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[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]

 
                         H.R. 793 and H.R. 794

=======================================================================

                          LEGISLATIVE HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                        Thursday, March 6, 2003

                               __________

                            Serial No. 108-4

                               __________

           Printed for the use of the Committee on Resources

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
         Committee address: http://resourcescommittee.house.gov

                                 ______

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                         COMMITTEE ON RESOURCES

                 RICHARD W. POMBO, California, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska                    Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Jim Saxton, New Jersey                   Samoa
Elton Gallegly, California           Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee       Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland         Frank Pallone, Jr., New Jersey
Ken Calvert, California              Calvin M. Dooley, California
Scott McInnis, Colorado              Donna M. Christensen, Virgin 
Barbara Cubin, Wyoming                   Islands
George Radanovich, California        Ron Kind, Wisconsin
Walter B. Jones, Jr., North          Jay Inslee, Washington
    Carolina                         Grace F. Napolitano, California
Chris Cannon, Utah                   Tom Udall, New Mexico
John E. Peterson, Pennsylvania       Mark Udall, Colorado
Jim Gibbons, Nevada,                 Anibal Acevedo-Vila, Puerto Rico
  Vice Chairman                      Brad Carson, Oklahoma
Mark E. Souder, Indiana              Raul M. Grijalva, Arizona
Greg Walden, Oregon                  Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado         Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona               George Miller, California
Tom Osborne, Nebraska                Edward J. Markey, Massachusetts
Jeff Flake, Arizona                  Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana           Ciro D. Rodriguez, Texas
Rick Renzi, Arizona                  Joe Baca, California
Tom Cole, Oklahoma                   Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
VACANCY

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    BARBARA CUBIN, Wyoming, Chairman
              RON KIND, Wisconsin, Ranking Democrat Member

W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Chris Cannon, Utah                       Samoa
Jim Gibbons, Nevada                  Solomon P. Ortiz, Texas
Mark E. Souder, Indiana              Grace F. Napolitano, California
Dennis R. Rehberg, Montana           Tom Udall, New Mexico
Tom Cole, Oklahoma                   Brad Carson, Oklahoma
Stevan Pearce, New Mexico            VACANCY
Rob Bishop, Utah                     VACANCY
Devin Nunes, California              Nick J. Rahall II, West Virginia, 
Richard W. Pombo, California, ex         ex officio
    officio

                                 ------                                
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 6, 2003....................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, Prepared statement of....................    61
    Delahunt, Hon. William D., a Representative in Congress from 
      the State of Massachusetts.................................    17
        Prepared statement of....................................    19
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin...............................................     4
        Prepared statement of....................................    16
    Rahall, Hon. Nick J. II, a Representative in Congress from 
      the State of West Virginia, Prepared statement of..........     5
    Rehberg, Hon. Dennis R., a Representative in Congress from 
      the State of Montana.......................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Bailey, Bruce H., President, AWS Scientific, Inc.............    40
        Prepared statement on H.R. 793...........................    41
    Burton, Johnnie, Director, Minerals Management Service, U.S. 
      Department of the Interior.................................    22
        Prepared statement on H.R. 793 and H.R. 794..............    24
    Kendall, Sara, Washington Office Director, Western 
      Organization of Resource Councils..........................    56
        Prepared statement on H.R. 794...........................    58
    Quinn, Harold P., Jr., Senior Vice President, Legal and 
      Regulatory Affairs, and General Counsel, National Mining 
      Association................................................    50
        Prepared statement on H.R. 794...........................    52
    Reilly, Hon. Thomas F., Attorney General, State of 
      Massachusetts..............................................    34
        Prepared statement on H.R. 793...........................    36
    Shelley, Peter, Vice President, Conservation Law Foundation..    43
        Prepared statement on H.R. 793...........................    45
    Smith, Eric, Vice President for Strategic Planning, Global 
      Industries, Ltd............................................    37
        Prepared statement on H.R. 793...........................    39

Additional materials supplied:
    Alliance to Protect Nantucket Sound, Statement submitted for 
      the record on H.R. 793.....................................     7
    Long Island Power Authority, Statement submitted for the 
      record on H.R. 793.........................................    63
    Rackstraw, Kevin, Clipper Windpower, Inc., and Aquantis, LLC, 
      Bethesda, Maryland, Statement submitted for the record on 
      H.R. 793...................................................    64

LEGISLATIVE HEARING ON H.R. 793, A BILL TO AMEND THE OUTER CONTINENTAL 
  SHELF LANDS ACT TO AUTHORIZE THE SECRETARY OF THE INTERIOR TO GRANT 
 EASEMENTS AND RIGHTS-OF-WAY ON THE OUTER CONTINENTAL SHELF (OCS) FOR 
  ACTIVITIES OTHERWISE AUTHORIZED BY THAT ACT, AND H.R. 794, THE COAL 
                    LEASING AMENDMENTS ACT OF 2003.

                              ----------                              

                        Thursday, March 6, 2003

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10 a.m.,in 
Room 1334, Longworth House Office Building, Hon. Dennis R. 
Rehberg presiding.
    Present: Representatives Rehberg, Cannon, Souder, Cole, 
Pearce, Kind, and Faleomavaega.

 STATEMENT OF THE HON. DENNIS R. REHBERG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF MONTANA

    Mr. Rehberg. Let us begin, please. We are probably going to 
be called to a vote, so I would like to get started, and I see 
that Mr. Delahunt is not here yet. So we will dispense with the 
opening statement.
    The legislative hearing by the Subcommittee on Energy and 
Mineral Resources will come to order.
    The Subcommittee is meeting today to hear the testimony of 
H.R. 793 to amend the Outer Continental Shelf Lands Act to 
authorize the Secretary of Interior to grant easements and 
rights-of-way on the Outer Continental Shelf for activities 
otherwise authorized by the Act, and H.R. 794 to amend the 
Mineral Leasing Act to provide for the development of Federal 
coal resources.
    Under Committee Rule 4(G), the Chairman and the Ranking 
Minority Member can make opening statements. If any members 
have other statements, they can be included in the hearing 
record under unanimous consent. I ask unanimous consent that 
Representative Kind, when he arrives, have permission to sit on 
the dais and participate in the hearing.
    Today, the Subcommittee on Energy and Mineral Resources 
will hear testimony about these two bills, H.R. 793 and H.R. 
794. First, H.R. 793 addresses the need for statutory authority 
to permit future non-traditional energy and energy related 
projects on the OCS. Such projects would include alternative 
energy projects, such as wind, wave, and solar power 
production, as well as ancillary projects to oil and gas 
development on the shelf, such as emergency medical facilities 
and supply facilities that support deep water exploration and 
development projects. Working with the Administration, we have 
addressed the clarification of the permitting process for these 
innovative projects and introduced a bill that gives the 
Secretary of Interior to permit and oversee energy-related 
activities under the OCS Lands Act.
    H.R. 793 is needed because no authority currently exists to 
permit alternative energy projects and ancillary projects to 
support oil and gas development on the OCS. Clearly, America 
faces a growing energy supply and demand imbalance that calls 
for new solutions. Two innovative ways that will help us meet 
the challenge are increased production and use of energy, 
renewable energy, and production of oil and gas from deep 
waters.
    H.R. 793 facilitates both of these solutions. The bill 
clarifies the jurisdiction for these projects so that private 
sector entities wanting to develop alternative energy resources 
offshore will have a clear path by which to approach relevant 
Federal agencies for permits. It also ensures that future 
projects on the OCS will be performed in a safe and 
environmentally sensitive manner and that a proper abandonment 
and reclamation process will exist for each project.
    This bill will not supersede or modify existing authority 
or any other agency responsible for permitting or regulating 
offshore energy projects. It is designed to complement existing 
statutes and ensure that all innovative offshore energy 
projects have a clear and certain permitting process.
    I understand that offshore wind energy projects are now 
being considered in the U.S. and that several have already been 
developed in northern Europe with significant generation 
capacity on the drawing board. In fact, a record 6,868 
megawatts of new wind power capacity was installed worldwide in 
2002, increasing generating capacity by 28 percent last year.
    We need a new alternative and traditional energy solution 
in order to meet our future energy needs. This bill will help 
facilitate those solution.
    Mr. Rehberg. The second bill, H.R. 794, makes targeted 
technical changes to the Mineral Leasing Act that adapt to the 
realities of market conditions so that we may make full use of 
America's Federal coal resources. It encourages continued 
diligent development of coal on Federal lands and ensures the 
flow of Federal royalty revenue, while giving the Interior 
Secretary the ability to manage coal resources for maximum 
value to the public. Coal is an abundant domestically produced 
fuel and through the continued development and implementation 
of clean coal technology will remain secure energy resource for 
years to come.
    Federal coal benefits the Nation not only because it is a 
domestically produced energy resource, but also because the 
Minerals Management Service collected about 5.5 billion in 
revenues last year on coal produced from Federal lands. The 
legislation we discuss today would facilitate the continued 
development of Federal coal by making only changes to coal 
leasing provisions in the Mineral Leasing Act that present 
impediments to the efficient development of Federal coal 
resources.
    One provision amends the 160-acre life-of-lease limitation 
on Federal coal lease modifications. This provision provides 
flexibility by giving the Secretary the discretion to allow 
production of non-competitive coal contiguous to an existing 
lease so that small quantities of coal would be recovered that 
might otherwise be left behind. This provision is not designed 
to sidestep the competitive lease process, and I am willing to 
work the minority to address any concerns to the contrary.
    Other provisions allow the consolidation of leased coal 
reserves requiring more than 40 years to mine; to allow the 
Secretary to accept the payment of advance royalties in lieu of 
continued operations for a total of years; a provision 
addresses the requirement of surety bonds for the payment of 
bonus bids on coal leases; and a provision to eliminate the 
requirement that a lessee has to file a mining plan no later 
than 3 years after the lease is issued. These are common sense 
adjustments that provide flexibility and allow cost effective 
development of the resource.
    Mr. Rehberg. Both of these bills would provide dynamic ways 
for Government to help the private sector increase energy 
production at a low cost to the consumer.
    [The prepared statement of Mr. Rehberg follows:]

   Statement of The Honorable Dennis R. Rehberg, a Representative in 
      Congress from the State of Montana, on H.R. 793 and H.R. 794

    Madam Chairwoman, I thank you for scheduling this hearing today--it 
allows us to address an issue of supreme importance: streamlining 
development of additional energy sources for the nation.
    H.R. 793 facilitates energy-related uses on the Outer Continental 
Shelf (OCS), where interest has increased in non-traditional energy 
projects, such as wind, wave, and solar energy production.
    These non-traditional projects are important to diversifying our 
energy portfolio, unfortunately, authority to permit these kinds of 
projects is not addressed in the Outer Continental Shelf Lands Act, and 
existing authority to review, permit, and regulate such projects is 
either non-existent or limited in scope.
    Chairwoman Cubin's bill helps to remedy this deficiency in 
permitting authority for non-traditional energy projects by clarifying 
the regulatory process considerably and clearly providing one agency 
within the Federal Government with the full array of tools needed to 
comprehensively manage non-traditional Outer Continental Shelf energy-
related uses.
    I support the Chairwoman's legislation--and the President's 
National Energy Policy initiative--to simplify permitting for energy 
production in an environmentally sensitive manner.
    I am a cosponsor of the second bill on today's agenda, H.R. 794, 
which streamlines coal leasing on Federal lands, which comprise a huge 
percentage of lands in the western states and my home state of Montana.
    According to the 2002 Minerals Management Service estimates, 
Montana sold over 18 million tons of Federal coal. The Federal 
royalties paid (50% to Montana) were nearly $25 million- that means 
over $12 million goes right back in to the state.
    Nearly 40% of current United States coal production is from mines 
located on Federal lands. Over one-third of the nation's coal reserve 
is found on lands owned or controlled by the Federal Government.
    The Mineral Leasing Act of 1920 outlines the law with respect to 
Federal coal leasing. Unfortunately, certain provisions in the Mineral 
Leasing Act impede operational flexibility; result in the bypass of 
nearby Federal coal resources; compel inefficient production; and 
reduce Federal and state royalty and tax revenues. Changes in market 
and economic conditions necessitate modifications in the coal leasing 
provisions of the MLA.
    In order to ensure that these vast Federal coal reserves can be 
developed in an orderly and efficient manner without distorting coal 
markets nationwide, it is necessary to update the Mineral Leasing Act 
of 1920 or we face continued inefficient or wasteful production of coal 
resources.
    For example, this legislation eliminates the 160 acre life-of-lease 
limitation on Federal coal lease modifications. The intent is to allow 
the flexibility to add smaller tracts of non-competitive coal that 
would otherwise be bypassed. This is absolutely essential in my state 
of Montana.
    I am proud to cosponsor legislation and look forward to hearing the 
panelists comments and testimony today.
    Thank you, Madame Chairwoman, for considering these important bills 
today.
                                 ______
                                 
    Mr. Rehberg. I want to welcome our witnesses as well as our 
Subcommittee members to their first Subcommittee hearing of the 
108th Congress. Mr. Kind will now be recognized for an opening 
statement.

 STATEMENT OF THE HON. RON KIND, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF WISCONSIN

    Mr. Kind. Thank you. Excuse my tardiness. Thank you, Mr. 
Chairman. Thanks for the recognition.
    I want to thank the witnesses here today for your presence 
and for your testimony, including our good friend from 
Massachusetts, Mr. Delahunt. This is an issue I know that he 
has been paying particular attention to, and we appreciate your 
time here today, Bill. Thanks for coming.
    With the imminent threat of war with Iraq looming over this 
hearing, the need to develop renewable energy sources such as 
wind, solar, biomass could not be more evident. In addition to 
other concerns, a substantial portion of the domestic oil 
imports from the Middle East may soon be at risk; therefore, we 
must continue to encourage clean renewable energy alternatives 
now so that they will be available should the need arise.
    Generally, I believe it is a good idea to clarify and 
specify that the Minerals Management Service has the necessary 
authority grant easements or rights-of-ways for alternative 
energy projects on the Outer Continental Shelf not currently 
authorized by law. I feel that with their history of managing 
oil and gas development projects on the OCS, the MMS is well 
equipped to do the job.
    Last year, we expressed an interest in hearing testimony 
from representatives of coastal states that have a vested 
interest in the bill. I am pleased to see that Attorney General 
Reilly is here to speak on behalf of the people of 
Massachusetts, along with Mr. Delahunt who here with us.
    We are currently engaged in a discussion over a proposed 
wind farm in the Nantucket Sound. I would like to see H.R. 793 
amended to specifically require consultation with the affected 
states prior to permitting alternative energy projects such as 
wind farms on the OCS. While there is no shortage of 
controversy with the Nantucket Sound project, it is critical 
that the affected states and the public have sufficient 
opportunity to participate in the permitting process.
    That said, if we are to reduce our dependance on foreign 
oil imports and reduce greenhouse gas emissions, as a Nation we 
are going to have to develop alternative energy strategies, 
including wind farms. We should not, indeed cannot, advocate 
alternatives to fossil fuels and then cry not in my backyard 
whenever a new project is being proposed.
    I am not saying that the Nantucket Sound project should go 
forward. I haven't taken a position on it. I am not as 
acquainted with the facts as others who have been involved with 
this issue have been for sometime, but nevertheless, I think we 
need to wrestle with this so-called NIMBY problem and find out 
some resolution in order to encourage further development of 
alternative and renewable energy sources in our own 
jurisdiction.
    However, I would note that during a recent Congressional 
trip to northern Europe to learn more about alternative energy 
projects as well as other issues before the Committee, members 
of this Committee had the opportunity--and the ranking chair 
here today was along with that trip--to view the wind energy 
facilities at the mouth of the Copenhagen Harbor. According to 
local government officials, there was some initial resistance 
to the proposal and still some dislike for the way the wind 
mills look lining up across their skyline. Nevertheless, once 
the wind field had been in operation and the residents became 
accustomed to its presence, and more importantly its 
production, their fears started to abate. They have found that 
the benefits of inexhaustible, clean and renewable energy from 
the offshore wind farm have thus far outweighed the more 
undesirable factors often cited.
    Though I support the goals of H.R. 793, there are problems 
with the legislation which I hope to be able to work with the 
Chairman and other members on the Committee before the mark-up 
and see if we can resolve them.
    The second bill being discussed today, H.R. 794, is one 
that relates to Federal coal leasing practices. I am aware that 
our Committee Ranking Member from West Virginia, Mr. Rahall, 
has numerous and specific concerns with the proposed 
legislation. I fully support his views on the subject and defer 
to him to comment on a bill that would most certainly upset the 
current state of coal leasing in America and would affect a 
large majority of his constituency.
    In his absence, I would, however, ask for unanimous consent 
to have his statement recorded in the record.
    [The prepared statement of Mr. Rahall follows:]

   Statement of The Honorable Nick J. Rahall, II, Ranking Democrat, 
                  Committee on Resources, on H.R. 794

    While I have a great deal of respect for the Chair of this 
Subcommittee, my dear friend Representative Barbara Cubin of Wyoming, I 
must express vehement opposition to H.R. 794.
    In my view, this legislation would eliminate many of the reforms 
Congress made to the Federal coal leasing program in 1976. In effect, 
H.R. 794 would significantly dilute the competitive nature of the 
Federal coal leasing program, allowing a few large coal companies to 
control a vast amount of America's coal resources for infinite periods 
of time. This is not only bad public policy, but it would also 
artificially enhance the competitiveness of the select few western coal 
producers who would benefit from this legislation to the detriment of 
coal producers in the Appalachian and Midwestern regions of the 
country.
    More specifically, by eliminating the 160-acre lease modification 
limit the bill would subsequently eliminate the need to compete for 
coal leases that companies require to expand existing coal mines. And 
in so doing, the bill would shortchange both Federal and state coal 
revenues by foreclosing the kind of increased bonus payments secured in 
recent years.
    According to BLM, since1991 successful bidders have generated more 
than $1.1 billion in bonus bids on Federal coal leases. These revenues 
are shared equally with the States in which the coal is located. For 
example, a 2002 Powder River Basin lease sale generated a $328 million 
bonus payment from Kennecott Energy. Had this bill been in effect at 
that time, the State of Wyoming would not have received its approximate 
$164 million share of the bonus payment.
    In addition, under current law the Federal Government is required 
to let successful coal lease bidders defer payment of bonus bids. A 
successful bidder can either pay the full amount at the time of the 
sale or opt to pay in five 20 percent increments over five years. 
However, H.R. 794 would let coal companies terminate that Federal lease 
and walk away scot-free without paying any remaining balance on the 
outstanding bonus payment. The bill does this by preventing the BLM 
from requiring a surety bond guaranteeing payment of deferred bonus 
bids and by requiring forgiveness of any balance due from either the 
coal company or the surety if the coal company for any reason opts to 
terminate the lease. The BLM requirement to secure a bond, or other 
financial guarantee, in the amount due to the Treasury is simply good 
business practice. By requiring a bond, the Federal Government is 
simply trying to protect the interests of the public.
    In my view, H.R. 794 has additional problems. For instance, under 
current law leased coal reserves can be consolidated into logical 
mining units in order to achieve maximum economic recovery of the coal. 
However, the coal reserves of the entire logical mining unit must be 
mined within a period of 40 years. According to information supplied to 
us by the BLM, there are 45 logical mining units covering approximately 
367,000 acres of Western Federal land. That is nearly 80% of the 
469,000 acres under coal lease on Federal lands that is closed off to 
other uses for the duration of the logical mining unit. However, H.R. 
794 would allow these 45 units to continue in operation--and be 
unavailable for other uses--for as long as the coal mine wants.
    Not only would H.R. 794 allow a relatively few number of 
corporations to hold vast sums of public lands for undetermined lengths 
of time---measured in decades not years--- the bill would also allow 
the coal companies to take a free ride while doing so. That is because 
H.R. 794 would allow coal companies to be forgiven on paying certain 
royalties, known as advance royalties, when they decide to stop 
producing coal, but want to keep the lease in force anyway.
    Finally, the bill would change the formula for advance royalties 
from one that is based on production to one that is based on the 
average price of coal sold in the spot market from the region. 
According to BLM officials, however, for many parts of the country 
there are no reliable spot markets for the particular type of coal 
produced there, and as such, there is no guaranty that this system has 
any merit.
    Coal leasing policies in current law are not unlike standard 
business practices in other parts of our economy. Taken together, the 
bonus payment, rent and royalties paid to the U.S. Treasury equal the 
fair market value of the coal to be extracted from the public domain 
and are all parts of doing business in a Federal leasehold. The option 
to pay a bonus bid over time, to pay advance royalties while not 
producing coal, basing advance royalties on production, limiting 
logical mining units to 40 years are all provisions that have withstood 
the test of time and are still valid Federal policy that allows the 
coal industry to be profitable, efficient and also protects the public 
interest.
    In sum, while certain amendments may be in order to improve the 
Federal coal leasing program, there is nothing on the record that I 
know of to justify the broad changes proposed in H.R. 794. If enacted, 
this bill would provide a huge windfall to a select few western coal 
producers while shifting significant costs and risks to the American 
public.
                                 ______
                                 
    Mr. Kind. I would also like to ask that the statement of 
the Alliance to Protect Nantucket Sound also be admitted in the 
record for purposes of this hearing.
    [The statement of the Alliance to Protect Nantucket Sound 
follows:]

Statement submitted for the record by The Alliance to Protect Nantucket 
                                 Sound

