[Senate Hearing 106-14]
[From the U.S. Government Publishing Office]



 
55-970 CC

                                 ______

1999

                                                         S. Hrg. 106-14

                  OFFSHORE OIL AND GAS ACTIVITY IMPACT

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                 on the

IMPACTS OF COASTAL AREAS AND COMMUNITIES CAUSED BY OFFSHORE OIL AND GAS 
                      EXPLORATION AND DEVELOPMENT

                               __________

                            JANUARY 27, 1999


                       Printed for the use of the
               Committee on Energy and Natural Resources

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402
?

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  FRANK H. MURKOWSKI, Alaska, Chairman

PETE V. DOMENICI, New Mexico         JEFF BINGAMAN, New Mexico
DON NICKLES, Oklahoma                DANIEL K. AKAKA, Hawaii
LARRY E. CRAIG, Idaho                BYRON L. DORGAN, North Dakota
BEN NIGHTHORSE CAMPBELL, Colorado    BOB GRAHAM, Florida
CRAIG THOMAS, Wyoming                RON WYDEN, Oregon
GORDON SMITH, Oregon                 TIM JOHNSON, South Dakota
JIM BUNNING, Kentucky                MARY L. LANDRIEU, Louisiana
PETER G. FITZGERALD, Illinois        EVAN BAYH, Indiana
SLADE GORTON, Washington             BLANCHE L. LINCOLN, Arkansas
CONRAD BURNS, Montana

                  Andrew D. Lundquist, Staff Director

                      David G. Dye, Chief Counsel

                 James P. Beirne, Deputy Chief Counsel

               Robert M. Simon, Democratic Staff Director

                Sam E. Fowler, Democratic Chief Counsel

              Kelly Johnson, Counsel for Natural Resources

                Shirley Neff, Staff Economist, Minority

                                  (ii)

  
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                            C O N T E N T S

                               __________

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     6
Caldwell, Jack C., Secretary, Louisiana Department of Natural 
  Resources......................................................    21
Fitzgerald, Hon. Peter G., U.S. Senator from Illinois............    12
Graham, Hon. Bob, U.S. Senator from Florida......................    10
Landrieu, Hon. Mary L., U.S. Senator from Louisiana..............     6
Lincoln, Hon. Blanche L., U.S. Senator from Arkansas.............    20
Lott, Hon. Trent, U.S. Senator from Mississippi..................     5
Murkowski, Hon. Frank H., U.S. Senator from Alaska...............     1
Navarre, Mike, Mayor, Kenai Peninsula Borough, AK................    52
Oltz, Dr. Donald F., Ph.D., State Geologist, Alabama.............    30
Palmer, James I., Jr., Executive Director, Mississippi Department 
  of Environmental Quality.......................................    15
Sessions, Hon. Jeff, U.S. Senator from Alabama...................    13
Van Putten, Mark, President and CEO, National Wildlife Federation    34
Whitaker, Jim, State Representative from Alaska..................    27

                                APPENDIX

Responses to additional questions................................    55

                                 (iii)

  

 
                  OFFSHORE OIL AND GAS ACTIVITY IMPACT

                              ----------                              


                      WEDNESDAY, JANUARY 27, 1999

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:35 a.m., in 
room SH-216, Hart Senate Office Building, Hon. Frank H. 
Murkowski, chairman, presiding.

         OPENING STATEMENT OF HON. FRANK H. MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    The Chairman. Good morning. We will call the hearing to 
order.
    This is the Committee on Energy and Natural Resources, an 
oversight hearing on the impacts of offshore activities on 
coastal States and communities. And I might add, for the 
benefit of those of you, this is not our normal room. The 
Architect of the Capitol has designs on our space and, as a 
consequence, there is substantial construction going on. So, I 
suspect at some point in time we will be moving back.
    But we also have a hearing tomorrow. And I believe it is in 
this room. And we will hear from witnesses on the state of our 
domestic oil industry from the standpoint of the impact of the 
mergers, consolidations, as well as the smaller producers, as 
well as the drilling contractors, and the general effect that 
lower oil prices are having on the economy and the continued 
increase in foreign production, particularly that which would 
be potentially brought about by the lifting of the sanctions on 
Iraq, from about 500,000 barrels a day to 2.5 million.
    Let me welcome Senator Bingaman, as he takes over the role 
of the ranking member, from long-time member, Senator Bumpers. 
And we look forward to working with you, my Democratic 
colleagues on your side, as well as the very professional staff 
that we have on both sides. We have been graced, I think, in 
this committee with a good deal of bipartisanship, and we 
continue to look forward to having that kind of a relationship 
as we pursue the areas of responsibility under our 
jurisdiction.
    So, welcome to the first Energy and Natural Resources 
Committee hearing of this new Congress.
    I would also like to point out that we are pretty much on 
schedule with our hearings. We have not lost any significant 
time as a consequence of the other items that have taken up a 
good deal of our attention.
    We are going to hear testimony today from those that are 
most affected by the offshore oil and gas production, the 
States and communities who share their coast for the national 
interest of domestic energy production. There will be a number 
of future hearings to examine in depth the three titles of the 
bill that Senator Landrieu and I have introduced, to provide 
coastal impact assistance.
    Further, I want to advise those that are interested in the 
States that have a moratoria that we will accommodate those 
States in future hearings relative to their concerns about any 
activity off their OCS areas, and also the dilemma of the 
revenue-sharing issue. But that is a commitment that I made to 
a number of members who have indicated a concern, and wanted to 
testify at this hearing.
    The purpose of this hearing is simply to basically lay down 
the legislation. Currently, Federal OCS production is 
authorized to occur off the coast of six States. That is Texas, 
Alabama, Mississippi, Louisiana, a part of California, and 
parts of Alaska. Although, in Alaska, there is no significant 
production off of our coast at this time.
    Our witnesses today represent three of the Gulf Coast 
States, as well as my State of Alaska. They know firsthand the 
mixed blessings of Federal OCS energy programs, and can add to 
our knowledge of how offshore oil and gas production impacts 
those closest to it.
    If oil and gas are discovered on Federal lands in Wyoming, 
the revenues from that discovery would be split 50/50 with the 
State of Wyoming. However, as you know, those rules do not 
apply to the oil and gas discovered on Federal submerged lands 
on the outer continental shelf.
    In fiscal year 1997, the Federal OCS leasing program 
generated $4.1 billion in rents and royalties. None of these 
funds were shared with the State which hosts the development 
and of course underwrites and puts up with the impacts.
    Well, all that money goes to the Federal Treasury. We do 
not think that is fair. It is also important to note the role 
of the Federal OCS production in meeting our energy demands. 
America imports more than 56 percent of our total domestic 
petroleum requirements. And, further, the Department of Energy 
predicts that in 10 years America will be at least 64 percent 
dependent on foreign oil.
    I think that addressed the national energy security 
interests of the country. OCS development will play, and 
continues to play, an important role in offsetting even greater 
dependence on foreign energy. Currently, the OCS accounts for 
14 percent of our oil production and 24 percent of our gas 
production.
    Unlike foreign oil and foreign tankers, this energy is 
homegrown and contributes directly to the national wealth of 
the country, and produces good jobs in those industries, and 
contributes to the balance of payments. Technological 
advancements have and will continue to result in new OCS 
production, having an unparalleled record of excellence on 
environmental and safety issues. Hence, we need to maintain a 
healthy OCS leasing program.
    Today's hearing occurs against the backdrop of the bill, S. 
25. That was legislation introduced by a bipartisan group of 11 
Senators.
    Now, I would like to recognize Senator Landrieu's efforts. 
Senator Landrieu, from Louisiana, has done an extraordinary job 
in working on this legislation, cooperating with staffs and the 
cosponsors of Senator Landrieu, Senator Lott, Senator Sessions, 
Senator Breaux, and Senator Cleland, Senator Johnson, Senator 
Craig, Senator Mikulski, Senator Cochran. And I think there are 
others, as well.
    The bill, as it stands in its current submitted form, would 
remedy the current inequity by redistributing 50 percent of the 
OCS revenue for three programs. The first would be coastal 
impact assistance. The second would be State and local park and 
recreation programs. And third, State wildlife programs. The 
other 50 percent, of course, is maintained in the Federal 
Treasury.
    S. 25 allots 27 percent of the OCS revenues to coastal 
States and communities that shoulder the responsibility of 
offshore oil and gas development off their coastlines. Funds 
would be used for a variety of coastal, environmental and 
infrastructure purposes under the jurisdiction of the 
communities, not the Federal Government.
    Our bill acknowledges that all coastal States have unique 
needs, and provides coastal impact assistance to 34 coastal 
States, even those States which currently prohibit by 
moratorium oil and gas activity off their coasts. The bill also 
takes a portion of the revenues and invests them in 
conservation and wildlife programs in all 50 States.
    Sixteen percent of the revenue would go to fund the Land 
and Water Conservation Fund for State and local park recreation 
facilities. Seven percent of the revenues would be used for 
State fish and wildlife programs, including actual activities 
to enhance the expansion of the wildlife resource.
    These programs recognize that a portion of the revenues 
earned from the depletion of a non-renewable resource should be 
reinvested in renewable resources--the park, recreation and 
conservation systems--which, of course, all Americans enjoy.
    And, finally, importantly, the expenditures of this money 
throughout the bill rests with the local communities and not 
the Federal Government. Local communities are going to figure 
out what renewable resources need to be conserved and enhanced 
for the benefit of the residents, not the Federal Government.
    One provision of concern is the protection of private 
property. The bill provides money for Federal land 
acquisition--approximately $350 million--based on OCS revenue 
of $4.1 billion in 1997. That would be shared with all 50 
States. And the average is, I think, $5 million to $10 million 
per State.
    Throughout the Western States, in Federal conservation 
units, there are private property holders being held in limbo, 
wanting to sell their land because their land use and access is 
curtailed by the Federal regulations, but no Federal money has 
been provided to make those owners whole. Well, that is an 
opportunity for those to seek relief.
    At the same time, there are inholders who do not want to 
sell. And what we have tried to do is reach a balance among 
those competing interests. And again, I want to compliment the 
staff in negotiating this, because they have, I think, put 
reasonable parameters around this. Only Federal purchases would 
be those that are authorized within land management units, 
authorized by an act of Congress. None of the funds could be 
used to condemn property.
    Two-thirds of the money would have to be spent east of the 
100th meridian, which runs from Texas, north, through the Great 
Plains. And it is kind of the area that is east of the 
Mississippi, but not quite. Acquisitions greater than $5 
million would require House and Senate authorization in 
appropriating committees. And while we recognize that this is 
not a perfect bill by any means, we think it is a start.
    We want to move it through the committee and through the 
hearing process through the appropriate method, which of course 
is to get witnesses to tell us the impacts of OCS and gas 
revenue in their schools, in their backyards, in their 
emergency response--all types of infrastructure services which 
the areas provide.
    The representatives of State and local government hear 
first when something of course goes wrong, whether real or 
perceived. So, after having opening statements from our 
members, we would look forward to hearing from our 
distinguished roster of witnesses.
    I will call on the ranking member, Senator Bingaman, at 
this time.
    [The prepared statements of Senators Murkowski and Lott 
follow:]
Prepared Statement of Hon. Frank H. Murkowski, U.S. Senator From Alaska
    Welcome to the first Energy and Natural Resources Committee hearing 
of this new Congress. We will hear testimony today from those most 
affected by offshore oil and gas production--States and communities who 
share their coasts for the national interest of domestic energy 
production and jobs.
    There will be a number of future hearings to examine, in depth, the 
three titles of the bill Senator Landrieu and I introduced to provide 
coastal impact assistance.
    Further, we want to promptly hold a hearing to accommodate those 
States that currently have moratoria on OCS development. Federal OCS 
production is authorized to occur off the coast of 6 States: Texas, 
Alabama, Mississippi, Louisiana, a part of California and parts of 
Alaska though there is no significant protection off of Alaska at this 
time.
    Our witnesses today represent three of the Gulf Coast States and 
Alaska. They know, first-hand, the mixed blessings of federal OCS 
energy programs and can add to our knowledge of how offshore oil and 
gas production impacts those closest to it. If oil and gas are 
discovered on Federal lands in Wyoming, the revenues from that 
discovery are split 50-50 with Wyoming.
    Those rules do not apply if the oil and gas are discovered on 
Federal submerged lands on the Outer Continental Shelf. In Fiscal Year 
1997, the Federal OCS leasing program generated $4.1 billion in rents 
and royalties--none of these funds were shared with the States which 
host this development and underwrite the impacts. All of the money goes 
to the Federal treasury. This is not fair.
    It also is important to note the role of Federal OCS production in 
meeting our energy demands. America imports more 56 percent of our 
domestic petroleum requirements. DOE predicts that, in the next 10 
years, America will be at least 64 percent dependent on foreign oil.
    OCS development will play an important role in offsetting even 
greater dependence on foreign energy. The OCS accounts for:
   14% of oil production;
   24% of our gas production.
    Unlike foreign oil on foreign tankers, this energy is home-grown 
and contributes directly to our national wealth. Produces good jobs in 
these industries and contributes to the balance of payments.
    Technological advancements have and will continue to result in new 
OCS production having an unparalleled record of excellence on 
environmental and safety issues. Hence, we need to maintain a healthy 
OCS leasing program.
    Today's hearing occurs against the backdrop of S. 25 legislation 
introduced by a bipartisan group of eleven Senators. Other cosponsors 
include: Landrieu, Lott, Sessions, Breaux, Cleland, Lott, Johnson, 
Gregg, Mikulski, and Cochran.
    Our bill would remedy the current inequity by redistributing 50% of 
the OCS revenues for three programs:
   coastal impact assistance;
   State and local park and recreation programs; and
   State wildlife programs.
    The other 50% remains in the Federal treasury. S. 25 allocates 27% 
of the OCS revenues to coastal States and communities that shoulder the 
responsibility of offshore oil and gas, development off their 
coastlines. Funds will be used for a variety of coastal, environmental 
and infrastructure purposes.
    Our bill acknowledges that all coastal States have unique needs and 
provides coastal impact assistance to 34 coastal States--even those 
States which prohibit oil and gas activity off their coasts. The bill 
also takes a portion of the revenues and invests them in conservation 
and wildlife programs in all 50 States. 16% of the revenues would go to 
fund the Land and Water Conservation Fund for State and local park and 
recreation facilities; and 7% of the revenues would be used for State 
fish and wildlife programs.
    These programs recognize that a portion of the revenues earned from 
the depletion of a non-renewable resource should be reinvested in 
renewable resources--the park, recreation and conservation systems 
which all Americans enjoy. Importantly, the expenditure of this money 
throughout the bill rests with local communities not with the Federal 
government. Local communities will figure out what renewable resources 
need to be conserved and enhanced for the benefit of their residents--
not the Federal government. One provision of concern is the protection 
of private property.
    The bill provides money for Federal land acquisition--approximately 
$350 million based on OCS revenues of $4.1 billion in 1997. Throughout 
the western States in Federal conservation units, there are private 
property holders being held in limbo--wanting to sell their land 
because their land use and access is curtailed by Federal regulations 
but no Federal money has been provided to make these owners whole. At 
the same time, there are other inholders who do not want to sell.
    The bill tries to reach a balance between these competing 
interests:
   only Federal purchases would be those within land management 
        units authorized by the Act of Congress;
   none of the funds could be used to condemn property;
   2/3 of the money would have to be spent east of the 100th 
        meridian which runs from Texas north through the Great Plains; 
        and
   acquisitions greater than $5 million would require House and 
        Senate authorizing and appropriating committees.
    No bill of this magnitude is perfect--it can, and will be, improved 
as it works its way through the Committee. Our witnesses can tell us 
the impacts of OCS oil and gas activity in their backyards of their 
communities, on their schools, on their emergency response teams and 
all types of infrastructure services. Representatives of State and 
local governments hear first when something goes wrong, whether real or 
perceived.
    So, after hearing opening statements from our members, we will look 
forward to hearing from our distinguished roster of witnesses.
                                 ______
                                 
  Prepared Statement of Hon. Trent Lott, U.S. Senator From Mississippi
    Mr. Chairman, since the inception of the oil and gas program on the 
Outer Continental Shelf (OCS), States and coastal communities have 
understandably sought a greater share of the benefits from development. 
These communities provide the infrastructure, public services, manpower 
and support industries necessary to sustain this development, and some 
percentage of the revenues should be reinvested in the affected region.
    Currently, the majority of OCS revenues are funneled into the 
Federal Treasury where they are used to pay for various federal 
programs and to reduce the deficit. The Conservation Reinvestment Act 
diverts one-half of the OCS revenues from the Federal Treasury to 
coastal States and communities for a multitude of programs. These 
States will effectively use the funds for local needs. This bill 
provides a framework within which these localities can make the right 
decisions for their citizens and their environment.
    Mr. Chairman, I know that there is no way to totally eliminate this 
impact on coastal communities. I also know that, while the benefits of 
a healthy OCS program are felt nationally, the infrastructure, 
environmental and social costs are felt locally.
    In addition to supporting up the States and coastal communities, 
our bill also provides funding for the Land and Water Conservation Fund 
(LWCF). More than 30 years ago, Congress set up this fund to address 
the American public's desire for more parks and recreational 
facilities. This bill makes the program self-sufficient, providing a 
secure funding source from the OCS revenues. This is an investment in 
our future--our land, our natural resources and our recreational 
enjoyment.
    The bill makes yet another investment with these OCS revenues--an 
investment in fish and wildlife programs. With the inclusion of OCS 
revenues, the amount of money available for State programs would nearly 
double. This is money that can be used to increase fish and wildlife 
populations and habitats. It could even be used for wildlife education 
programs.
    This bill was carefully crafted to strike a balance between the 
needs and interests of the oil and gas industry, the States, and the 
environmental and conservation groups. It's a good package that will 
benefit all Americans, not just those who live and work in coastal 
areas.
    I commend the Chairman for holding these hearings, and appreciate 
the hard work of my colleagues. I look forward to advancing this 
important legislation in the 106th Congress.

