prevention of unreasonable interference with other
uses of the high seas, and conservation of mineral resources. The DSHMRA
encourages other nations that embark on ocean mining ventures to manage
the activities of their nationals in a similar fashion and to respect
licenses and permits issued under the DSHMRA. The DSHMRA also
facilitates the transition from a domestic regime to an acceptable
international regime.

The DSHMRA sets forth criteria that would need to be met for an
international regime to be acceptable to the United States, namely:
assured and non-discriminatory access for U.S. citizens, under
reasonable terms and conditions, to deep seabed resources; and assured
continuity in mining activities undertaken by United States citizens
prior to entry into force of an international regime under terms,
conditions, and restrictions which do not impose significant new
economic burdens. The DSHMRA also recognizes that a treaty must be
judged by the totality of its provisions. The Agreement to implement
Part XI of the United Nations Convention on the Law of the Sea revises
Part XI in a manner that satisfies these criteria.[^3] During the period
of provisional application of the Agreement, the DSHMRA remains in
effect and provides authority to implement likely United States
obligations under the Agreement.

IV\. STATE AUTHORITIES RELATING TO ENERGY AND MINERAL RESOURCES

**[Under the Submerged Lands Act]{.underline}**, (43 U.S.C. § 1301
[et]{.underline} [seq]{.underline}.)

There are a number of state authorities, implemented by different state
agencies, relating to energy and mineral resources. Under the Submerged
Lands Act (SLA), 43 U.S.C. § 1301 [et]{.underline} [seq]{.underline}.,
the location of the energy and mineral resources determines whether or
not they fall under state control. Specifically, the SLA granted states
title to the natural resources located within three miles of their
coastline (three marine leagues for Texas and the Gulf coast of
Florida). For purposes of the SLA, the term "natural resources" includes
oil, gas and all other minerals.

State authorities range in the nature and extent of their control over
ocean energy and mineral resources on state submerged lands. The range
depends on each state's evaluation of different policy interests, such
that activities may be restricted in certain areas and allowed in
others. State management authority for oil and gas exploration and
production on state submerged lands may be implemented by more than one
state entity. Also, state management of energy and mineral resources is
often addressed within the context of a broader state coastal management
plan.

State policies also affect energy and mineral resource development on
the OCS. As indicated above, federal authorities such as the OCSLA
provide for consultation and coordination with affected coastal states.
However, consultation and coordination can be difficult when there are a
large number of stakeholders representing strong policy interests.

V. IMPROVING STAKEHOLDER INVOLVEMENT

Successful, sustainable development of ocean energy and mineral
resources requires that we move from conflict to consensus among all
stakeholders within the framework of a comprehensive management
strategy. Stakeholders have blocked development of oil and gas resources
in many areas of the OCS. Management of ocean energy and mineral
resources can be difficult due to the number of stakeholders and the
nature of their interests or responsibilities. Federal and state laws
relating to energy and mineral resources often contain differing policy
objectives that must be balanced. However, the Department of the
Interior (DOI) has taken steps to solve conflicts in the application of
its OCS program by working with stakeholders.

The history of the OCS program relating to energy resources shows that
its expansion has been controversial. When federal management of the OCS
began under the OCSLA, oil and gas activity was concentrated in the Gulf
of Mexico off Louisiana and Texas, where the program was supported as a
part of that region's economy. Following commercial discoveries offshore
southern California, the 1969 Santa Barbara Channel blowout and oil
spill started opposition to offshore oil and gas development.

In response to the oil embargo of late 1973 and early 1974, the federal
government expanded the OCS program to include areas where activities
had not occurred before. The increased scope and pace of activity
heightened concerns about the environmental and socioeconomic effects of
offshore development. Citizens and governments in coastal areas demanded
that they be consulted. As a result, the OCSLA was amended in 1978 to
provide for environmental consideration and more substantive involvement
of state and local governments and others in OCS decision making.

In 1979, oil supply disruptions and price increases renewed pressure for
developing offshore energy resources. The federal government announced
an area wide OCS leasing plan for frontier areas. The announcement of
this plan sparked opposition. Even though the new provisions of the
OCSLA called for increased consultation and coordination, many affected
parties felt that their concerns and recommendations were not being
adequately considered in OCS leasing and development decisions. As a
result, the OCS program became the subject of congressional moratoria
and administrative deferrals. In May 1992, certain congressional
moratoria became the subject of litigation by oil companies under breach
of contract and takings claims.

DOI has decided to resolve conflicts related to the OCS program relating
to energy resources by working with stakeholders. As part of this
approach, DOI endorsed existing congressional moratoria on lease sales
in order to maintain the [status]{.underline} [quo]{.underline} while
discussions on various OCS issues ensured. DOI began resolving disputes
on existing leases through the settlement of litigation and is taking
steps to establish working relationships among stakeholders in a move
toward consensus decision making. The MMS has also increased
stakeholders' role in developing consensus on 5-Year program and lease
sale decisions. DOI's actions will help coordinate decision making, and
facilitate comprehensive management of ocean resources.

**LIST OF ACRONYMS**

MMS Minerals Management Service

OCS outer continental shelf (particularly as defined jurisdictionally by
the Submerged Lands Act of 1953 and subsequent amendments, etc.)

SEMP Safety and Environmental Management Program

[^1]: The term "mineral" as used in this paper refers to hard minerals
    found on and in the seabed; examples are sand, gravel, and shell
    resources; metals such as manganese, gold, titanium, and
    polymetallic deposits; sulfide deposits; and phosphates.

[^2]: ^1^The development of ocean energy and mineral resources is
    subject to a number of environmental laws in addition to the
    environmental protection requirements contained in the OCSLA. Other
    sections of the legal issue paper will address the legal regime to
    protect the environmental quality of the oceans. For example, see
    the Marine Environmental Quality section for a description of the
    Federal Water Pollution Control Act (also called the Clean Water
    Act)..

[^3]: International legal authorities relating to ocean energy and
    mineral resources will be fully addressed elsewhere in the legal
    authorities issue paper.