    Ms. Chairwoman.
    Thank you for the opportunity to submit these comments on H.R. 793. 
I am Douglas Yearley, Chairman of the Alliance to Protect Nantucket 
Sound, a coalition of diverse interests with the objective of 
protecting the important environmental, scenic, cultural and economic 
values of Nantucket Sound. The Sound includes offshore areas owned both 
by the Commonwealth of Massachusetts and the Federal Government. The 
Alliance is composed of a broad mix of business, local government, 
fishing, environmental and other interests, with the common purpose of 
ensuring that development does not occur in the Sound that would 
destroy the unique values and natural beauty of this national treasure. 
Indeed, the Sound is a designated ``marine protected area'' under 
Massachusetts law and the Executive Order issued by President Clinton, 
and subsequently endorsed by President Bush.
The Cape Wind Project
    While the interests of the Alliance are long-term and broad-based, 
an immediate threat has galvanized our organization. Specifically, this 
is the Cape Wind Project, which proposes to construct what would be the 
largest offshore wind energy plant in the world in the middle of the 
Nantucket Sound, and the first in this country. It is important for 
this Committee to have a sense of the scale of this project and how 
serious its impacts will be. Cape Wind's industrial facility would 
consume 24 square miles of the outer continental shelf (OCS) in 
Nantucket Sound. The project would include 130 wind towers, each of 
which would be 416 feet tall. We believe this project has significant 
potential to cause serious damage to the most basic values of the 
Sound. This includes adverse effects on endangered species, migrating 
birds, marine mammals, and commercially valuable fish; threats to 
navigation and air traffic, including national security flights; 
declines in property values, tourism, and tax revenue; and harm to 
recreational activities and scenic values. All of these adverse impacts 
would be caused by a project for which there is no clear energy demand 
in the region, and which would likely not be constructed at all but for 
a variety of public subsidies which make it economically profitable for 
the developer, largely at taxpayer expense.
    While the Alliance, and the diverse interests and individuals who 
support it, share the public policy goal of increasing alternative and 
renewable energy as a part of our total energy supply, this general 
objective simply does not offset or justify the negative impacts of a 
project on this scale, in this location. Nor, as I shall explain, does 
it in any way legitimize the rush to develop this site, without 
adequate consideration of other, more suitable locations, and in the 
absence of any Federal law providing the authority even to build the 
project.
    This proposed project intersects with H.R. 793 in the following 
way. The Minerals Management Service, and the Department of the 
Interior, along with the Chairwoman of this Subcommittee, have 
correctly recognized that no legal authority exists to convey the 
Federal property rights which are mandatory to allow this project to be 
developed. What the Administration concludes on this authority issue is 
in doubt and perhaps will be clarified in this hearing. Equally 
important to the issue of Federal ownership and authority is the 
complete lack of a comprehensive Federal program to articulate 
standards for decision making, to set environmental rules, to impose 
rent, or even to designate a lead agency. In the meantime, in addition 
to Cape Wind, a number of other wind energy projects are being proposed 
in this region and along the Atlantic Coast. Thus, the need for 
congressional authority and guidance is clear, and we commend the Chair 
for taking the initiative on these issues.
    Despite the absence of legal authority, Cape Wind is proceeding to 
move the project forward with the assistance of one Federal agency in 
particular, the Army Corps of Engineers (COE). Cape Wind intends to 
build this huge energy project in an offshore area owned by the Federal 
Government simply on the basis of a permit under section 10 of the 
Rivers and Harbors Act, a law which has the important but narrow role 
of permitting potential obstructions to navigation. One permit already 
granted, but subject to appeal, is for a single scientific data 
gathering tower, and a second section 10 permit application, believe it 
or not, is the sole Federal process for the entire 130-tower wind 
energy project.
    Remarkably, even with the admitted knowledge that no Federal 
authority exists to build the project on the Federal OCS, and that a 
section 10 permit conveys no property rights whatsoever, the COE has 
moved expeditiously to process the permits, including undertaking the 
preparation of a major environmental impact statement under NEPA for 
the entire 130-tower project. The COE explanation, conveyed directly to 
me and other Alliance representatives is, to paraphrase--``We get a 
permit application; we process it.'' To the COE, the largest offshore 
wind energy project is apparently like any other section 10 permit, 
such as a buoy or small dock. Such a single-minded approach by the COE 
ignores the larger and more difficult issues that are presented by the 
lack of legal authority, or the existence of any Federal program for 
such a huge energy project in our valuable offshore waters. While the 
COE has expressed some limited doubts about processing the permits (at 
hearings of the U.S. Commission on Ocean Policy), and makes clear that 
no property rights whatever are conveyed in a section 10 permit, it 
nonetheless overcame its institutional misgivings, and has undertaken a 
full EIS process for 130 wind towers, despite the fact that the Federal 
Government has no authority for this project.
    Your legislation, Ms. Chairwoman, enters the scene at this point, 
seeking to confirm and assert Federal ownership and control of the OCS 
for non-oil and gas purposes, and to provide congressional authority 
for a program to make Federal offshore lands available for development.
    The Alliance has a number of comments as to how the legislation can 
be modified to increase its credibility in coastal areas, to achieve a 
better balance between development objectives and management and 
protection of the offshore environment, and to better serve taxpayer 
interest and the free market policies of the Congress and the 
Administration. To advise the Committee on these issues, we intend to 
touch briefly on the Federal ownership issues, and then in more detail 
on the nature of a program authorizing these uses you intend in H.R. 
793.
    At the heart of the dispute over the use of offshore lands for wind 
energy plants and other facilities is the absence of a mechanism to 
authorize the use and occupancy of Federal property held in the public 
trust for private development.
    The United States has clear ownership of this land. This principle 
is embedded in Supreme Court decisions and a long line of Federal 
actions. It also has been clearly established through case law that 
private parties cannot simply make use of such land for their own 
purposes without express authority to do so. Under Federal law, 
however, no such grant of power has been delegated by Congress to the 
Executive Branch to approve land use and occupancy for wind energy or 
other projects, other than oil and gas under the OCSLA and a few other 
specific activities such as deep water ports and ocean thermal 
conversion.
    Cape Wind and other developers anxious to stake out what they 
perceive to be a claim before a law can be passed, argue that a section 
10 permit alone is enough, and if a law ultimately does provide 
authority that does not exist now, have their claim preserved under 
that law. The Corps of Engineers, also seeking to have it both ways, 
says that a section 10 permit does not confer property rights. At the 
same time, however, the Corps has stated in its brief in the pending 
lawsuit filed by the Alliance against the section 10 permit issued for 
Cape Wind's initial industrial facility that it is ``the sole authority 
to allow and regulate all other (non-oil/gas) structures on the OCS 
pursuant to section 10.'' Corps of Engineers Brief, at 18. Thus, under 
the Corps' approach, the property right issue is ignored and Federal 
ownership of the OCS is literally at the mercy of any developer who can 
obtain a section 10 permit. The only exception to this, according to 
the Corps, is for oil and gas activities, which must comply with the 
rigorous OCSLA procedures and standards.
    The Department of the Interior clearly takes a different position. 
In a statement that directly conflicts with the Corps' position on the 
Cape Wind project and the authority conferred by section 10, Assistant 
Secretary Watson has stated:
        Generally, mechanisms do not currently exist by which an 
        applicant can obtain approval from the Federal Government to 
        utilize the OCS for non-oil and gas related activities. 
        Similarly, there exists no designated Federal agency that is 
        tasked with the authority to protect the Federal interest in 
        the OCS and to manage such activities to ensure that they are 
        conducted in a safe and environmentally sound manner.
    Letter from Rebecca W. Watson, Assistant Secretary of the Interior 
for Land and Minerals Management, to the Honorable Richard B. Cheney, 
President of the Senate 1 (June 20, 2002)(transmitting proposed 
legislation to provide authority to the Secretary of the Interior to 
grant easements or rights-of-way for traditional and non-traditional 
energy-related projects on the OCS). In addition, the DOI's Minerals 
Management Service (MMS) has testified before Congress that renewable 
energy projects on the OCS, including wind energy, ``are not currently 
covered under existing statutes,'' and that ``there currently is no 
legal authority to permit these types of projects.'' Legislative 
hearing on H.R. 5156, Before the House Subcommittee on Energy & Mineral 
Resources, Committee on Resources, 107th Cong. 2 (July 25, 
2002)(statement of Johnnie Burton, Director, Minerals Management 
Service, Department of the Interior).
    As this discussion demonstrates, there is a clear need for Congress 
to address the questions of whether and how to authorize the use of the 
OCS for non-oil and gas purposes. This question is so confused that the 
Federal Government is arguing against itself on this question, with the 
Corps saying authority currently exists and Interior saying it does 
not. Clearly, Congress needs to reconcile these conflicting views and 
define precisely what the law is.
    To its credit, H.R. 793 addresses this question by establishing the 
mechanism by which such property rights would be conferred. As 
discussed below, however, the approach called for by this bill is not 
adequate. Granting such rights by means of an easement, though a 
noncompetitive process that does not apply rigorous environmental 
standards, or the defined and meaningful inclusion of coastal states 
and communities in the process, is not the appropriate solution to this 
issue. This testimony sets forth the Alliance's recommended approach.
The Need for a Comprehensive Program and a Moratorium
    Those larger questions of law and policy have now been framed even 
more vividly by the appearance of numerous additional wind energy 
projects that are proposed for the OCS off the southwest coast of 
Massachusetts and down the Atlantic Ocean shoreline to Virginia (see 
map attached). If the COE follows its rote ``receive a permit; process 
a permit'' approach for additional projects which cannot be built under 
present law and which raise issues outside the Corps' expertise, it 
will have contributed to the creation of an ``open to entry'' approach 
to the use of Federal offshore resources for energy development. And it 
will have done so without adequate review, without meaningful 
standards, and without revenue return to the Federal Government.
    Such an applicant-driven program, called an ``over-the-counter'' 
land program in some states, puts the Federal Government, the adjacent 
coastal state, and all affected interests, including local and regional 
regulatory bodies already strapped for resources, in the position of 
always responding to the initiative and pressures of a project sponsor, 
one at a time. Such sponsors relentlessly press for quick decisions on 
a specific location of their choice which, as in the case of Nantucket 
Sound, may not be an appropriate place to develop such a project at 
all. This ``open-to-entry'' pressure is just what is happening with 
Cape Wind. Such project-driven programs to commit public land or other 
resources to private development may work for selected, unique, and 
smaller projects, like a single offshore platform for a support 
function, or a right-of-way for an underwater transmission line, but 
private developers of large projects requiring vast tracts should not 
simply be able to stake an offshore claim and hold it for development.
    Congress has recognized previously that such a ``permit on demand'' 
approach does not work for larger nationwide programs like geothermal 
or oil and gas, which also require large areas, in different regions, 
and which, because of the presence of rich resources in certain 
locations, should always involve competition for a site to ensure 
maximum return to the public and the U.S. Treasury. Clearly, the 
permit-by-permit approach is the wrong one for the large-scale wind 
energy projects which are proliferating. A comprehensive Federal 
program is essential.
    A comprehensive program for developing Federal resources or for 
using Federal offshore tracts is proactive, positive, and best protects 
the public interest. A good program should, among other purposes, 
encourage wise and needed energy development, guarantee a fair return 
for the taxpayers, set uniform standards for environmental protection, 
and provide extensive state, local and public participation in the 
process. And it should designate Federal agency leadership, not simply 
accept decisions from any agency with limited permit authority. 
Moreover, because of the importance of these public policy objectives, 
there is a real need to put a hold on all such development until a 
comprehensive program is enacted. If this is not done, important 
resources, such as Nantucket Sound, could be sacrificed before a 
legally valid and adequate Federal program exists.
    We recognize and appreciate that H.R. 793 addresses the reality 
that no authorization now exists under which any Federal agency may 
grant and condition legal rights to develop resources on the OCS, other 
than those already authorized under the Outer Continental Shelf Lands 
Act (OCSLA) and a few other laws governing specific activities. The new 
offshore uses which are being proposed are currently without Federal 
legal authorization, despite their extensive and significant impacts, 
and without regard to the value of the taxpayer-owned resources they 
will use. These unauthorized uses include not only the wind energy 
projects I described, but also the construction of platforms and 
transmission systems for liquid natural gas (LNG) gasification 
projects, electric transmission lines, pipelines and cables, oil 
storage platforms, and other offshore industrial facilities. Without a 
doubt, such intensive uses of the Federal OCS call for a comprehensive 
and thoughtful program. Specifically, and in addition to whatever 
permitting right-of-way or easement authority is established or smaller 
and more simpler projects, there should be a leasing program for large-
scale and longer term uses, for which the best general model available 
in our current system of laws is the OCSLA itself.
H.R. 793 and the OCSLA Model
    For these reasons, the Alliance applauds the intent of H.R. 793 to 
provide much needed authority for new energy-related uses of the 
Federal OCS. The Alliance cannot, however, support passage of the bill 
unless it is substantially amended to provide for the sort of overall 
program and standards that are included in the OCSLA and its 
legislative history, and in addition, there is assurance in the bill, 
that none of the so-called ``Section 10 projects'' will be allowed to 
proceed until they have fully complied with that program.
    The OCSLA is a law that has evolved since 1953 to provide a 
balanced Federal program intended to encourage the development of 
Federal oil and gas and mineral resources on the OCS. Because of the 
OCSLA, this development has proceeded on terms that ensure the balanced 
protection of the public interest, affected local governments, and the 
significant participation of states which, after all, are the owners of 
offshore land up to three miles from shore. As introduced, H.R. 793 
amends only section 8 (43 U.S.C. Sec. 1337) of the OCSLA. Beyond this, 
H.R. 793 makes no reference to the OCSLA, almost as if the application 
of the OCSLA is being avoided. To the contrary, H.R. 793 would be a 
significantly more credible bill if it were a true amendment to OCSLA 
and included many of its provisions.
    Respect for the role of states runs throughout OCSLA, and other 
laws regulating the use of OCS, such as the Coastal Zone Management 
Act. Federal laws for offshore and marine resources reflect this 
respect by recognizing that the three-mile limit of state ownership 
must be regarded with flexibility so that states, localities and 
Federal agencies can work together to provide the best management of 
the resources.
    While H.R. 793 is well intended in its creation of general 
authority for the Secretary of the Interior, in a number of areas the 
problem is that, because of the generality of the delegation of 
authority in the bill as introduced, the Secretary is given too little 
guidance as to the details of the program to be created. Congress can, 
and should, do more. In addition, H.R. 793 fails to give a proper role 
to agencies with responsibility over marine resources, such as the 
National Oceanic and Atmospheric Administration. Congressman Delahunt 
is developing proposed legislation which recognizes this role, and even 
assigns lead responsibility to the Department of Commerce for this 
reason.
    The following specific areas must be addressed if H.R. 793 is to 
provide a credible foundation for new offshore energy development, as 
it appears intended to do.
Recommendations
    Although this testimony does not include specific language for 
amendments to H.R. 793, the following points should be covered by 
amendments if the legislation is to provide a level of authority, 
guidance and protection of the public interest, similar to what 
currently exists in the OCSLA.
    First, it is essential that any new authorization, such as H.R. 
793, that would allow a broad range of new, energy uses on the OCS, is 
based, at least in large part, on a programmatic approach relying on 
leases, rather than just permits, rights-of-way or easements. A permit-
to-permit, ``open-to-entry'' approach to the commitment of Federal 
property interests for project development simply does not provide 
either a programmatic approach or sufficient property rights, properly 
conditioned, for energy projects the size of those being proposed. 
Where 23 square miles, or more, of the OCS is committed to intensive, 
long-term, energy development, the Federal Government should not be 
approving one project at a time based on a simple permit. Rather, it 
must develop a serious and comprehensive program that addresses choices 
between alternative locations to develop or protect, that applies to 
all projects, and that gives coastal states, communities and citizens 
fair notice and a chance to do more than react to one project proposal.
    The details and descriptions of such a program are scattered 
throughout the OCSLA and other Federal laws, but the central 
description of the OCS program is in 43 U.S.C. Sec. 1344. Section 1344 
directs the Secretary to prepare, periodically revise, and maintain a 
leasing program for offshore oil and gas, and minerals, that implements 
the policies set out in the Act. The program is specified to be 
conducted in a manner that considers economic, social and environmental 
values of both renewable and non-renewable resources contained in the 
OCS, as well as the potential impact of oil and gas exploration on 
other resource values including the marine, coastal and human 
environments. The program is to be based on a broad range of existing 
information regarding developmental benefits and environmental risks 
among regions of the country, so that the risks and benefits may be 
equitably shared. If we had relied on the proposals of the oil industry 
to develop each area they wanted, Georges Bank, instead of being 
comparatively considered, would have been developed long ago. The 
program must also fully consider other uses of the sea and seabed, 
including conservation, fisheries, and navigation. The OCSLA is a model 
that H.R. 793 would wisely follow, and it would require only slight 
adaptation to apply.
    Such a programmatic approach can give full and fair attention, but 
not unfair advantage, to corporate project sponsors by comprehensively 
studying various areas for the significance of their resources, 
including wind resources, and seeking nominations for those areas that 
are most favored by industry. Such a program should also allow for 
certain areas to be nominated, and selected, for exclusion from 
development, where, for a variety of reasons, development would not be 
appropriate. Any nominations can be balanced against other factors that 
would include competing resource and economic values in the area, the 
nature of Federal or state protection of the marine resources in the 
area, the opinions of the adjacent state and local governments, and 
other factors. Such a process is intended ultimately to make available 
for development those areas which have high potential for energy 
production, but which present few conflicts for enabling the 
development to occur. This is exactly the sort of program that has 
evolved with respect to offshore oil and gas development. It is also 
the sort of program that led to the decision not to lease and develop 
some areas off of Alaska, Florida, California and New England, despite 
the industry's belief that the most promising resources were there. At 
the same time, this balanced program opened up some of the other 
highest potential areas with limited conflict. It is essential that a 
similar program be instituted for the new offshore energy uses 
authorized by H.R. 793.
    Second, the program proposed in H.R. 793 should not be vested 
exclusively in the Department of the Interior. These projects will 
dramatically affect marine resources, and authority should be shared 
with the Department of Commerce through NOAA. Serious consideration 
should be given to the proposal of Mr. Delahunt for even greater 
authority, or program leadership, in the Department of Commerce and 
NOAA.
    Third, such a program must have respect for, and provide for the 
substantial involvement of states, local governments and the public, in 
each area for which new offshore energy development is proposed. Among 
other provisions, 43 U.S.C. Sec. 1344 and Sec. 1345 set out important 
standards directing that the Federal OCS program be fully cooperative 
with adjacent states. These provisions include not only coastal zone 
management planning, but also involve the states fully in the Federal 
offshore development planning process. They establish the right of 
states to submit recommendations to the Secretary regarding the size, 
timing or location of a proposed project or lease sale. The Act also 
permits a state to recommend areas that should not be eligible for 
leasing. In essence, much of the success of the offshore oil and gas 
leasing program is due to the fact that the consultative process 
eliminates areas where state-Federal conflict is likely to forestall 
development, even if leases are issued. H.R. 793, in contrast, provides 
only the most general direction for state consultation and fails to 
detail a role for states, local governments or the public. For example, 
the Governor and Attorney General of Massachusetts oppose the Cape Wind 
Project. Yet under the Corps' permit by permit process, state and 
community concerns were relegated to reacting against a single permit 
proposal, rather than being part of a larger process to decide whether 
Nantucket Sound is an appropriate location prior to opening the area to 
development proposals.
    Sound legislation also must authorize an ongoing program of 
environmental studies to identify areas where alternative energy 
resources, like wind, are greatest. The studies must also assess the 
environmental effects of developing those resources, since the impacts 
are certainly not benign. Such a program, as directed in 43 U.S.C. 
Sec. 1346, has been established and maintained for many years with 
respect to offshore oil and gas. The same type of program, specifically 
modified to address alternative energy development, could serve as a 
basis for an alternative energy environmental studies program. The goal 
is a successful long-term approach to alternative energy development, 
not a rush to get the first project expedited on any terms.
    Fourth, a fair return for taxpayers is addressed only in the most 
general terms in H.R. 793. The bill, as introduced, directs the 
Secretary only to establish ``reasonable forms of annual or one-time 
payments for any easement or right-of-way granted.'' It also authorizes 
negotiated arrangements with the party to whom the easement or right-
of-way is granted. The one-time payment and negotiated arrangement 
approach is typical of right-of-way and easement grants, for single 
facilities or for very defined and limited land-uses. Such a one-time 
fee payment approach is, however, inappropriate for large projects that 
consume a great deal of land or resources, and for which the taxpayers 
deserve a market value return and a marketplace approach. Indeed, it is 
surprising that a market-driven approach would not be the cornerstone 
of a program from the Congress or current Administration.
    In contrast, under the OCSLA, Federal leases are sold competitively 
to the highest bidder, an approach which is made possible by the fact 
that leasing of tracts occurs only after a plan has been developed that 
identifies high priority areas in which more than one bidder will be 
interested. This is far preferable to a ``first come, first served, 
let's make a deal'' approach. 43 U.S.C. Sec. 1337. A fair return for 
taxpayers can be accomplished for alternative energy development, but 
not under the open-to-entry approach that H.R. 793 presents. At the 
very minimum, H.R. 793, or any bill intending to provide authorization 
for new energy-related uses of the OCS, should direct that competitive 
bidding be treated as the preferred approach to be used, unless there 
is justification not to do so, or an attempt to offer a property 
competitively draws no interest. High resource value areas, either for 
industrial wind projects or pipeline rights-of-way, should be 
competitive and sold accordingly to the market as a program preference. 
Otherwise, public resources will be negotiated away, and sold for 
single payments at levels that do not return to the taxpayers the fair 
market value of the valuable resource rights that are conferred. The 
development of alternative or renewable energy resources, to be sure, 
is a worthy objective, but not at any price, particularly considering 
the other subsidies that are provided.
    The use of a competitive bidding approach is especially appropriate 
for offshore wind projects. As the multiplicity of sites and developers 
indicates, there appears to be a true ``market'' for offshore wind 
project property rights. In Massachusetts alone, there are eight sites 
under consideration. The Nantucket Sound site being pursued by Cape 
Wind is known for its wind resources, yet the Federal Government, 
through the Corps, ignores the potential that multiple developers would 
be interested and is prepared to authorize a single for profit 
developer to proceed with no return whatever to taxpayers. The only way 
to provide any return for taxpayers is to rely upon competitive 
bidding, and competitive bidding can only occur through a program which 
identifies and offers areas for development to the development 
community.
    Neither Cape Wind, nor other alternative energy proposals, are 
``public service projects'' undertaken by non-profit organizations. The 
project may provide cleaner electric generation, but the projects are 
private, for-profit enterprises by corporations; they create other 
environmental impacts, and they are based on the use of taxpayer-owned 
resources, just like oil and gas. The profit is supplied in substantial 
part by taxpayers through subsidies. This is precisely what is 
happening now in Nantucket Sound and is another reason that an 
immediate moratorium must be imposed on the permit speculators until 
authority and standards are established by Congress.
    Fifth, H.R. 793 fails to provide for specific environmental 
standards. As the Cape Wind Project demonstrates, these projects have 
the potential to be very damaging to the environment. Any authorization 
for such a program must establish real standards for environmental 
review, including prohibitions on locating any such project in areas 
designated as sanctuaries or protected zones under state or Federal 
law. It is not good enough, in the view of coastal states and 
communities, and those, like fisherman, who depend on the marine 
environment, for Congress to simply say, ``The secretary will take care 
of it.'' The question is how? And Congress must provide the standards.
    Other issues that must be resolved in any bill establishing new 
authority for alternative energy uses for the OCS include the 
following:
     The authorization should contain provisions, such as 
those in 43 U.S.C. Sec. 1347, providing for safety and health 
regulations including the use of best available and safest economically 
feasible technologies. No such provision exists in H.R. 793, in spite 
of the potential for such problems in LNG operations, oil storage and 
even wind energy facilities.
     The authorization should incorporate 43 U.S.C. Sec. 1349, 
to provide rules for citizen suits challenging program decisions and 
dealing with significant jurisdictional issues. No such provision 
exists in H.R. 793.
     Separating leasing and development decisions, as OCSLA 
does with respect to OCS oil and gas, should be addressed in any 
authorization. H.R. 793 contains no such provisions, and in the limited 
hearings afforded to this legislation, there was no way in which this 
option could be explored. The point is that the separation of leasing 
and development into two phases makes sense in certain situations, as 
it affords states an added opportunity to review the specific plans for 
development before it proceeds. The authorization need not require 
separation in all cases, but instruct the Secretary to consider it in 
all cases.
    There are numerous other features of the OCSLA that would be 
desirable for inclusion in a bill authorizing alternative energy uses 
on the OCS. These features include the requirement of annual program 
reports, as well as regular reports on human and budgetary resources 
needed to carry out a credible program that will make a contribution to 
the nation's energy supply, while protecting the environment and other 
significant interests.
    Perhaps no element of the OCSLA demonstrates the differences 
between the approach of H.R. 793, and the approach taken by the 
Congress for the offshore oil and gas program than does 43 U.S.C. 
Sec. 1332. This section is an impressive declaration of policy by the 
Congress with regard to petroleum and mineral development on the 
Federal OCS, and confirms that it will occur only in balance with other 
significant interests, including environmental protection and state and 
local government involvement. It is unclear why H.R. 793 did not 
incorporate such a declaration of policy or reference Section 1332 at 
all.
    Finally, the OCSLA includes authority to exclude specific areas 
that are not suitable for development from the leasing program. This 
provision is based on the obvious fact that particular locations in the 
marine environment are incompatible with development under the OCSLA. 
Such a principle also should be included in H.R. 793. Any such 
provision should, either by direct reference or through a statement of 
standards, ensure that marine ecosystems as pristine and valuable on 
ecological, economic and aesthetic grounds as Nantucket Sound are not 
sacrificed for private development. As the current rush to development 
of offshore wind projects demonstrates, there are an abundance of 
possible sites. There is no reason that Nantucket Sound, or other areas 
of similar value, should be made available to developers seeking to 
maximize their profits.
Comments on Other Issues
    In addition to the points made above supporting comprehensive 
legislation to authorize the new alternative energy uses proposed on 
the OCS, it is also necessary that we comment on some elements of the 
testimony given last year on behalf of the American Wind Energy 
Association, testimony we are certain the Committee will hear again.
    First, this testimony asked that any rules that may flow from 
passage of H.R. 793 ``be sensitive'' to the financial investments in 
potential offshore projects made prior to enactment of the legislation. 
The Association was concerned, as it said, about projects that have 
already begun being ``disadvantaged by new rules and requirements'' or 
``unnecessarily delayed'' by whatever system Congress ultimately 
chooses to put in place to manage these new uses of the outer 
continental shelf.
    This position essentially stands reason on its head. It asks that 
the speculative corporate developers who proceeded to invest in and 
force consideration of the projects they staked out, in a legal setting 
that clearly does not provide authority for such projects, should 
actually be rewarded for the attempt. Just the opposite is called for; 
not only should such ``transitional relief'' not be granted to those 
who were presumptuous enough to assume that they could begin these 
developments for their personal profit and without regard to the 
desires of affected communities and interest groups, but a moratorium 
should be placed on all Federal agencies from processing such permits 
to avoid creating even a suggestion of such grandfathered rights to 
proceed free of the constraints of a new program.
    Similarly, in a short section entitled ``Interconnection,'' the 
Association expressed its concern that if a current or future project 
gains approval and begins construction, that there be an ``orderly 
process'' to ensure the project can connect to electric substations and 
distribution lines on the mainland. While no one can oppose an 
``orderly process,'' and we do not, our concern is that this is 
``code'' for the preemption of legitimate state and local rights with 
respect to rights-of-way across state offshore lands or local planning, 
zoning and utility location requirements. This would amount to an 
extraordinary breach of the Federalism concepts so long championed by 
this Committee and inherent in the OCSLA itself.
    Essentially, what the Association appeared to have in mind here 
last year, and no doubt still does, is a totally Federalized program 
for alternative energy projects that preempts legitimate state and 
local prerogatives and eases the way for approval with minimal review 
and no standards. That kind of Federal overreaching should not be 
tolerated by this Congress. In essence, any bill that is passed to 
establish a new program for granting and conditioning rights for 
alternative energy development on the OCS should be fully applicable to 
all proposals, whether underway or not, and should be deeply respectful 
of the prerogatives of state and local governments, avoiding Federal 
preemption in all cases. Those who invest prior to the existence of 
such authority should do so at their own risk.
Conclusion
    The Alliance to Protect Nantucket Sound recognizes, as do the 
sponsors of H.R. 793, that no authority currently exists for the 
Federal Government to grant property rights for the OCS to develop 
alternative energy, or for other energy activities, which are not 
already authorized by the OCSLA. We have already learned from the 
emerging wind energy project proposals that these developments can be 
of immense scale and impact. Fully recognizing the general and long-
term value of alternative or renewable energy, offshore projects of 
this type must be undertaken. But they will be most successful if 
undertaken through a comprehensive program incorporating virtually all 
of the elements that are already delineated in the OCSLA. This is the 
approach, not the ``give me my project now'' approach, that will truly 
cause renewable energy to become institutionalized over the long-term.
    All who care about the manner in which the offshore areas of our 
country are developed should support the points that are outlined in 
this testimony. The Alliance urges Congress to pass legislation that 
provides for the development of new offshore energy resources in 
balance with all of the other factors that are involved. We trust that 
such a program, properly administered, is more likely than not to 
determine that a site such as Nantucket Sound should never be chosen 
for a project like Cape Wind. The outcome on this authorization, 
however, raises issues which go well beyond one project and one 
location. The formula for the long-term success of offshore alternative 
energy development is not permit by permit conflict, nor a cursory 
direction to the Secretary, but a comprehensive program which creates a 
solid foundation for offshore development. Thank you again for this 
opportunity to submit comments.
                                 ______
                                 
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    Mr. Kind. And with that, Mr. Chairman, I will yield back.
    Mr. Rehberg. Thank you, Mr. Kind.
    [The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, Ranking Democrat, Subcommittee on 
         Energy and Mineral Resources, on H.R. 793 and H.R. 794

    With the imminent threat of war with Iraq looming over this 
hearing, the need to develop renewable energy sources such as wind, 
solar and biomass could not be more evident. In addition to other 
concerns, a substantial portion of domestic oil imports from the Middle 
East may soon be at risk, therefore we must continue to encourage 
clean, renewable energy initiatives now so that they will be available 
should the need arise.
    Generally I believe it is a good idea to clarify and specify that 
the Minerals Management Service has the necessary authority to grant 
easements or rights-of-way for alternative energy projects on the Outer 
Continental Shelf not currently authorized by law. I feel that with 
their history of managing oil and gas development projects on the OCS, 
the MMS is well equipped to do the job.
    Last year, we expressed an interest in hearing testimony from 
representatives of coastal states that have a vested interest in the 
bill. I am pleased to see that Attorney General Reilly is here to speak 
on behalf of the people of Massachusetts, who are currently engaged in 
discussion over a proposed wind farm in Nantucket Sound. I would like 
to see H.R. 793 amended to specifically require consultation with 
affected States prior to permitting alternative energy projects, such 
as wind farms, on the OCS. While there is no shortage of controversy 
with the Nantucket Sound project, it is critical that the affected 
States and the public have sufficient opportunity to participate in the 
permitting process.
    That said, if we are to reduce our dependence on foreign oil 
imports, and reduce greenhouse gas emissions, as a Nation we are going 
to have to develop alternative energy strategies, including wind farms. 
We should not, indeed, cannot, advocate alternatives to fossil fuels 
and then cry ``not-in-my-backyard'' whenever a new project is proposed. 
I am not saying that the Nantucket Sound project should go forward, I 
am not fully aware of the facts in that case.
    However, I would note that during a recent Congressional trip to 
Northern Europe to learn more about alternative energy projects, as 
well as other issues before the Committee, Members of this Committee 
had the opportunity to view the wind energy facilities at the mouth of 
the Copenhagen harbor. According to local government officials, there 
was some initial resistance to the proposal--and still some dislike for 
the way the windmills look lining up across the skyline. Nevertheless, 
once the wind field had been in operation and the residents became 
accustomed to its presence, and more importantly, its production, their 
fears abated. They have found that the benefits of inexhaustible, 
clean, and renewable energy from the offshore wind farm have, thus far, 
outweighed the more undesirable factors.
    Though I support the goals of H.R. 793, there are problems with the 
legislation, which I hope to work out with Chairman Cubin before the 
bill is marked-up.
    The second bill being discussed today, H.R. 794, is one that 
relates to Federal coal leasing practices. I am aware that our 
Committee Ranking Member from West Virginia, Mr. Rahall, has numerous 
and specific concerns with the proposed legislation. I fully support 
his views on the subject and defer to him to comment on a bill that 
would most certainly upset the current state of coal leasing in America 
and would affect a large majority of his constituency. In his absence, 
I ask unanimous consent to submit his statement in the hearing record.
                                 ______
                                 
    NOTE: A report submitted for the record by Mr. Kind entitled 
``Review of State and Federal Marine Protection of the Ecological 
Resources of Nantucket Sound'' prepared by the Center for Coastal 
Studies has been retained in the Committee's official files.
                                 ______
                                 
    We had anticipated there would be a vote. There hasn't been 
yet. Why don't we just kick off. We will get as far as we can 
and we will begin with Panel No. 1 and Mr. Delahunt.