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Thank you very much, Mr. Chairman.
    I congratulate you for getting started on hearings, 
considering the other preoccupations we have around this place.
    Let me also congratulate Senator Landrieu and you for this 
legislation that you have introduced. I think it will give us 
the needed opportunity to analyze the pros and cons of the 
issues involved. I know this hearing is not focused directly on 
the legislation. I understand you are having additional 
hearings that will do that. But I think it does give us a 
chance to begin to understand the problem, or at least some of 
the problems, that the legislation is intended to address.
    So, I am glad to be here, and I look forward to hearing 
from the witnesses. We do have a caucus this morning on this 
impeachment issue, which I will have to duck out for. But I 
hope to hear some witnesses before then.
    Thank you.
    The Chairman. Thank you very much, Senator Bingaman.
    I might add that we too have a caucus. Ours starts at 11 
o'clock.
    Senator Bingaman. Ours starts at 10 o'clock.
    The Chairman. All right. Well, it looks like you are going 
to be leaving before me.
    It gives me a great deal of pleasure to welcome a new 
Senator to our committee, Senator Fitzgerald. It is a pleasure 
to have another banker around here. Bankers do not do very well 
in the election process, usually because they have a history of 
having to say ``no'' too often. Is that right?
    Senator Fitzgerald. That is true.
    The Chairman. Let me call on Senator Landrieu for an 
opening statement. Let me also recognize Senator Graham, who is 
with us this morning. He has been on the committee for many, 
many years, and he is from one of the States that is obviously 
affected, the State of Florida.
    Senator Landrieu, please proceed.

       STATEMENT OF HON. MARY L. LANDRIEU, U.S. SENATOR 
                         FROM LOUISIANA

    Senator Landrieu. Thank you.
    Mr. Chairman, in light of the time, I have prepared a 
statement that I want to submit it for the record. Because I 
think it is important to lay down some important facts.
    The Chairman. Without objection, so ordered.
    Senator Landrieu. But I will speak just from my heart this 
morning about this bill. You and I have worked so closely in 
the last year about it. Or, I should say, this issue, not the 
bill. I want to thank you for your help and your leadership in 
getting this process started. And I want to thank the members 
on my side for their input, their advice and their counsel.
    Because I think, frankly, there is no greater environmental 
issue in our country today than trying to focus our attention 
on the coastline of America. There are issues all over the 
country, but our coastlines really deserve some attention.
    Now, Louisiana is an oil and gas producing State. We have 
been that way for more than 50 years. And our notable Secretary 
is here, who can talk more about the details. We have 
benefitted greatly from that industry. But there have also been 
some negative environmental impacts.
    We are not the only oil and gas producing State. Each State 
in this Nation has chosen their own way to address that issue. 
But I am here this morning at this hearing to say that I firmly 
believe that the Federal Government needs to be a greater and 
more reliable partner in helping provide some revenues for 
States to manage better the great resources of our tremendous 
and valuable coastline in this Nation.
    It is the West Coast, the East Coast, the Gulf Coast and 
the Great Lakes that represent a tremendous resource, in terms 
of tourism, fisheries, wildlife, our general environment, oil 
and gas. And that is what this hearing is about--to lay down a 
record for the great needs that are out there. And there are 
many. The panelists that are here this morning can talk from a 
variety of different experiences about it.
    Our comments, of course, and mine, will be somewhat focused 
on the problems in Louisiana, but I would like to call to my 
colleagues' attention that the greatest and largest wetlands in 
the United States on the coast of course is in the Mississippi 
Delta, if you will, of one of the greatest rivers in the world 
and on our continent. And while the Everglades gets a 
tremendous amount of attention, and needs the attention, and I 
want to support my friend, Senator Bob Graham, I do believe 
that Louisiana does not quite get the attention that we deserve 
on this important topic.
    We are losing, according to the latest figures that I have, 
or have lost, 630,000 acres--or the projection will be 
630,000--coastal marshes, swamps and barrier islands by the 
year 2050 if nothing is done in terms of preserving that 
coastline.
    Erosion is occurring along much of Texas's 3,667 miles of 
Gulf and Bay shoreline. But this represents, the coastline that 
we are speaking about, primarily in Louisiana, represents 80 
percent of all the coastal wetland loss in the continental 
United States. So this is a serious environmental issue.
    We are hoping that as this bill and this issue works its 
way through Congress that these monies that come from the outer 
continental shelf, which are significant--they have been $120 
billion since 1955, $120 billion, of which Louisiana has 
produced the lion's share off of our coast--and there is a 
graph, which I would like to submit for the record, of last 
year's figure. I want to show this, Mr. Chairman, because it is 
important. But the lion's share of that money has been produced 
offshore in Louisiana.
    We are happy to contribute to the Federal Government in 
this way. And I just want the members and the audience to see 
this pie chart. The red is basically what Louisiana contributes 
to the Federal Treasury. Last year, it was $2.5 billion. The 
closest other State was Texas, which is $472 million. The next 
State is California, with $64 million.
    Now, I am going to wrap up in just a minute, but I have to 
express that we are happy with the oil and gas industry. We 
want it to be environmentally sensitive. Louisiana has produced 
this money for the Nation, as a domestic oil and gas source. We 
have produced this money for the Federal Treasury. But I have 
to say that it is about time that we got a portion of it back 
to help save the coastline that we are losing, which benefits 
the whole Nation, not just with oil and gas but with fisheries 
and everything else. And we are happy to share that money with 
the rest of the Nation as we try to shore up our coastlines.
    So, Mr. Chairman, I have this statement for the record, but 
I look forward to working with you on this issue. I welcome 
Secretary Jack Caldwell and the other members of this 
distinguished panel that can give more specifics. But I really 
do not believe there is a more important environmental issue 
than this.
    I want to thank the administration for their thoughts about 
this. We are not exactly on point yet, but I know that this 
administration is sensitive to these needs. I am hoping that 
this hearing will go a long way in laying out the record of how 
important it is to get money to our States and our cities and 
our coastline communities for things like beach erosion, 
wetlands loss, et cetera, and how important it is to do that 
now, and not wait. Every year, every week, every day that we 
wait, we lose additional wetlands and additional valuable 
resources of this Nation.
    So I thank the chairman, and I particularly thank my 
colleagues and my ranking member for his advice and thoughts as 
we proceed.
    Thank you.
    [The prepared statement of Sen. Landrieu follows:]
    Prepared Statement of Hon. Mary L. Landrieu, U.S. Senator From 
                               Louisiana
    Mr. Chairman, thank you for convening this hearing today to discuss 
what I believe to be one of the most important environmental topics 
that this committee can examine--the impacts of offshore activity on 
the coastlines and communities of oil and gas producing States and the 
need for a permanent source of funds for the Land and Water 
Conservation Fund. As a Senator from Louisiana, a State with one of the 
more aggressive and intense production plans in place, I am 
particularly pleased to be able to assist in the development of a 
record on coastal impacts. In doing so, I would like to welcome the 
witnesses before us this morning. In particular, I would like to 
welcome Louisiana Department of Natural Resources Secretary Jack 
Caldwell. Secretary Caldwell is also a member of the Outer Continental 
Shelf Policy Committee, one of the four advisory committees of the 
Minerals Management Service. He, along with our other distinguished 
panelists, has worked long and hard to inform the public about 
environmental impacts being suffered in our coastal communities in the 
State, and has identified solutions to these problems.
    Before I make a few remarks about the Gulf Coast area and impacts 
from offshore activity, I would like to point out that there is grave 
coastal degradation occurring all over the country. Shoreline 
environmental problems are not unique to producing States. Coastal 
erosion poses serious difficulties for non-producing States whose 
economies are closely tied to maritime, fisheries and tourism 
industries. One need only pick up the newspapers to learn about the 
needs for beach replenishment in many States and cities across the 
country, or for assistance with invasive species in frequently used 
waterways. The Minerals Management Service currently engages in State 
cooperative activities to pump sand in Alabama, Florida, Louisiana, 
Maryland, Delaware, New Jersey, North Carolina, South Carolina and 
Virginia. These are important projects, but more is needed.
    In my State of Louisiana, we value the importance of our natural 
resources, and the extent to which we rely on those resources. In 1947, 
Kerr McGee sank the first platform into shallow waters in the Gulf of 
Mexico. 1997 marked the 50th anniversary of the discovery of oil in the 
Gulf. Over the years, the United States has benefited from a source of 
domestic oil that has contributed greatly to our supply needs. In 1998, 
approximately 20 percent of U.S. consumption of oil was supplied 
domestically from the OCS, and 27 percent of our natural gas. Close to 
90 percent of those domestic resources came from the Gulf of Mexico. I 
would like to submit for the record a chart showing the division of 
resources in the Gulf of Mexico according to State offshore production 
in 1998.
    While we have welcomed this activity and the positive influence on 
the economy, there have also been some negative environmental 
consequences. For over 50 years, the Gulf Coast States have supported 
OCS activity with its influx of people and burdens on coastal 
infrastructure, including service bases, helicopter hubs, construction 
facilities, processing facilities including refineries and gas 
processing plants, terminals for barges and tanker ports, disposal and 
storage facilities for offshore operational wastes, landfills and 
coastal pipelines. Supplying the offshore has meant using 
infrastructure that was not designed to handle the volume of activity 
involved. As this is an industry that serves the nation's energy needs, 
some responsibility must be borne by the Federal government.
    There is another complicating factor in Louisiana. We are dealing 
with an underestimated, under-researched, yet highly threatening 
phenomenon--coastal erosion. Current rates of land loss range from 25 
to 35 square miles annually. This represents 80% of all the coastal 
wetlands loss in the continental United States. According to the 
Louisiana Department of Natural Resources, if there is no action, the 
State will lose 630,000 acres of coastal marshes, swamps and barrier 
islands by the year 2050. This is an area the size of Delaware. Erosion 
is occurring along much of Texas' 3,667 miles of Gulf and Bay 
shorelines as well. If we lose these wetlands--altogether, the effects 
on people living in these areas will be devastating. Wetlands serve as 
storm surge buffers, anchoring points for pipelines, habitat for 
migratory waterfowl and nurseries for coastal fisheries. Water 
diversion is partly to blame for losses, but they are also due to 
weighted surface compression from infrastructure or from development 
policies of the past. Once developed, these coastal lands subside and a 
formerly land-covered area becomes open water. This constitutes a 
threat to the communities that support oil and gas activity, and the 
oil and gas activities themselves. One major coastal initiative 
underway in Louisiana, a program called Coast 2050, aims to arrest 
those losses. It will take a great deal of effort, and an adequate 
funding stream to succeed.
    Offshore activity, coupled with boom and bust cycles, has had a 
number of physical impacts on the land, and diminished the ability of 
the State to rely on a steady economy. Our institutions of higher 
learning evaluate these impacts on coastal environments. Recently, they 
have begun to evaluate the impacts on the residents of coastal 
communities that support offshore activities. The results sound a clear 
signal. A study at the University of New Orleans concluded that in 
communities that rely on extraction activities, such as in the coastal 
parishes of Louisiana, in the first year of an upturn in activity, 
average per capita income and high school completion rates rise, while 
college enrollment decreases. Incomes rise, sales tax collections 
increase, and people move into the areas to benefit from higher wages 
and a better living. In the second year after an upturn, the economic 
impacts reverse. Too many newcomers arrive and do not have enough jobs. 
Since college enrollment has decreased, people are less qualified to 
engage in other gainful employment and social problems result. This in 
turn burdens the local law enforcement authorities. A low oil price 
scenario, such as the one we are experiencing now, only aggravates the 
problem with layoffs and decreased profits. Onshore impacts from 
offshore activities are multi-dimensional.
    To conclude, studies indicate that OCS activities affect the 
coastal States as well as the offshore marine environment, and in fact 
appear to affect the coastal zone to a greater degree than offshore. 
These impacts take the forms of physical change, cultural 
diversification and economic alteration. Without OCS activity there 
would be fewer changes onshore and without onshore activities there 
would be reduced offshore activities. The relationship between the two 
areas is direct and irrefutable. We will hear testimony that will go 
far beyond my comments into specific examples of needs and suggested 
remedies. I look forward to hearing the remarks this morning. Thank 
you, Mr. Chairman.

    The Chairman. Thank you very much, Senator Landrieu. And 
again I want to thank you for all your diligence, hard work and 
effort on this. I know how much it means to your State. I think 
it is your maiden legislation, if I can use that term that I 
might get in trouble for.
    Senator Landrieu. That is okay.
    The Chairman. But I do want to acknowledge your efforts and 
that of your staff.
    We have a policy in the committee to take them as they 
come, as opposed to back and forth. And unless I am overruled, 
Senator Graham is the next one who came in.

          STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR 
                          FROM FLORIDA

    Senator Graham. Thank you very much, Mr. Chairman.
    In recognizing the desire to move on to the witnesses who 
have travelled here today, I will submit my statement for the 
record.
    I would like to congratulate you and Senator Landrieu for 
your leadership in presenting this important issue to us. I 
would like to ask consent to submit for the record comments 
that will be provided by our newly-inaugurated Governor Bush, 
who has taken a special interest in this issue.
    [The information referred to follows:]

                    Department of Environmental Protection,
                                 Tallahassee, FL, January 26, 1999.
Hon. Bob Graham,
U.S. Senate, Hart Senate Office Building, Washington, DC.
    Dear Senator Graham: On behalf of Governor Jeb Bush, please accept 
the enclosed testimony into the record for the Senate Committee on 
Energy and Natural Resources' January 27 hearing regarding the effects 
of coastal oil and gas drilling.
    The Governor remains concerned about the potential for 
environmental damages to our coastal and marine resources from outer 
continental shelf oil and gas activities. Because of these concerns, 
this testimony reiterates Governor Bush's strong opposition to oil and 
gas leasing, exploration and development offshore Florida. While we 
recognize the potential significance of S. 25 to effected States, this 
testimony pertains only to the Committee's interest toward 
understanding the impacts of oil and gas activities on coastal States.
    I appreciate the opportunity to submit this testimony. We look 
forward to working with you and the committee on issues important to 
Florida.
            Sincerely,
                                           David B. Struhs,
                                                         Secretary.