       STATEMENT OF THE HONORABLE WILLIAM D. DELAHUNT, A 
   REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS

    Mr. Delahunt. Thank you, Mr. Chairman, and let me extend an 
invitation immediately to all members of the Committee to come 
visit Nantucket sound. I am sure we could arrange for a field 
trip sometime in May or June and give you an opportunity to see 
firsthand the concerns that the people have in my district, and 
I think it would be enlightening to see the rather small area 
for which the project that Mr. Kind referred to in his opening 
statement, is proposed.
    First, I want to extend my regards and my gratitude to you, 
Mr. Chairman, and specifically to the Chair of the 
Subcommittee, Ms. Cubin, for her leadership in charting a 
course for development of renewable energy in our coastal 
waters. Your interest in this issue is vital to districts like 
mine and states like Massachusetts.
    I am especially pleased that the Committee will hear from 
my good friend and former colleague, Tom Reilly, the Attorney 
General of the Commonwealth of Massachusetts and I might add 
one of the best Attorneys General in these United States. And 
as an advocate of local control and civil and states rights, I 
know that you will find his testimony compelling.
    The problems we are here to address derive from impressive 
technological break-throughs that now make large renewable 
energy projects commercially feasible. That is very good news, 
as Mr. Kind indicated. Unfortunately, there is no coherent 
comprehensive Federal permitting process to ensure development 
does not violate multiple public policy considerations. Current 
Federal law does not provide a yardstick so we can responsibly 
judge the merits of individual proposals.
    For example, the proposal that Mr. Kind alluded to is being 
processed by the Army Corps of Engineers under the authority of 
a statute that was enacted in 1899. With the current pace of 
development accelerating, I welcome your commitment to bridging 
the gaps in current law, and it is imperative that we act 
quickly to create a coherent responsible regulatory process, 
one that is fair and predictable for investors and one that 
would restore public confidence and governance of the coastal 
zone.
    Today, I am introducing legislation which I believe will 
address those concerns, and I respectfully ask you to review 
this proposal as you proceed. My bill would affirmatively 
encourage alternative energy development on the Outer 
Continental Shelf by requiring a new licensing regime to be in 
place within 1 year after passage that draws, as does the so-
called Cubin bill, from analogous existing provisions of oil 
and gas regulation.
    But there are key differences: The average size of an oil 
and gas track leased by the Department of Interior is roughly 
eight square miles, while the size of proposed wind farms range 
from 15 to 100 square miles. The Long Island Power Authority's 
proposal for the waters off New York covers more than 50 square 
miles. The sheer size of these facilities make them more 
intrusive than oil and gas platforms. More over, decisions 
about renewable facilities tend to be more permanent than those 
related to oil and gas.
    OCS platforms are mobile and can be moved if needed, but 
once concrete and steel wind towers are built, they are there 
imbedded in the seabed for decades. Finally, oil and gas 
development typically take place far from shore and Federal 
waters. Improved technology allows oil companies to access 
reserves in deep waters of the gulf and elsewhere. Because this 
activity is far from shore, it doesn't tend to conflict with 
competing interests. Conversely, almost all of the sites for 
proposed wind farms either straddle or abut state waters in 
their coastal zone.
    For all these reasons, the processed outlined in my 
legislation foresees a new licensing program that calls on the 
expertise of the National Oceanographic and Atmospheric 
Administration and their coastal zone managers. As you know, 
NOAA already oversees the development of and licensing of ocean 
thermal energy conversion facilities. Specifically, the bill 
encourages coastal states and requires the Federal Government 
to identify priority areas for prospective renewable energy 
development. It includes incentives to encourage states to 
amend their coastal zone management plans accordingly. It 
requires the construction and operation of licensed facilities 
to be consistent with these state CZM programs, and once a 
facility begins producing energy, it requires annual royalties 
for allocation to coastal states.
    In short, our goals are to expedite energy development, 
minimize disruption of competing uses, capitalize on existing 
regulatory expertise, and respect state coastal priorities.
    Where I live, Mr. Chairman, the sea is in our blood. We are 
a people bound to the water, and, as you know, the term 
``Yankee ingenuity'' signifies our welcoming creativity and 
innovation, and they don't necessarily have to be mutually 
exclusive, our love for the sea and this time honored Yankee 
ingenuity, but when we speak of new proposals, we have to 
obviously factor in the consequences.
    What is at stake in my area is a marine environment so 
ecologically valuable and fragile that is a candidate for 
designation as a National Marine Sanctuary. The commercial 
fishing fleet and vibrant tourism industry is utterly dependant 
on the health of Nantucket Sound. There are some mistakes that 
you can only make once. This is that situation.
    I commend your efforts to address the shortcomings of 
Federal law so that we can get it right the first time. I thank 
the Chair and yield back whatever time I may have.
    [The prepared statement of Mr. Delahunt follows:]

   Statement of The Honorable William Delahunt, a Representative in 
                Congress from the State of Massachusetts

    First, my thanks to you, Madame Chairman, for your leadership as we 
chart a course for development of renewable energy in our coastal 
waters. Over the past year, I have benefited from your counsel, and 
that of your staff; and I appreciate your resuming this discussion so 
early in this session of Congress.
    As you know, this is a very important issue to me and my 
constituents. Every community in my district is touched by the ocean. 
We rely on the ocean to drive important segments of our economy, such 
as fishing and tourism. Our ocean is also important for recreation and 
transportation, and because of that we have a profound respect and 
appreciation for a healthy marine environment.
    Some months ago, developers proposed building a wind farm spanning 
25 square miles in Nantucket Sound. This proposal set off a firestorm. 
Since then, issues of ocean governance and new policies for renewable 
energy in the marine environment have dominated our newspapers, our 
fishing piers and our town halls. I have opposed the Nantucket Sound 
project, not because I oppose renewable energy, but rather because I 
believe that we must have sensible policies in place before the Federal 
Government starts issuing permits for such large projects.
    Since our discussions last year, when this issue arose in the 
context of the energy bill, I have been working with the Massachusetts 
Attorney General--from whom you'll hear soon--as well as the fishing 
and boating communities, conservation and wildlife groups, and coastal 
zone management experts to develop a predictable and inclusive 
regulatory program. Legislation I will be introducing today, I believe, 
a consensus among the major interest groups.
    I would be pleased to discuss specific provisions of the bill and 
possible changes to any of them, but frankly I would rather spend the 
few moments we have together this morning to share with you our 
concerns about what appears to be a corporate land rush for our ocean 
seabed and the need to involve at the earliest of stages the coastal 
states and other users of the ocean resources.
    From the outset, I want to say that I am a strong supporter of 
renewable energy and the bill I introduced is intended to encourage 
sensible development of alternative energy in the marine environment.
    The problems we're here to address derive from impressive 
technological breakthroughs that finally mean that offshore renewable 
energy projects can be commercially viable. That's very good news, 
particularly given the geopolitical challenges we now face. The merits 
of wind energy are indisputable; and we should do all we can to nurture 
and reward investment in this sector by providing sensible guidance on 
how to authorize these new uses of the oceans.
    That's why I welcome your commitment to addressing this issue. Last 
session, you introduced your own proposal. Since then, we have 
witnessed dozens of new wind farm proposals up and down the east coast, 
with a half dozen off the New England coast alone. To the taxpayer, it 
seems as if our coastal waters are being held hostage to whatever 
commercial interests stake the first or loudest claim.
    In the absence of guidance from Congress, regulators now find 
themselves with no choice but to default to rules and standards as 
archaic as the mashing of corn in the gears of Cape Cod windmills. For 
developers, this vacuum yields uncertainties and public attacks without 
the benefit of referees or even ground rules.
    With the pace of proposed development accelerating, I am here today 
to propose several constructive steps that I believe could yield a more 
responsible process.
    First, we need to move quickly. The bill I am introducing requires 
the proposed licensing regime to be in place within one year after 
passage so as not to delay development. It recognizes that development 
should be done with due consideration to all the competing uses and 
public interests in our ocean. Just as we discourage oil development in 
environmentally sensitive areas like coral reefs, we would not want to 
put a wind farm right in the middle of a prime fishing area, shipping 
lane, critical marine habitat or even in the middle of a state-
designated ocean sanctuary.
    In many respects the siting decisions related to marine renewable 
energy facilities are more difficult than those related to oil and gas. 
For example, the average size of an oil and gas tract leased by the 
Department of Interior is roughly 8 square miles, while the size of 
proposed wind farms range from 15 to 100 square miles. The Long Island 
Power Authority's proposal for siting a wind farm in the coastal waters 
of New York covers more than 50 square miles. The shear size of these 
facilities makes them more intrusive than oil and gas platforms, and 
consequently the impacts on the other users of the ocean even greater.
    Moreover, decisions about renewable facilities tend to be more 
permanent than those related to oil and gas. OCS platforms are mobile 
and can be moved if needed but once a wind farm is built it's there for 
decades. Concrete and steel wind towers imbedded in the seabed are 
permanent until dismantled.
    Finally, oil and gas development in large part takes place far from 
shore in Federal waters. New deep water technology is allowing oil 
companies to access reserves in deep waters of the Gulf and elsewhere 
and because this activity is far from the coast, avoiding conflicts 
with a multitude of competing uses.
    Conversely, almost all of the sites for proposed wind farms either 
straddle or abut state waters, near designated coastal zones, shipping 
lanes, fishing or boating areas and critical habitat. For this reason 
alone, states must have a major say in the development of offshore 
resources.
    Consequently, the process outlined in our legislation establishes a 
new licensing program that calls on the expertise of the National 
Oceanographic and Atmospheric Administration (NOAA) and their coastal 
zone managers. As you know, NOAA already oversees the development and 
licensing of Ocean Thermal Energy Conversion (OTEC) facilities. NOAA's 
experience with the marine environment makes them particularly well 
equipped to guide this process.
    Specifically, the bill encourages coastal states and the Federal 
Government to identify priority areas for the siting of renewable 
energy facilities. Identifying these priority areas up-front will help 
avoid costly and protracted battles among marine interests, and 
expedite offshore renewable energy development.
    The bill authorizes financial assistance to states to ensure that 
they amend their coastal zone management plans to incorporate policies 
for assisting in the development of renewable energy. In addition to 
requiring that the construction and operation of renewable energy 
facilities be consistent with approved state management programs, the 
bill requires the Secretary of Commerce to consult with the relevant 
Federal agencies to ensure that the construction of one of these 
facilities will not compromise national security efforts to harm the 
environment. Finally, once a facility begins producing energy, the 
Secretary is required to establish annual royalties that will go back 
into the Coastal Zone Management Fund for allocation to coastal states.
    In short, our goals are to expedite energy development, minimize 
disruption of competing uses, capitalize on existing regulatory 
expertise, and respect state coastal priorities.
    Where I live, our historical heritage and economic vitality are 
interdependent with the marine environment. It's in our blood to 
welcome innovation, and we have always embraced renewable technology. 
But no matter how noble our intentions, we must never lose sight of the 
consequences. Any more than public transit would mean running the 
Boston subway system to the Cape Cod National Seashore. Or the need for 
prescription drugs would argue for abolishing the FDA.
    What is at stake, in our own area, is a body of water so abundant 
in natural resources that it was nominated by the Commonwealth of 
Massachusetts as a National Marine Sanctuary. It is a resource that 
helps sustain a vibrant tourism industry and a commercial fishing 
fleet.
    There are some mistakes you can make only once. I commend your 
efforts to address the shortcomings in the Federal law, so that we get 
it right the first time.
                                 ______
                                 
    Mr. Rehberg. Thank you, Mr. Delahunt, and certainly those 
concerns will be taken into consideration in this Committee, 
and the Chairman I know will look forward to working with you 
on an acceptable compromise.
    As Mr. Kind mentioned, we saw the facilities in Norway last 
summer, and there can be a visual change in the horizon or the 
outer banks that we recognize and know that not everybody will 
like it the way that it is, but if anybody did a nice job with 
it, their facilities are fairly attractive.
    Mr. Delahunt. I believe we pose a distinctly unique 
situation, and again, I am going defer to my Attorney General 
to explain his concerns, but I think our collective concerns 
are concerns that you would all share. And let me again repeat 
the invitation to come to Nantucket Sound to visit the Cape, 
Nantucket, and Martha's Vineyard to observe the potential 
impact of this proposal on the people in my district.
    Again, thank you, Mr. Chairman.
    Mr. Rehberg. Thank you. Even those of us from Montana are 
tired of the winter. We would rather wait until spring or 
summer to visit you.
    Mr. Delahunt. We will schedule it accordingly.
    Mr. Rehberg. That would be nice.
    Before you leave, are there any other questions from the 
Committee for Mr. Delahunt?
    Mr. Kind.
    Mr. Kind. Before you get away that easily, just so I 
understand the position of your constituents back home, Mr. 
Delahunt, are they adamantly opposed to any wind farm project 
occurring in the Nantucket Sound, or is it the size of the 
project, or is it the sight-line problem?
    Mr. Delahunt. There are a variety of concerns. We have 
obviously an active commercial fishing fleet. We have safety 
concerns. We have flights from the mainland and Cape Cod to the 
islands. There would be the obvious, again, safety concerns 
there. The Coast Guard and the Navy have articulated concerns. 
And, the issue of the seabed itself, it is a breeding ground 
for gray seals, for example.
    There are multiple, multiple concerns, and I think it is 
important to understand that there is, in fact, a marine 
sanctuary that was created by the Commonwealth of Massachusetts 
back in 1970, and if I had a map before you now, I could 
demonstrate to you that this particular proposal is surrounded, 
if you will, by this state marine sanctuary. And back in 1980, 
the entire Nantucket Sound was nominated for National Marine 
Sanctuary status, and again, I think this reflects the 
interests of the state before any proposal for a wind farm was 
ever put forward.
    Now what we have learned, of course, is that there is no 
coherent comprehensive policy regarding these particular 
proposals, and with the advent of the first proposal, that has 
spawned numerous proposals. Just this past week, there were 
three more proposals for wind farms off of Cape Cod and 
Nantucket. If they were all permitted and were developed to 
sail from Cape Cod to Nantucket would require a skillful 
navigator. It would be a slalom course. It would be a disaster.
    Mr. Kind. Just for my information, there is pending 
litigation in Boston Federal Court right now?
    Mr. Delahunt. I will let the Attorney General address that, 
and again, I think it is very important, and even under the 
existing current Federal statutory scheme, there is language 
that recognizes the interests of the state and that the state 
must be consulted in terms of the impact as far as state 
coastal waters are concerned, and as I just mentioned earlier, 
the fact that we have a state marine sanctuary, I would suggest 
speaks volumes about the attitude of the state regarding this 
particular body of water, which I would suggest to you is 
absolutely one of not just Massachusetts', but this Nation's 
treasured resource.
    Mr. Kind. Thank you.
    Thank you, Mr. Chairman.
    Mr. Rehberg. Thank you, Mr. Delahunt, and we will conclude 
with Panel No. 1 and invite Ms. Burton who is the only person 
on Panel 2 to please come up to the desk there.
    There are advantages and disadvantages to serving in 
Congress. The advantage is you don't have to sit through many 
hours of Committee meetings. The disadvantage is when you do 
testify, there is a time limit, and if you will notice in front 
of you, there is a panel of lights. That will designate when 
your 5 minutes are up, and please understand that the record is 
always open to witnesses to put in the testimony they were 
unable to read before the Committee, and then we will follow 
with questions.
    So, at this time, I would like to welcome Ms. Johnnie 
Burton, Director, Minerals Management Services, United States 
Department of Interior.
    Ms. Burton.

  STATEMENT OF JOHNNIE BURTON, DIRECTOR, MINERALS MANAGEMENT 
            SERVICE, U.S. DEPARTMENT OF THE INTERIOR

    Ms. Burton. Thank you, sir, and good morning. I appreciate 
the opportunity to appear today to testify on H.R. 793, the 
Administration's OCS alternative energy uses legislation, and 
also on H.R. 794, the Coal Leasing Amendment Act of 2003.
    I would like to begin my oral remarks by discussing H.R. 
793. As the Department has stated in previous testimony, the 
Administration strongly supports the enactment of this 
legislation. H.R. 793 embodies the Administration's legislative 
proposal that was formally sent to Congress in June the 2002. I 
would like to thank Chairman Cubin, even though she is not here 
today, but I would like to thank her for introducing this 
legislation and introducing H.R. 793 this year.
    We look forward to working closely with you and other 
members on this legislation as it proceeds through the 
legislative process. It is our hope that the legislation can be 
enacted in an expeditious manner.
    The Administration believes that there are several benefits 
associated with enacting the legislation. In general, we 
believe it has the potential to encourage innovative 
alternative energy projects on the Outer Continental Shelf. It 
supports the President's national energy policy initiative to 
streamline permitting for energy production in an 
environmentally sensitive manner, and it will further the 
Secretary's commitment to facilitate renewable energy projects 
on Federally managed lands.
    Equally important, we believe the legislation will clarify 
the regulatory process considerably and will provide the 
Department with the tools to comprehensively address in one 
statute the array of issues associated with permitting and 
managing OCS alternative energy uses. As it currently stands, 
the vast majority of OCS alternative energy activities that are 
or may be contemplated have no coordinated permitting process, 
nor is there a single Federal agency with an overarching role 
to coordinate that process and protect the spectrum of Federal 
interests. This legislation is designed to address those 
deficiencies.
    There are obvious drawbacks to the present process. First, 
it does not ensure that Federal Government's economic and land 
use interests are fully considered and protected; and second, 
it does not encourage innovation in the energy arena since the 
private sector has no clearly defined and transparent 
permitting process.
    It is important to note that the legislation does not 
supersede or alter the existing authority of any Federal or 
state agency or other Federal law. H.R. 793 is drafted as an 
amendment to the OCS Lands Act and sets up a comprehensive 
framework for permitting alternative energy activities on the 
OCS. Placing the authority into the OCSLA which already 
provides the statutory framework for oil, gas, and other 
mineral activities will allow the Department to build on many 
of the provisions already in the Act while tailoring this 
bill's or this act's relevant provision to innovative 
alternative energy-related activities.
    In addition to these underlying authority, H.R. 793 also 
enumerates other specific provisions that are critical to the 
comprehensive management of alternative management activities 
on OCS, including: the explicit authority to grant an easement 
or right-of-way for an array of alternative energy activities; 
including renewable energy projects, such as wind, wave, solar, 
or other uses of the OCS oil and gas structures previously 
permitted under the OCSLA; provisions to protect the public's 
interest to capture fair value for the use of Federal OCS; 
provisions to issue an easement or right-of-way on either a 
competitive or non-competitive basis as appropriate and 
determined by the Secretary; provisions to ensure safety and 
environmental protection through the development of appropriate 
regulations and inspection activities; provisions to ensure 
that appropriate enforcement actions can be taken in the event 
violations occur; and provisions to require bonds to ensure 
that companies have a financial surety to conduct operation on 
the OCS to complete end of life site clearance and reclamation.
    Since the legislation was introduced last year, we have 
received numerous comments from interested parties, including 
the need for rigorous environmental review and safeguards and 
the need for active and meaningful participation by affected 
states, local governments, and the public. We agree these are 
important considerations, but we also believe by amending the 
OCSLA, a lot of the framework for these activities are already 
included in the present law, and these issues, after 793 is 
enacted into law as an amendment to OCSLA, will be dealt with; 
however, we are also very amenable to working with the 
Committee and other interested parties to ensure that these 
issues are addressed in an appropriate manner.
    Before concluding these remarks on this bill, Mr. Chairman, 
the Administration would like to reiterate its strong support 
for enactment of H.R. 793. The bill has the potential to help 
increase and balance both sources and supplies of energy that 
are critical to our nation. Further, if we are serious about 
encouraging new and innovative technologies to help us meet our 
increasing needs, enactment of this legislation will be one 
important step in helping us meet those needs.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Ms. Burton follows:]

  Statement of Johnnie Burton, Director, Minerals Management Service, 
              U.S. Department of the Interior, on H.R. 793