    On behalf of Governor Jeb Bush and the citizens of Florida, I 
appreciate the opportunity to submit this testimony regarding the 
Committee's interest in environmental damage caused by offshore oil and 
gas activity. We have not completed an analysis of S. 25 and therefore 
will not take a position on nor directly address the bill, even though 
we recognize its potential and significance to our State. The purpose 
of this testimony is to express Governor Bush's strong opposition to 
oil and gas leasing, exploration and development offshore Florida. Our 
Governor recognizes the potential for environmental damages to our 
coastal and marine resources--as has been felt by our neighboring Gulf 
States.
    Our concerns about negative impacts of offshore oil and gas 
development cannot be overstated. These concerns are expressed by a 
wide range of people--from our elected officials to scientists to 
citizens and tourists enjoying the white sands and clean waters of 
Florida's beaches and coastal regions. The potential for damage to our 
coastal and marine resources from these activities in the Eastern Gulf 
of Mexico off the northwest Florida Panhandle is high.
    Over the last several years, with the support of former Governors 
and the Florida Cabinet, our Congressional Delegation has been 
successful in securing limited protection of our coastal and marine 
resources by implementing moratoria on new leasing off the west Florida 
coast. However, approximately 125 active leases remain in the eastern 
Gulf of Mexico. More alarming is the fact that production is being 
proposed by Chevron just 25 miles off Pensacola--some of the nation's 
most beautiful and popular beaches and coastal areas.
    The Eastern Gulf of Mexico off Florida is ecologically and 
geologically quite different from the other Gulf States where natural 
oil seeps, high turbidity loads and the effects of continuous oil and 
gas activities occur. Accidental spills remain the most visible 
concern, however, physical disturbances caused by anchoring, pipeline 
placement and rig construction; the resuspension of bottom sediments; 
and the chronic pollution from discharges can be very destructive. 
Scientists believe that the marine and coastal communities off west 
Florida are not well adapted to withstand adverse impacts associated 
with oil and gas activities. The development of oil and gas resources 
off Florida's coast will cause long-term negative impacts to air, water 
and biota where none currently exist.
    Florida's panhandle provides an array of marine and coastal 
habitats, including productive offshore fishing grounds, bountiful 
estuaries, sandy white beaches and barrier islands. The area's 
environmental and economic importance is reflected in the number of 
State and federal preservation, conservation, and recreation areas 
including the Gulf Islands National Seashore and more than 50 other 
sites along the panhandle coast. The seagrasses, marshes and other 
coastal areas provide habitats for a variety of wildlife, including 
many threatened and endangered species. Offshore marine habitats are 
critical to most life stages of marine species and would be directly 
impacted by these activities.
    The economy of Florida's northwest coast, like the remainder of the 
State, is directly tied to our warm climate, clean waters and unspoiled 
natural resources. Environmentally clean industries, including 
recreation, tourism, retirement, commercial and recreational fishing 
are major economic activities of the panhandle that bring in billions 
of dollars annually to State and local economies. Florida ranks second 
only to California in tourism expenditures, generating over 90 million 
dollars a day. Visitors rank our parks, preserves and natural areas as 
the second major attraction bringing them to Florida. Recently, the 
five western counties of the Florida panhandle brought in more than 
eight million dollars from tourist development tax. Three cities in 
this area recorded more than 1.5 billion dollars in tourism and 
recreation taxable sales during the same period. The unique quality and 
character of the panhandle's beaches are reflected in their inclusion 
in the ``Annual Ranking of America's Best Beaches'' by the nation's 
foremost beach expert, Dr. Stephen Leatherman.
    Our marine and coastal waters also support commercial fishing 
industries, worth nearly 6 billion dollars to Florida. Commercial 
fishery landings for Florida's west coast are valued at over 130 
million dollars, with revenues from processed fishery products 
exceeding 350 million dollars.
    Furthermore, the National Marine Fisheries Service reports that 
Florida led all coastal states in saltwater recreational fishing 
activity in 1997. During that year, there were over two million out-of-
state anglers participating in more than 24 million trips to the state. 
Recent studies also show that the panhandle hosted over 200,000 
saltwater fishermen who spent over 92 million dollars.
    Florida's coastal and marine resources are the foundation of our 
economy and quality of life. In a healthy condition, these self-
sustaining resources will continue to provide benefits to people who 
live in and visit Florida. Otherwise, the ecology and economy of the 
state will fail.
    For these reasons, any proposal that deals with outer continental 
shelf oil and gas activities has our undivided attention. We look 
forward to working with the Committee on this and other legislation 
important to Florida. Thank you.

    Senator Graham. I thank you, Mr. Chairman, for your 
interest in holding, as part of this series of hearings, a 
hearing for States like Florida, which currently have a 
moratorium on oil and gas leasing, and would look forward to an 
opportunity to discuss our experience under those moratoriums.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Graham follows:]
    Prepared Statement of Hon. Bob Graham, U.S. Senator From Florida
    Mr. Chairman, members of the Committee, I thank you for this 
opportunity to speak on an issue that is so important to the State of 
Florida.
    As you are aware, Congress has been diligent in protecting 
Florida's fragile coastline from the impacts of offshore drilling. You 
have for many years supported Senator Mack and me in our efforts to 
adopt moratoria on leasing and preleasing activity off the coast of 
Florida. We appreciate and thank you for your continued support.
    Today, we will hear from several distinguished representatives from 
the States of Alabama, Mississippi, Louisiana, and Alaska on the 
impacts that offshore drilling has had on their coastlines. In the next 
several days, I will be submitting written comments on behalf of 
Governor Bush, and I am looking forward to the hearing on S. 25 which 
will address issues pertaining to coastal states with moratoria on 
leasing and drilling. Today, I would like to take a few minutes to tell 
you how your protective actions have benefited Florida's coastlines and 
communities.
    This coastline is home to some of the richest estuarine areas in 
the world. These habitats provide an irreplaceable link in the life 
cycle of both marine and terrestrial species. Florida's commercial 
fishing industry relies heavily on these estuaries as they support the 
nurseries for most commercially harvested fish. In addition, nearly 90% 
of the reef fish resources in the Gulf of Mexico are caught on the West 
Florida Shelf.
    Our local communities also benefit from healthy coastlines. In 
1997, over 47 million tourists visited Florida, spending $41 billion. 
The five western counties of the Florida Panhandle brought in over $8 
million from tourist development tax in 1996. Three cities in this 
area--Panama City, Pensacola, and Fort Walton Beach--recorded over $1.5 
billion in tourism and recreation taxable sales during the same period.
    Florida's coastline and beaches are not only our greatest economic 
asset, but they are a part of our identity. Newcomers to the State are 
drawn to our shores. Many Floridians remember childhood weekends along 
the endless white beaches of the Panhandle. All of us are struck by the 
tranquility of Tampa Bay or the beauty of Sanibel Island. Florida's 
coastlines are as integral to the state's identity as the Grand Canyon 
is to Arizona or the redwoods are to California. Their health directly 
affects our State's future.
    I suspect that our witnesses today will tell us that their States 
share this relationship between land, water, and man. I look forward to 
hearing from them. Thank you.

    The Chairman. Thank you very much, Senator Graham.
    I want to assure you, in the fourth paragraph of my opening 
statement was a reference--and I will read it for you:
    Further, we want to promptly hold hearings to accommodate 
those States that currently have moratoriums on OCS 
development.
    And thank you very much.
    Senator Fitzgerald, good morning. We look forward to your 
statement and your presence on the committee.

      STATEMENT OF HON. PETER G. FITZGERALD, U.S. SENATOR 
                         FROM ILLINOIS

    Senator Fitzgerald. Well, thank you, Chairman Murkowski. I 
am delighted to be on this committee. And I think, in addition 
to bringing the perspective of a banker, it will be good for 
balance on this committee to have somebody from Illinois, east 
of the Mississippi and a little bit north of Senator Landrieu 
and Senator Graham.
    Illinois is very interested in the issues that this 
committee will work on, such as storage of nuclear waste, 
electric deregulation and even the outer continental shelf 
activity work here, because we are a Great Lake State. And we 
are worried about the degradation to our Great Lakes, as well.
    So I look forward to the work on this committee. And I 
would ask for unanimous consent to submit my opening statement 
for the record.
    The Chairman. Without objection.
    Senator Fitzgerald. Thank you.
    [The prepared statement of Senator Fitzgerald follows:]
   Prepared Statement of Hon. Peter G. Fitzgerald, U.S. Senator From 
                                Illinois
    I would like to thank Chairman Murkowski for holding this hearing 
on the Impact of Outer Continental Shelf Activity on Coastal States and 
Communities. As a freshman Senator, I am very pleased to serve as a 
member of this important Committee. I look forward to working with the 
other members of the Energy and Natural Resources Committee on this and 
many other issues of national importance. The Committee faces many 
challenges on a full range of issues including the deregulation of the 
electric industry, the storage of nuclear waste, raining law reform, 
proposals on global emissions, and a host of other issues.
    Today, our focus is on assessing the impact of outer continental 
shelf (``OCS'') activity on States and communities, This issue is of 
enormous importance to coastal States, including Great Lakes States 
like my home State of Illinois, and their residents which are directly 
and indirectly affected by offshore activities.
    As a Senator from Illinois, I am familiar with the environmental 
problems faced by coastal States. The Lake Michigan shoreline is also 
subject to environmental degradation and erosion. This is of real 
concern to me and the residents of my State who do not want to see 
their shoreline degraded regardless of the cause. It is my hope that 
legislation produced as a result of these hearings will serve to 
address problems which confront all coastal States.
    There is some concern from private property groups that legislation 
addressing these issues may lead to an increase in the purchase of land 
by the federal and State governments. The Committee should address this 
concern in today's or future hearings on this topic.
    It is my belief that the hearings we hold will assist us in sorting 
through these issues, help us to ascertain the nature and extent of OCS 
impact, and ultimately permit us to achieve the goal of assisting the 
States and local communities impacted by OCS activity. I look forward 
to these hearings and welcome the opportunity to consider these issues. 
Again, my thanks to the members of the Committee and to Chairman 
Murkowski.

    The Chairman. We have been joined by Senator Sessions.
    Good morning.

         STATEMENT OF HON. JEFF SESSIONS, U.S. SENATOR 
                          FROM ALABAMA

    Senator Sessions. Mr. Chairman, thank you very much for two 
reasons and that you have allowed me to be with you. One is I 
am so much impressed with this legislation. I believe it could 
be one of the biggest steps we have made toward environmental 
improvement and good management of resources. Alabama does have 
a lot of involvement in offshore activities. It is a matter 
that is important to us in a lot of different ways.
    I am also pleased to be invited to be here, because Mr. Don 
Oltz, from Alabama, is our State Geologist and will be 
testifying. He is Vice Chairman of the Mineral Management 
Services Outer Continental Shelf Policy Committee. He is a 
Supervisor of the State Oil and Gas Board, and a part-time 
magician, as I understand it.
    [Laughter.]
    The Chairman. Well, we need him to help us in our 
discussions and deliberations on impeachment, then, if he is 
available.
    [Laughter.]
    Senator Sessions. And oil and gas exploration, too. I 
understand that is a factor.
    As Director of the Geological Survey, he is responsible for 
providing information on geology, biology and environmental 
impacts on oil and gas production. He is a tremendous resource 
to me, as we have researched this legislation in the State of 
Alabama. I am honored to have him and honored to be here. I 
also feel like this legislation has an opportunity to be a 
historic step toward environmental improvement and wise use of 
our resources.
    And further, I would like to express my admiration for your 
leadership in being continually concerned about domestic 
production of oil and gas. Instead of having our wealth be 
transported around the world, we have tremendous resources 
offshore and onshore that we need to be producing wherever 
possible.
    Thank you.
    [The prepared statement of Senator Sessions follows:]
  Prepared Statement of Hon. Jeff Sessions, U.S. Senator From Alabama
    I would like to thank Senators Murkowski and Landrieu for allowing 
me the opportunity to attend the hearing today on the Conservation and 
Reinvestment Act. I commend you both for your tremendous leadership on 
this bipartisan bill and look forward to working with you as the bill 
develops.
    The Conservation and Reinvestment Act offers a unique opportunity 
for the entire nation to enjoy the tangible benefits of Outer 
Continental Shelf oil and gas production. It redirects a portion of 
royalties from Outer Continental Shelf production directly back to 
States and local communities for environmental and conservation 
programs.
    The effect of this bill will be to provide States and local 
communities funding to expand and maintain parks and to enhance 
hunting, fishing and other outdoor recreational activities.
    In addition, this bill would redirect a portion of Outer 
Continental Shelf Royalties back to the States which have endured the 
risks of production through the bill's Coastal Impact Assistance 
program. This program will provide dedicated funding to coastal States 
for air quality, water quality and to mitigate the environmental 
effects of Outer Continental Shelf infrastructure developments.
    Alabama might use these funds to help ensure water quality in 
Mobile Bay, part of the National Estuary Program, and for the 
preservation and restoration of oyster beds and other sensitive 
environments areas along our coast. States may choose to establish a 
protected ``trust fund,'' as Alabama has with existing State royalties, 
in order to use the revenues in perpetuity for environmental and 
conservation purposes.
    Alabama is one of only six States with active Outer Continental 
Shelf natural gas production off its shore and onshore infrastructure 
to refine and transport those resources. Alabama ranks ninth in the 
country for natural gas production and produced over 430 billion cubic 
feet of natural gas in 1994. There are four onshore refineries and 
numerous natural gas pipelines to process Outer Continental Shelf 
natural gas. The State has made a significant investment in providing 
the land and infrastructure to handle this production, yet has not been 
able to enjoy any direct royalty benefits from Outer Continental Shelf 
production.
    This bill takes a step towards ensuring Alabama and the entire 
nation receive at least a part of the direct benefits of OCS 
production.
    Mr. Chairman, thank you for permitting me this opportunity to 
appear before your Committee today. I look forward to working with you 
and Senator Landrieu to help craft a conservation bill which can 
continue to enjoy bi-partisan support.

    The Chairman. Thank you very much, Senator Sessions.
    I am going to call the witnesses up now: Mr. James I. 
Palmer, Jr., Executive Director of the Mississippi Department 
of Environmental Quality, from Jackson, Mississippi, please 
come to the witness table.
    The Hon. Jim Whitaker, House of Representatives, State of 
Alaska, Juneau, Alaska. Jim, it is nice to welcome you. You do 
not have to shovel any snow down here today, do you. Well, you 
have a little snow around here. You just do not see it. It is a 
different kind.
    Donald Oltz. Donald is the State Geologist and Supervisor, 
Geology Survey of Alabama, Tuscaloosa, Alabama. And you have 
already received, I think, an introduction.
    Mr. Mark Van Putten, President of the National Wildlife 
Federation. Good morning.
    And the Hon. Jack C. Caldwell, Secretary, Louisiana 
Department Natural Resources, of Baton Rouge, Louisiana.
    Good morning, gentlemen.
    I want to recognize Senator Burns. Senator Burns, you are 
recognized.
    Senator Burns. Yes, sir. Thank you very much. I was afraid 
of that.
    The Chairman. That is fine.
    [Laughter.]
    The Chairman. We are talking about Montana's coastline here 
very briefly.
    Senator Burns. Keep fooling around. We have every 
Californian in the world up there. We might as well have a 
coast.
    [Laughter.]
    Senator Burns. That name, by the way--I was called all 
kinds of names last night. And the one on that plaque ain't one 
of them.
    [Laughter.]
    Senator Burns. Thank you and good morning.
    The Chairman. Good morning.
    With that, I would remind you that the Democratic members 
are going to have a caucus starting very soon. And I am going 
to end this probably before 11 o'clock. So we want to get your 
statements. I would encourage you to take 5 to 7 minutes. I get 
a little edgy beyond that. You can submit the balance for the 
record. Of course, we want to ask some questions as well. So, 
please proceed in the order I called you. I will accommodate 
anyone if they have to leave early. Does anyone?
    [No response.]
    The Chairman. All right, Mr. Palmer, it looks like you are 
on. James Palmer, Executive Director, Mississippi Department of 
Environmental Quality.