    Madam Chairman, thank you for the opportunity to appear before the 
Subcommittee today to discuss two energy Bills before the Committee: 
H.R. 793, a Bill to facilitate alternative energy -related uses on the 
Outer Continental Shelf; and H.R. 794, the Coal Leasing Amendments Act 
of 2003.
H.R. 793, OCS Alternative Energy and Energy Related Activities
    The President's National Energy Policy report laid out a 
comprehensive, long-term energy strategy for securing America's energy 
future. While many critics focus on the report's call for the 
production of energy from traditional sources, there are critical 
components of the President's policy that call for production of energy 
from alternative sources, such as renewable energy projects.
    In support of the President's energy policy initiative to simplify 
permitting for energy production in an environmentally sensitive 
manner, the Administration developed a legislative proposal last year 
to facilitate the permitting and development of alternative energy-
related projects in the Outer Continental Shelf (OCS). The 
Administration's legislation was submitted to Congress in June 2002, 
and was introduced as H.R. 5156 by Chairman Cubin on July 18, 2002. The 
Administration expressed its strong support for the Bill at a hearing 
before this Subcommittee on July 25, 2002 and continues to strongly 
support enactment of this legislation.
Highlights of H.R. 793
    H.R. 793 would amend the Outer Continental Shelf Lands Act (OCSLA) 
to set up a comprehensive framework for permitting alternative energy-
related uses on the OCS not already expressly covered by existing 
statutes. Placing this authority under the OCSLA, which already 
provides the statutory framework for oil, gas, and other mineral 
activities, will allow the Department to build on many of the 
provisions already embodied in that Act, including: the authority to 
coordinate with and enter into agreements with other Federal agencies; 
requirements for occupational safety for activities; authority for site 
access to facilities; and the authority for imposing civil and criminal 
penalties. Using the OCSLA as the umbrella statutory authority will 
allow us the flexibility to tailor the Act's relevant provisions to 
innovative alternative energy-related activities.
    Specifically, the proposed legislation would grant the Secretary of 
the Interior the authority to:
     Grant an easement or right-of-way for alternative energy-
related activities on the OCS--including renewable energy projects, 
such as wave, wind, or solar projects; projects ancillary to OCS oil 
and gas operations, such as offshore staging areas; and energy or non-
energy related uses of existing OCS facilities previously permitted 
under the OCSLA;
     Protect the public's interest to capture fair value for 
the use of the Federal OCS by authorizing the Secretary to require an 
appropriate form of payment such as a fee, rental, or other payment for 
use of the seabed;
     Issue the easement or right-of-way on either a 
competitive or non-competitive basis, as appropriate and determined by 
the Secretary;
     Oversee all activities associated with a project through 
regulations and inspection activities to ensure safety and 
environmental protection;
     Pursue appropriate enforcement actions in the event that 
violations occur; and
     Require financial surety to ensure that any facilities 
constructed are properly removed at the end of their economic life.
    There are several benefits associated with enacting H.R. 793. 
First, it will clarify the regulatory process considerably. The private 
sector will know where to start the permitting process, and the 
Department will be able to inform other relevant Federal agencies of 
the proposal, thus better facilitating its timely review and 
consideration. Second, the legislation will explicitly provide the 
Department with the tools to comprehensively address in one statute the 
array of issues associated with permitting and overseeing alternative 
energy-related uses on the OCS.
Why the Department of the Interior Is Designated as the ``Lead'' 
        Permitting Agency
    As the Administration began to actively consider the best approach 
for addressing issues associated with siting alternative energy-related 
activities on the OCS, it became clear early in the process that the 
Department of the Interior should be given the lead role in the 
permitting of such activities. While there are numerous Federal 
agencies with permitting responsibilities on the OCS, the Department is 
the primary agency in the Federal Government to oversee development of 
our Nation's Federal energy resources. The Department manages more than 
500 million surface acres of land. The Minerals Management Service 
(MMS) managing approximately 1.76 billion acres of offshore Federal 
lands for oil, gas and other mineral activities and the Bureau of Land 
Management (BLM) manages 262 million surface acres and more than 700 
million subsurface acres of Federal mineral estate. Since the proposed 
legislation pertains to the permitting and oversight of energy uses on 
offshore Federal lands, it is only logical that any new legislative 
authority that is enacted remain with the Department already entrusted 
with that overall responsibility.
    In this role, the Department has demonstrated unparalleled 
experience in multiple-use land management and routinely makes 
decisions to balance economic activities with the need to protect the 
environment. For this reason, the proposed legislation fits well with 
the Department's core missions.
    Within the Department, MMS has many years of experience in 
overseeing oil, gas, and sand activities on offshore Federal lands. 
This experience covers many areas such as:
     Environmental expertise and research which are used to 
make informed decisions with regard to leasing and operations;
     Engineering expertise and research regarding emerging 
offshore technologies used to develop oil and gas resources and the 
various safety issues associated with these activities;
     Regulatory expertise in overseeing OCS oil and gas 
activities to ensure human safety and environmental protection;
     A trained offshore inspection workforce that, in addition 
to enforcing MMS regulations, also conducts offshore inspections for 
the Coast Guard and the EPA; and
     Established working relationships with State, Federal and 
international regulators to coordinate and share information and 
experience on regulation of offshore energy projects to ensure safety 
of workers and protection of the environment.
Highlights of Comments Received on the Administration's Legislative 
        Proposal
    Since we submitted our original legislative proposal to Congress in 
June 2002, we have received numerous comments from a variety of 
interested parties on the proposal. In general, comments and concerns 
can be grouped into several overarching themes. The first set of 
comments involve the issue of proper site planning. Many commenters 
expressed concerns that there needed to be a mechanism in place to view 
alternative energy sites from the standpoint of all projects that may 
be appropriate for an area as well as what sites will be best for all 
affected parties--as opposed to reviewing one project and one site at a 
time without concern for cumulative impacts or other considerations.
    Commenters also expressed concerns about the need for active and 
meaningful participation from the public--particularly participation 
from State and local governments. This participation included the 
review of any proposed activities under the Coastal Zone Management Act 
(CZMA) to ensure that a potential activity is consistent with a State's 
CZMA program.
    Finally, commenters expressed concerns that whatever statutory 
process was put in place must provide for a rigorous environmental 
review and appropriate environmental safeguards.
    We agree that these are important concerns and we are amenable to 
working closely with the Committee and others to ensure that the 
concerns mentioned above are addressed in an appropriate manner.
Conclusion
    H.R. 793 will provide for the sound management of offshore public 
lands by ensuring that principles of safety, environmental protection, 
multiple use, fair compensation, and conservation of resources are all 
addressed before a project is initiated. It will also provide the 
private sector, which has expressed a desire to invest in offshore 
energy-related projections, certainty and predictability. Finally, H.R. 
793 has the potential to help increase and balance both our sources and 
supplies of energy that will be so critical to our Nation in the 
future. We strongly believe that we must encourage new and innovative 
technologies to help us meet our increasing energy needs--enactment of 
this legislation will be one important step in helping us meet those 
needs.
    I would again like to thank the Committee for its interest in this 
issue and express our sincere desire to work with you on all aspects of 
this important legislation.
H.R. 794, the Coal Leasing Amendments Act of 2003
    H.R. 794 would amend portions of the Mineral Leasing Act relating 
to the development of Federal coal resources.
    Coal produced from the Federal lands contributes about 40% of the 
national coal supply. Production from Federal lands continues to 
increase. In Fiscal Year 2002, production from Federal lands exceeded 
400 million tons. The BLM's management and development of these Federal 
coal resources are governed by the Mineral Leasing Act as amended by 
the Federal Coal Leasing Amendments Act and implementing regulations 
found at 43 CFR 3400.
    The Department recognizes that the Federal Coal Leasing program 
would benefit from select modifications to provisions of the Mineral 
Leasing Act (MLA), as amended by the Federal Coal Leasing Amendments 
Act of 1976 (FCLAA).. The President's National Energy Policy directed 
the BLM to analyze the effectiveness of the MLA as it relates to coal 
leasing on Federal lands and to recommend any needed administrative or 
legislative changes. Accordingly, a working group established to 
accomplish this task should be releasing a draft report soon. In 
reviewing your legislation Madam Chairman, we see several changes that 
are useful and important.
    The Department supports repeal of the current 160-acre limitation 
for lease modifications as provided in section 2 of the bill. We 
believe the current limitation has unintentionally caused the bypass of 
some otherwise recoverable coal reserves. The amendments in section 2 
do not affect the requirements of section 3 of the MLA that lands added 
to a lease be contiguous to the existing leasehold and that the 
Secretary find the lease modification is ``in the interest of the 
United States.''
    We also agree with the provision in the bill allowing the Secretary 
to extend the life of a mine beyond 40 years if the Secretary 
determines a longer time period will ensure the maximum economic 
recovery of a coal deposit or is in the interest of the orderly, 
efficient, or economic development of the coal resources. The current 
legislative limit requires that a mine operator submit a plan that 
shows all reserves being mined out within 40 years. In some cases, this 
does not reflect actual mining practice, particularly where incremental 
parcels are being added to established logical mining units. There may 
also be cases where the size of a reserve in an original logical mining 
unit is large enough to require more than 40 years to develop it.
    The Department supports legislative changes to the advanced royalty 
provisions. Under current law, the Secretary may suspend the condition 
that a lessee continually operate upon payment of advance royalties. In 
granting a suspension, the Secretary must find that the public interest 
must be served thereby. However, the aggregate number of years during 
the period of the lease for which advanced royalties may be accepted 
cannot exceed ten. H.R. 794 would extend that to 20 years. Under this 
provision, an operator would not have to relinquish a lease if 
unfavorable market conditions make resumption of coal production 
uneconomic.
    Section 5 of the bill eliminates the requirement that a lessee 
submit a mine plan within 3 years of lease issuance. We support the 
elimination of this provision as most mine plans submitted to meet this 
requirement do not reflect the actual mine plan submitted under the 
Surface Mining Control and Reclamation Act (SMCRA) and, therefore, are 
a wasted effort for both lessee and the BLM. The ultimate mining plan 
is reflected in the application for a permit submitted under SMCRA.
    Section 6 addresses the issue of surety bonds and deferred bonus 
bids. The Department is concerned about the current bond availability 
dilemmas facing lessees, and this issue has been a subject for review 
by the Department's Bonding Task Force. However, we are not certain at 
this time that a broad prohibition on the use of surety bonds is the 
most appropriate solution. We would be happy to discuss the findings of 
the Task Force when their review is complete.
    In addition, the bill removes the direct prohibition on the 
Secretary waiving advance royalties. We have no objection to that 
provision. Section 3 of the MLA provides the Secretary may only grant a 
waiver or suspension of royalties if it is in the interest of 
conservation and for the purpose of achieving the greatest ultimate 
recovery of the coal.
    Finally, we support the objective of a Federal coal resource 
inventory and impediment assessment. We do point out though that 
funding for such an inventory should be subject to review during 
development of the President's budget.
    We appreciate the opportunity to testify on these changes to 
Federal coal legislation and look forward to working with you and your 
staff on these and other changes to the MLA that will ensure that 
Federal coal resources are efficiently developed for the continued 
benefit of the public. If H.R. 794 is enacted, the Department will 
develop guidelines for carrying out the determinations required under 
the MLA related to the provisions mentioned above that recognize the 
importance of the competitive leasing process, a fair return to the 
taxpayer, and the efficient and orderly development of coal resources.
    This concludes my written testimony. However, I would be pleased to 
respond to any questions from Members of the Subcommittee.
                                 ______
                                 
    Mr. Rehberg. Thank you very much.
    To begin the questioning, I would like to ask you doesn't 
Mineral Management Service have expertise in permitting 
offshore alternative energy projects now?
    Ms. Burton. The Mineral Management Service today has 
acquired over the last 20 years an enormous amount of 
experience in dealing with submerged lands and the management 
of the facilities offshore. It works very closely with the 
Coast Guard and with EPA. In fact, in inspections of offshore 
facilities, we have memoranda of understanding with both of 
these agencies, and we work very closely together to make sure 
that the regulations are respected and that everything is done 
in a manner that is going to be watching over the safety of the 
people as well as the safety of the environment.
    So, Mr. Chairman, we have do considerable expertise.
    Mr. Rehberg. Under this bill, would applicants still comply 
with the environmental statutes like NEPA, Coastal Zone 
Management Act, Endangered Species Act, Marine Mammal 
Protection Act? Does the language somehow supersede these 
statutes?
    Ms. Burton. Absolutely not, Mr. Chairman. We will comply 
with all those statutes because they are also referred to and 
expressed in the OCSLA, and this is an amendment to the OCSLA 
that adds, does not subtract. So we will have to follow all of 
those.
    Mr. Rehberg. Do you believe that the state and local 
governments will continue to play an important role, and do you 
have an relationship with them now?
    Ms. Burton. They will continue to play a role under the 
Coastal Zone Management Act. We will continue to work with 
them. If the Committee feels that there has to be more 
consultation, we are perfectly willing and amenable to any 
direction on this issue.
    Mr. Rehberg. Thank you. Before I pass it along to you, Mr. 
Kind, I would like to point out under unanimous consent, if 
there is no objection, if Mr. Delahunt were to come back and 
would like to sit at the dais as a member of the Subcommittee, 
we would allow him to do that.
    Mr. Kind, do you have any questions?
    Mr. Kind. Thank you, Ms. Burton. Thank you for your 
testimony here today.
    I need a little clarification, because there seems to be a 
conflict in statutory interpretation within the Administration. 
If our records are correct and our memory serves us well, I 
believe last July when you were here testifying on H.R. 5156, 
you indicated that renewable energy protection projects, 
including wind energy projects, on the OCS are not currently 
covered on existing statutes and that there currently is no 
legal authority to permit these type of projects, and maybe the 
Attorney General can help me out on this as well, but in the 
pending case before the Federal Court in Boston, the Department 
of Justice is taking a different interpretation and instead is 
saying that Section 10, in fact, does apply and that is all the 
permitting process that is required, is through Section 10.
    So there is a little bit of confusion between the left hand 
and the right hand in the Administration. Maybe you can shed a 
little light on that for us today.
    Ms. Burton. Mr. Chairman, this is a delicate subject 
because we are in litigation. So I won't be able to expand very 
much on that, but suffice it to say that we are not saying 
there is no authority to do this today under a Section 10 
permit. What we are saying is that there is not one agency that 
has the overarching management of the land today and that it 
becomes very difficult to know that all precautions have been 
taken to make sure everything is done correctly.
    Also, we need to coordinate and to make sure that the 
private investor who comes to do that is being guided properly 
to the right permits, to the right agencies, and also we need 
an agency that will have responsibility for monitoring the 
project all the way to its very end.
    So it is not just a matter of a permit. It is a matter of 
the life of a project and who is going to watch over the 
Federal interest and the state interest in those projects.
    Mr. Kind. But you understand the dichotomy we are kind of 
faced with here. Under your testimony again here today, if you 
feel Section 10 doesn't grant you the authority for the 
permitting process, then why are we allowing a project to move 
forward under a Section 10 analysis?
    Ms. Burton. Mr. Chairman, I don't think I said that. The 
Section 10 does give authority to grant permit to the Corps of 
Engineers. All I am saying is that we feel there has got to be 
more for the life of the project and that it would be easier to 
have everything in one agency and possibly one that has 
experience and expertise in managing those projects offshore.
    Mr. Kind. Got it. Thank you.
    Mr. Rehberg. Additional questions?
    Mr. Souder.
    Mr. Souder. Do you see any reason to delay the permitting 
process until the release of the U.S. Oceans Commission and Pew 
Oceans Commission reports?
    Ms. Burton. Mr. Chairman, I think we are all waiting for 
that report anxiously, and we know that at that time it will 
have to be analyzed; it will have to be looked at, and that may 
change some things. But the report is due this summer or early 
summer. It will take for the Administration and Congress to 
analyze the report and to decide if new legislation is needed, 
and we may be two, 3 years before there are effective changes.
    There are issues today, as witness the Cape Winds example, 
that need to be addressed. So we feel that we need to move and 
do something now. It may have to be amended later when that 
commission report comes in and is fully analyzed, but we don't 
think we should wait.
    Mr. Souder. Will the environmental impacts will be 
adequately studied?
    Ms. Burton. Sir, the environmental impact, if this bill 
were to pass, will be studied as they are now for oil, gas, 
sand, gravel, any minerals offshore. So yes, there would be a 
very serious review of environmental impact.
    Mr. Sounder. Relating to Congressman Delahunt's concerns, 
when you say the environmental impacts will be studied, would 
that include the impact on any marine sanctuaries that are 
adjacent or are pending proposals, and would it also include 
potential impact on economic revenues in an area such as 
tourism? I mean, the visual impact of the wind farms are 
substantially different than oil rigs even.
    Ms. Burton. Mr. Chairman, the impact will be determined and 
studied under the NEPA process, and you know this is a very 
comprehensive process. So yes, all of this will be looked at.
    Mr. Souder. And that includes economic impact on an area?
    Ms. Burton. I am afraid I can't answer that specifically, 
but I do believe that there is a provision for it in NEPA.
    Mr. Souder. I would hope, and I am less familiar -- I am 
from Indiana, and so I am less familiar since we have 3 percent 
public land in the entire state, counting township and 
counties, than a lot of the westerners are, but I would hope 
because it goes both directions in energy projects and in 
environmental projects that just like when we add public lands, 
we look at what economic impact that has, that when we do 
energy things, we look at economic impact too, because these 
things cut both directions.
    Ms. Burton. Right, and, Mr. Chairman, I do believe there is 
a segment of NEPA that addresses economic impact.
    Mr. Souder. Thank you.
    I yield back.
    Mr. Rehberg. Thank you. Understanding that you ran out of 
time before you had an opportunity to give your opinion on 794, 
H.R. 794, would you like to give a brief opinion on that 
particular legislation?
    Ms. Burton. I will try, sir. Thank you very much.
    H.R. 794 is the Coal Leasing Amendment Act of 2003. I don't 
need to remind anybody that coal is produced in very large part 
off Federal land, 40 percent of it and about 400 million tons. 
It is substantial.
    BLM had a group that studied the Mineral Leasing Act to see 
whether or not it needed to have some amendments, and it came 
up with some amendments. I will go through them very quickly. 
The Department supports, generally supports, the bill. It 
supports the repeal of the current 160-acre limitation to lease 
modification. We believe that this is a very important 
provision and a good one.
    We agree with the provision allowing the Secretary to 
determine whether a mine could be continued for more than 40 
years if more coal is to be recovered. We support the changes 
to the requirements of advance royalty to provide coal 
operators more flexibility to meet their diligence 
requirements. It would extend the number of advance royalty 
years from 10 to 20, and the Secretary would have to 
flexibility there. So we think it is a good change.
    The law today requires that a mine submit a plan within 3 
years after leasing. We feel that very often this is a waste of 
time for both the staff and the operator and the requirement 
would be abolished by this law. We support that very much.
    Bonding is an issue and it is an issue that concerns 
everybody. The bill, 794, proposes to abolish bonding 
requirements for the bonus bids, and we do support that. It 
does not at this point propose abolishing bonding for the 
option of the mine, but just for the bonus bids, and we support 
that, but I need to let you know that the bonding task still 
working on the issue, and their report is not final yet, and we 
would be happy to work with you when that report comes out.
    And finally, we support the objective of a Federal coal 
resource inventory and impediment assessment; however, I am 
here to tell you that the bill gives the BLM 2 years to do it 
and the BLM just doesn't have the resources and people and 
funds to do it in 2 years. So if that is going to be done, they 
would appreciate some reconsideration of this particular issue.
    I appreciate the opportunity to say a few words on this, 
Mr. Chairman, and I would be happy to try and answer some 
questions.
    Mr. Rehberg. Thank you.
    Are there questions from the Committee of Ms. Burton on 
H.R. 794?
    Mr. Pearce.
    Mr. Pearce. Thank you, Ms. Burton and Mr. Chairman.
    Can you go a little bit more into the surety bond process, 
the fact that they are not available, meaning that a bidder 
must put up the total bid in cash equivalent. What is the 
outcome of that going to be on Federal and state revenues? Our 
state, New Mexico, has a tremendous amount of coal leasing 
land.
    Ms. Burton. Right. Mr. Chairman, what is proposed here is 
to do away with bonding requirements on bid, meaning that a 
company would have to either pay cash up front, which could be 
a problem, but they could still defer payment as they do today. 
They would have 5 years to pay for their bid. There wouldn't be 
a bond required, but if they were to default, then BLM would 
take back the lease and the money that had already been paid 
would stay with the state and the Federal Government, and the 
lease could be put back in the market and could be bid on 
again.
    In other words, the bonding is replaced by the collateral 
of the lease. You would take the lease back if the operator 
defaults. This is how it would work. Now, how would it impact 
the state or the Federal Government? It would obviously 
abbreviate the revenue that were anticipated from that 
particular lease sale, but you could put the lease back on the 
block, so to speak, and then you would get a second bid, sell 
it to another company. So in the very end, you get more money 
because you keep whatever they paid before they defaulted. Then 
you get the second sale, which would bring back a new amount of 
money.
    So there would be a gap in the revenue between the time 
that the company defaults and the lease is repossessed, so to 
speak, and the time it is sold again, but there would be at the 
end of the second sale additional money.
    Mr. Pearce. Mr. Chairman, when businesses do that in real 
estate, we call them slum lords. Are you suggesting that we are 
going set up a process in the Federal Government where we are 
going to depress the initial bid price and then hope that 
companies are not able to carry through and the Federal 
Government would enjoy some economic gain because of the 
inability?
    Have you taken full comments from business on this?
    Ms. Burton. We have, Mr. Chairman, and at this point, I 
don't think we are too concerned about that. We are going to be 
conducting the business as we normally do, and I don't think 
that is an issue that we are going be very worried about.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Rehberg. Are there any questions from the minority?
    Mr. Faleomavaega.
    Mr. Faleomavaega. Thank you, Mr. Chairman.
    I basically plead ignorance in terms of the provision on 
794, but something did catch my attention in terms of the 
forgiveness of debts to the Federal Government. Can you 
elaborate on that?
    Ms. Burton. I am sorry, Mr. Chairman. I am afraid I did not 
understand the question.
    Mr. Faleomavaega. There is a provision in 794 that allows 
forgiveness of loans or some kind of debt owing to the Federal 
Government by these companies. Is there a provision in that 
proposal, in 794, that addresses that issue?
    Ms. Burton. Mr. Chairman, not that I am aware of.
    Mr. Faleomavaega. Advance royalties.
    Ms. Burton. Oh. The advance royalties is a different issue, 
Mr. Chairman. The advance royalties are paid by a company that 
cannot continue producing every year for whatever reason, and 
they can continue to keep their lease by paying advance royalty 
to the Secretary, and the advance royalty will be paid based on 
the spot market when they have exhausted the number of years 
allowed for them to do that.
    If they never produce again, the Federal Government is 
really ahead because it kept all these advance royalties when 
the coal was not produced. If they produce after that, then 
they will get credit for what they have paid ahead of time.
    So no, sir, we don't forgive debts. The company is taking a 
chance, if you will, when they pay advance royalty without 
production, and the chance they are taking, the risk they are 
taking, is maybe they will never be able to produce again. But 
that is their decision.
    Mr. Faleomavaega. I gather that the Department keeps very 
excellent records in terms of the provisions of the royalties 
and amount of profits that are made by the companies. For how 
many years has this been done through this Mineral Leasing Act?
    Ms. Burton. I am not sure I know the answer to that, but it 
is has been done a long time on the 10 year. Now we are 
extending it to 20 years through the lease life.
    Mr. Faleomavaega. Well, I am sure this is not just 
something that happened just 10 years ago. We have been doing 
this for many, many years.
    Ms. Burton. That is correct.
    Mr. Faleomavaega. My only thought here is that if the 
office has been able to keep good records in terms of royalties 
owing not only to the Federal Government, but whatever is owing 
to these companies, unlike a very serious problem we have with 
the Native Americans, their royalties and the leases of their 
lands that companies have been using for how many years, and we 
can't even find the money in the Department in terms of what is 
owing to the Native Americans who have interests in these 
tracts of lands.
    I was just curious if we do better recordkeeping with the 
leases as they go on to the mineral resources than we do with 
the Native Americans, what is expected to be gotten for them.
    Ms. Burton. Mr. Chairman, this is really a different 
system, because in this case, we know who the lessee is and we 
keep track per lessee. In the issue of the Native Americans, 
MMS collects the money, collects the royalty, but does not 
distribute it to individual Indian owners. We don't know who 
they are. That goes to the Bureau of Indian Affairs.
    So I can't speak for them or what they do, but I can speak 
for us and we keep very good records. We have audits. Every 3 
years, everything is audited. Every year, the books are audited 
by an outside entity, and I assure you we do keep good records.
    Mr. Faleomavaega. Thank you.
    What surprises me, Mr. Chairman, if we do it with this area 
in our lease program, then I am very disappointed that we 
couldn't do the same for the funds needed by the Native 
Americans. It ranges somewhere from two to ten billion dollars 
that is owing that the Department of Interior has not kept good 
records. I mean, this is ridiculous.
    Thank you, Mr. Chairman.
    Mr. Rehberg. Thank you.
    Mr. Cole.
    Mr. Cole. Thank you, Mr. Chairman. I actually want to 
follow up on a question my colleague on the other side raised 
just for a little specificity. This legislation impacts lands 
that we do hold in trust for Native American tribes. Have any 
tribes expressed any opinion on 794 so far as you know, and has 
their opinion been solicited?
    Ms. Burton. Mr. Chairman, I cannot answer that question. I 
do not know the answer, but I would be happy to find an answer 
and get it back to you.
    Mr. Cole. I would appreciate that very much. Thank you.
    Ms. Burton. You bet.
    Mr. Rehberg. Additional questions on the minority side?
    I would like to follow up with one last question then. 
Surety bonds are not available now. Doesn't this cause a 
reduction in bonus bids in the future of coal lease sales 
resulting in a significant loss in revenue to states like 
Montana and the Federal Government?
    Ms. Burton. The fact that companies cannot find bonds is a 
real, real problem, Mr. Chairman. It is a problem not just for 
coal. It is a problem for oil, gas offshore. It is a problem 
for lots of people. We are studying that today, and that 
certainly has been a problem for industry.
    What this bill attempts to do is alleviate that problem 
somewhat by not requiring bonds for bidding, but the bonds will 
still be required for operations, and we are awaiting a bonding 
task force report that will, I hope, give us some options, and 
we are working with the bonding market as well as industry to 
find solutions. It is definitely a problem.
    Mr. Rehberg. Great. Thank you very much for being with us.
    Mr. Faleomavaega?
    Mr. Faleomavaega. I just again plead a layman's ignorance 
in the very important proposed legislation that we have with 
us. On page 4 of the H.R. 794, subparagraph B, line 1 does say 
under Section 39 we are amending something here that would 
allow or authorize the Secretary of the Interior, at least if I 
correctly read the proposal here, is to allow the Secretary of 
the Interior to waive, suspend, or reduce the advance 
royalties.
    Is this something that would enure to the benefit of the 
government? Are we giving something away that should belong to 
the people?
    If I read this correctly, it allows the Secretary of the 
Interior to forgive certain royalties owed to the U.S. 
Treasury. That is my reading of this provision here. Can you 
elaborate on this a little more?
    Ms. Burton. Mr. Chairman, I don't think I can elaborate on 
that specifically. There might be someone else who can in here, 
but again, this is something I would need to get back to you 
on.
    Mr. Faleomavaega. Please.
    Ms. Burton. The bill, generally speaking, is designed to 
give a little more flexibility to the Administration in order 
to give industry a better hold on producing the coal. The 
bottom line is that this Administration would like to have more 
production of energy, coal being one of the major fuels that we 
use.
    So with more flexibility, we can provide more help to 
industry to go and produce more coal, but I don't think that I 
can answer your question specifically, and I would appreciate 
if you would let me get back to you in writing.
    Mr. Faleomavaega. I would really appreciate it if you could 
submit that for the record.
    Ms. Burton. I sure will.
    Mr. Faleomavaega. Thank you, Mr. Chairman.
    Mr. Rehberg. Ms. Burton, we will excuse you now and thank 
you for appearing before our Subcommittee.
    We will now invite Mr. Reilly, Mr. Smith, Mr. Bailey, and 
Mr. Shelly, Panel No. 3.
    Mr. Cannon. [presiding] Thank you all. We appreciate your 
indulging us as we shift chairs for just a moment. Mr. Rehberg 
will join us shortly and take over the Chair.
    We appreciate this panel for joining us. We have the 
Honorable Tom Reilly, the Massachusetts Attorney General. Thank 
you for joining us; Mr. Eric Smith, Vice President for 
Strategic Planning, Global Industries, Inc. Thank you, Mr. 
Smith. We have Mr. Bruce Bailey, the President of AWS 
Scientific, and Mr. Peter Shelley, the Vice President of the 
Conservation Law Foundation. Thank you.
    Mr. Reilly, if you would like to begin your testimony, we 
would appreciate that now.