    STATEMENT OF JAMES I. PALMER, JR., EXECUTIVE DIRECTOR, 
        MISSISSIPPI DEPARTMENT OF ENVIRONMENTAL QUALITY

    Mr. Palmer. Thank you, Mr. Chairman, and members of the 
committee, for the opportunity to participate in your first of 
what I know will be a series of hearings on the concepts that 
are framed in S. 25. We strongly support the legislation and 
how it is built.
    What I will touch on in a few moments, Mr. Chairman, 
without reading my statement--I have submitted it for the 
record and would appreciate it being included there--I will 
touch on the significance of this legislation to Mississippi. 
My assignment is more so for a few moments to be the somewhat 
resident historian. Because we all know that those who do not 
learn from history are destined to repeat it.
    There is a history here. And I have lived it and litigated 
it now for 19 years. And I would simply remind you, in our 
first moments of this discussion, about some key things.
    First, let us start with what I would submit, Mr. Chairman, 
you are not here to do and you will not be doing throughout 
your series of hearings. You are not here to debate the 
fairness, the equity, the prudence of helping coastal States 
deal with, cope with impacts caused by offshore operations. You 
have been there and you have done that.
    You made that national decision in 1976 when you amended 
the Coastal Zone Management Act to create a coastal energy 
impact program. The thesis of that program is exactly what we 
are again here today to talk about. Your idea was sound. 
Unfortunately, it was doomed from the beginning. It was doomed 
for two reasons.
    One, it was framed around an annual appropriations concept. 
Bad move. Second, it was built around a process that was so 
cumbersome and complicated it collapsed, ultimately, of its own 
weight.
    I litigated that situation, Senator Landrieu, between 
Mississippi and Louisiana, and wound up having to craft the 
agreement that the Governors signed to resolve those 
differences. Do not repeat that history. When you pass this 
legislation, do not sentence the recipient States to have to go 
then, make it work through court battles. Bad move.
    Ultimately, the Congress realized that the program was not 
going to work. And so you killed it in 1990. But after, you 
then passed another stage of recognizing the correctness of the 
concept. In 1986, 10 years later, I came to this Congress with 
representatives of the other coastal States, and we went nose 
to nose with the Department of the Interior over what you now 
know as the Section 8(g) settlement. The States made a big gain 
in that settlement, because of the recognition that the program 
was right; and, second, it was keyed not to appropriations but 
to direct diversion of those revenues to the States. Good idea.
    Limited, though. Because you will remember that the key 
issue that you grappled with was possible drainage of resources 
from adjacent State waters. So you limited the revenue stream 
to a 3-mile zone. Again, good idea. We made headway. But it was 
limited.
    Now, after that happened, we have come back to this 
Congress time and time again, saying, you got a good start. You 
have stumbled several times. Let us regain our footing and put 
in place now--and you have a mechanism to do it--a concept that 
will distribute those revenues fairly, through a system that 
works, and life will go on.
    In 1993, after a failed attempt--one of many--to persuade 
you to move to something like S. 25, the Outer Continental 
Shelf Policy Committee--and I have been a member since 1987--
sent to you our key report, called ``Moving Beyond Conflict to 
Consensus.'' And we said to you again: Get it done.
    Well, frankly, the Congress piddled around with it a year 
or so later, and nothing happened.
    In 1994 and 1995, as I had the opportunity to be vice 
chair, and then chair, the policy committee, we have come back 
to you again to say: We are not going away. The issue is not 
going away. The impacts are getting worse. As you will hear 
from my colleagues in more graphic detail, it is time for us to 
get the job done.
    We support this concept. Remember the history. You have the 
chance now to fix it.
    In Mississippi, just a little bit of perspective. In the 
Majority Leader's hometown of Pascagoula, we have industries 
that build and work over rigs. We have Chevron's largest 
refinery east of the Mississippi River processing crude from 
the Shelf. We have a new Amoco gas processing plant to process 
the gas from Federal production. People, we are contributing 
our part to help the economy of the country and to meet the 
national energy needs of this country. We want you to help us 
back.
    Remember, though, as you flesh out S. 25, it is not limited 
to the coastline. There are industries in all coastal States 
that you will find inland that make their contributions.
    In Vicksburg, Mississippi, LeTourneau is building today the 
world's largest offshore jack-up rigs. Yes, the first one was 
sent to the North Sea. But the orders that have come to 
LeTourneau we know will lead to rigs being in U.S. waters.
    Again, the concept of S. 25 would reach the impacts in the 
Vicksburg area, caused by these new industrial operations. And 
you will now hear the other folks talk about what those impacts 
are--from traffic, water, waste water, air emissions, and all 
those things that we are coping with.
    Mr. Chairman, we thank you for the opportunity to be here. 
Pass the legislation. And do not wait forever in doing it.
    Thank you.
    [The prepared statement of Mr. Palmer follows:]
    Prepared Statement of James I. Palmer, Jr., Executive Director, 
            Mississippi Department of Environmental Quality
    Mr. Chairman, my name is James I. Palmer, Jr. I submit this 
statement to you and the members of the Committee in support of S. 25, 
the Conservation and Reinvestment Act of 1999, and I appreciate the 
opportunity to address you personally about this much needed, and long 
awaited, legislation.
    Since 1980, I have been very much involved in the efforts of 
Mississippi and all other similarly situated States to obtain our fair 
share of revenues from offshore oil and gas operations in federal 
waters to help mitigate the onshore impacts of these activities. As a 
Special Assistant Attorney General, Staff Counsel to the Governor, 
Executive Director of the Mississippi Department of Environmental 
Quality (which has jurisdiction over leasing State-owned lands, both 
onshore and offshore, for oil and gas exploration and development), 
Mississippi's representative on the Outer Continental Shelf (OCS) 
Policy Committee since 1987, and both Vice-Chairman and then Chairman 
of this Committee over the last four years, I have long been a strong 
critic of the federal government for its failure to be fair with 
Mississippi and other coastal States that have to cope with onshore 
impacts from offshore operations, and a strong supporter of all 
legislative efforts to right this wrong.
    The first, and one of the most important, points I want to make to 
you is that you are not plowing new ground here. Congressional 
recognition of the reality of--and the need to fully compensate 
effected coastal States for--onshore impacts attributable to offshore 
operations occurred some twenty-three years ago, when Congress amended 
the Coastal Zone Management Act (CZMA) by creating the Coastal Energy 
Impact Program (CEIP) which was grounded in, and had the same goals of, 
S. 25. The idea was sound, but the program, administered by the 
Department of Commerce, was doomed from the outset because of two fatal 
flaws. First, and foremost, the CEIP was not a true revenue-sharing 
program, because funds flowed to State and local governments only when 
Congress was in the mood to approve annual appropriations under the 
program. In short, the CEIP provided only periodic handouts, ignoring 
the fact that onshore impacts in coastal States can't be turned on and 
off according to the whim and caprice of the Congress regarding 
funding. These impacts are experienced in the real, everyday world of 
life in our coastal States, not the surreal world of politics in 
Washington.
    The second fatal flaw in the CEIP was a labyrinthine formula for 
distributing the appropriated funds which was so convoluted in concept 
and complex in administration that it collapsed of its own weight. 
Administration of the program sparked litigation among coastal States 
in which I was personally involved, having authored the document which 
was used by the governors of Mississippi and Louisiana in settlement of 
the terribly expensive and time consuming CEIP controversy between our 
two States.
    As to the first flaw in the CEIP, S. 25 provides for direct 
distribution of funds to coastal States and local governments by the 
Secretary of the Interior, not an annual appropriation by the Congress. 
The States deserve a guaranteed, permanent distribution of these 
revenues based on facts--not political temperament. As to the second 
flaw in the CEIP, the S. 25 revenue distribution formula is both fair 
and workable. As this legislation moves forward to passage, the 
Congress should make every effort to avoid creating another situation 
like the CEIP in which recipient States have to go to court just to 
make the program work timely and fairly.
    Ultimately, after haphazard treatment of the CEIP by both the 
Congress and the Executive Branch, the program failed and was repealed 
in the 1990 CZMA amendments.
    Reinforcing its policy decision recognizing the reality of, and the 
need to compensate coastal States for, onshore impacts associated with 
offshore oil and gas exploration and development operations, Congress 
amended Section 8(g) of the Outer Continental Shelf Lands Act (OCSLA) 
in 1986 to distribute offshore revenues to coastal states to help 
offset impacts from federal OCS activities. While the main purpose of 
these amendments was to compensate States for possible drainage of oil 
and gas reserves from State lands, the funds may be used to mitigate 
other costs, as well. The concept is sound, but the relief to the 
States is limited because the Section 8(g) ``zone'' extends seaward 
only three miles from State waters. As Mississippi's representative in 
the multi-State effort to resolve the Section 8(g) dilemma through 
Congressional action, I can personally attest to the success of that 
initiative. As with S. 25 today, the Section 8(g) battle was fought 
over a single issue--equity. Congress did the right thing, but it was 
only a step in the right direction. S. 25 will complete the task of 
putting in place a revenue sharing concept that has been denied the 
States for as long as there has been oil and gas activity in federal 
waters on the OCS, and that is simply intolerable.
    After the CEIP died, President Bush directed the Department of the 
Interior to develop a legislative proposal to, once again, establish a 
coastal impact assistance program. It was inserted into, and then 
removed from, the National Energy Policy Act of 1992. Utterly 
frustrated by yet another refusal by the Congress to be fair with 
coastal States, the OCS Policy Committee then stepped into the breach 
by formally endorsing a revenue sharing concept somewhat like S. 25 
proposes today. Mr. Chairman, each member of this Committee should 
carefully review the OCS Policy Committee's 1993 recommendations, which 
were set forth in their report entitled, ``Moving Beyond Conflict to 
Consensus.''
    The Energy and Natural Resources Committee took notice of the OCS 
Policy Committee's work, and considered a bill (S. 575) during the 
104th Congress to create a coastal impact assistance program. 
Unfortunately, the Committee did nothing but ``consider''--it did not 
act--because of wrangling over how to make an impact assistance program 
work in light of the constraints in the Congressional Budget 
Enforcement Act.
    The OCS Policy Committee's most recent actions regarding coastal 
impact assistance began about four years ago. As Vice Chairman, I 
recommended to Chairman Paul Kelly that we make another effort to keep 
this issue before the Congress. Paul readily agreed, and he and I again 
worked this issue through the Committee, culminating in our report in 
October 1997, which became the launching pad for what is now S. 25. As 
Chairman of the OCS Policy Committee when our report was finalized and 
transmitted to both the Secretary of the Interior and Congressional 
leaders, I can state unequivocally that the overall concept of S. 25, 
taking into account the goals of each of the three titles, is 
unprecedented. A very large and diverse coalition of interests, 
including State and local governments and various private sector 
organizations, has come together to push this bill to passage. And yes, 
while there is no way to avoid the inevitable nit-picking and paranoia 
with which any major piece of legislation like this will meet, the 
foundation of S. 25 is rock solid.
    All coastal States and our territories will share revenues from 
offshore operations in federal waters. For producing areas, these funds 
are sorely needed to mitigate very real impacts today. In areas now 
under moratoria, these funds may be utilized to conduct comprehensive 
environmental and economic studies, which will provide decision makers 
an informed basis for future decisions regarding possible offshore 
activities, consistent with the nation's energy needs. Most 
importantly, as I have already stated, the key feature of S. 25, beyond 
its geographic coverage and the revenue distribution formula, is that 
the funding mechanism will be conformed, generally, to that of the 
Section 8(g) program. Simply put, Congress will authorize the 
guaranteed, permanent revenue stream and then get out of the way.
    Mr. Chairman, while my principal assignment here is to remind this 
Committee of the Congress' spotty history of dealing with coastal 
impact assistance, I must not miss this opportunity to comment on our 
situation in Mississippi in this regard. In recent years, major 
discoveries, principally deep gas, have resulted in on-line production 
from federal OCS waters adjacent Mississippi. Moreover, shipyards in 
Pascagoula, Mississippi, Senator Lott's hometown, are making a major 
contribution to these activities by providing rig construction and 
workovers, as well as crew boat construction. On the downstream side, 
Chevron's largest refinery east of the Mississippi River is also 
located in Pascagoula, and this facility processes large volumes of 
crude landed in Venice, Louisiana and transmitted to the refinery via a 
pipeline that crosses the OCS and State waters. Finally, Amoco has just 
completed a new gas processing plant in Pascagoula, further expanding 
Mississippi's contribution to our offshore industry. As you can 
imagine, while these activities have brought a much appreciated boost 
to our coastal economy, they have also brought growing concerns about 
water and wastewater infrastructure and air emissions, along with a 
growing need for oil spill contingency planning and preparedness.
    As is the case with most producing States along our nation's 
coastline, the impact of offshore operations reaches inland more than 
meets the eye. Mississippi's best example of this is the LeTourneau 
facility on the Mississippi River at Vicksburg. Now a division of 
Rowan, LeTourneau is constructing the world's largest jack-up drilling 
rigs. The first of these mammoth, state-of-the-art units was launched 
last year, and work on additional rigs is in progress today. While the 
first rig was deployed to the North Sea, Rowan/LeTourneau will no doubt 
continue to be a major force in providing offshore drilling 
capabilities in the United States, as well. Again, this new industrial 
activity is a major economic asset of the Vicksburg area, but the 
growth issues, such as water supply and wastewater disposal, air 
emissions, transportation arteries, and the like have been serious, and 
the revenues Mississippi will receive when the program contemplated by 
S. 25 is in place will be a tremendous help to State and local 
officials, as well as planners and regulators, as offshore support 
industries like LeTourneau continue to grow in our State.
    Because my invitation to appear before this Committee today gave me 
only a very short time to prepare, I was not able to obtain from 
appropriate Mississippi officials estimates on the economic impacts 
associated with the onshore activities in our State that I just 
described. We will continue to work with your staff to develop this 
information as consideration of S. 25 continues in this Committee and 
elsewhere in the Congress.
    Mr. Chairman and members of the Committee, it has been my pleasure 
to appear before you today and to submit this statement in support of 
S. 25. This bill is good law. It rests on a history of clear--but as 
yet not fully implemented--policy of compensating coastal States for 
impacts attributable to oil and gas operations in federal waters, and 
it creates a rational, workable program to distribute OCS revenues to 
State and local governments for use in a variety of ways, all under a 
system of accountability to the Secretary of the Interior and the 
Congress. Finally, S. 25 couples with this long-needed coastal impact 
assistance program welcomed amendments to make the administration of 
the Land and Water Conservation Fund also more flexible and permanent. 
Mississippi strongly supports all three titles in S. 25, and we urge 
this Committee to move the bill to final passage as quickly as 
possible.

    The Chairman. Thank you very much.
    Senator Landrieu. Mr. Chairman, could I say a word? Because 
I may have to leave. If you do not mind.
    The Chairman. I am going to accommodate your witness next.
    Senator Landrieu. Okay. I do want to thank Jimmy, if I 
could, for his great advice and counsel he has been to us in 
the development of this concept, and how invaluable your long-
time work has been. And I just wanted to thank you.
    Mr. Palmer. Thank you, Senator.
    Senator Landrieu. I think we are going to move, Mr. 
Chairman, to Jack. Can I introduce him?
    The Chairman. Before you do, I want to make a couple of 
comments.
    First of all, I want to recognize a new member of the 
committee that has just joined us. And in keeping with the long 
association of the State of Arkansas on this committee, it is a 
pleasure to welcome Blanche Lincoln, from Arkansas.

      STATEMENT OF HON. BLANCHE L. LINCOLN, U.S. SENATOR 
                         FROM ARKANSAS

    Senator Lincoln. Thank you.
    The Chairman. Senator Lincoln joins us for the first time, 
and at our first meeting, I might add. And we look forward to 
your contribution.
    Do you have any brief statement?
    Senator Lincoln. Thank you, Mr. Chairman. I will submit my 
statement for the record for the sake of time.
    I do want to thank you very much for your leadership. I am 
very excited to be on this committee. We do, as you have said, 
have a long record of Arkansas presence on this committee. But 
I also, in my own right, come from the Energy and Commerce 
Committee on the House side. So I have some good background and 
a good record there, as well.
    I am looking forward to working with you. And I would also 
like to thank my colleague, Senator Landrieu, for her 
leadership on this issue, which I think is very important. I am 
looking forward to working with both of you on this.
    The Chairman. Thank you very much.
    Senator Lincoln. Thank you for having me on the committee.
    [The prepared statement of Senator Lincoln follows:]
      Prepared Statement of Hon. Blanche L. Lincoln, U.S. Senator 
                             From Arkansas
    Thank you, Mr. Chairman. And thank you to our distinguished ranking 
member, Senator Bingaman. As a freshman member of the Senate and the 
junior Senator from the State of Arkansas, it is a pleasure to have 
been appointed to the Energy and Natural Resources Committee. I am 
looking forward to serving with you and my other colleagues here on the 
committee.
    As an Arkansan, and seventh generation farmer, I am pleased to 
represent the private and public entities in my State, for whom energy 
is so important. While serving in the House of Representatives and on 
the Commerce Committee, I was active in supporting the needs of rural 
Americans to have access to affordable electricity, protecting our 
natural resources, promoting U.S. oil exploration, finding a resolution 
to the problems of nuclear waste, and solving many other issues 
important to my State.
    My predecessor, Senator Bumpers, has been an active voice on this 
committee for many years. His long and effective service on this 
committee is reflected in statute and public policy. He has been an 
advocate for protection of the natural resources of Arkansas and the 
United States, for caution when implementing legislative mandates, and 
for civility in guiding the interests of Arkansas and the country. 
Clearly, his is a tough act to follow, but I am committed to 
aggressively pursuing the interests of the State of Arkansas and 
fighting for the needs of rural America . . . to make sure that an 
acceptable resolution is found to the problems of nuclear waste 
disposal, that the needs of rural Arkansans are represented during the 
electricity restructuring debate, that our Nation's resources and 
national parks are protected for future generations, that we continue 
to pursue renewable energy options, and that the needs of industry are 
balanced with the requirements of the environment.
    This hearing, to provide Senate oversight on the impact of outer 
continental shelf oil production on coastal States, has an indirect 
effect on the State of Arkansas. My State benefits from the oil 
produced in the outer continental shelf and does not have to bear any 
of the environmental impact it causes. As a committee, we cannot ignore 
this important issue or its effect on the communities along our 
coastline. We should give proper deference to the impact that they bear 
for the oil resources that we all enjoy. The panel before us today will 
help us take the first step along the path of exploring this issue. I 
look forward to the testimony to be presented here today and to the 
insight offered by the witnesses.

    The Chairman. I am very happy that you are here.
    Senator Graham. Mr. Chairman.
    The Chairman. Yes, Senator Graham.
    Senator Graham. Can I ask this? I am afraid I am going to 
have to leave for that caucus. I wonder if we would be 
permitted to submit questions in writing to the witnesses for 
subsequent-to-the-hearing response.
    The Chairman. Sure, we will provide that opportunity.
    Senator Graham. Thank you very much.
    Before I recognize Senator Landrieu, let me indicate how 
broad the interest in the issue and in the players are because 
LeTourneau is a very interesting subsidiary of the Rowan 
Company. And the Rowan Company has got activities in our State 
in the area of aviation and others. So we have a stretch across 
a broad breadth of America in the interests of those that are 
in the oil and gas exploration, development and so forth.
    Senator Landrieu, I believe you wanted to introduce your 
witness, Mr. Caldwell. Please proceed.
    Senator Landrieu. Jack Caldwell is our Secretary of Natural 
Resources, and has done just an outstanding job as he has spent 
days, weeks, months, years on this issue, travelling to almost 
every State in the Union, talking with any people who will 
gather to hear him. And I want to thank him for his leadership. 
He is on one of the advisory committees of the Mineral 
Management Service, and has just done an outstanding job, Mr. 
Chairman, helping us get to this point.
    Jack, before you start, I also want to thank Mark for his 
leadership. Mark Van Putten and the National Wildlife 
Federation have been one of the great environmental groups that 
can speak specifically to this issue. So, thank you very much.
    I am going to have to leave in a few minutes. I am going to 
try to stay as long as I can. But, Jack, thanks for coming.
    The Chairman. Please proceed, Jack.

STATEMENT OF JACK C. CALDWELL, SECRETARY, LOUISIANA DEPARTMENT 
                      OF NATURAL RESOURCES

    Mr. Caldwell. Thank you, Senator Landrieu.
    Mr. Chairman and honorable members of the committee, as 
Senator Landrieu has just emphasized to you, Louisiana's 
coastal ecosystem is a unique national treasure and it is in a 
virtual state of collapse. In the last 50 years, we have lost 
1,000 square miles of coastline. And in the next 50 years, we 
are going to lose another 1,000 square miles of coastline if we 
do not do anything about it. This is an area the size of the 
State of Delaware that is disappearing into the Gulf of Mexico.
    I have here my digitized satellite map, which shows the 
losses, in red in the past, and the yellow is in the future, in 
just one part of the Louisiana coast. And you can see the 
catastrophic devastation that this coast is undergoing.
    The economic, social and environmental costs are 
staggering. The current estimate is that in infrastructure 
alone, we are going to lose $150 billion in value over the next 
50 years. Whole towns and communities, oil fields, coastal 
industries, public facilities are going into the Gulf of Mexico 
if we do not do something about it.
    Now, the causes of this loss are very complex and numerous. 
But, without a doubt, as always, the hand of man is a 
significant influence. And in this, offshore oil and gas 
operations have had a significant impact.
    Let us take one example, the Houma Navigation Canal. This 
canal was dug in 1964, and it runs from the town of Houma, 
Louisiana, population about 100,000, 25 miles down to the Gulf. 
And it is one of Louisiana's major offshore oil and gas 
operations bases. In the 35 years that this canal has been 
there, as you can see from my satellite map, we have lost 10 
square miles along that one canal in a 25-mile area.
    This is due to boat wash in these fragile marshes, 
saltwater intrusion that comes up the canal and destroys the 
freshwater marsh, and the tidal energy that washes the soil in 
and out. Ten square miles in 35 years.
    In addition, the Louisiana coast is criss-crossed by 14,000 
miles of oil and gas pipelines, many of them from offshore 
coming onshore. The Mineral Management Service is presently 
doing a study to determine the impacts just of those pipelines. 
And we will have that and we will file that in the record when 
the MMS completes it.
    In addition, we have Port Fourchon, which is presently 
being studied by the MMS. It is the major offshore oil base, 
located down on the coast. Port Fourchon is serviced by one 
two-lane road, running up Bayou LaFourche, that carries 1,000 
trucks a day. And that poor road is crumbling into the Gulf as 
we speak. If we do not get some help, Port Fourchon will have 
to shut down.
    Now, Louisiana supports strongly offshore oil and gas 
operations. We have always believed in it, as Senator Landrieu 
has told you. But Louisiana should not bear a disproportionate 
burden of the adverse environmental impacts of these 
operations. We have furnished 90 percent of the revenues that 
come from offshore Louisiana. And we have been returned about 1 
percent of the royalties under the 8(g) funds.
    But there is hope on the Louisiana coast. Under the Breaux 
Act, sponsored by Senator Breaux in 1990, Louisiana has been 
receiving about $40 million in Federal funds. And this, 
together with State match, has gone into coastal restoration 
projects that my department is charged with implementing. And I 
want you to know that I am very pleased and very proud to 
report that we are currently meeting with modest success in 
coastal restoration.
    But this is not enough. At the present rate, it is 
estimated we will only save about 22 percent of the losses that 
will otherwise occur. We believe that S. 25 can provide the 
resources to restore the coast.
    A joint coalition of Federal and State agencies have just 
finished a comprehensive strategic plan for the Louisiana 
coast, known as Coast 2050. And we have furnished the committee 
with copies of this plan.
    The Coast 2050 estimates that if we take the appropriate 
action, we can save 90 percent of the loss that will otherwise 
occur, and at a modest cost of $14 billion over the 50-year 
period. And S. 25 we believe can provide those funds.
    So, we submit that the Louisiana coast is a perfect model 
for reaching the lofty and worthy goals of S. 25, which is to 
reinvest a portion of these nonrenewable oil and gas revenues 
into renewable and sustaining resources. We believe that title 
I, as well as title II and title III embody the great American 
tradition of conserving and preserving our dwindling natural 
resources.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Caldwell follows:]
Prepared Statement of Jack C. Caldwell, Secretary, Louisiana Department 
                          of Natural Resources
    Louisiana's story is compelling. It's about an irreplaceable part 
of America's coast that is disappearing at a catastrophic rate. If the 
loss is not stopped and reversed, the very industry we discuss today 
will be at risk, along with the economy, infrastructure, wildlife 
habitat, fisheries, communities and unique culture of south Louisiana.
    Louisiana's coastal wetlands represent 40% of all the salt marshes 
in the contiguous United States. During the past 50 years more than one 
thousand square miles have disappeared. During this decade, our coastal 
wetlands are being lost at the rate of 25 to 35 square miles a year, or 
the equivalent of a football field every 15 minutes. Even with current 
restoration efforts, we expect to lose almost one thousand more square 
miles by the year 2050. This dramatic loss represents 80% of all 
coastal wetland loss in the entire continental U.S.
    The effects of natural processes like subsidence and storms 
combined with human actions, including impacts from offshore oil and 
gas exploration and development, have led to an ecosystem on the verge 
of collapse.
    America is losing much more than acreage. Louisiana's coastal 
wetlands contribute 28% to the total volume of U.S. fisheries, provide 
winter habitat for one-half to two-thirds of the Mississippi Flyway 
waterfowl population and for many threatened and endangered species, 
the nursery ground for fish and shellfish for much of the nation's 
seafood consumption, and 40% of the nation's fur harvest. They provide 
for 400 million tons each year of waterborne commerce, and support and 
protect the multi-billion dollar a year oil and gas industry. Our 
coastal wetlands are home to more than two million people and serve as 
their buffer from hurricanes and storms.
                louisiana offshore oil and gas activity
    Eighteen percent of U.S. oil production originates in, is 
transported through, or is processed in Louisiana coastal wetlands with 
a value of $6.3 billion a year. Almost 24% of U.S. natural gas 
production originates in or is processed in Louisiana's coastal 
wetlands with a value of $10.3 billion a year.
    Louisiana's OCS (outer continental shelf) territory is the most 
extensively developed and matured OCS territory in the United States. 
It has produced 88.8% of the crude oil and condensate and 83.2% of the 
natural gas extracted from all federal OCS territories from the 
beginning of oil and gas exploration and development in the U.S. 
through the end of 1996.
    As of December 1998, Louisiana offshore leases totaled 5,363, with 
more than 27 million acres under lease, 130 active drilling rigs, 4,489 
producing oil wells and 3,813 producing gas wells.
    Our latest annual production data for 1997 shows that 353,846,995 
barrels of oil and 3,881,352,353 MCF (thousand cubic feet) of natural 
gas was produced. Between January and July 1998, oil production was at 
227,282,332 barrels, with gas at 2,281,832,468 MCF.
    As of October 1998, there were 3,439 platforms in the Gulf off 
Louisiana's coast.
    In 1997, oil and gas production was valued at a combined total of 
$18.6 billion, with federal royalties totaling $2.9 billion.
    Louisiana projection estimates for offshore oil and gas production 
and federal royalties:

 
----------------------------------------------------------------------------------------------------------------
                                                              1999     2000     2001     2002     2003     2004
----------------------------------------------------------------------------------------------------------------
OIL:
Production  (in millions of barrels)......................    413.0    493.9    524.8    541.2    556.7    572.2
Oil Royalties  (in millions of $$)........................  1,177.5  1,392.0  1,471.4  1,523.9  1,537.2  1,450.4
 
GAS:
Production  (in million MCF)..............................  3,700.8  3,527.3  3,308.5  3,318.3  3,373.4  3,428.4
Gas Royalties  (in millions of $$)........................  1,360.9  1,292.2  1,175.5  1,082.2    993.5    911.6
----------------------------------------------------------------------------------------------------------------