  STATEMENT OF HON. TOM REILLY, MASSACHUSETTS ATTORNEY GENERAL

    Mr. Reilly. First of all, my name is Tom Reilly. I am the 
Attorney General for Massachusetts. I want to thank the 
Committee for the courtesy of allowing me to appear and testify 
before you on this very important issue. I have submitted 
written testimony with supporting documents and certainly will 
rely upon that.
    I want to use the time that I have, realizing that it is 
limited, to focus on a few specific points. The first is that 
there is certainly no question that we have to develop new 
sources of energy. It is vital for our economy and our national 
security and certainly for the protection of our environment. 
There is also no question in our mind that wind energy presents 
very exciting possibilities and must be part of that effort.
    But I am here today to tell you that there is a right way 
to do things, and there is a right way to develop renewable 
energy. It includes planning. It includes respect for our 
national treasures. It includes respect to the rights of the 
state. It requires a set of rules and regulations which will 
guide the development of wind energy, and that is not what is 
happening now.
    Exhibit No. 1, case study, what is happening is a proposal 
to build an offshore wind plant in Nantucket Sound, and I won't 
repeat what Congressman Delahunt so eloquently described as the 
beauty of Nantucket Sound. I would urge you to visit it. I 
would urge a little bit of a wait. It has been a very harsh 
winter even by Montana standards.
    But it is beautiful, beautiful area. It is absolutely 
fantastic body of water, situated right off of Cape Cod and 
between the scenic islands of Nantucket and Martha's Vineyard. 
It has been a historic treasure for our state and all of New 
England. People from all of over the world come and enjoy its 
scenic beauty and its recreational opportunities. It has been 
considered so important by our state that we have designated 
the entire sound as a protected ocean sanctuary.
    Tragically, unless Congress acts and acts quickly, 
Nantucket Sound is about to be violated in a major, major way. 
There is a proposal with a full head of steam by Cape Wind 
Associates which is proposing to build a large wind power plant 
smack dab in the middle of Nantucket Sound. If you can 
visualize it, 130 wind turbines over 400 feet in the air. They 
are going take up over 24 square miles of pristine waters, and 
those 24 square miles are about to be turned over to a private 
developer -- a private developer -- for no compensation to the 
state or Federal Government. No compensation. No competition. 
One person. One private developer.
    This is the first project of this kind offshore in this 
nation. It will be, if it goes ahead as planned, the largest 
wind energy facility in the entire world. This is not the way 
that renewable energy should be developed, and this is not the 
precedent that we want to establish as to how we are going to 
go about this process, but that is exactly what is about to 
happen.
    The Army Corps of Engineers has been very clear about this, 
and they recently have told unless Congress acts, this project 
is moving forward. I think it is clear and I don't think anyone 
can question that Federal law as it exists today is 
insufficient and there is a gaping loophole that one private 
developer is taking advantage. Congress and only Congress can 
close this loophole and stop this project now.
    And when I say Exhibit 1 and people say it is provincial, 
what does that have to do with the other states and the rest of 
the country, this isn't just Nantucket Sound. If it can happen 
here, it can ham anywhere up and down our coastlines, and you 
will see exhibits, dozens of them. There are 22 proposals now 
as people see a wind rush with no rules, no regulations unless 
Congress steps in.
    And that is why I am here today and that is why I am here 
before this Committee, this Subcommittee. I am asking you to 
step in and set a framework for development that takes into 
consideration the rights of a state that are impacted 
dramatically, as this will be, and bring in the types of rules 
and regulations and safeguards that you would build in. This 
wouldn't happen anywhere. Any other type of development would 
be put under some type of rules and regulations and certainly 
oversight which is not happening here.
    I will close by saying that H.R. 793 is certainly a good 
starting point. I have worked long and hard, and I want to 
thank Congressman Delahunt for his leadership and his efforts, 
but I do believe we need more. We need a mechanism for 
identifying in advance, not ad hoc, in advance what are the 
appropriate sites. We need a process for soliciting competing 
proposals. We need compensation, compensation for state and 
Federal Government, and we need a meaningful role where states 
like Massachusetts or any other state that is impacted 
dramatically by a project of this sort.
    So this is Nantucket Sound and it is beautiful and it is 
gorgeous and it is important to New England and certainly to 
Massachusetts. It is a national treasure like the Grand Canyon 
to us, but we are asking you to step in with rules and a 
framework that will strike the proper balance as we go forward.
    Thank you very much for you consideration.
    [The prepared statement of Mr. Reilly follows:]

Statement of The Honorable Thomas F. Reilly, Attorney General, State of 
                       Massachusetts, on H.R. 793

    Thank you Congressman Delahunt, for that kind introduction and for 
your leadership on this issue.
    Good morning, Chairman Cubin, Ranking Member Kind, and members of 
the Committee. I very much appreciate the opportunity to testify before 
you today on this extremely important issue--the appropriate 
development, permitting and siting of alternative sources of energy.
    There is no question that the sensible development of new sources 
of energy is one of the most important energy matters facing us today. 
Indeed, offshore wind projects present exciting possibilities for the 
development of renewable energy resources. The controversy surrounding 
a recent proposal to build a large wind energy facility in Nantucket 
Sound, however, highlights the immediate need to develop a meaningful 
process at the Federal level to carefully review these types of 
proposals.
    Let me start by giving you a frame of reference for the debate--the 
proposal to build an offshore wind energy facility in Nantucket Sound.
    First, for those of you who aren't from New England--Nantucket 
Sound is a body of water 163 square nautical miles in size, situated 
between Cape Cod, and the islands of Martha's Vineyard and Nantucket. 
Massachusetts has historically revered Nantucket Sound as a vital 
national treasure--not unlike the Grand Canyon and other national 
parks. The Sound is renowned for its natural resources, marine 
habitats, scenic beauty and extensive recreational outlets--and 
Massachusetts has designated the entire Sound, as well as much of the 
Massachusetts coastline as a protected Ocean Sanctuary.
    With that context in mind--I turn to the specific proposal of Cape 
Wind Associates to illustrate one project that seems to have generated 
the largest head of steam so far--at least in New England. Cape Wind 
has proposed to develop a wind energy facility consisting of:
     130 wind turbines
     spread over 24 square miles
     in the middle of the Sound, only
     4 + miles off the coast of Cape Cod
    The proposed facility would occupy 15% of the entire Sound and 
would literally be surrounded by (and within 2 miles in some directions 
of) the area that Massachusetts has designated as a protected Ocean 
Sanctuary. This would be the first project of its kind in the nation, 
and to date, the largest offshore wind energy facility in the world.
    Chairman Cubin, your leadership in recognizing that Federal law is 
insufficient to appropriately license and site proposed wind energy 
facilities is admirable. And your timing in directing your attention to 
this issue now is critical, since the Army Corps of Engineers recently 
told the Cape Cod Times that, without legislation or:
        ``unless Cape Wind pulls its application, the process [of 
        permitting the Cape Wind proposal] will move forward.''
    It is imperative that no proposals to site such offshore facilities 
be permitted until Congress has had the opportunity to establish 
national policy to govern them. To allow otherwise will effectively 
lead to a gold rush--or wind rush--if you will. Developers such as Cape 
Wind Associates are taking advantage of a perceived loophole in the law 
before Congress has time act. In addition to the 130 turbines proposed 
in Nantucket Sound, another company is proposing to build wind farms on 
22 separate sites along the east coast, and published reports estimate 
that in New England alone, proposed wind developments are now valued at 
$615 million,
    Elsewhere, according to published reports, Florida Light and Power 
plans a project that, upon completion, would cost $4.7 billion and 
increase wind generation this year by at least 25 percent. These 
proposed projects--and many likely in the future--highlight the 
importance of a rational planning process.
    We should not allow the permitting of offshore projects to move 
forward with such haste that we risk siting large-scale wind projects 
in areas that--with proper deliberation--we may determine to be 
inappropriate.
    Such an approach is consistent with Federal policy with respect to 
other offshore projects. As you know, Section 1701 of that Federal Land 
Policy Management Act establishes that:
        ``the national interest will be best realized if public lands 
        and their resources are periodically and systematically 
        inventoried and their present and future use is projected 
        through a land use planning process coordinated with other 
        Federal and State planning efforts.''
    The Bill that you have introduced--H.R. 793--certainly provides a 
good starting point for a national policy. I respectfully suggest, 
however, that an appropriately comprehensive regulatory scheme must 
include--at a minimum--
     a mechanism for identifying--in advance--appropriate 
sites for developing offshore wind energy facilities that provide the 
greatest source of energy with the least damage to the environment and 
do not pillage our most treasured natural resources;
     a process for soliciting competing proposals for 
renewable energy facilities in the same locations;
     compensation to the government for the value of the 
license; and
     meaningful state input throughout the process.
    I have worked with Congressman Delahunt on this issue, and my 
office stands ready to assist the Subcommittee in any way that you deem 
helpful and appropriate as you craft this crucial national policy.
                                 ______
                                 
    Mr. Cannon. Thank you very much, Mr. Reilly, and what we 
will try to do is just give a little tap of the mallet as you 
get at the end of the timeframe so that we all can move 
forward, and you can finish your thoughts. We don't mean to 
shut everything off, but if you will finish your thought and 
try to draw it to a close, then I think we are going to have a 
pretty aggressive questioning period where you can elaborate on 
the ideas that you all have on the panel.
    So thank you very much, Mr. Reilly.
    Mr. Smith, would you favor us with your comments?

STATEMENT OF ERIC SMITH, VICE PRESIDENT FOR STRATEGIC PLANNING, 
                    GLOBAL INDUSTRIES, LTD.

    Mr. Smith. Thank you, Mr. Chairman, members of the 
Subcommittee. I appreciate the opportunity to testify here 
today on H.R. 793. It is a bill to provide authority to the 
Secretary to grant easements or rights-of-way for energy-
related projects on the OCS.
    I am the Vice President of Global Industries, one of the 
companies that builds things on the OCS. I am also a member of 
the Board of Directors of NOIA, National Ocean Industry 
Association. NOIA is the only trade group that speaks for all 
of the companies that participate in the OCS. We have 300 
members who range from drillers to producers to developers to 
engineering firms to folks who provide marine transportation, 
air transportation, offshore construction, equipment 
manufacturing, pretty much the gamut of activities that occur.
    This testimony is submitted on behalf of NOIA as well as 
DPC, the IPAA, IADC, and NGSA. These are other trade groups 
that have an interest in what happens on the OCS. We all work 
together to explore and produce hydrocarbon energy resources 
from the Nation's Outer Continental Shelf in an environmentally 
responsible manner.
    Global itself provides offshore construction, engineering, 
and support services, including pipeline construction, platform 
installation and removal, diving services for the oil and gas 
industry in the Gulf of Mexico and around the world. We are a 
leading provider of offshore services with 20 construction 
barges, 22 lift boats, 17 dive boats, and 15 support units 
around the world. A large portion of those operate in the Gulf 
of Mexico today.
    The domestic offshore natural oil and gas industry 
generates nearly $4 billion in revenue for the Federal Treasury 
every year. We produce something like 13 billion cubic feet of 
natural gas and 1.3 million barrels of oil a day. We also have 
over 4,000 fixed structures installed in the Gulf. We have 
installed over 6,000 and removed over 2,000. There is also 
31,000 miles of pipeline, pipeline rights-of-way that exist and 
are monitored by the MMS with very stringent rules about what 
you have to do if you want to cross one of them, for example.
    All told, there are more than 170,000 jobs associated with 
the OCS and in the offshore oil and gas production industry. So 
in our business, we are well acquainted with the Federal 
process required of companies operating on the OCS.
    The U.S. Minerals Management Service implements, also, the 
Outer Continental Shelf Lands Act, and it regulates our 
activities to ensure that we produce natural gas and oil for 
the Nation in a safe and environmentally sound manner; however 
there are several energy-related projects under discussion for 
the offshore that are not clearly covered under the Outer 
Continental Shelf Lands Act as currently constituted.
    In order to continue to supply the United States with 
natural gas and oil, our industry has moved into deeper waters 
of late. Today, over half of the oil that is produced off of 
the Outer Continental Shelf is produced from deep waters, a 
thousand feet or greater. That wasn't true 10 years ago. It 
wasn't true 5 years ago.
    The offshore oil and gas industry is contemplating 
ancillary projects offshore that would directly support this 
OCS oil and gas development in deep water. These projects may 
include developing offshore staging facilities, emergency 
medical facilities, supply points, a whole variety of support 
structures which will keep the time and support costs to a 
minimum for these facilities that may be out in 8,000 feet of 
water and over 200 miles from shore.
    Unfortunately, no Federal agency currently has a statutory 
authority to permit these ancillary facilities; therefore, our 
industry finds a regulatory black hole as we discuss possible 
future developments with our clients and with the various 
interested Federal agencies. H.R. 793 will fill that statutory 
gap for those structures, those activities not already covered 
by authority, and would give the Secretary of the Interior the 
authority to permit and oversee these energy-related activities 
on the Outer Continental Shelf.
    Current natural gas and oil operations will unavoidably be 
affected by anything that is added to that offshore universe, 
those 4,000 platforms and 31,000 miles of pipe. It is a finite 
area, and as I say, whether it is a wind farm or a solar 
facility or whatever, it is going to need to be installed. It 
is going to need to have umbilicals and service lines 
connecting it back to the shore, and those will unavoidably 
cross other rights-of-way that exist and are monitored by the 
MMS.
    Our industry interest is 793 is substantial. We are 
uniquely suited to comment on this positive impact it could 
have for continued safe and productive offshore operations. We 
commend the Administration and you, Mr. Chairman, for allowing 
us to speak.
    [The prepared statement of Mr. Smith follows:]

  Statement of Eric Smith, Vice President, Strategic Planning, Global 
     Industries, Ltd., on behalf of the National Ocean Industries 
    Association, Domestic Petroleum Council, Independent Petroleum 
     Association of America, International Association of Drilling 
      Contractors, and Natural Gas Supply Association, on H.R. 793

    Madam Chairman and Members of the Subcommittee, I appreciate the 
opportunity to testify here today on H.R. 793, a bill to provide 
authority to the Secretary of the Interior to grant easements or 
rights-of-way for energy-related projects on the Outer Continental 
Shelf (OCS). I am the Vice President for Strategic Planning of Global 
Industries, Ltd., and a member of the Board of Directors of the 
National Ocean Industries Association (NOIA). NOIA is the only national 
trade association representing all segments of the offshore energy 
industry. The NOIA membership comprises more than 300 companies engaged 
in activities ranging from producing to drilling, engineering to marine 
and air transport, offshore construction to equipment installation, 
manufacture and supply, and geophysical surveying to diving and 
remotely operated vehicle operations.
    This testimony is submitted on behalf of NOIA, the Domestic 
Petroleum Council, the Independent Petroleum Association of America, 
the International Association of Drilling Contractors, and the Natural 
Gas Supply Association. We all work to explore for and produce 
hydrocarbon energy resources from the nation's Outer Continental Shelf 
in an environmentally responsible manner.
    Global Industries Ltd. provides offshore construction, engineering 
and support services, including pipeline construction, platform 
installation and removal, and diving services, to the oil and gas 
industry in the Gulf of Mexico and around the world. We are a leading 
provider of offshore construction services, with 20 construction 
barges, 22 liftboats, 17 dive support vessels, and 15 support vessels. 
Of these, 9 construction barges, 22 lift boats, 7 dive support vessels, 
and 4 support units operate in the Gulf of Mexico.
    The domestic offshore natural gas and oil industry generates nearly 
$4 billion annually for the Federal treasury in bonuses, rents and 
royalties. Our industry produces approximately 13 billion cubic feet of 
natural gas and 1.3 million barrels of oil from the Outer Continental 
Shelf per day. In the Gulf of Mexico, our industry works from 
approximately 4,034 offshore platforms, and more than 31,000 miles of 
pipeline have been installed. And, more than 170,000 Gulf region jobs 
result directly from the offshore exploration and production industry.
    In our business, we are well acquainted with the Federal processes 
required of companies operating on the Outer Continental Shelf. The 
U.S. Minerals Management Service implements the Outer Continental Shelf 
Lands Act, regulating our activities to ensure that we produce natural 
gas and oil for the nation in a safe and environmentally sound manner. 
However, there are several energy-related proposals under discussion 
for the offshore that are not clearly covered under the Outer 
Continental Shelf Lands Act.
    In order to continue to supply the United States with natural gas 
and oil, our industry has moved into the deep water of the Gulf of 
Mexico. The offshore oil and gas industry is contemplating ancillary 
projects offshore that would directly support OCS oil and gas 
development, particularly in these deep water areas. These projects may 
include developing offshore staging facilities, emergency medical 
facilities, and supply facilities. However, no Federal agency currently 
has the statutory authority to permit these types of projects. 
Therefore, our industry finds ourselves in a regulatory black hole as 
we discuss possible future projects with our clients and the different 
Federal agencies, and try to determine the appropriate and legal means 
to proceed. H.R. 793 would fill that statutory gap for those activities 
not already covered under some other statutory authority, and would 
give the Secretary of the Interior the authority to permit and oversee 
these energy-related activities on the Outer Continental Shelf under 
the Outer Continental Shelf Lands Act.
    Current natural gas and oil operations would be directly affected 
by any approvals granted under the proposed legislation, whether the 
new approvals were to support existing offshore operations or for 
alternative energy projects. Our industry's interest in H.R. 793 is, 
therefore, substantial, and we are uniquely suited to comment upon the 
positive impact it could have for continued safe and productive 
offshore operations.
    We commend the Administration for its efforts in transmitting this 
proposed legislation to Congress in support of the National Energy 
Policy Initiative, and thank you, Madam Chairman, for sponsoring the 
bill. This legislation would authorize the Secretary of the Interior to 
grant easements or rights-of-way for projects to support development in 
the deep water areas of the Outer Continental Shelf. Under the bill, 
the Secretary would also be able to authorize renewable energy 
projects, such as wind, wave and solar energy. The proposed legislation 
would provide clarity to potential new and innovative energy-generating 
OCS operators, identifying the agencies, laws, and regulations with 
jurisdiction over their proposals.
    We support this grant of authority to the Secretary of the Interior 
to manage activities on the Outer Continental Shelf that are not 
currently covered under existing authorities. The Secretary, through 
the Minerals Management Service, currently manages natural gas and oil 
operations on the Outer Continental Shelf These operations constitute 
more than 25% of our nation's daily natural gas and oil production. The 
agency's experience in overseeing the construction, installation, 
operation, and eventual removal of thousands of offshore facilities and 
pipelines, the granting of rights-of-way, the conducting of 
environmental reviews under the National Environmental Policy Act, not 
to mention coordinating approvals among all interested Federal and 
state agencies, make it clear that the Department of the Interior and 
the Minerals Management Service are uniquely qualified to manage and 
regulate these alternative energy-related activities, as well.
    This concludes my prepared remarks. I will be happy to answer any 
questions.
                                 ______
                                 
    Mr. Cannon. Thank you, Mr. Smith.
    Mr. Bailey, if you would like to present your testimony.

 STATEMENT OF BRUCE H. BAILEY, PRESIDENT, AWS SCIENTIFIC, INC.

    Mr. Bailey. Thank you and good morning, Mr. Chairman and 
members of the Subcommittee.
    My name is Bruce Bailey. I am the president of AWS 
Scientific based in Albany, New York. I am also on the Board of 
Directors of the American Wind Energy Association. My 20-year-
old firm provides wind energy consulting services to some of 
the country's most progressive energy companies which are 
building wind farms all across America.
    Wind energy holds the distinction of being the world's 
fastest growing electricity-generating technology as well as 
being one of the lowest cost renewable energy sources. Over the 
past 2 years, I have had the good fortune of working with 
several public and private organizations interested in offshore 
wind energy. They include Cape Wind Associates, the 
Massachusetts Technology Collaborative, Northeast Utilities, 
the Connecticut Clean Energy Fund, the New York State Research 
and Development Authority, and the Long Island Power Authority 
or LIPA.
    On behalf of LIPA and over 30 civic and environmental and 
faith-based groups, I led the siting team to identify the 
targeted area for a hundred megawatt offshore wind farm south 
of Long Island which is planned for construction within the 
next 4 years. We have had several discussions with the U.S. 
Army Corps of Engineers, the Coast Guard, the FAA, and other 
agencies to identify relevant authorities and the logistics of 
permitting and environmental reviews. The single offshore wind 
project will generate enough clean energy to satisfy the needs 
of over 30,000 Long Island homes for next 30 years.
    Offshore wind power has the potential of providing a 
significant portion of the electricity requirements of coastal 
states. Indeed, about 54 percent of the country's population 
lives in coastal areas; however, many coastal states are in 
short supply of appropriate on-shore sites for large-scale wind 
development. So, consequently, turning to the sea is the only 
option for states to make wind power a meaningful part of their 
energy mix. Many coastal areas, including Long Island, are also 
transmission constrained. So using the sea as an alternative 
path for electricity delivery helps relieve transmission 
congestion and avoids the need for expensive grid upgrades.
    I would like to address a few issues specifically involving 
H.R. 793 and the future of wind energy development on the OCS. 
First, recognizing wind energy as a national asset, offshore 
wind energy development offers significant benefits to the 
Nation's energy economy, the environment, and national 
security. The bill's goal of expediting projects to increase 
the production and transmission of energy like wind on the OCS 
is welcomed.
    Second, payments for easements and rights-of-way, if 
Congress deems it appropriate, the wind industry is willing to 
make fair payments for easements and rights-of-way just as it 
already does for projects on land. The bill appropriately 
leaves the method of determining payment amounts to the 
discretion of the Secretary.
    Due to the long lead time and millions of dollars required 
to determine the commercial viability of wind resources at any 
specific offshore site, it is imperative to leave an incentive 
for private initiative in proposing offshore commercial wind 
projects. For much the same reason, the Bureau of Land 
Management recently announced its interim wind development 
policy which includes the first come review of wind projects 
proposed by private industry on public lands at prescribed 
royalty rates as the preferred method with bidding for sites 
selected and tested for commercial viability by the Government 
as a secondary option. At this early and entrepreneurial stage 
of the offshore wind industry, the same treatment is 
appropriate here.
    Third, transitional issues, is it requested that the 
offshore wind projects already underway not be disadvantaged by 
new rules that would cause unnecessary and expensive delays or 
the need to begin a new application process. Considerable 
effort has already been taken to work with state and Federal 
agencies to fulfill permitting requirements in an 
environmentally responsible way.
    And finally, implementation, it is also requested that the 
implementation of this bill not inadvertently impose new 
barriers in the permitting approval process for offshore wind 
projects. Rather, it is desired that the process become more 
orderly and predictable.
    Our country's demand for energy sources continues to grow 
as does the public's appetite for cleaner sources of energy. 
Offshore wind energy is an untapped resource that holds great 
promise, especially for coastal states that have very limited 
opportunities for wind development on land due either to land 
use competition or relatively weak wind resources. By 
facilitating development of environmentally responsible wind 
projects on the Outer Continental Shelf, the many benefits of 
clean wind power can be realized by a greater portion of the 
American public.
    I thank you for your attention.
    [The prepared statement of Mr. Bailey follows:]

Statement of Bruce H. Bailey, President, AWS Scientific, Inc., Albany, 
                         New York, on H.R. 793,