    Recently, the oil and gas industry has rebounded from a downturn in 
the 1980s. The main reasons are the discovery of oil and gas in 
deepwater fields of the central Gulf of Mexico, deepwater royalty tax 
relief, and new and improved technology used to extract oil from the 
deepwater Gulf.
    Industry leaders are expressing a new optimism and the frantic pace 
of drilling is breaking old records. The deepwater Gulf of Mexico has 
emerged as the country's most significant oil and gas province and some 
estimates say within the next four to five years, as much as 30% of the 
country's total domestic output will originate from the Gulf of Mexico.
    Market analysts predict this intense level of exploration could 
last 10 years. The success of Louisiana's oil and gas industry 
contributes billions to the State and national economies every year. 
Offshore companies paid about $2.4 billion to vendors and contractors 
in 165 Louisiana communities in 1992 alone. Nearly 4,000 vendors serve 
offshore operations and employ 55,000 people and more than 30,000 are 
employed offshore.
    Port Fourchon is the geographic and economic center of offshore 
drilling efforts along the Louisiana Gulf Coast. More than $700 million 
in public and private investments have been made in the complex and the 
port will provide support to 75% of the deep water drilling prospects 
in the Gulf. It's tonnage has increased 275% in the last five years and 
it is anticipated to double again within two years. It handled more 
than 30 million tons of cargo in 1996.
    More than 6,000 people currently depend on the port as an avenue to 
and from offshore facilities and more than 13,000 people depend on it 
for jobs, supplies, facilities and as a hurricane evacuation hub to 
safer locations north of the coast. Most of the major and independent 
oil and gas companies operating in the Gulf have a presence at Port 
Fourchon. On any given day, more than 1,000 trucks are unloaded and 
loaded there and pipe yards, shipyards, platform construction 
facilities, service bases and barge terminals within the immediate 
service area of the port are working at or near capacity.
    Less than 20 miles southeast of Port Fourchon is the Louisiana 
Offshore Oil Port (LOOP), built by a group of major oil and pipeline 
companies. It serves as the central unloading and distribution port for 
all incoming supertankers to the Gulf region. The supertankers offload 
crude oil into LOOP's offshore pipeline continuously. The oil is then 
piped north to Lafourche Parish where it is stored and piped to markets 
all over the country.
           the oil and gas industry--impacts come full circle
    The United States depends on the oil and gas shipped through and 
produced in Louisiana's coastal zone. Wetlands and barrier islands 
protect the billions of dollars worth of infrastructure that supports 
the industry from wave and storm damage and are an integral part of the 
nation's energy system. The industrial uses associated with offshore 
exploration and production, pipelines, and canal developments have 
directly and indirectly contributed to marsh destruction, putting the 
industry, itself, at risk.
    Navigation channels and canals dredged for oil and gas extraction 
have dramatically altered the hydrology of the coastal area. North-
south channels and canals have brought salt water into fresh marshes, 
killing vegetation and habitat. East-west canals have impeded 
sheetflow, ponding the water on the marsh and leading to stress and 
eventual loss. Canals have also increased tidal processes that impact 
the marsh by increasing erosion. Channel deepening has caused saltwater 
intrusion, endangering the potable water supply of much of the coastal 
region.
    As of 1997, there were more than 20,000 miles of pipelines in 
federal offshore lands and thousands more inland. They all make 
landfall on Louisiana's barrier islands and wetland shorelines. The 
barriers are the first line of defense against combined wind and water 
forces of a hurricane and they serve as anchor points for pipelines 
originating offshore. These islands protect the wetland habitants from 
an offshore oil spill and are critical in protecting the state's 
wetland-oriented oil and gas facilities and thousands of jobs directly 
and indirectly tied to the industry.
    If the barrier islands erode entirely, as expected in the next 50 
years, platforms, pipelines and wells will be damaged in increasing 
numbers. More than 58% of the region's wells are located in coastal 
parishes. Most of them are more than 50 years old and were not designed 
to withstand the conditions of open water they could face in the next 
50 years. More than 30,000 wells are at risk within the 20-parish 
coastal area. Wells that were on land only a few years ago are now 
surrounded by water, a situation hazardous to boat traffic and an 
environmental liability to habitat and fisheries.
    Workers, equipment, supplies, and transportation facilities that 
accompany the rapid growth of the offshore oil and gas industry depend 
on land based facilities. Roads, housing, water, acreage for new 
business locations and expansions of existing businesses, waste 
disposal facilities and other infrastructure facilities will be needed 
in localized areas along the Louisiana coast. Existing land based 
infrastructure is already heavily overburdened and needs expansion and 
improvement, requiring extensive financial infusions from State and 
local governments. For example, Louisiana's only highway leading to 
Port Fourchon is on the verge of crumbling under the strain of the 
thousands of trucks that travel it each week. It will cost about $266 
million to make the highway safe and fully usable.
    LOOP also depends on onshore infrastructure protected by wetlands. 
Without this protection, America will lose an essential trade and 
navigation center that would affect commerce throughout the world.
                other impacts from coastal wetland loss
    Louisiana ranks first in the nation in total shipping tonnage, 
handling more than 450 million tons of cargo a year through its deep-
draft ports of New Orleans, Baton Rouge, Lake Charles, South Louisiana, 
Plaquemines Parish and St. Bernard. The ports between Baton Rouge and 
New Orleans are the largest by tonnage carried in the world and serve 
the entire eastern part of the country.
    The state's wetlands and barrier islands protect this 
internationally important port system, as well as navigation channels, 
waterways and anchorages from winds and waves. At present land loss 
rates, more than 155 miles of waterways will be exposed to open water 
in 50 years, leaving this key port system at risk and businesses 
throughout the nation losing preferred links to European and Pacific 
Rim markets.
    Because of our coastal marshes and barrier islands, Louisiana's 
commercial and recreational fisheries are among the most abundant in 
America, providing 25% to 35% of the nation's total catch. Louisiana is 
first in the annual harvest of oysters and crabs and menhaden, and is a 
top producer of shrimp. Some of the best recreational salt water 
fishing in North America exists off Louisiana's coast. The reason for 
this abundance is that our coastal marshes provide the nursery for 
young fish and shellfish.
    The long-term impacts of wetland loss relates to many species of 
fish and shellfish that depend on these habitats, translating into 
economic losses that affect the entire region and the nation. Nearly 
all Louisiana commercial species use the marsh at some stage of their 
life cycle, and fisheries loss will be proportional to marsh loss. By 
the year 2050, the annual loss of commercial fisheries will be nearly 
$550 million. For recreational fisheries, the total loss will be close 
to $200 million a year.
    Louisiana's coastal wetlands provide a diverse habitat for many 
wildlife communities. The wetlands provide life cycle needs for 
resident species and wintering habitat for migratory waterfowl and 
other birds. Land loss and habitat change by the year 2050 will affect 
the nation's wildlife population. Sea birds, wading birds and shore 
birds are expected to decrease, along with raptors and woodland birds. 
Alligators and furbearers will decrease in certain areas of the coast, 
as will the abundance of ducks and geese.
    Louisiana's cities and coastal communities are at great risk as the 
wetlands and barrier islands disappear, leaving people with no buffer 
from storm surges and the force of high winds. Miles of hurricane 
protection levees will be exposed to open water conditions, forcing 
widespread relocation and abandonment of coastal communities.
    Wetlands create friction and reduce high winds when hurricanes hit. 
They also absorb hurricane storm surges. Scientists estimate that every 
2.7 miles of wetlands absorbs one foot of storm surge. The 3.5 million 
acres of wetlands that line Louisiana's coast today have storm 
protection values of $728 million to $3.1 billion.
    The recent strike of Hurricane Georges, just a few miles east, 
brought home just how devastating a direct hit to New Orleans would be. 
The potential loss of life and property is incomprehensible and the 
threat of disaster was not lost on the city's residents. Bumper-to-
bumper traffic snaked out of the city north and west for hours as more 
than one million people evacuated the crescent city. Hotel space was 
scarce as far north as Memphis.
    With the loss of barrier islands and wetlands over the next 50 
years, New Orleans win be a Gulf coast city and will lose its wetland 
buffer that now protects it from many effects of flooding. Hurricanes 
will pose the greatest threat, since New Orleans sits on a sloping 
continental shelf, which makes it extremely vulnerable to storm surges.
    More than two million people in inland south Louisiana will be 
subject to more severe and frequent flooding than ever before. Coastal 
communities will become shorefront towns and the economic and cultural 
costs of relocation is estimated in the billions of dollars.
    We expect an increase in homeowner and commercial insurance rates 
by 20% in some cases. Insurance coverage for wind damage may be 
discontinued, deductibles will increase by 20% by next year, and large 
insurance companies will stop issuing new policies in the coastal zone.
    South Louisiana's unique culture is a national treasure and the 
very fabric of its distinct way of fife is being eroded with the coast 
at great intangible cost to the nation and the world.
                   coast 2050: a vision of the future
    Louisiana began work in earnest to restore its coast in 1989 with 
the passage of Act 6 and in 1990 with passage of the Breaux Act or 
CWPPRA (The Coastal Wetlands Planning Protection and Restoration Act). 
Since then, more than 80 restoration projects are presently underway or 
already completed. We have gained the technical know-how and, by 
working with our federal partners, we are cementing long-term 
partnerships as we build projects together.
    During the past 18 months, the Coast 2050 Plan was developed in 
partnership with the public. It is a technically sound strategic plan 
to sustain Louisiana's coastal resources and to provide an integrated 
multiple-use approach to ecosystem management.
    Coast 2050 has received unanimous approval from all 20 Louisiana 
coastal parishes, the federal Breaux Act Task Force, the State Wetlands 
Authority, and various environmental organizations, including the 
Coalition to Save Coastal Louisiana. This approval is unprecedented.
    The main strategies of the plan are watershed structural repair, 
such as restoration of ridges and barrier islands, and watershed 
management, such as river diversions and improved drainage. In making 
recommendations, the process did not view the number of coastal 
wetlands acres saved as the only priority, but considered other 
resources as well, such as roads, levees, fish and wildlife resources, 
and public safety and navigation, in making recommendations.
    The Breaux Act (CWPPRA) Task Force, the State Wetlands Authority 
and the Department of Natural Resources Coastal Zone Management 
Authority will establish it as a unifying strategic plan of action. It 
will become the CWPPRA restoration plan and Louisiana's overall 
strategic coastal plan. Proposed projects will be measured against the 
strategies in the Coast 2050 Plan before being approved.
    In one way or another, everyone in the nation will feel the 
enormous loss of land along Louisiana's coast and current restoration 
efforts will only prevent 22% of the land loss projected to occur 
within the next 50 years. However, we know that a comprehensive 
restoration program using the Coast 2050 Plan as a guide, could restore 
and maintain more than 90% of the coastal land existing today.
    The price tag is $14 billion to construct more than 500 projects 
that would be needed, but the price of infrastructure alone that would 
be lost is more than $150 billion.
    For more than 50 years, Louisiana has shouldered the environmental 
and infrastructure impacts of supporting the OCS oil and gas industry. 
In 1997, royalties paid to the federal government from OCS revenues off 
the coast of Louisiana totaled $2.9 billion. Louisiana realized only a 
fraction in direct financial benefit, while losing another 35 square 
miles of its coast. If Louisiana receives its fair share of OCS 
revenues, we will be well on the way to restoring our coastline, 
justifying the $14 billion investment.
    Senate Bill 25 makes good sense. Investing income from a non-
renewable capital asset into renewable resources that will provide 
economic stability and health to an entire region and the nation for 
decades to come, is good business.
    Louisiana and America cannot afford to wait.

    NOTE: Some of the information in this testimony was taken from: the 
preliminary final draft of Coast 2050: Toward A Sustainable Coastal 
Louisiana, the final draft of No Time to Lose, a report by the 
Coalition to Restore Coastal Louisiana, and reports written by Dr. 
Donald W. Davis, administrator, Louisiana Applied Oil Spill Research 
and Development Program.

    The Chairman. Thank you very much, Mr. Caldwell. I 
appreciate your statement. And your entire statement will be 
entered into the record.
    Senator Craig has joined us. Good morning.
    Senator Craig. Good morning, Mr. Chairman.
    Go right ahead.
    The Chairman. The next witness will be the Hon. Jim 
Whitaker of the House of Representatives, State of Alaska.

        STATEMENT OF JIM WHITAKER, STATE REPRESENTATIVE 
                          FROM ALASKA

    Mr. Whitaker. Thank you, Mr. Chairman.
    If I may jump right to it. I respectfully submit my 
statement for the record.
    The Chairman. Without objection.
    Mr. Whitaker. Thank you.
    And I will paraphrase parts of it. But before I do that, 
let me state simply--and if you remember nothing of what I say 
for the remainder of that which I speak, please remember this--
this bill is a good idea, and we need good ideas. The people of 
Alaska support it. And, again, it is a good idea.
    I am testifying here today on behalf of State Senate 
President Drue Pearce and the Alaska State Senate and on behalf 
of State House Speaker Brian Porter and the Alaska State House, 
and, most importantly, on behalf of the people of Alaska.
    I serve as Chairman of the Oil and Gas Committee in the 
Alaska State House. I am here today to talk about the impacts 
of offshore oil and gas development activities on Alaska and 
its coastal communities. I want to begin, however, by 
expressing my appreciation to you, Chairman Murkowski, Senator 
Landrieu, and other cosponsors of S. 25, the Conservation and 
Reinvestment Act of 1999.
    This legislation is a much-needed and appropriate step 
towards addressing the impacts, needs and inequities which have 
been discussed today and will continue to be discussed, I am 
sure.
    For the last three decades, Alaska has been one of the 
primary sources of this country's domestic energy supply. And 
it is no secret that the oil and gas industry has brought many 
benefits to those of us in Alaska. At the same time, however, 
it has also created responsibilities and burdens which have 
economic costs throughout the State.
    I can tell you that my own hometown of Fairbanks 
experiences many real economic, environmental and community 
impacts as a result of the oil and gas activities which takes 
place further north and also from the Trans-Alaska Pipeline. 
Fortunately, we have also been able to benefit from them, as 
well, and rely upon those benefits, to some extent, to deal 
with such impacts and responsibilities.
    Alaska is one of several States which has active Federal 
outer continental shelf oil and gas development taking place 
off its shores. More importantly, the level of production from 
Federal OCS oil and gas leases in Alaska is likely to increase 
significantly as new development is brought online. Hundreds of 
millions of dollars in revenues will be produced from Federal 
OCS development in Alaska. And I hope that billions becomes the 
byword, rather than millions, as the years go by.
    Yet, unlike Federal onshore activities, Alaska and the 
individual communities which are most proximate to Federal OCS 
development will receive no direct benefits from it, even while 
we shoulder the burdens and responsibilities that arise from 
development.
    Senator, in light of time constraints, I will stop my 
testimony at this point. Thank you very much, again, for giving 
me the opportunity.
    [The prepared statement of Mr. Whitaker follows:]
  Prepared Statement of Jim Whitaker, State Representative From Alaska
    Good Morning, Mr. Chairman and members of the Committee. My name is 
Jim Whitaker and am here testifying today on behalf of State Senate 
President Drue Pearce and the Alaska State Senate and Alaska State 
House Speaker Brian Porter and the Alaska State House. I am a member of 
the Alaska State House from Fairbanks, Alaska and serve as Chairman of 
the Oil and Gas Committee.
    I am here today to talk about the impacts of offshore oil and gas 
development activities on Alaska and its coastal communities. I want to 
begin, however, by expressing my appreciation to Chairman Murkowski, 
Senator Landrieu and the other co-sponsors of S. 25, the Conservation 
and Reinvestment Act of 1999. This legislation is a much-needed and 
appropriate step towards addressing the impacts, needs and inequities 
we are discussing today.
    For the last three decades, Alaska has been one of the primary 
sources of this country's domestic energy supply. It is no secret that 
the oil and gas industry has brought many benefits to Alaska. At the 
same time, however, it has also created responsibilities and burdens 
which have economic costs throughout the State. I can tell you that my 
own hometown of Fairbanks experiences many very real economic, 
environmental and community impacts as a result of the oil and gas 
activities which take place further north and from the Trans Alaska 
Pipeline System. Fortunately, we have also been able to benefit from 
them as well and to rely upon those benefits, to some extent, to deal 
with such impacts and responsibilities.
    Alaska is also one of the several states which has active federal 
outer continental shelf (OCS) oil and gas development taking place off 
its shores. More importantly, the level of production from federal OCS 
oil and gas leases in Alaska is likely to increase significantly as new 
development is brought on line. Hundreds of millions of dollars in 
revenues will be produced from federal OCS development in Alaska. Yet, 
unlike federal onshore activities, Alaska and the individual 
communities which are most proximate to federal OCS development will 
receive no direct benefits from it even while we shoulder the burdens 
and responsibilities that arises from development.
    As in the case of onshore development, federal OCS activities are 
major industrial undertakings which inevitably impact the State and 
particularly the communities nearest to them. Federal OCS oil and gas 
activities place increased demands on infrastructure, such as roads, 
ports, airports and not just those in the immediate area. Anchorage, 
our largest city, which is itself a coastal community, feels such 
affects from activities all over the State. In Alaska, much OCS-related 
equipment and facilities must come through the Port of Anchorage 
whether it is destined for the nearby waters of Cook Inlet or those 
much further north. The Anchorage and Fairbanks airports both 
experience significantly higher traffic, both cargo and passenger, as a 
direct result of onshore development and offshore activities will bring 
further increases. Federal OCS activities also place increased demands 
on local public services, such as fire protection, search and rescue, 
and law enforcement, as well as the utility systems of nearby 
communities, such as Barrow, Kaktovik, Kodiak and around Cook Inlet. 
Equally important are the increased environmental monitoring and 
regulatory functions that must be performed by the State and local 
governments. All of these impacts have economic costs for the State and 
for our local communities. Under the current federal system, however, 
we derive no direct economic benefits from federal OCS oil and gas 
development to assist us in dealing with the impacts which these same 
activities create.
    Not only is this unfair, it is also at odds with the historical 
practice and policy in the United States of allowing affected states 
and communities to share in the benefits of the development of 
federally-owned resources. The Alaska Statehood Act and, in other 
states, the Mineral Leasing Act, provide that we are entitled to 
receive a significant portion of the revenues derived from federal oil 
and gas leases on lands within our boundaries. This policy exists both 
as a matter of fairness and in recognition of the very real impacts 
which such activities create. Similarly, the federal payments in lieu 
of taxes or PILT program seeks to account for the economic impacts of 
federal lands on the local tax base. But the rules suddenly and 
inexplicably change when those very same federal activities occur right 
off our shores. That, I believe you'll agree, is simply not right and 
makes no sense.
    Nevertheless, this is not simply a matter of sharing the wealth, 
but also about addressing very real needs. Many of the smaller coastal 
communities in Alaska are struggling under what can best be described 
as third world conditions. Most are still trying to address basic 
community needs like education and water and sewer service. Many of the 
residents in these villages exist below the poverty line and are forced 
to rely on subsistence activities for survival. I have included as an 
exhibit to my written testimony a chart with income and poverty 
information for some of our coastal communities. The social and 
cultural problems that accompany poverty are often rampant. Money will 
not solve all of these problems. But providing some form of OCS 
community impact assistance will help improve the quality of life for 
such communities and their residents.
    Allowing Alaska and other coastal States to share in the economic 
benefits of federal OCS development will also assist us in addressing 
other important needs and functions. As a coastal State, Alaska has an 
extensive Coastal Zone Management Plan and Program Which is concerned 
not just with OCS oil and gas activities but all activities which 
impact the coastal environment. Federal OCS revenues would better 
enable Alaska and its communities to implement adequate monitoring and 
planning programs. The monitoring and collection of data regarding 
marine species and habitat could be significantly expanded. Local 
communities would be able to participate more fully and address their 
concerns in the extensive federal and State environmental planning 
process which precedes OCS development.
    In closing, let me emphasize that the Legislature and the citizens 
of Alaska overwhelmingly support responsible OCS development. Alaska 
has been blessed with a wealth of natural resources and their 
development is a crucial element of our economy. At the same time, 
however, it is important that the United States recognize the necessity 
and equity of allowing Alaska and other coastal States to share 
directly in the benefits of the development OCS resources so as to 
better enable them to deal with the very real impacts and 
responsibilities which they create.
    Thank you again, Mr. Chairman, for the opportunity to appear here 
and express the Legislature's concerns on this very important matter.

 
------------------------------------------------------------------------
                                                      Median     Percent
             Community                Population    household     below
                                                      income     poverty
------------------------------------------------------------------------
Kipnuk.............................        567       $ 4,999       76.6%
Kokhanok...........................        168        14,286       53.4%
Tyonek.............................        151        11,591       37.1%
Wales..............................        162        15,000       35.2%
Savoonga...........................        622        11,339       50.9%
Quinhagak..........................        567        17,500       37.2%
Chevak.............................        721        17,222       27.0%
Edna Bay...........................         70        12,250       63.7%
Gambell............................        653        15,938       46.4%
Hooper Bay.........................      1,012        18,125       43.5%
Perryville.........................        107        25,000       25.4%
------------------------------------------------------------------------
SOURCE: 1990 U.S. Census


    The Chairman. Thank you very much, Mr. Whitaker. I 
appreciate your statement. And the balance will be entered into 
the record.
    Our next witness is Mr. Donald Oltz, State Geologist and 
Supervisor for the Geological Survey, State of Alabama.
    Please proceed.

            STATEMENT OF DR. DONALD F. OLTZ, PH.D., 
                    STATE GEOLOGIST, ALABAMA

    Dr. Oltz. Thank you, Mr. Chairman. I appreciate the 
invitation to be here.
    I am the State Geologist of Alabama, and apparently I am 
lobbying for State magician also.
    [Laughter.]
    Dr. Oltz. I want to thank Senator Sessions for his 
introduction.
    The Chairman. In case some of our members missed it, this 
gentleman is also a magician. And I thought maybe we could use 
him in either the Democratic or the Republican caucus.
    Senator Craig. More than he ever would realize.
    [Laughter.]
    The Chairman. So, if you are looking for something to do 
after you finish, we have got a place for you.
    Dr. Oltz. Okay.
    Senator Burns. I want to take the opposite position to 
that. I think we have got more than we need now.
    [Laughter.]
    The Chairman. Well, there is never an unspoken thought 
around here.
    Please proceed.
    [Laughter.]
    Dr. Oltz. Today, I would like to briefly touch on how 
Alabama currently handles OCS income and activities, and then 
discuss how offshore exploration and production activities for 
natural gas and oil impact the coastal part of Alabama.
    I thought it would be informative just to briefly mention 
the Alabama model for revenues the State currently receives 
from oil and gas production. A 2 percent production tax and a 6 
percent privilege tax are assessed on oil production. The 
counties from which the production is severed receive 25 to 30 
percent of the privilege tax. The majority of severance tax 
goes into the general fund, which supports all non-educational 
programs in Alabama.
    Two trust funds have been established that receive offshore 
revenues, the Alabama and the Heritage Trust Funds will be 
merged together in 2001. They currently have a combined corpus 
of $1.61 billion. These funds include royalties and other 
revenues derived from State waters and all 8(g) revenues. 
Investment income last year approached $122 million, which was 
deposited in the State's general fund.
    Now, I would like to focus on Alabama, and discuss how 
offshore exploration and production activities for natural gas 
impact the coastal area. Natural gas was discovered in Alabama 
in 1979. Additional discoveries of natural gas in Alabama State 
waters led to natural gas discoveries in the OCS off Alabama, 
Mississippi and Florida. Offshore production platforms, 
pipelines, and onshore processing facilities were established 
to allow for production of these very large natural gas 
reserves.
    Currently, gas production offshore of Alabama occurs within 
the 3-mile State coastal waters, in the State shared with 
Federal 8(g) area, and beyond the 6-mile 8(g) boundary. Over a 
billion and a half--and let me repeat that, because I am going 
to come back to some of these numbers--a billion and a half 
cubic feet a day are brought onshore in southern Mobile County, 
Alabama. This gas originates from Alabama, Mississippi and 
soon, possibly, Florida.
    Alabama has over 100 industries that participate in the 
construction and operation of drilling rigs. New production 
drilling and production technology will expand exploration and 
production operations into very deep water.
    Some specific Alabama infrastructure needs are roads. For 
instance, we have four gas processing plants in three locations 
in Mobile County, Alabama. These plants, as an example, send 
out 25 to 30 molten sulfur-laden semis, tanker trucks, every 
day, each day accumulating 400 to 500 long tons of molten 
sulfur. Sulfur is removed from the gas because a lot of the gas 
produced in offshore Alabama is sour.
    Docks and port facilities are obvious. New pipelines--we 
are projecting increased exploration in the Gulf of Mexico. It 
is one of the hottest spots for exploration for the oil 
industry in the world right now. So we can look for expanded 
for pipelines in Alabama. Sometimes these have to cross coastal 
wetlands and other environmentally sensitive areas.
    Accommodations to Federal production--in the interest of 
efficiency offshore, a lot of material will be combined with 
State production at an offshore platform and then piped into 
onshore facilities. We are going to be accommodating Federal 
production, and commingling it with the State production, which 
means a whole administrative nightmare, metering problems, and 
also accommodation for the increased volume.
    We have viewshed issues. Residents of the coastal 
communities have complained about the viewshed issues offshore 
Alabama. We have boat and air traffic problems, competition for 
offshore space. You are probably aware that Alabama has a 
tremendous shrimping industry and a fishing industry, and the 
shrimp boats compete with crew boats and other traffic going 
back and forth in support of the offshore platforms.
    Air quality is a problem in the south coastal air basin. 
Oil spills could potentially be a problem in offshore Alabama. 
Right now, we only have to handle gas. And there is no threat 
to the shoreline. As production increases and as new 
discoveries are made further offshore, we expect that oil will 
have to be something that infrastructure will be needed to 
handle, in terms of potential beach problems.
    Of course labor is a problem.
    My written comments address also title I provisions, but we 
go on record here in support of the title II and title III.
    Alabama has produced over 1 trillion cubic feet of gas. And 
I go back to this idea about numbers, because the industry 
talks about a million cubic feet a day, or 5,000 barrels of oil 
per day. A trillion cubic feet of gas is about 20 percent of 
the total reserves that are available offshore Alabama. One 
trillion cubic feet will take the area of a football field 
2,800 miles high. That is how much gas and how much 
infrastructure impact there is in Alabama.
    As I have described, Alabama is currently being impacted by 
offshore development in a variety of ways. And we are carrying 
more than our share of the burden. It would be appropriate for 
the State of Alabama and local governments to receive 
additional revenues that could be used to mitigate adverse 
environmental and public service impacts incurred due to OCS 
development.
    I appreciate the opportunity to make these comments. Thank 
you.
    [The prepared statement of Dr. Oltz follows:]
   Prepared Statement of Dr. Donald F. Oltz, Ph.D., State Geologist, 
                                Alabama
    Mr. Chairman, thank you for the invitation to appear here today. I 
am Don Oltz, State Geologist of Alabama. In my position as Supervisor 
of the State Oil and Gas Board of Alabama, I have regulatory authority 
for oil and gas operations in Alabama. As Director of the Geological 
Survey of Alabama, I head an agency which provides current, competent, 
and complete information and research on Alabama energy, minerals, 
water, and biology. Also, I am the current vice chairman of Minerals 
Management Service (MMS) Outer Continental Shelf (OCS) Policy Committee 
and was one of the votes to move the assistance concept to the 
Department of the Interior. I also have many years' experience in the 
oil and gas industry. Today, I would like to provide a short summary of 
the OCS Policy Committee's report on coastal impact assistance, briefly 
touch on how Alabama handles current income from OCS activities, and 
then discuss how offshore exploration and production activities for 
natural gas and oil impact the coastal area of Alabama.
    The OCS Policy Committee was established to provide advice to the 
Secretary of the Interior through the MMS on policy issues related to 
oil and natural gas activities on the OCS. Members represent the 
coastal States and constituencies impacted by federal OCS programs. At 
the Spring 1997 meeting, the OCS Policy Committee reiterated its 
support for impact assistance and revenue sharing to coastal States and 
communities directly affected by oil and gas development. The MMS asked 
the OCS Policy Committee to develop a proposal to implement an impact 
assistance program. The resulting report entitled, ``Coastal Impact 
Assistance'' was approved by the OCS Policy Committee and transmitted 
to the Secretary of the Interior.
    The OCS Policy Committee report identified two fundamental 
justifications for a revenue sharing or impact assistance program: (1) 
mitigate the various impacts of OCS activities and (2) support 
sustainable development of nonrenewable resources. The committee report 
states that `` `OCS development can . . . affect community 
infrastructure, social services and the environment in ways that cause 
concerns among residents of coastal States and communities.' These 
effects cannot be entirely eliminated and they underscore the fact 
that, while the benefits of the OCS program are national, a 
disproportionate share of the infrastructure, environmental and social 
costs are local.''
    Impacts listed in the OCS Policy Committee report are:
   the need for infrastructure, such as ports, roads, water and 
        sewer facilities, to support expanded economic activity 
        accompanying OCS development;
   the need for public services, such as schools, recreation 
        facilities, and other social services, to support the 
        population growth accompanying OCS development;
   the need to mitigate the effects of occasional accidents 
        (e.g., oil spills) or cumulative air, water, and solid waste 
        discharges on coastal and marine resources and on the economic 
        activities (e.g., tourism and fisheries) that depend on those 
        resources;
   the need to mitigate the physical impact of OCS activities 
        (e.g., pipelines, wake wash, road traffic, canal digging, and 
        dredging) on sensitive coastal environments;
   the visual impact on residents and tourists from production 
        platforms and facilities, waste disposal sites, pipeline rights 
        of way, canals, etc.; and
   the costs to State and local governments of effective 
        participation in OCS planning and decision-making processes and 
        permitting, licensing, and monitoring onshore activities that 
        support offshore development.
    Mr. Chairman, I thought it might be informative to briefly mention 
revenues the State currently receives from oil and gas production 
including the offshore. In Alabama, severance taxes are charged on 
natural gas production. A two percent production tax and a six percent 
privilege tax are assessed on all production. The counties from which 
the production is severed receive 25 to 30 percent of the privilege 
tax. The majority of severance tax revenues are deposited in the State 
General Fund which supports all non- educational State programs. Two 
trust funds have been established that receive offshore revenues. The 
Alabama and Heritage Trust Funds will be merged in 2001 and currently 
have a combined corpus of 1.61 billion dollars. These funds include 
royalties and other revenues derived from State waters and all 8(g) 
revenues. Investment income last year approached 122 million dollars 
which was transferred to the State's General Fund.
    Now I would like to focus on Alabama and discuss how offshore 
exploration and production activities for natural gas and oil impact 
our coastal area. Our coastal area comprises two counties: Mobile and 
Baldwin. Mobile County is more populated and has a strong industrial 
base which includes: paper products, ship building, aviation, 
chemicals, lumber products, textiles, seafood processing, and oil and 
gas production. Baldwin County is less populated but has the fastest 
growing population in the State. Retail trade and real estate are the 
industries which support a strong and growing tourist industry.
    Natural gas was discovered in Alabama State waters in 1979. 
Additional discoveries of natural gas in Alabama State waters led to 
natural gas discoveries in the OCS off Alabama, Mississippi, and 
Florida. Offshore production platforms, pipelines and onshore 
processing facilities were established to allow for production of these 
very large natural gas reserves. Production from Alabama State waters 
and the OCS off Mississippi and Alabama constitutes a significant 
contribution to U.S. energy production. We fully expect the 
infrastructure necessary to produce these energy resources will 
continue to expand offshore and onshore Alabama.
    Currently, gas production offshore Alabama occurs within the 3-mile 
State coastal waters, in the Federal-State shared ``8(g)'' area and 
beyond the 6-mile ``8(g)'' boundary. Over a billion and a half (1.5 
bcf) cubic feet of gas are brought onshore every day in south Mobile 
County, Alabama. This gas originates from offshore Alabama, 
Mississippi, and soon, possibly Florida. Alabama has over 100 
industries that participate in the construction and operation of 
offshore drilling rigs. New drilling and production technology will 
expand exploration and production operations into very deep water. 
Geologic creativity continues to expand the number of ``plays'' so that 
more and more prospects are being drilled. New plays currently being 
developed in OCS waters include the oil-prone deep water flex play and 
the Cretaceous carbonate trend offshore Mississippi and Alabama.
    Alabama infrastructure needs for maintaining current and future 
Gulf of Mexico drilling and production include:
    1. Roads. Alabama has to widen a two-lane road south of I-10 toward 
the gulf to add lanes to handle increased industrial traffic. One 
source of some of that traffic is tankers carrying molten sulfur. We 
have four gas-processing plants in three locations in Alabama; these 
plants send out 25 to 30 trucks laden with 400 to 500 long tons of 
molten sulfur each day. (Sulfur is removed from the ``sour'' gas prior 
to entering sales lines.) Many of the 100+ industries supporting 
offshore oil and gas activities also deliver their products to 
facilities on the coast over Alabama roads.
    2. Docks and Port Facilities. The Mobile area port facilities 
service much of the OCS exploration and production operations offshore 
Alabama, Mississippi, and Florida.
    3. New Pipelines. As projected production increases occur, new 
pipelines will need to be brought onshore Alabama. In some areas they 
may cross coastal wetlands or other environmentally sensitive areas. 
The current plans to add natural gas liquids plants will also increase 
current daily throughput and the need for new pipelines.
    4. Accumulations to Federal Production. In the interest of 
efficiency, some federal production may be commingled with State 
production prior to pipelining. Metering and allowables will become an 
additional administrative issue for the Alabama State Oil and Gas 
Board.
    5. Viewshed Issues. Residents of coastal communities have 
complained about the visual impacts of offshore exploration and 
production facilities.
    6. Boat and Air Traffic. Helicopters, crews and supply boats 
operate out of onshore of nearshore bases. Alabama has a tremendous 
offshore fishing and shrimping industry that compete in the flow of 
traffic.
    7. Air Quality. The south-coastal air basin has air quality 
problems. Some contributions that impact air quality may be related to 
onshore processing, truck traffic, etc.
    8. Oil Spills. All of Alabama's State and ``8(g)'' production is 
gas. Deep water production will introduce oil production into the 
infrastructure of coastal Alabama. Alabama needs support for State 
coastal-based response teams because of increased exposure of risk not 
contemplated by current planning.
    9. Labor and Associated Infrastructure. Increased jobs brings 
increased needs for schools, hospitals, water treatment plants, sewers, 
etc. Some socioeconomic studies are in progress to address these and 
other related issues.
    In closing, Senate Bill 25 is designed to provide Coastal Impact 
Assistance to State and local governments in order to mitigate adverse 
environmental and public service impacts incurred due to OCS 
development. Alabama has produced over 1 tcf of gas. I think industry 
people throw numbers around that are sometimes hard to envision: 1 mmcf 
or 1.5 bcf/day or 5,000 bopd; 1 tcf of gas will cover the area of a 
football field vertically for 2,800 miles. As I have described, Alabama 
is currently being impacted by offshore development activities in a 
variety of ways and we are carrying more than our share of the burden. 
It would be appropriate for the State of Alabama and local governments 
to receive additional revenues that could be used to mitigate adverse 
environmental and public service impacts incurred due to OCS 
development. I appreciate the opportunity to provide these comments. 
Thank you.