    Chairman Cubin and members of the Subcommittee, my name is Bruce 
Bailey. I am the president of AWS Scientific, Inc., based in Albany, 
New York. I am also on the Board of Directors of the American Wind 
Energy Association. My 20-year old firm provides wind energy consulting 
services to some of the country's most progressive energy companies. 
These companies, which include EnXco, FPL Energy, Renewable Energy 
Systems, Zilkha Renewable Energy, and Atlantic Renewable Energy, are 
building wind farms all across America. Wind energy holds the 
distinction of being the world's fastest growing electricity generating 
technology as well as one of the lowest cost renewable energy sources.
    Over the past two years I've had the good fortune of working with 
several public and private organizations interested in offshore wind 
energy. They include Cape Wind Associates, the Massachusetts Technology 
Collaborative, Northeast Utilities, the Connecticut Clean Energy Fund, 
the New York State Energy Research and Development Authority, and the 
Long Island Power Authority (LIPA). On behalf of LIPA and over 30 
civic, environmental and faith-based groups, I led the siting team to 
identify the target area for a 100 MW offshore wind farm south of Long 
Island, which is planned for construction within the next four years. 
We have had several discussions with the U.S. Army Corps of Engineers, 
the Coast Guard, the FAA, and other agencies to identify the relevant 
authorities and the logistics of permitting and environmental reviews. 
This single offshore wind project will generate enough clean 
electricity to satisfy the needs of over 30,000 Long Island homes for 
the next 30 years.
    Offshore wind power has the potential of providing a significant 
portion of the electricity requirements of coastal states. Indeed, 
about 54% of the country's population lives in coastal areas. However, 
many coastal states are in short supply of appropriate onshore sites 
for large-scale wind development. Consequently, turning to the sea is 
the only option for states to make wind power a meaningful part of 
their energy mix. Many coastal areas, including Long Island, are also 
transmission constrained, so using the sea as an alternative path for 
electricity delivery helps relieve transmission congestion and avoid 
the need for expensive grid upgrades.
    Wind power applications on land are technologically mature and 
reliable, and in windy areas they are cost-competitive with 
conventional energy sources. Worldwide, the wind is satisfying the 
electricity needs of over 30 million homes. Wind can also be a major 
electricity provider, as evidenced in Denmark which derives 18% of its 
electricity needs from the wind. Wind energy can provide a number of 
local, regional and national benefits as well. The U.S. Department of 
Energy's Wind Powering America initiative states that wind power ``can 
help the United States achieve targeted regional economic development, 
protect the local environment, reduce air pollution, lessen the risks 
of global climate change, and increase energy security.'' Some specific 
advantages of wind power:
     It is clean and inexhaustible. A single large-scale wind 
turbine can displace over 2,000 tons of carbon dioxide, 14 tons of 
sulfur dioxide, and 8 tons of nitrogen oxides (based on the U.S. 
average utility generation fuel mix). In California alone, wind plants 
effectively save the energy equivalent of nearly 5 million barrels of 
oil per year, and unlike oil, it is renewable year after year without 
incurring fuel costs.
     It promotes local economic development. Wind energy 
provides more jobs per dollar invested than any other energy 
technology. And major manufacturers like General Electric are investing 
heavily in developing world-class wind turbine designs tailored for 
offshore applications. Wind plants throughout America also increase 
property tax revenues for local communities while providing another 
source of income to landowners who lease their land for wind 
development.
     It is modular and scalable. Wind applications can take 
many forms, including large wind farms, distributed generation, and 
singe end-use systems.
     It promotes energy price stability. By further 
diversifying the energy mix, wind energy reduces dependence on 
conventional fuels that are subject to price and supply volatility.
    Europe's pursuit of offshore wind development, which began over 10 
years ago, is being demonstrated as a viable way to realize the 
benefits of wind energy while avoiding the barriers to its use posed on 
land in coastal areas. By the end of this decade, thousands of 
megawatts of offshore wind power will be built off the shores of the 
United Kingdom, Germany, Denmark, and other countries. The most recent 
offshore project--known as Horns Rev and having a generating capacity 
of 160 MW--was commissioned last fall off the west coast of Denmark. 
Interest in offshore opportunities in the U.S. is growing rapidly, as 
evidenced by projects in Massachusetts and New York that are in the 
advanced stages of planning.
    I would like to address a few issues specifically involving H.R. 
793 and the future of wind energy development on the outer continental 
shelf:
     Recognizing Wind Energy as a National Asset: Offshore 
wind energy development offers significant benefits to the nation's 
energy economy, environment, and national security. The bill's goal of 
expediting projects to increase the production and transmission of 
energy like wind on the Outer Continental Shelf is welcomed.
     Payments for Easements and Rights-of-Way: If Congress 
deems it appropriate, he wind industry is willing to make fair payments 
for easements and rights-of-way, just as it already does for projects 
on land. The Bill appropriately leaves the method of determining 
payment amounts (i.e., whether by specified rates or competitive 
bidding) to the discretion of the Secretary. Due to the long lead-time 
and millions of dollars required to determine the commercial viability 
of wind resources at any specific offshore site, it is imperative to 
leave an incentive for private initiative in proposing offshore 
commercial wind projects. For much the same reason, the Bureau of Land 
Management recently announced its Interim Wind Development Policy, 
Inst. Memo No. 2003-020, which includes the ``first come'' review of 
wind projects proposed by private industry on public lands, at 
prescribed royalty rates, as the preferred method, with bidding for 
sites selected and tested for commercial viability by the Government 
(at taxpayer expense and risk) as a secondary option. At this early and 
entrepreneurial stage of the offshore wind industry, the same treatment 
is appropriate here. Unlike oil or natural gas facilities, offshore 
wind plants will not extract any finite fuel source from the Outer 
Continental Shelf where the wind is naturally replenished.
     Transitional Issues: It is requested that offshore wind 
projects already underway not be disadvantaged by new rules that would 
cause unnecessary and expensive delays or the need to begin a new 
application process. Considerable effort has already been taken to work 
with state and Federal agencies to fulfill permitting requirements in 
an environmentally responsible way.
     Implementation: It is also requested that the 
implementation of this bill not inadvertently impose new barriers in 
the permitting approval process for offshore wind projects. Rather it 
is desired that the process become more orderly and predictable.
    Our country's demand for energy sources continues to grow, as does 
the public's appetite for cleaner sources of energy. Offshore wind 
energy is an untapped resource that holds great promise, especially for 
coastal states that have very limited opportunities for wind 
development on land, due either to land use competition or relatively 
weak wind resources. By facilitating the development of environmentally 
responsible wind projects on the outer continental shelf, the many 
benefits of clean wind power can be realized by a greater portion of 
the American public. Thank you.
                                 ______
                                 
    Mr. Rehberg [presiding]. Thank you.
    Mr. Shelley.

 STATEMENT OF PETER SHELLEY, VICE PRESIDENT, CONSERVATION LAW 
                           FOUNDATION

    Mr. Shelley. Thank you, Mr. Chair, and members of the 
Subcommittee. My name is Peter Shelley. I am with the 
Conservation Law Foundation, a regional environmental advocacy 
organization in the New England area, founded in 1966. I am 
also pleased to be here on behalf of the Union of Concerned 
Scientists, the Natural Resources Defense Counsel and 
Environmental Defense. I would ask that a copy of our full 
statement be introduced into the record of the Subcommittee.
    Mr. Chair, our groups are committed to ensure that critical 
renewable energy development occurs in a timely manner, occurs 
in the right locations, occurs subject to terms that fully 
project the public interest and through processes that ensure 
ample public input. To that end, we urge Congress to establish 
a comprehensive statutory framework for offshore renewable 
energy development.
    However, we do not see H.R. 793 as the vehicle for 
developing that framework and urge that the Subcommittee reject 
this bill as it is currently written. H.R. 793 fails to specify 
the appropriate balances between industrial activities and our 
coastal waters and stewardship of shelf's invaluable living 
resources and other public values.
    H.R. 793 improperly grants jurisdiction over a broad range 
of potential new industrial activities to an agency with little 
core expertise in these technologies or policies, and H.R. 793 
improperly mixes unrelated extractive and non-extractive 
industries in one statutory framework, threatening to 
overregulate some activities and underregulate others.
    I would like to spend some time addressing for the 
Subcommittee some of the core principles that we feel should be 
in any comprehensive legislation that should go forward for 
renewable energy development. First, we do believe this 
legislation should wait and be informed by the reports of the 
President's U.S. Commission on Ocean Policy and the Pew Oceans 
Commission. Both of these bodies are likely to make very 
important recommendations both in terms of the government 
institution who should be involved in the marine resource 
issues as well as some of substantive programs, including 
renewables.
    Second, we think that offshore renewable energy development 
is fundamentally different from oil and gas extraction and 
related oil and gas extraction activities and should be 
regulated separately such as was done with the Ocean Thermal 
Energy Conversion Act. The legislative purpose of such 
legislation should be to establish a comprehensive regime to 
promote appropriate offshore renewable energy development while 
minimizing harm to the environment and mitigating unavoidable 
harms.
    We feel that Interior Minerals Management Service is not 
the right agency for the task of regulating offshore renewables 
which falls more within the core competencies of NOAA or 
perhaps the National Ocean Service. We believe that project-
specific reviews and permitting should fully include state 
agencies and the Governors of the states in the process. We 
believe that ocean renewable energy projects should be fully 
subject to all applicable Federal law. Any financial 
obligations or lease assignments associated with renewable 
leasing arrangements -- and we do prefer leases to govern these 
activities at this point to easements or rights-of-way -- 
should be tailored to the different nature and the state of 
maturity of the offshore renewable industry; and finally, 
sitings should avoid all designated marine protected areas as 
well as physical or biologically unique or important areas, not 
just national marine sanctuaries as is specified in H.R. 793 
currently.
    Finally, we would like to collectively state that because 
of the imperative need to develop renewable wind energy as well 
as what we feel is a comprehensive environmental review process 
currently in place and being applied to all projects, that 
there is no need for Congressional moratoria on these projects. 
It is simply not needed.
    In conclusion, on behalf of our members, we ask that this 
Committee reject H.R. 793 and offer our assistance to the 
Committee staff and others to develop legislation that 
approaches offshore renewable regulations separately, directly, 
and in a positive light.
    Thank you very much.
    [The prepared statement of Mr. Shelley follows:]

 Statement of Peter Shelley, Conservation Law Foundation, on behalf of 
The Conservation Law Foundation and the Union of Concerned Scientists, 
                              on H.R. 793

    Madame Chair and Members of the Committee, thank you for this 
opportunity to appear before you today to present testimony on H.R. 
793. My name is Peter Shelley. I am a Vice President of the 
Conservation Law Foundation, directing CLF's Rockland, Maine Advocacy 
Center. CLF is the oldest and largest regional environmental advocacy 
organization in the nation. I have worked extensively on marine issues 
at CLF, including landmark cases on fisheries management, the pollution 
of Boston Harbor, and Outer Continental Shelf oil and gas leasing 
proposals.
    I am pleased to be here to testify on behalf of CLF and the Union 
of Concerned Scientists (UCS), a nonprofit organization of more than 
60,000 citizens and scientists working for practical environmental 
solutions. For more than two decades, UCS has combined rigorous 
analysis with committed advocacy to reduce the environmental impacts 
and risks of energy. UCS' energy program focuses on encouraging the 
development of clean and renewable energy resources, such as solar, 
wind, geothermal and biomass energy, and on improving energy 
efficiency.
    We are committed to ensuring that environmentally important 
renewable energy development occurs in a timely manner, in the right 
locations, subject to terms that fully protect the public interest, and 
through processes that ensure ample public input. To that end, we 
believe that Congress should establish a comprehensive statutory 
framework for offshore renewable energy development, and we stand ready 
to assist Congress in whatever way appropriate to develop and enact 
such legislation.
    As much as our organizations want to see the promotion of timely 
and environmentally responsible renewable energy projects on the Outer 
Continental Shelf (``OCS''), we cannot support H.R. 793. This piece of 
legislation is fundamentally flawed and should not be supported by the 
members of this Subcommittee. The proposed legislation fails to strike 
an appropriate balance between industrial development of the coastal 
marine system and protection of its invaluable living marine resources; 
it grants broad jurisdiction to an agency without expertise in the 
requisite areas of marine policy and regulation; and it would require 
substantial modification before it could serve as an appropriate 
framework for offshore renewable energy development.
    H.R. 793 is substantially identical to H.R. 5156, legislation that 
was introduced and failed in the last session as a result of widespread 
opposition. In its current form, H.R. 793 grants unprecedented 
jurisdiction to the Secretary of the Interior over future permitting 
and rights of way for virtually all energy and energy-related 
activities on the OCS, mixing together renewable energy projects with 
unrelated fossil fuel facilities and activities. While we salute the 
fact that this bill recognizes offshore renewable energy development as 
important, a bad bill in this area is worse than no bill at all.
    Rather than simply registering our objections to H.R. 793, however, 
we would like to provide the members of the Subcommittee with an 
affirmative view of what a regulatory framework for offshore renewable 
energy projects should look like and what form the Federal legislation 
creating such a framework should take.
    Any legislation of this kind should be informed by the findings and 
reports of the U.S. Commission on Ocean Policy and the Pew Oceans 
Commission on Ocean Zoning, which are due to be released this year. 
Both Commissions are expected to make critical strategic 
recommendations on this Nation's ocean policy, including the siting of 
renewal energy projects on the Outer Continental Shelf. In light of the 
high relevance of these studies to marine protection and siting issues 
inherent in offshore renewable energy development, it seems premature 
to go forward with legislation before knowing the outcomes of these 
studies.
    That said, I would like briefly to present some core principles on 
which we believe any statutory framework for offshore wind, wave, and 
tidal energy projects should be based. These principles are 
complimentary to existing Federal law, as many of them are derived from 
existing Federal schemes including the Ocean Thermal Energy Conversion 
Act (OTEC Act):
     1. LOffshore renewable energy (wind, wave, and tidal energy) 
development is fundamentally different from oil and gas extraction and 
related activities, and therefore should be subject to a separate 
statutory framework. Impacts of offshore renewable energy projects are 
generally limited to the installation and dismantling of structures 
that are attached to the seabed. Once in operation, renewable energy 
projects have minimal impacts and risks compared to oil and gas 
operations.
     2. LThe purpose of offshore renewable energy legislation should be 
to establish a comprehensive regime to permit and promote development 
of appropriate wind, wave, and tidal energy projects in a manner that 
minimizes harm to the environment and provides proper mitigation of 
unavoidable harms.
     3. LThe Department of the Interior/Minerals Management Service 
(MMS) should not be the principal Federal agency overseeing offshore 
renewable energy.
     4. LOversight of offshore renewable energy projects in the oceans 
should include a leading role for Federal agencies with a direct marine 
regulatory and habitat protection mission, including the National 
Oceanic and Atmospheric Administration (NOAA) and the National Marine 
Fisheries Service (NMFS).
     5. LProject-specific reviews and permitting processes should 
include state environmental and marine resource agencies and governors 
from affected states.
     6. LConstruction of an offshore renewable energy project should be 
fully subject to existing Federal law, including the National 
Environmental Policy Act (NEPA), the Coastal Zone Management Act 
(CZMA), the Endangered Species Act (ESA), the Marine Mammal Protection 
Act (MMPA), and the Magnuson-Stevens Fisheries Conservation and 
Management Act.
     7. LAny financial obligations that come from renewable leasing 
arrangements should be appropriate for renewable energy applications, 
which differ from conventional resource projects, are non-extractive, 
and have lower environmental impacts and risks than other offshore 
facilities based on extractive industries.
     8. LSiting of renewable energy projects should be avoided in areas 
on the Outer Continental Shelf that meet the definition of a Marine 
Protected Area (MPA) contained in Executive Order 13158 (65 Fed. Reg. 
34909 (May 26, 2000)) (``any area of the marine environment that has 
been reserved by Federal, State, territorial, tribal, or local laws or 
regulations to provide lasting protection for part or all of the 
natural and cultural resources therein'') and in areas that contain 
biologically or physically unique or sensitive marine habitats.
     9. LOffshore renewable energy legislation should authorize term-
limited leases, rather than easements or rights of way, for eligible 
offshore energy projects.
    10. LLeases for offshore renewable energy projects should be 
assigned on a basis that considers factors including the following: 
minimum environmental detriment, timely commencement of operation, 
maximum net energy impact, and lower initial installation and 
operations and maintenance costs to the extent that such differentials 
may significantly affect the ultimate cost to the consumer.
    Measured against these principles, H.R. 793 falls far short of the 
mark and should be rejected by the Subcommittee.
    While we would support legislation that incorporated these 
principles and promoted the findings of the U.S. Commission on Oceans 
and the Pew Oceans Commission on Ocean Zoning, I want to clarify that 
our organizations do not believe that Congress should impose an 
economically and potentially environmentally damaging moratorium on 
offshore wind development pending enactment of such a comprehensive 
statutory framework.
    The absence of a Federal asset management framework for renewable 
energy does not compromise environmental protection of the OCS and its 
resources from the impacts of development. Given existing permitting 
authority and environmental regimes, it would be a mistake to put 
review of offshore wind proposals on hold. Together with the National 
Environmental Policy Act, the Army Corps of Engineers' Section 10 
regulations provide clear authority to conduct a comprehensive 
environmental review process and to issue permits after consultation 
with all relevant agencies and entities. If these authorities are used 
together, and used thoughtfully and in combination with state 
environmental reviews, we believe they provide an adequate process 
until appropriate legislation can provide additional clarity and 
establish a process for addressing various aspects of a developer's 
relationship with the Federal Government, such as leases and royalties.
    Timely development of wind energy is imperative in light of 
dramatic current and future damage caused by power plant emissions and 
the importance of wind energy as a means of mitigating that damage. In 
New England, for example, wind power represents about three-fourths of 
the region's renewable energy potential and is considered a critical 
component to the region's strategy to combat global warming.
Specific concerns about H.R. 793
    As I mentioned, we are very concerned about H.R. 793 because it 
would grant unprecedented jurisdiction to the Secretary of the Interior 
over future permitting and rights of way for virtually all energy and 
energy-related activities on the Outer Continental Shelf (OCS). The 
Department of Interior's record in managing the nation's offshore oil 
and gas program and in preventing that program from damaging our 
environment is, unfortunately, not one we would like to see emulated 
for other types of offshore energy development. We are particularly 
concerned that this bill would provide a shortcut mechanism by which 
proponents of a wide range of commercial-scale projects could 
circumvent existing Federal jurisdictions and sidestep longstanding 
requirements for appropriate environmental review of the full range of 
energy facilities and activities in the marine environment.
    It appears this bill would not only grant Interior/MMS jurisdiction 
over offshore wind generation, wave energy, and other ``alternative'' 
energy projects, but also significantly expand and centralize Interior/
MMS jurisdiction over new types of offshore hydrocarbon facilities such 
as at-sea floating and stationary marine terminals, gasification 
plants, and subsea pipelines. This new authority would be created over 
and above the new jurisdiction for the Department of Interior that was 
established only last year over Liquefied Natural Gas (LNG) facilities 
in the adopted amendments to the Deepwater Ports Act.
    In addition, it appears that H.R. 793 would establish broad, open-
ended Interior/MMS authority over a range of additional unidentified 
``support'' facilities associated with offshore oil and gas 
development, such as offshore floating oil storage and processing 
facilities. In this regard, H.R. 793 could create a regulatory ``end 
run'' for many types of offshore activities that are otherwise subject 
to the jurisdictional protections of the present Presidential OCS 
Deferrals and the long-established bipartisan legislative OCS 
moratorium provisions.
    On behalf CLF and UCS, we urge the members of this Subcommittee to 
reject this bill as written. Any legislation governing offshore 
renewable energy projects should be separate and apart from legislation 
affecting oil and gas activities on the OCS, and should strike an 
appropriate balance between promoting offshore renewable energy 
development and protecting the resources of our marine environment. 
H.R. 793 fails to do so.
    Thank you for the Committee's attention to these matters.
                                 ______
                                 
    Mr. Rehberg. I thank the members of the panel. If you will 
bear with us, we have a series of at least one, perhaps two, 
votes. We will get back as quickly as we can and we will open 
up it up for questions that we might have of you.
    So if you could bear with us, and we will begin as soon as 
I get back. Thank you.
    [Recess.]
    Mr. Rehberg. All right. Why don't we start.
    Question for Mr. Reilly: Doesn't the OCS Lands Act which 
House Resolution 793 would amend require state and local 
participation in activities affecting the state's coastal zone?
    Mr. Reilly. It does allow for that. It is unclear exactly 
how this is going to happen here, and it is still outside that 
three-mile limit. It certainly impacts the coastal zone, but 
what exactly the role is going to be, how much importance is 
going to be given to it, and simply as well, you know, in terms 
of the way this goes about, this is not what the Army Corps of 
Engineers does in terms of their area of expertise and interest 
and focus. They are going to be focused on the navigational 
aspects of it.
    Mr. Rehberg. You suggest identify appropriate offshore wind 
energy sites in advance. Who would identify these sites and how 
might the selection process work?
    Mr. Reilly. I believe that you could select, certainly, the 
agency, but putting it under the Coastal Zone Management Act 
with a meaningful role for certainly the state and particularly 
in an area as close as this to do the siting, to do the 
planning, and to go about it in a logical and a rational way. 
But I believe that the Coastal Zone Management is the 
appropriate vehicle.
    Mr. Rehberg. OK. The legislation allows the Secretary of 
the Interior to set the compensation to the Government for the 
easement or right-of-way by rule or through negotiations with 
the lessee. Do you think that is the right way to go? Do think 
that is sufficient, or do you believe that these fees should be 
set by legislation?
    Mr. Reilly. I think these fees should be tied to fair 
market value unless there is specific reasons why you would not 
follow that. Certainly, I would be in favor of encouragements 
and particularly with the development of renewable energy and 
take into consideration certain benefits that would go into it, 
but fair market value and one of the most important factors is 
competition, that there be a competitive process and that is 
how you will find fair market value.
    Mr. Rehberg. I understand you have a plane to catch, and I 
have no further questions.
    Mr. Delahunt.
    Mr. Delahunt. Yes. Thank you, Mr. Chairman, and I want to 
extend my gratitude to Attorney General Reilly. You are making 
us proud, Tom, in terms of protecting the people of 
Massachusetts and particularly this resource that truly is a 
national treasure.
    I think it is important, Mr. Chairman, to note also, and we 
have not yet had an opportunity to sit down with the Governor 
of the state, the newly elected Governor whom of course Mr. 
Cannon knows quite well because of his connection to Utah, and, 
Mr. Chairman, he also happens to be a Republican, but he 
recently made public statements regarding this specific 
proposal, that he shares the same perspective that Mr. Reilly 
and myself do regarding the Cape Winds proposal.
    I again want to emphasize that the Attorney General and I 
are looking forward to sitting down with the Governor and have 
him reaffirm his public statements to us that we can work 
together to protect the people, not just in Massachusetts, by 
the way, but on both coasts and maybe even up the Mississippi. 
Who knows? I am not really familiar with that issue.
    But I would also ask unanimous consent to introduce a 
report that I commissioned that was conducted by the Center for 
Coastal Studies located in Provincetown, and it is entitled 
``The Review of State and Federal Marine Protection of the 
Ecological Resources of Nantucket Sound'', and if the Chair 
would indulge me, I am just going to read very quickly an 
excerpt, again to underscore the particular value of this body 
of water.
    ``Nantucket Sound contains significant ecological, 
commercial, and recreational resources that have been at the 
heart of several past nominations for enhanced environmental 
protection and conservation policies within the region. The 
biological diversity and unique habitat areas of Nantucket 
Sound led the state, the Commonwealth of Massachusetts, to 
nominate the area for national marine sanctuary status in 
1980'', a long time before the application was filed by the 
entity known as Cape Wind. The resources of Nantucket Sound 
were again deemed worthy of consideration for national marine 
sanctuary status by the Resource Evaluation Committee appointed 
by the National Marine Sanctuary program in 1983.
    These resources are equally significant today, and I would 
hope you and other members would have the time and the 
opportunity to read this report which I think speaks eloquently 
of why Attorney General Reilly and myself are here today.
    Mr. Rehberg. Thank you very much.
    Mr. Delahunt. Thank you.
    Mr. Rehberg. Thank you. If you need to leave, please do.
    Mr. Smith, under the status quo, how would you go about 
applying for permits for energy-related projects not covered by 
the OCS Lands Act?
    Mr. Smith. I think our natural tendency would be to go to 
the MMS and say who should we be talking to on this particular 
issue, we see where it fits partly into MMS, but perhaps the 
Corps of Engineers has a role to play and frequently does on 
the Gulf Coast.
    I was making the point earlier that in Massachusetts right 
now, there is a pipeline project ongoing using equipment that 
would be typically seen in the Gulf of Mexico, and as I 
understand it, the basis of the code, if you will, for building 
that pipeline started out with the MMS rules which were then 
modified for use by the State of Massachusetts.
    Mr. Rehberg. Do you see a value in having one agency with 
the lead role?
    Mr. Smith. Absolutely. I don't see how it is possible to go 
out in an area certainly one as developed as the Gulf of Mexico 
and start putting in rights-of-way and pipelines and power 
cables and other structures without having some context and 
some understanding of what is already there. MMS has very 
strict rules about how you approach pipeline crossings, for 
example, how much separation, whether it is buried or not, what 
permission you need from the title holders to the existing 
line. All of that needs coordination.
    Mr. Rehberg. Mr. Bailey, will you answer the same question? 
Do you see a value in having a single agency take the lead role 
in energy permitting?
    Mr. Bailey. Yes. I can see some value in having one agency 
take sort of lead authority. I say it that way because the 
current process is very rigorous in terms of environmental 
scrutiny and looking after the public interest. Siting and 
permitting of offshore wind projects fall under the 
jurisdiction of the Army Corps of Engineers, and the number of 
other Federal agencies as well as state agencies who have to be 
involved in this process does require rigorous review and 
scrutiny.
    So we feel that it is not essential to have MMS step in as 
an overseeing body. We see that it can facilitate the process 
and give more clarity and predictability to it, but the process 
right now, we don't feel is broken.
    Mr. Rehberg. Mr. Shelley, H.R. 793 specifically says that 
nothing shall be construed to displace, supersede, limit, or 
modify the jurisdiction responsibility or authority of any 
Federal or state agency under any other Federal law. Doesn't 
this fully address the situation of offshore renewable energy 
under the existing Federal law? I guess I don't understand what 
the concern is.
    Mr. Shelley. Mr. Chair, we just wanted to reemphasize that 
all those statutes should continue to apply to this new 
development activity as well as other activities related to oil 
and gas development. We wanted the legislative history to be 
clear on that point.
    Mr. Rehberg. OK. It also says that it shall not apply to 
any area outside the Outer Continental Shelf designated as a 
marine sanctuary. Doesn't this address your concern about the 
national marine sanctuaries?
    Mr. Shelley. The national marine sanctuary program is 
actually quite a limited program in the United States. It was 
frozen at a certain point by Congress and in our view doesn't 
reflect all of the areas that are really entitled and deserving 
of special protection. So that is why we have spoken in terms 
of President Bush's executive order designating marine 
protected areas, as well as really wanting to put an emphasis 
on some of the unique resources that could be irreversibly 
harmed in a siting process.
    So national marine sanctuaries are a subset, Mr. Chair, but 
not fully sufficient.
    Mr. Rehberg. At this point, I would ask if there were any 
other questions of any Committee members, but clearly there 
must not be. So I will excuse this panel and thank you all for 
coming, and any additional material you would like to have put 
into the record, please do so at this time or feel free to at a 
later date.
    At this time, I will invite Mr. Quinn and Ms. Kendall.
    Mr. Rehberg. I thank you both for joining us today, and I 
would like to introduce Ms. Sara Kendall, Washington Office 
Director, Western Organization of Resource Councils, and Mr. 
Harold Quinn, Senior Vice President, Legal and Regulatory 
Affairs and General Counsel, National Mining Association.
    Why don't we begin with Mr. Quinn.

STATEMENT OF HAROLD P. QUINN, JR., SENIOR VICE PRESIDENT, LEGAL 
   & REGULATORY AFFAIRS AND GENERAL COUNSEL, NATIONAL MINING 
                          ASSOCIATION

    Mr. Quinn. Thank you, Mr. Chairman.
    Thirty years ago in the wake of the 1973 oil embargo, 
attention was focused upon the development of our Nation's vast 
coal resources, especially our Federal coal reserves as a 
source of fuel for our domestic energy needs. Back then, 
despite vast reserves under Federal leases, the relatively few 
Federal leases that were in production accounted for only 3 
percent of our national production.
    Today, we again face questions about the security and 
reliability of our Nation's energy supply. For Federal coal, 
the questions about its role and capability have largely been 
answered. The critical role of Federal coal and the coal 
industry's capability to produce it reliably and affordably has 
been realized. Today, coal produced from Federal leases 
accounts for almost 40 percent of all domestic production, and 
with electricity requirements predicted to rise by 40 percent 
in the next two decades, Federal coal will need to assume a 
greater role in the energy equation. In order to meet this 
challenge, we should now decide whether to change existing 
leasing policies which thwart the most efficient and orderly 
development of our Federal coal resources.
    A number of the existing leasing policies embodied in the 
Mineral Leasing Act were established to address concerns and an 
industry structure of a different era. The industry, its 
market, and price structures are substantially different now 
than they were 25 years ago when the Mineral Leasing Act was 
amended substantially in 1976.
    Allow me just to address a few of those structural issues 
and differences that bear on that legislation before you. 
First, substantially more coal is produced from substantially 
fewer mines today. Coal prices in both nominal and real terms 
have declined substantially and consistently since the early 
1980's. The average mine size is three times larger than 25 
years ago, and in turn, the life of mines must be longer in 
order to justify the substantial capital investment required to 
compete in today's marketplace.
    Larger mines with longer lives require more coal reserves 
to replace those depleted; however, in the last decade, the 
reserves owned or leased at producing mines continues to 
decline as reserves are not being replaced at a rate which 
keeps pace with production. H.R. 794 would provide the changes 
to leasing policy that are required to accommodate the 
operating flexibilities necessary today, extend the life of 
those mines, and preserve the high-paying jobs as well as the 
tax and royalty revenue stream those mines provide the Federal 
and state governments.
    In the interest of time, I won't address all the sections 
or provisions of H.R. 794, but I will address a number of those 
that I heard questions about this morning. First, the lease 
modification process: The law allows the addition of coal 
contiguous to an existing lease on an emergency or expedited 
basis. This process affords the opportunity to add nearby coal 
that might otherwise be bypassed if not mined while the 
operations are in that vicinity; however, the current law 
places a 160-acre limit on the amount of land that can be added 
in this manner over the entire life of the original lease. This 
limit seems arbitrary since it does not appear reasonably 
related to geological or other circumstances that would dictate 
the addition of greater amounts of Federal coal that might be 
bypassed permanently if not mined in conjunction with the mine 
plan for the existing operations.
    Removing the acreage limit would not provide an open 
invitation to add any amount of coal desired. The decision to 
approve the use of this expedited leasing mechanism would still 
be subject to the findings that the Government will receive 
fair market value, there is no competitive interest in leasing 
the area, and that the area itself could not support and 
independent operation.
    Advance royalties: The law requires that a lease commence 
production in commercial quantities within 10 years. After this 
so-called due diligence milestone is reached, the lease must 
continue producing coal annually at minimum commercial quantity 
rates of 1 percent of the coal reserves or pay advance 
royalties in lieu of production; however, the law currently 
imposes a 10-year limit on the number of years one can pay 
advance royalties for the entire life of the lease. Operations 
are idle from time to time when, for example, the mine loses 
its customers, its competitive position is eroded by changes in 
cost structure due to new or changed regulatory requirements, 
increases in labor, fuel, or material costs, or unanticipated 
geological conditions that increase mining costs.
    Once the 10-year limit has been reached, the operator has a 
difficult choice, either forfeit the lease and the investment 
or produce the minimum quantities and sell that production at 
distressed prices. Neither choice is desirable from an economic 
standpoint. First, if the operator produces coal to avoid 
forfeiture of the lease and its investment, the coal will 
likely be placed on the market at distressed prices which harms 
other producers competing in the marketplace. The amount of 
coal pushed into the market can be substantial since the 
minimum commercial quantities for many Federal leases exceeds 
the annual production for most mines in the United States.
    Second, if the operator forfeits the lease, the 
investments, jobs, Federal and state revenue generated by the 
operation will be lost.
    There is one other feature that deserves some attention 
that I will address today on the advanced royalties. Advanced 
royalties paid in the first 20 years cannot be credited against 
subsequent production produced during the next 20-year term. 
This artificially inflates the effective royalty rate on 
subsequent production to twice the otherwise applicable rate. 
In the case of surface coal mines, it will be 25 percent, 
underground coal mines, 16 percent.
    I see my time is out, but let me just conclude with one 
final word about the revenues these mines provide to the 
Federal and state local governments. Production of Federal coal 
generates more than $330 million annually in Federal coal 
royalties with half of that being shared with the states. In 
addition, these mines pay abandoned mine land taxes, black lung 
taxes, and an assortment of state severance and sales taxes. 
Placed in perspective, a large surface coal mine in Wyoming, 
for example, that would produce 67 million tons of coal 
annually has a payroll or supports a payroll of $50 million, 
purchases about a hundred million dollars in goods and services 
each year, pays $14 million in state severance taxes, $13 
million in black lung taxes, $23 million in AML taxes, and more 
than $41 million in Federal royalties. Quite apart from the 
essential fuel these mines with Federal coals leases supply for 
our Nation's energy needs, I think these are the types of 
investments everyone should see as worthy of supporting and 
preserving.
    Thank you, Mr. Chair.
    [The prepared statement of Mr. Quinn, Jr. follows:]

   Statement of Harold P. Quinn, Jr., Senior Vice President, Legal & 
      Regulatory Affairs and General Counsel, The National Mining 
                        Association, on H.R. 794

    My name is Harold P. Quinn, Jr. I am appearing here on behalf of 
the National Mining Association (``NMA''), to testify on the critical 
role coal resources on Federal lands have in providing a reliable and 
affordable supply of energy to sustain our economy and Nation's well 
being. More specifically, I am here to provide the reasons why the 
National Mining Association supports H.R. 794, the ``Coal Leasing Act 
Amendments of 2003,'' introduced by Chairman Cubin. Thank you for the 
opportunity to express the mining industry's views on this subject and 
legislation.
General Introduction
    The National Mining Association (NMA) represents producers of over 
80% of America's coal--a reliable, affordable, domestic fuel that is 
the source of over fifty percent (50%) of the electricity used in 
America. NMA's members also include the producers of metals and non-
metal minerals, manufacturers of processing equipment, machinery and 
supplies, transporter of coal and mineral products, and engineering, 
consulting and financial institutions serving the mining industry.
Federal Coal and Its Contribution to the Nation's Energy Security
    Coal accounts for approximately one-third of the United States' 
primary energy production, the largest portion of any energy source. 
About 35% of the nation's coal production is from mines located on 
Federal lands. The Energy Information Agency (EIA) is predicting that 
electricity use will increase by over 40% by 2020, which in turn will 
require a 28% increase in coal production. A substantial portion of the 
coal production needed to meet this increase will come from Federal 
lands.
    Currently, over one third of our coal reserves are owned or 
controlled by the Federal Government. More than 70% of the coal 
production in the western United States comes from mines located on 
Federal lands. Moreover, a majority of privately held western coal 
reserves are effectively controlled by Federal land policies as a 
result of land ownership patterns that place state and private coal 
reserves nearby Federally owned coal.
    There is no question that our Nation will require more energy in 
the future to fuel economic growth. We will use energy more efficiently 
due to technological advances, conservation and increased efficiency. 
But, we will use more energy. Meeting this demand with reliable 
affordable and secure sources will be a challenge, but a challenge that 
can be met with the correct policies that enhance the role of all 
domestic energy sources, including those found on Federal lands. H.R. 
794 embodies the very type of policy choices that must be made to meet 
this challenge by adjusting Federal coal leasing polices to ensure that 
our Federal coal resources can continue to play a critical role in our 
energy future.
Background
    The Mineral Leasing Act of 1920 (MLA) established a program for 
leasing Federally owned coal for development subject to various terms 
and conditions. The oil embargo of 1973 focused attention on the 
question of domestic energy supplies including the development of the 
Federal coal resource base. By the early 1970s, the amount of coal 
under lease was four times the amount leased prior to 1960, but actual 
production had not increased significantly. Apparently only about 10% 
of the Federal coal leases were producing coal in an amount just 
slightly more than 3% of the national total. This raised concerns about 
the holding of vast coal reserves for speculation and whether the 
government was receiving a fair return for the resource.
    In 1976, after several administrative moratoriums on coal leasing, 
Congress addressed these concerns with the passage of the Federal Coal 
Leasing Amendments Act (FCLAA). FCLAA imposed a series of requirements 
related to development time frames, land use planning, and royalty 
rates for Federal coal leases. Many of these policies were based upon 
forecasts of immediate spikes in coal demand and prices in the wake of 
the 1973-1974 oil embargo. For example, FCLAA's legislative history 
cites forecasts that predict coal demand reaching as high as 1.4 
billion tons by 1980. Although the energy supply disruptions of the 
early 1970s spurred development of western coal reserves, coal demand 
never reached the level predicted, and coal prices actually declined in 
real terms by $10 a ton in just 10 years following FCLAA's enactment.
    In many respects, the coal leasing policies adopted in FCLAA were 
intended to address a coal market and industry structure anticipated in 
a different era. In the more than 25 years since FCLAA's enactment, the 
coal industry has undergone a substantial restructuring in order to 
survive a market and price structure that dictates flexibility and 
efficiency. A combination of market forces and coal leasing policies 
has reduced by 40% the number of Federal coal leases. A number of 
features of the Federal coal leasing program today present impediments 
to the most rational and efficient development of Federal coal 
resources. The changes proposed in the Coal Leasing Amendments Act of 
2003 address provisions of the MLA that: no longer reflect economic and 
coal market realities; result in the bypass of nearby Federal coal 
reserves; compel inefficient production; and reduce Federal and state 
royalty revenues.
    H.R. 794 recognizes the long lead times and extremely large capital 
expenditures necessary to produce Federal coal in the most efficient, 
low cost and environmentally sound manner. Moreover, it reflects the 
very type of flexibility most private coal lessors retain in order to 
assure that their coal resource can be fully developed so they can 
maximize their return in the form of future coal royalty revenue.
Coal Lease Modifications
    The MLA recognized that it might not always be possible to 
determine all the lands to include in an initial lease due to geologic 
uncertainty and that that an operating mine may need to add Federal 
coal. In 1976, amendments imposed a limit of 160 acres for all such 
modifications throughout the life of a lease. Section 2 of H.R. 794 
would eliminate the 160 acre life-of-mine limitation on Federal coal 
lease modifications. This would allow the Secretary to add small 
quantities of non-competitive coal to an existing lease outside the 
time consuming lease-by-application process. The lease modification 
process facilitates the leasing of contiguous coal that might otherwise 
be bypassed forever as the coal in question cannot support a stand 
alone mining operation.
    The Secretary s discretion in the granting of lease modifications 
is not unfettered. 43 CFR 3432 allows the authorized officer to modify 
the lease to include all or part of the lands applied for if it is 
determined that: (1) the modification serves the interests of the 
Untied States; (2) there is not competitive interest in the lands or 
deposits; and (3) the additional lands or deposits cannot be developed 
as part of another potential or existing independent operation. While 
the lands could be added without competitive bidding, the government 
would retain discretion to lease these tracts based upon its 
determination whether it will receive the fair market value for the 
lease of the added lands, either by cash payment or adjustment of the 
royalty applicable to the lands added to the lease by the modification.
40 Year Mine-out Requirement
    The Secretary should be given the discretion to allow the 
consolidation of leased coal reserves into a logical mining unit (LMU) 
that will require more than 40 years to mine. A logical mining unit may 
include Federal leases as well as contiguous lands where the U.S. does 
not own the coal. The purpose of an LMU is to allow the coal lessee to 
achieve maximum economic recovery of Federal coal, as well as nearby 
state and private coal, by combining these tracts of coal into one unit 
for purposes of coordinating and meeting the diligent development and 
continued operations requirements of the law. Current law requires that 
the coal reserves of the entire LMU must be mined within a period of 40 
years.
    This change would allow long term efficiency and orderly 
development of Federal, state and private coal and minimize the 
premature closure of mines, the potential for bypassing nearby coal 
resources, and the attendant loss of Federal and state royalty and tax 
revenue. This proposal would not affect the existing requirement of 
diligent development or continued operation.
Advance Royalties
    The Secretary should be allowed to accept the payment of advance 
royalties in lieu of continued operation for a total of 20 years, allow 
the lessees to apply those paid royalties against actual production 
beyond the initial twenty year lease term, and simplify the methodology 
for computing advance royalties. This change would permit the Secretary 
and Federal coal lease holders the flexibility to manage Federal coal 
resources for maximum return to the Federal and state treasuries and 
avoid the compulsion of production that is not warranted by market 
conditions.
    Federal coal leases are subject to the MLA's requirements of 
``diligent development'' and ``continued operation.'' To meet the 
diligent development requirement, a Federal lessee must produce the 
commercial quantities of the recoverable coal reserves within the 
initial 10-years of the lease. ``Commercial quantities'' is defined by 
regulation as 1% of the recoverable coal reserves contained in a lease. 
Failure to meet diligent development requirements results in the 
termination of the lease. The diligent development requirement cannot 
be postponed or substituted by the payment of advance royalties. H.R. 
794 does not alter the existing diligent development requirement in the 
MLA.
    After the diligent development requirement is met, however, the 
lessee must continue to produce coal in commercial quantities (i.e., 1% 
of the recoverable reserves) during the remainder of the lease term. 
This is commonly referred to as the continued operation requirement. 
The law currently limits the flexibility to pay advance royalties in 
lieu of production to ten years for the entire life of the lease. Once 
that limit is reached, the lessee must either produce coal at the 
commercial quantity level, notwithstanding economic and market factors, 
or forfeit the lease.
    Continued operation is not always possible if the coal producer 
cannot mine coal at the prevailing market price. As a practical matter, 
a lessee must spend tens of millions of dollars, if not hundreds, in 
order to lease Federal coal, prepare and process permits, acquire 
equipment, hire a labor force, and achieve diligent development. 
Obviously, the mine operator desires to continue operating after the 
significant costs to open the mine have been expended. However, a 
currently operating mine may temporarily lose its competitiveness, due 
to a number of factors, including: increased costs of production due to 
geology; limited labor supply in rural areas; changes in prices for 
competing fuels; changes in transportation costs; and changes in state 
and Federal environmental regulations which affect either production 
costs or the ability of customers to use the coal from that lease. When 
one or more of these factors arise, an operation is generally idled and 
when the market dictates, operations resume.
    Advance royalties provide a royalty income stream for the 
government while a mine is idled. However, the current 10-year limit on 
accepting advance royalties constrains the lessee's flexibility in 
operating the mine in accordance with prudent economic principles. With 
the current life of many currently operating mines exceeding 25 years, 
and the potential for many additional years of mining at the same 
locations, the 10-year limit should be increased to 20 years.
    When advance royalties are paid in lieu of continued operation, 
those amounts can be used to offset production royalties due when coal 
is again produced. At present, no advance royalty paid during the 
initial 20-year term of a Federal lease or LMU may be used to reduce a 
production royalty after the 20th year of that lease or LMU's initial 
term. This arbitrary limitation should be removed in light of the 
longevity of mines producing Federal coal.
    When advance royalty is accepted in lieu of continued operation, it 
is paid in the amount equal to the royalty that would be owed on the 
production of 1 percent of the recoverable coal reserves. The royalty 
on this production is calculated by selecting an assumed sales price 
that reflects the value at which the coal would have been sold in the 
market. Determining the appropriate sales price is a long and 
contentious process. Establishing that the value on the basis of the 
average price for coal sold in the spot market from the same region 
would save considerable Federal and industry resources currently 
expended over disputes on acceptable valuation methods, and more 
accurately reflects the current market conditions that idled the mine. 
Simply put, if the mine is idled, the coal is marginal and would find 
its highest value in the spot market. If the actual sale price is 
higher later when the coal is produced and sold, the difference is paid 
at that time.
    Due to the shifting competitiveness of various operations, several 
Federal coal lessees have been forced temporarily to curtail production 
and idle mines. Without the option of extending the lease by paying 
advance royalties, producers will be forced to take one of three 
courses of action: 1) prematurely terminating leases and walking away 
from the massive existing investment; 2) pay advance royalties on older 
leases with no opportunity to recover advance royalties; 3) dump coal 
onto the market at distressed prices. All of these options will have a 
negative impact on the Nation's energy position, disrupt coal and 
electricity markets, waste Federal coal resources, cost jobs, and 
reduce Federal and state tax and royalty income.
    If leases are terminated, the probability of the lease being mined 
again is small. Royalty income that would otherwise flow from the 
payment of advance royalties would cease. Not only would jobs at the 
subject mine be lost, but so would jobs in the mine support sector 
(transportation, construction, vendors, consultants, and other jobs in 
the community that support the miners and their families.) Coal that 
otherwise would fuel electricity generation would remain in the 
ground--wasted.
    Paying advance royalties without ever recouping the payment would 
result in the practical application of a 25 percent royalty on future 
production. Even if the market could bear the price of coal burdened 
with this levy, which is unlikely, electricity rates would ultimately 
reflect this increase.
    If Federal coal lessees produce this coal in order to recover at 
least a portion of their capital and operating costs, it would compete 
not just with other Federal coal from the West, but also private coal 
in markets shared by private coal from the Midwest and Appalachia. 
Failure to address these anachronistic provisions in the MLA will hurt 
non-Federal coal producers in the Midwest and Appalachia. Modifications 
to the advance royalty provisions do not favor Western coal over 
Eastern coal or Federal coal over private coal. They just make good 
sense for America's energy future.
Coal Lease Operation and Reclamation Plan
    Under current law, before causing a significant disturbance of the 
environment, but no later than three years of lease issuance a lessee 
must submit for the Secretary's approval an operation and reclamation 
plan. NMA supports the elimination of the three year mandate.
    This change would allow the coal operator to coordinate the 
preparation and submission of its MLA mine plan dealing with coal 
resource recovery with the permit required under the Surface Mining 
Control and Reclamation Act (SMCRA) which addresses the environmental 
planning and protection measures. This will eliminate duplication of 
resources by both the lessee and the Department while still requiring 
the lessee/operator to submit a plan before it takes any action which 
might cause a significant environmental disturbance as required 
presently by the MLA.
Financial Assurances with Respect to Bonus Bids
    This section clarifies that MLA does not require a bond in 
connection with deferred bonus bids for coal leases. However, if the 
lessee fails to pay any installment of a deferred bid, the lease would 
terminate.
    A combination of economic conditions and extraordinary events over 
the past two years has caused severe constraints in the surety capacity 
available to satisfy financial assurance requirements of the coal 
mining industry. It is unlikely that in the near term adequate surety 
capacity will be available to meet the mining industry's financial 
assurance requirements. The mining industry's inability to access 
surety for various financial assurance requirements imposed under 
Federal and state regulatory programs is a product of severe 
disruptions to the credit markets, and not a result of any unusual loss 
experience associated with mining related projects. Indeed, the surety 
industry loss experience for mining related bonds are no more, and 
often less, than that for the other surety lines. Between 1989 and 
2000, for example, the loss ratio for the entire surety industry was 
about 28%, while the ratio for mining related obligations was about 
25%. However, substantial losses that began to appear at the end of 
2000 through 2002 in the surety industry's other underwriting lines of 
business has resulted in the exit of many primary sureties from the 
market and caused the remaining ones to limit their underwriting in all 
areas. For the mining industry, the inability to access surety 
jeopardizes the continuation of existing operations and thwarts 
development of new operations since bonds are required as a condition 
to receive permits or other necessary government authorizations.
    Last summer, the House Resource Committee Subcommittee on Energy 
and Mineral Resources conducted a hearing on this emerging crisis in 
the surety market. The Subcommittee heard testimony describing how an 
investment grade company was unable to access a surety bond at a 
reasonable price and terms to secure its deferred bonus bid payments 
for a Federal coal lease. Companies that cannot access surety bonds for 
their financial assurance requirements must use cash or cash 
equivalents which compromise their capital and liquidity positions. The 
effect of these developments for the Federal coal leasing program is 
that potentially fewer bidders will participate and bids will be lower 
than before as companies factor in the higher expense of posting some 
form of financial assurance. At the same time, not requiring a bond or 
other form of financial assurance to secure future installments for a 
deferred bonus bid does not pose any undue risk. First, bonus bids must 
be paid in five installments with the first due upon execution of the 
lease. Placing a lease into production typically exceeds five years so 
the leasehold will remain largely undisturbed. If the successful bidder 
defaults on an installment and is unable to cure that default, the 
Department of the Interior can cancel the lease and the cancelled lease 
resold to another prospective bidder.
    In sum, this provision protects the government in the event of 
default without further reducing the limited surety capacity available 
to guarantee performance of other regulatory obligations.
Conclusion
    Again, thank you for the opportunity to express the mining 
industry's views on the critical role of Federal coal resources to our 
Nation's energy security and how H.R. 794 will assist in ensuring that 
those resources are produced in an orderly and efficient manner for the 
benefit of all Americans.
                                 ______
                                 
    Mr. Rehberg. Thank you.
    Ms. Kendall.

STATEMENT OF SARA KENDALL, WASHINGTON OFFICE DIRECTOR, WESTERN 
               ORGANIZATION OF RESOURCE COUNCILS

    Ms. Kendall. Good afternoon. My name is Sara Kendall. I am 
the Washington Office Director for WORK, the Western 
Organization of Resource Councils. WORK is a network of 
grassroots organizations from seven western states. Many of our 
members live and work in communities impacted by coal mining, 
and most are taxpayers in coal-producing states.
    We have worked for over 30 years to ensure that the 
benefits of natural resource development are shared with the 
local people and that Federal coal management takes into 
account the needs of local people and communities to plan with 
certainty for their futures.
    WORK was one of the principal organizations advocating for 
the passage of the Coal Leasing Amendments Act of 1976. This 
Act was passed in direct response to a decade of rampant 
speculation on Federal coal leases and enjoyed strong 
bipartisan support of Members of Congress from coal-producing 
areas.
    I want to thank you for the opportunity to present our 
views on H.R. 794. We are concerned that the broad changes 
proposed in this bill would eliminate many of the requirements 
Congress placed on the Federal coal leasing program to 
encourage a fair return to Federal and state taxpayers for the 
use of public minerals and promote the diligent development of 
those minerals. I will focus on our three primary concerns with 
the bill this morning.
    First, by eliminating the 160-acre limit on lease 
modifications, H.R. 794 would effectively allow mines to expand 
indefinitely without having to bid competitively and make bonus 
payments. In areas where there has been competition to secure 
leases for the remaining unleased acreage, a coal company 
seeking to expand its operation could submit a plan 
modification for additional acreage and not have to compete for 
the coal as is currently the case.
    While there is some limits on the Secretary's discretion to 
improve lease modifications, we believe that maintaining an 
acreage limit is necessary to ensure that the lease by 
application process remaining part of common practice in order 
to ensure that the public's coal is properly valued. In 
removing the acreage limit, we remove the incentive for lessees 
to design tracts that are big enough and allow lease 
configurations that split deposits that would be competitive as 
a whole into a series of noncompetitive parcels that can be 
added later without undergoing the competitive bid process. An 
acreage limit helps ensure that the lease modification process 
is used as was intended for adjustments to borders and that the 
lease by application process is used when the lessee needs more 
coal.
    Second, although the Mineral Leasing Act's requirement that 
lessees produce commercial quantities of coal within 10 years 
would not be changed, a series of provisions in H.R. 794 would 
remove other important protections that currently ensure that 
coal leases are developed in a timely way and that the leasing 
program is not misused to speculate with the people's coal. 
When the investment required to hold the lease is reduced below 
the fair market value and the requirements for timely 
production are relaxed, a lessee is more free to hold a lease 
during the period when it can be economically mined and then 
terminate the lease and walk away.
    H.R. 794 would eliminate the requirement of a surety bond 
or other financial assurance to guarantee cash bonus payments, 
allow operators to mine logical mining units for more than 40 
years, allow companies to stop producing coal for 20 years 
instead of 10 and pay advance royalties instead of production 
royalties during this period, and finally, give the Secretary 
the discretion to reduce, suspend, or forgive advance royalties 
during such periods of nonproduction.
    The provision that would allow the waiving of advance 
royalties is particularly disturbing to us. I see no protection 
against uneven application of royalty waivers, and only way 
that this provision when implemented could be viewed as 
anything other than a special favor for specific companies is 
if it applied across board to all lessees. I don't think either 
of these options is a desirable alternative.
    We are also particularly concerned with the proposal to 
eliminate the requirement of a surety bond for deferred bonus 
payments. Requiring such financial assurance is a well-
established business practice and entirely appropriate in this 
case. Bonus payments are part of the cost of securing a Federal 
leasehold and should not be forgiven if a lessee changes its 
business plan or the market chains.
    Our third area of concern is with the impact these 
amendments would have on the states. Since bonus payments and 
royalties are shared equally with the states in which the coal 
is located, state as well as Federal revenues would be impacted 
if the removal of the 160-acre limit on the lease modifications 
results in reduced bonus payments, if deferred bonus payments 
are not paid in full due to a lack of financial assurance, if 
advance royalty waivers are granted, and/or if we see a return 
to speculation that reduces the overall development of Federal 
coal resources.
    In closing, although there may be some specific cases where 
the requirements of current law are impeding further 
development, we do not believe that the case has been 
adequately made that the overall program is not functioning 
well and that the broad changes are needed. We are not as 
opposed to allowing narrow exemptions for individual companies 
in specific cases where burdensome problems can be alleviated, 
but we are concerned that the amendments proposed in H.R. 794 
would return us to speculation with public resources, and we 
urge you to reconsider this approach.
    Thanks again for the opportunity.
    [The prepared statement of Ms. Kendall follows:]

  Statement of Sara Kendall, on behalf of the Western Organization of 
                     Resource Councils, on H.R. 794

    Madam Chairwoman, my name is Sara Kendall. I am the Washington, 
D.C. Office Director for WORC--the Western Organization of Resource 
Councils. WORC is a network of grassroots organizations from seven 
western states that include 8,250 members and 46 local community 
groups--the Dakota Resource Council in North Dakota, Dakota Rural 
Action in South Dakota, the Idaho Rural Council, the Northern Plains 
Resource Council in Montana, Oregon Rural Action, the Powder River 
Basin Resource Council in Wyoming and Western Colorado Congress.
    Many of WORC's members live and work in communities impacted by 
coal mining, and most are taxpayers in coal-producing states. We have 
worked for over 30 years to ensure that the benefits of natural 
resource development are shared with local people, and that Federal 
coal management takes into account the needs of local people 
communities to plan with certainty for their futures. WORC was one of 
the principle organizations advocating for the passage of the Coal 
Leasing Amendments Act of 1976. This Act was passed in direct response 
to a decade of rampant speculation on Federal coal leases, and enjoyed 
the strong bipartisan support of members of Congress from coal 
producing areas.
    Thank you for the opportunity to present our views on H.R. 794. 
WORC is concerned that this bill would eliminate many of the 
requirements Congress placed on the Federal coal leasing program to 
encourage a fair return to Federal and state taxpayers for the use of 
public minerals, and promote the diligent development of those 
minerals. We are quite concerned that the broad changes proposed in 
H.R. 794 would result in a return to policies that allowed coal 
companies to amass control of large amounts of public land and coal, 
and hold them for an indefinite period without mining. We have four 
concerns with the bill.
    First, by eliminating the 160-acre limit on lease modifications, 
H.R. 794 would effectively allow mines to expand indefinitely without 
having to bid competitively and make bonus payments. In areas where 
there has been competition to secure leases for the remaining unleased 
acreage, such as the Powder River Basin, a coal company seeking to 
expand its operation could submit a plan modification for additional 
acreage and not have to compete for the coal as is currently the case.
    While there are some limits on the Secretary's discretion to 
approve lease modifications, we believe that maintaining an acreage 
limit is necessary to ensure that the lease by application process 
remains part of common practice in order to ensure that the public's 
coal is properly valued. In removing the acreage limit, we remove the 
incentive for lessees to design lease tracts that are big enough, and 
allow lease configurations that split deposits that would be 
competitive as a whole into a series of non-competitive parcels that 
can be added later without undergoing the competitive bid process. An 
acreage limit helps ensure that the lease modification process is used 
as it was intended, for adjustments to borders, and that the lease by 
application process is used when the lessee needs more coal.
    Second, although the Mineral Leasing Act's requirement that lessees 
produce commercial quantities of coal within ten years would not be 
changed, a series of provisions in H.R. 794 would remove other 
important protections that currently ensure that coal leases are 
developed in a timely way, and that the leasing program is not misused 
to speculate with the peoples' coal. When the investment required to 
hold a lease is reduced below the fair market value, and the 
requirements for timely production are relaxed, a lessee is more free 
to hold a lease during the period when it can be economically mined, 
then terminate the lease and walk away.
    H.R. 794 would:
     Eliminate the requirements of a surety bond or other 
financial assurance to guarantee cash bonus payments,
     Allow operators to mine ``logical mining units'' for 
longer than 40 years,
     Allow companies to stop producing coal for 20 years 
instead of ten, and pay advance royalties instead of production 
royalties during this period,
     Give the Secretary the discretion to reduce, suspend or 
forgive advance royalties during such periods of non-production, and
     Eliminate the requirement that operating and reclamation 
plans be submitted within three years of lease issuance.
    The provision that would allow the waiving of advance royalties is 
particularly disturbing. I see no protection against uneven application 
of royalty waivers. The only way this provision, when implemented, 
could be viewed as anything other than a special favor for specific 
companies is if it's applied across the board to all lessees. Neither 
of these options is a desirable alternative.
    Congress had the foresight to allow bonus payments to be deferred 
over a five-year period. In return, the lessee must secure a surety 
bond or other financial assurance mechanism to protect the government's 
interests. Requiring such financial assurance is a well-established 
business practice and entirely appropriate in this case. Bonus payments 
are part of the cost of securing a Federal leasehold, and should not be 
forgiven if a lessee changes its business plan or the market changes.
    Third, we are concerned about the impact many of these amendments 
would have on the states. Since bonus payments and royalties are shared 
equally with the states in which the coal is located, state as well as 
Federal revenues would be impacted if:
     Removal of the 160-acre limit on lease modifications 
results in reduced bonus payments,
     Deferred bonus payments are not paid in full due to lack 
of financial assurance,
     Advance royalty waivers are granted, and/or
     We see a return to speculation that reduces the overall 
development of Federal coal resources.
    Finally, H.R. 794 would change the method for computing advance 
royalties from the amount of production royalties that would have been 
paid to be based instead on the average price of coal sold in the spot 
market from the region. It is unclear how this system would work and 
whether it would result in a fair return to the public.
    In closing, although there may be specific cases where the 
requirements of current law are impeding further development, we do not 
believe that the case has been made that the overall program is not 
functioning well and that broad changes are needed. We are not opposed 
to allowing narrow exemptions for individual companies in specific 
cases where burdensome problems can be alleviated, but we are concerned 
that the amendments proposed in H.R. 794 would return us to a day of 
speculation with public resources. We urge you to reconsider this 
approach. Thank you again for the opportunity to testify.
                                 ______
                                 
    Mr. Rehberg. Thank you.
    Mr. Quinn, Ms. Kendall reiterated a position or at least a 
question that Ms. Burden was asked earlier about the fact that 
the Secretary could forgive debt. Could you explain what the 
provision does? Can the Secretary just forgive royalties that 
are due?
    Mr. Quinn. No. There is no provision in law that allows the 
Secretary to forgive royalties that are due on production. It 
believe there was some confusion being expressed about advance 
royalties. Advance royalties are not due the Government. 
Advance royalties are paid in lieu of production if allowed, 
and you have to pay them to get the opportunity to put your 
mine on an idle status. So the fact that this law would allow 
some flexibility to continue to pay advance royalties does not 
absolve anybody of paying them if they choose that option.
    Mr. Rehberg. I thought I heard you say that there could not 
be a cumulative expansion under the 160 acres, and yet Ms. 
Kendall said that there would be. How do you respond to her 
position that there would be that expansion indefinitely?
    Mr. Quinn. The criteria that applies currently for what we 
call bypass or at least modifications is that the Government 
will receive fair market value at the operation, there is no 
other competitive interest in that lease tract, and three, that 
tract alone could not support an independent operation on its 
own. Those criteria, I think would govern and guide the 
Secretary's discretion in ensuring that, as Ms. Kendall 
suspects, that people will take a lease initially at a smaller 
size and then just keep adding on.
    I can tell you from a matter of economics in the west, for 
western mines, you are not going to start with a small lease 
and then try to grow it. You are going try to start with a 
sizable lease that will support production levels that get you 
into the marketplace, and thereafter, you will try to add to 
it. But the marginal lease modification process won't be 
adequate for that. That is really to pick up coal nearby that 
you would otherwise be bypassing anyway and would be lost 
forever.
    Mr. Rehberg. Do the provisions of this proposed legislation 
eliminate or change the diligence development requirement of 
the Mineral Leasing Act?
    Mr. Quinn. No, they don't, and the diligence development 
requirement of 10 years was the provision in the 1976 Act to 
address so-called speculation. That provision stays in tact. 
You cannot evade that by paying advance royalties. You have to 
be in production within 10 years.
    Mr. Rehberg. Ms. Kendall, right now, surety bonds -- and I 
asked this question earlier -- are not available, meaning that 
the bidder on a coal lease must put up the total bid in cash or 
cash equivalent, thereby negating any advantage of deferring 
payment of the entire bonus bid. Isn't this going to cause a 
reduction in bonus bids in future lease sales, causing a 
significant loss of revenue to both state and Federal 
Governments?
    Ms. Kendall. I think our concern is that, you know, whether 
doing away with financial assurance for deferred bonus payments 
is an appropriate response. There was a hearing before the 
Subcommittee last year in which the surety industry testified, 
and with respect to these specific bonds, their testimony was 
that the concern they had -- if my recollection is correct, the 
concern that they had was that they were not allowed to cover 
the cost of the bond, that the lease would revert back to the 
Government and that that is what made those bonds are poor 
risk.
    So I am not sure that completely doing away with the 
bonding requirement is the appropriate response to the problem 
that we are seeing in the industry right now.
    Mr. Rehberg. You expressed concerns about the affects this 
bill would have on the royalties collected by states. What 
states? Have you heard from individual states that have 
concerns about this?
    Ms. Kendall. We have not, and I think this is just a 
general concern, and part of the problem is that we don't have 
specifics, and I think the industry has asked for these 
changes. The Administration supports them, and they have talked 
about the need to maintain flexibility, but we don't have a lot 
of specifics. There was some testimony over on the Senate side 
from Arch Minerals, I believe it was, last week, and they 
talked about certain companies coming close to the 160-acre 
limit, for example, but we don't have the details.
    So it is very hard to assess what kind of impact these 
changes would have, but I do think that if you look at doing 
away with the 160-acre limit on lease modifications, that does 
away with the bonus payments for any additional average that is 
added, and that is a reduction in revenues. I mean, there may 
be also an associated rise in coal production, but it is very 
hard to assess in the absence of more information.
    I think the other points that we raised about the language, 
the language in the bill that I was referring to earlier that 
had to do with the authority to waive, suspend, or reduce 
advance royalties is near the end, and it basically strikes 
language that says nothing in this section shall be construed 
as granting the Secretary the authority to waive, suspend, or 
reduce advance royalties, which subjects that you are giving 
the Secretary the authority to do that or the discretion to do 
that. I mean, you may be able to argue that that will spur more 
coal development, but if the Secretary is reducing advance 
royalties, then that is a reduction in revenues to both the 
Federal and state governments.
    And so those are just two examples. I think there are 
others that we have the concerns about. We have not assessed 
the specifics and we have not heard from states.
    Mr. Rehberg. Well, I want to thank you for coming before 
this Committee today. I apologize on behalf of our Chairman, 
Chairman Cubin who has an excused absence today, was not 
anticipating being absent, and so I need to say that member of 
the Subcommittee will have additional time. They might have 
additional questions that they might have of the witnesses, and 
we ask that you respond in writing, if you would, please.
    The hearing record will be open for 10 days for these 
responses, and if there is no further business before this 
Subcommittee, the Chairman again thanks the members of the 
Subcommittee and our witnesses, and the Subcommittee stands 
adjourned.
    [Whereupon, at 12:29 p.m., the Subcommittee was adjourned.]

    The following information was submitted for the record.
    [The prepared statement of Mrs. Cubin follows:]

  Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on 
         Energy and Mineral Resources, on H.R. 793 and H.R. 794

    Today, the Subcommittee on Energy and Mineral Resources will hear 
testimony about two bills, H.R.793, legislation on energy related uses 
of the Outer Continental Shelf (OCS), and H.R. 794, the Coal Leasing 
Amendment Acts of 2003.
    H.R. 793 addresses the need for statutory authority to permit 
future non-traditional energy and energy-related projects on the OCS. 
Such projects would include alternative energy projects--such as wind, 
wave and solar power production--as well as ancillary projects to oil 
and gas development on the Shelf--such as emergency medical facilities 
and supply facilities that support deepwater exploration and 
development projects.
    Last year, I was contacted by the Administration about the need for 
legislation that would clarify the permitting process for these 
innovative projects on the OCS. Working with the Administration, we 
introduced a bill that gives the Secretary of the Interior the 
authority to permit and oversee energy related activities under the OCS 
Lands Act. I have again introduced that bill for consideration in the 
108th Congress.
    H.R. 793 is needed because no authority currently exists to permit 
alternative energy projects and ancillary projects to support oil and 
gas development on the OCS. Clearly, America faces a growing energy 
supply and demand imbalance that calls for new solutions.
    Two innovative ways that will help meet that challenge are 
increased production and use of renewable energy and production of oil 
and gas from deep waters. H.R. 793 facilitates both of these solutions. 
The bill clarifies the jurisdiction for these projects so that private 
sector entities, wanting to develop alternative energy resources 
offshore, will have a clear path by which to approach relevant Federal 
agencies for permits. It is crucial for the development of any 
alternative or traditional energy project to have certainty in the 
permitting and regulatory processes. This bill would provide such 
certainty. It also ensures that future projects on the OCS will be 
performed in a safe and environmentally sensitive manner and that a 
proper abandonment and reclamation process will exist for each project.
    H.R. 793 enables the Department of Interior to inform and work with 
other Federal agencies that will be involved in the project permitting 
process. It is my understanding that the legislative language in H.R. 
793 has gone through an extensive discussion and approval process 
amongst all Federal agencies that have an interest in the OCS, and that 
the legislative language has been agreed to by those agencies and the 
OMB. This bill will not supercede or modify any existing authority of 
any other agency responsible for permitting or regulating offshore 
energy projects. It is designed to complement existing statutes and 
ensure that all innovative offshore energy projects have a clear 
permitting process.
    The President's National Energy Plan called for the simplification 
of permitting for energy production in an environmentally-sensitive 
manner. It also called on the Secretaries of the Interior and Energy to 
evaluate access limitations to Federal lands in order to increase 
renewable energy production. This legislation helps to address both of 
these goals.
    I understand that offshore wind energy projects are now being 
considered in the U.S. and that several have already been developed in 
Northern Europe with significant generation capacity on the drawing 
board. In fact, a record 6,868 megawatts of new wind power capacity was 
installed worldwide in 2002, increasing generating capacity by 28% last 
year, according to new figures released from the American Wind Energy 
Association and European Wind Energy Association.
    Offshore wind development is a sound use of public resources for 
energy production. We need new alternative and traditional energy 
solutions in order to meet our future energy needs. I believe this bill 
will help to facilitate these solutions.
    H.R. 794 makes targeted technical changes to the Mineral Leasing 
Act that adapt to the realities of market conditions so that we may 
make full use of the America's Federal coal resources. It encourages 
continued diligent development of coal on Federal lands and ensures the 
flow of Federal royalty revenue while giving the Interior Secretary the 
ability to manage coal resources for maximum value to the public.
    Coal is the largest domestically produced energy source and remains 
the largest source of electricity generation in the nation, at about 
50% of current generation capacity. Coal is an abundant, domestically 
produced product and, through the continued development and 
implementation of clean-coal technology, will remain a secure energy 
resource for years to come.
    Currently over one-third of our coal is mined on Federal lands. 
Federal coal benefits the nation not only because it is a domestically 
produced energy resource, but also because the Minerals Management 
Service collected about $5.5 billion in revenues on coal produced from 
Federal lands. The legislation seek today would facilitate the 
continued development of Federal coal by making only changes to coal 
leasing provisions in the Mineral Leasing Act that present impediments 
to the efficient development of Federal coal resources.
    One provision amends the 160 acre life-of-lease limitation on 
Federal coal lease modifications. This provision provides flexibility 
by giving the Secretary the discretion to allow production of non-
competitive coal contiguous to an existing lease so that small 
quantities of coal will be recovered that might otherwise be left 
behind. This provision is designed to provide a common sense way to 
encourage efficient production of a domestic energy resource. It is not 
designed to side step the competitive lease process. I am willing to 
work with the minority to address any concerns to the contrary.
    Other provisions allow the consolidation of leased coal reserves 
requiring more than 40 years to mine, allow the Secretary to accept the 
payment of advance royalties in lieu of continued operations for a 
total of 20 years and eliminate the requirement under the Mineral 
Leasing Act that a lessee to file a mining plan no later than three 
years after the lease is issued. SMCRA contains a similar requirement 
which remains in force. These are common sense adjustments that provide 
flexibility and allow cost-effective development of the resource.
    Finally, a provision addresses the requirement of surety bonds for 
the payment of bonus bids on coal leases. A lease will be terminated if 
a lessee fails to make a bonus bid payment.
    These bills promote ways for government to help the private sector 
increase energy production. A new round of energy price spikes in 
recent weeks are yet another wake-up call concerning our need to 
increase domestic energy production in this country. Energy issues will 
again be a major priority in this Congress and the development of a 
comprehensive energy bill is underway.
    I want to welcome our witnesses as well as our Subcommittee members 
to the first Subcommittee hearing of the 108th Congress. I look forward 
to working with you all on these legislative issues and all of the 
issues that will come before our Subcommittee this year.
                                 ______
                                 
    [A statement submitted for the record on H.R. 793 by the 
Long Island Power Authority follows:]

 Statement submitted for the record by the Long Island Power Authority

    The Long Island Power Authority (``LIPA'') is pleased to provide 
testimony on H.R. 793, to amend the Outer Continental Shelf Lands Act 
for Alternative Energy-Related Uses. LIPA is a corporate municipal 
instrumentality of the State of New York and was established by the New 
York legislature in 1986. LIPA provides electric service to nearly 1.1 
million customers in Nassau and Suffolk counties, and the Rockaway 
Peninsula in Queens, New York.
    LIPA requests that H.R. 793 not impose new impediments on offshore 
wind projects that are currently underway. On January 22, 2003, LIPA, 
supported by a coalition of interests representing over 30 Long Island-
based environmental, civic and faith-based groups, released a Request 
for Proposals (``RFP'') seeking development of an offshore wind project 
to be operational by 2007. The RFP requests proposals for wind power to 
be produced from a facility located 2 to 6 miles offshore of Long 
Island with a total generating capacity of 100-140MW. LIPA intends to 
purchase 100% of the capacity, ancillary services, and environmental 
attributes of the offshore project for a term of at least 15 years. We 
will provide an underground cable to connect the offshore wind project 
to LIPA's power grid.
    The offshore wind project is intended to help meet the region's 
growing electricity demands in an environmentally sensible way. 
Population density and the continued rapid development on Long Island 
has resulted in the lack of suitable locations to site and construct 
electricity generation projects powered by wind. The offshore area of 
Long Island, however, has the potential to accommodate significant 
amounts of wind energy. One recent study shows that an area of over 314 
square miles off the coast of Long Island could yield 5,200 megawatts 
of wind power capacity which would produce the equivalent of 77% of 
Long Island's current electricity needs.
    This ongoing wind project is part of LIPA's Clean Energy 
Initiative, a multi-year, $170 million program implemented by New York 
Governor George Pataki to promote energy conservation and efficiency, 
and to research, develop and implement the use of alternative energy 
technologies. These programs have yielded over 122 GWH of energy 
savings with 290 GWH of energy savings projected by the end of 2004.
    In addition, this offshore wind project is an important means for 
achieving Governor Pataki's proposed renewable energy portfolio 
standard which requires that 25% of electricity bought in New York 
State must come from renewable technologies within 10 years.
    This project has broad support from the State of New York, business 
groups and the environmental community on Long Island, including the 
Environmental Advocates of New York, the Natural Resources Defense 
Council, the Neighborhood Network, the Long Island Sustainable Energy 
Alliance, the Citizen's Campaign for the Environment, the New York 
Public Interest Group and the Citizens Advisory Panel.
    The developer of the offshore wind project must obtain all 
necessary Federal, state and local permits. LIPA has already conducted 
studies on the project's impact on marine and avian species and a legal 
analysis of Federal, state and local laws relevant to project. In 
addition, LIPA has completed siting assessments on the location of the 
offshore wind project. The 60-page Phase II Siting Assessment evaluated 
a number of environmental, economic and operational factors to identify 
for potential developers the offshore area that offers the best 
opportunity for constructing and operating the offshore park with the 
least environmental impact on the communities. The success of our 
efforts thus far, is evidenced by the fact that the major environmental 
groups on Long Island support the project.
    As the Committee continues its assessment of H.R. 793, LIPA 
requests that this legislation not be drafted in a manner that will 
impose delays or added costs to offshore projects, like ours, that are 
well underway. LIPA's offshore wind project is important to meeting 
Long Island's growing electricity needs in an environmentally sensible 
way. As consideration of this legislation moves forward, LIPA would be 
pleased to provide any additional information about this offshore wind 
project.
                                 ______
                                 
    [A statement submitted for the record on H.R. 793 by Kevin 
Rackstraw, Clipper Windpower, Inc., and Aquantis, LLC, 
Bethesda, Maryland follows:]

March 19, 2003

The Honorable Barbara Cubin, Chair
Committee on Resources
Subcommittee on Energy and Mineral Resources
1334 Longworth House Office Building
Washington, DC

Dear Representative Cubin:

    My name is Kevin Rackstraw. I am the Eastern Regional Leader for 
Clipper Windpower, Inc., one of the leading developers of wind energy 
projects. In addition, I also represent an affiliated company called 
Aquantis, LLC, which is developing an undersea ocean current turbine.
    Thank you for your efforts to bring some certainty and structure to 
the approvals process for utilizing the tremendous energy resources off 
the coasts of the United States. Attached is written testimony I would 
like to submit for the record related to the hearing held on March 6, 
2003, about H.R. 793, your bill to amend the Outer Continental Shelf 
Lands Act for Alternate Energy-Related Uses. I apologize for not being 
present at the March 6 hearing, but unfortunately we did not learn of 
the opportunity to testify until relatively late. I am happy to make 
myself or members of the Aquantis team available to the Subcommittee 
should the opportunity arise to brief you, the Members or staff on the 
ocean current turbine.
    Thank you again for your interest in this important matter.

Sincerely,

Kevin Rackstraw
Eastern Regional Leader
Eastern Regional Office: 6500 Pyle Road, Bethesda, MD 20817
(301/263-0028; 301/263-0042 fax)
Headquarters: 6305 Carpinteria Avenue, Suite 300
Carpinteria, CA 93013
(805/899-9199; 805/899-1115 fax)
                                 ______
                                 

    Statement submitted for the record by Kevin Rackstraw, Clipper 
  Windpower, Inc., and Aquantis, LLC, Bethesda, Maryland, on H.R. 793

    My name is Kevin Rackstraw. I am the Eastern Regional Leader for 
Clipper Windpower, Inc., one of the leading developers of wind energy 
projects. I am submitting testimony to support your efforts to 
streamline and clarify the process for the granting of rights to 
develop renewable energy projects on the Outer Continental Shelf (OCS). 
Clipper is expecting offshore windpower to be an important part of the 
country's effort to develop domestic, renewable energy projects over 
the coming years. It is vital that the process for granting rights to 
utilize the huge offshore wind resource be clarified and streamlined. 
The current situation of overlapping and uncertain jurisdiction and 
absence of a grant or easement process makes it difficult to attract 
the necessary capital to move this huge opportunity forward. Clipper 
supports the testimony submitted by Bruce Bailey for the American Wind 
Energy Association at your March 6, 2003, hearing.
    I also represent an affiliated company called Aquantis, LLC, which 
is developing an ocean current turbine that can be deployed at moderate 
depths below marine traffic and yet cause a minimal disturbance to the 
ocean floor. Ocean currents are relatively constant, meaning that ocean 
current technology can provide baseload power year around. We also 
believe that this technology will be competitive with any other 
renewable energy technology within a relatively short time and has the 
potential to be directly competitive with conventional energy as well. 
Aquantis is within several years of commercial deployment of this 
technology, so it is vital to the technology's future that any effort 
to clarify the offshore permitting process addresses ocean currents as 
well.
    Aquantis has received substantial research grants from the State of 
California and the U.S. Government through the Small Business 
Innovative Research (SBIR) program to continue the development of this 
very promising technology and has recently tested a prototype at the 
Naval Surface Warfare Center at Carderock. Admiral Albert Baciocco, 
former Chief of the Office of Naval Research, is on the Aquantis Board 
of Directors, as is Richard Metrey, former head of the Carderock 
facility.
    Much like Clipper, Aquantis will also seek the right to utilize the 
huge natural and renewable resources that are present offshore of the 
United States. Ocean currents are not mentioned in your current bill, 
which does make specific mention of wave energy. We believe that ocean 
current technology will be the first ocean energy technology to make a 
significant contribution to our energy future, so we would respectfully 
request that the bill's language be expanded to cover ocean currents. I 
will provide in a separate mailing to the Subcommittee more details on 
the design and operation of the turbine to allow the Members and staff 
to validate the strides that this new technology has made.
    I would like to echo in particular one specific comment made by 
Bruce Bailey in his March 6, 2003, testimony before the Subcommittee. 
We respectfully request the Subcommittee to ensure that the 
implementation of this bill not impose new barriers in the permitting 
approval process for offshore projects, whether wind or ocean-based. We 
support the purpose of the bill, which is to make the process more 
orderly and certain.
    Thank you for the opportunity to present testimony on this 
important bill. We look forward to working with you to develop the huge 
offshore renewable energy resources that are available to us. 
Generating electricity from clean and renewable sources of energy from 
the wind and oceans will help to lessen our dependence on imported and 
polluting sources of energy, which will be a boon to both our 
environment and our economy.

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