    The Chairman. Thank you very much, Mr. Oltz. The balance of 
your statement will be entered into the record.
    I want to welcome Mr. Van Putten. Mark Van Putten, 
President of the National Wildlife Federation. We look forward 
to your statement and welcome you this morning.

       STATEMENT OF MARK VAN PUTTEN, PRESIDENT AND CEO, 
                  NATIONAL WILDLIFE FEDERATION

    Mr. Van Putten. Thank you, Mr. Chairman. Good morning to 
you and to the members of the committee.
    My name is Mark Van Putten. And I am here today to testify 
on behalf of the National Wildlife Federation, America's 
largest conservation advocacy and educational organization. I 
have submitted written testimony, which I would ask be included 
in the record of this hearing.
    My testimony today outlines some of the threats that our 
invaluable coastal resources face as a result of offshore oil 
and gas drilling. Unfortunately, most of these adverse impacts 
are borne primarily by America's coastal zones, which are among 
the most biologically rich natural resource systems on this 
continent. They are also among our Nation's most important 
systems because of the crucial role they play in minimizing 
coastal flooding and erosion, providing important spawning 
habitat, and harboring rare and endangered wildlife.
    Any analysis of this issue quickly reveals three 
fundamental facts. First, petroleum and petroleum byproducts 
are an integral part of our economy. Second, these products are 
toxic to nearly every type of living organism. And, third, 
these products are nearly impossible to contain once they have 
been released from the protective shelter of the Earth's crust.
    While it is critical that we as a Nation wrestle with the 
impacts of drilling in the outer continental shelf, the battle 
over needed changes in our Nation's offshore oil and gas 
drilling practices will likely drag on long into the future. In 
the meantime, there are real opportunities for this Congress to 
begin to mitigate, protect and restore some of the coastal 
resources that have been degraded.
    S. 25, recently introduced by Senators Murkowski, Landrieu 
and others, provides an important opportunity to redirect 
revenue from our offshore oil and gas drilling activities to 
address some of these impacts.
    My written testimony provides a detailed accounting of 
these impacts, so I will only highlight a few of them here. 
Laying pipelines, anchoring rigs to the ocean bottom and other 
related construction activities generally result in significant 
mechanical damage to the sea floor, and can have devastating 
impacts on ecologically sensitive habitats.
    The accompanying noise associated with construction and 
operation of these sites has been found to disturb critical 
marine species. Oil and gas development on the OCS also bears 
substantial responsibility for coastal subsidence, which was 
spoken to so eloquently by Mr. Caldwell.
    Scientists have persuasively documented that the laying of 
pipelines and opening of navigation channels through Louisiana 
coastal wetlands have accelerated erosion and subsidence.
    In addition, routine platform operations create several 
chronic pollution sources, the most deadly of these are the 
toxic chemicals routinely used to lubricate drill bits. These 
fluids and lubricants mix with the rock and mud to form a toxic 
sludge that is often found hundreds of meters away from the 
rigs. This sludge is left directly on the ocean floor, where it 
both suffocates and poisons species.
    Toxic brine, or produced water as it is known, is generated 
in massive quantities by offshore oil wells, and contains a 
variety of pollutants.
    Additionally, naturally occurring radioactive materials 
found deep in the Earth's crust leach into produced water and 
are then brought to the surface as a consequence of drilling.
    The cumulative impacts of these various toxics have had 
serious consequences for important species like lobsters, 
oysters and fin fish that inhabit the areas under these rigs. 
In addition to this ongoing chronic pollution associated with 
OCS oil and gas drilling, accidental leaks, spills, blowouts, 
tanker barge collisions, and explosions all result in the 
release of oil and petroleum byproducts into the ocean and 
coastal systems.
    Although relatively rare, when they happen, the impacts of 
these spills are often catastrophic and long lasting. More 
common are the smaller, chronic spills that occur as leaks. The 
incidence of these leaks in the future will likely grow as the 
pipelines laid in the 1960's and 1970's age and corrode.
    As substantial and diverse as these impacts of OCS drilling 
are, one of the most significant long-term impacts of OCS 
production for the coastal zone is human-induced climate change 
and sea level rise. EPA has estimated that an increase in sea 
level of 50 centimeters would inundate more than 5,000 square 
miles of current uplands and 4,000 square miles of wetlands, an 
area six times larger than the State or Rhode Island.
    Chronic pollution, catastrophic oil spills and other 
detrimental impacts of OCS oil and gas drilling are having a 
substantial impact on our invaluable coastal resources, 
including estuarine and coastal wetlands which provide vital 
protection from flooding and erosion; sea grass beds, which 
serve as nurseries for commercially important food fish and 
shellfish; barrier islands, which protect waterfront 
communities from the ravages of storms; coral reefs, whose 
biological richness is equal to that of tropical rain forests; 
and little known deep-sea ecosystems whose treasures are yet to 
be discovered.
    If properly crafted, S. 25 would help to mitigate the 
damage to the environment that is created by offshore oil and 
gas drilling. The National Wildlife Federation wholeheartedly 
endorses the idea of reinvesting revenues from the sale of 
nonrenewable resources in the conservation of renewable 
resources such as land, wildlife, habitat, air, and water.
    At the same time, it is critical that any legislation 
intended to meet these needs does not, at the same time, 
negatively affect the environment by encouraging more oil and 
gas development. To prevent this perverse effect, the impact 
assistance funds for coastal governments should be dedicated to 
environmentally sound projects designed explicitly to mitigate 
the environmental damage, and shaped by public input.
    Further, the allocation of these funds should be structured 
so that local communities are not encouraged to support 
inappropriate oil and gas development along their coasts.
    NWF also commends the application of OCS dollars to other 
conservation areas that have historically been underfunded--the 
Land and Water Conservation Fund and State and wildlife 
programs. Attached to my testimony is a letter, signed by NWF 
and other leading conservation organizations that provide 
suggestions for ensuring that these funds are used for their 
intended conservation purposes and directed to the areas of 
greatest need.
    I would also note the positive development of the 
President's Lands Legacy initiative as another important factor 
that could lead us to addressing this need.
    In conclusion, our coastal zones contain invaluable natural 
resources that face substantial threats from OCS oil and gas 
drilling and other sources. The National Wildlife Federation 
encourages this committee to give serious consideration as you 
move forward to amending S. 25 to fulfill its potential as a 
tool for addressing some of America's most pressing 
conservation needs.
    Thank you, Mr. Chairman. And we look forward to working 
with you and the members of this committee as S. 25 moves 
ahead.
    [The prepared statement of Mr. Van Putten follows:]
  Prepared Statement of Mark Van Putten, President and CEO, National 
                          Wildlife Federation
    Mr. Chairman, Senators, thank you for this opportunity to testify 
before you. My name is Mark Van Putten. I am here today on behalf of 
the National Wildlife Federation, the Nation's largest conservation 
advocacy and education organization.
    My testimony outlines some of the threats that our invaluable 
coastal resources face as a result of offshore oil and gas drilling--in 
particular, drilling on the Outer Continental Shelf (OCS). It is hard 
to overstate the devastating environmental impacts of OCS drilling--
impacts that result from the initial exploration and development of the 
platforms; from the production, transportation, and refining of oil and 
gas; and ultimately, from our own consumption of OCS petroleum. 
Unfortunately, the lion's share of these impacts are borne by America's 
coastal zones, which rank among the most biologically rich and 
economically significant natural systems on the continent. These 
coastal zones are home to over half the Nation's population, play a 
critical role in absorbing flooding and blunting storms, provide 
important spawning habitat for commercially valuable fisheries, and 
harbor a disproportionate fraction of rare and endangered wildlife.
    Thoughtful analysis of this issue quickly reveals three underlying 
facts: (1) petroleum and petroleum by-products are an integral part of 
our economy; (2) these products are toxic to nearly every type of 
living organism; and (3) once freed from the earth's crust, these 
substances are virtually impossible to completely contain--in small and 
large quantities, they leak, spill, and evaporate, with environmental 
effects that are felt far from the rigs that bring them to the surface.
    The impacts of OCS drilling are substantial and widespread. Some of 
these impacts are so severe that there is no hope for mitigation or 
restoration, however, many others can and should be addressed. Indeed, 
there are real opportunities to mitigate and restore some of the 
coastal resources that have been degraded and protect existing 
resources from future degradation. S. 25, the ``Conservation and 
Reinvestment Act of 1999,'' that was recently introduced by Senators 
Murkowski, Landrieu, and others, proposes to redirect revenue generated 
from offshore oil and gas drilling for conservation and other purposes. 
Amendments to S. 25 are necessary to ensure that it fulfills its 
potential for addressing the conservation impacts described in this 
testimony and that the bill in no way creates incentives for increasing 
OCS drilling.
                        overview of ocs drilling
    Currently, there are approximately 3,800 oil and gas drilling 
platforms along the U.S. federal Outer Continental Shelf (National 
Research Council, 1996). Although drilling platforms are found on the 
coasts of 6 States (California, Alaska, Texas, Louisiana, Alabama, and 
Mississippi), they are most heavily concentrated in the waters off of 
Louisiana and Texas. Cumulatively, this drilling accounts for 
approximately 18% of domestic oil and 27% of domestic natural gas 
production (Quarterman, 1998).
    Florida, California, Oregon and Washington have banned new leasing 
in State waters (and there are existing leases in Florida and 
California that have not yet been developed). With the exception of 
some areas off of Florida, Alabama, and Alaska, nearly all remaining 
coastal areas have been withdrawn by President Clinton from new oil and 
gas leasing through the year 2012. This moratoria also applies 
indefinitely to all areas designated as marine sanctuaries. To date, 12 
sites have been designated marine sanctuaries, including one--the 
Flower Garden Banks--in the Gulf of Mexico.
    The OCS moratoria does not affect existing leases and drilling on 
existing leases shows no signs of abating. In fact, the Minerals 
Management Service (MMS) notes that development of the OCS is expected 
to increase substantially over the next few years, in part due to 
growing interest and activity in the area of deepwater drilling (MMS, 
``Deepwater,'' 1999; Year of the Oceans Report, 1998). Furthermore, 
over half the Nation's undiscovered oil and gas reserves are believed 
to occur on the OCS, and the pressure to drill in existing lease areas 
is likely to increase as oil resources become depleted (Year of the 
Oceans Report, 1998),
    The OCS program generates bonuses, rent, and royalty payments to 
the Federal Treasury of nearly $4-5 billion annually (with a cumulative 
historic total of $120 billion, as of 1998) (Quarterman, 1998). A 
portion of these funds is distributed to coastal States that have OCS 
drilling sites off of their coasts (under section 8(g) of the OCS Lands 
Act--in 1998, $65 million went to six coastal States). Some of these 
OCS receipts are also used to fund the Land and Water Conservation Fund 
(over $19 billion to date) and the National Historic Preservation Fund 
(nearly $3 billion to date) (Quarterman, 1998).
    The following discussion of the destructive impacts of OCS oil and 
gas drilling argues strongly for mitigation and conservation practices 
that offset, where possible, the impacts of current OCS drilling.
                     threats posed by ocs drilling
    If asked to reduce Outer Continental Shelf (OCS) drilling to a 
single visual image, most people would picture an oil rig, silhouetted 
against the sky, in the middle of open ocean. In fact, while oil rigs 
do have significant environmental impacts by themselves, the rigs are 
just one step in a long process of production, refining, distribution, 
and consumption. Impacts of OCS drilling on the coastal zone arise at 
all stages of this process, from pre-production exploration and rig 
construction, to refining, to transportation of oil and gas by pipeline 
and tanker, and ultimately to consumption patterns shaped by the 
availability of OCS petroleum.
Oil exploration and rig construction
    From the outset, offshore exploration has significant environmental 
consequences. Seismic surveys used in oil and gas exploration generate 
sound waves that are known to disturb various marine mammals, as well 
as other marine species. For example, seismic waves are believed to 
interfere with gray whales' ability to communicate with one another and 
they demonstrate behavioral changes in response to seismic pulses.
    Development of the rigs and related structures also has substantial 
environmental repercussions. Laying down pipelines, anchoring rigs to 
the ocean bottom, and other related construction activities generally 
result in mechanical damage to the underlying sea floor and can have 
devastating impacts on ecologically sensitive habitats such as coral 
reefs and sea grass beds (MMS, 1999; DOI, ``Notice to Lessees and 
Operators 98-12,'' 1998). Newly discovered deep-sea benthic communities 
of unique chemosynthetic organisms (which include assemblages of 
tubeworms, clams, mussels, and other species) face significant threats 
from the rapid increase in deepwater ocean drilling (DOI, ``Notice to 
Lessees and Operators 98-11,'' 1998).
    The accompanying noise, increased boat and air traffic, and debris 
generated during the construction of these sites have also been found 
to disturb the surrounding marine ecosystem and marine species that 
inhabit the area. Sea otters, for example, have been observed avoiding 
areas where construction is ongoing and have reacted negatively to 
recorded playbacks of platform construction sounds (MMS, 1999).
    Interestingly, scientists are beginning to discover that the 
deconstruction of these structures also presents serious environmental 
challenges. Approximately one-quarter of the existing offshore 
platforms are over 25 years old and many of them will have to be 
decommissioned over the next 10-15 years (National Research Council, 
1996; MMS, 1999). To date, the vast majority of decommissioned rigs 
were broken into pieces--through the use of underwater explosives--so 
that the smaller pieces could be carried away. Unfortunately, these 
underwater explosives have significant detrimental impacts on 
endangered sea turtles and marine mammals. These explosions have also 
been found to cause substantial fish kills (National Research Council, 
1996). As the large number of platforms built in the 1960's and 70's 
become ready for decommissioning, this issue will become a more serious 
problem.
Subsidence and coastal marsh destruction
    Louisiana boasts 40 percent of the coastal and estuarine wetlands 
in the Lower 48 States, but accounts for 80 percent of estuarine 
wetlands loss (Boesch, et al, 1994; Louisiana Coastal Wetlands 
Conservation and Restoration Task Force, 1993). The State's marshes are 
sinking into the Gulf at a rate of 25-35 square miles per year 
(Louisiana Coastal Wetlands Conservation Task Force, 1998). In part, 
Louisiana's coasts are subsiding as a direct result of our efforts to 
control the Mississippi River. Levees built and maintained by the U.S. 
Army Corps have imprisoned the great river in its banks and defeated 
its natural delta-building efforts, forcing the Big Muddy instead to 
drop its sediments into the abyss off the continental shelf.
    Oil and gas development on the OCS, however, also bears substantial 
responsibility for coastal subsidence. Studies by government and 
academic scientists have persuasively documented that laying of 
pipelines and opening of navigation channels through Louisiana's 
coastal wetlands has accelerated erosion and subsidence. As a 1987 
biological report by the U.S. Fish and Wildlife Service noted, 
``[w]here canal density is high, land loss is high; where canal density 
is low, land loss is low; where canal density is nearly zero, land loss 
is nearly zero. . . . [C]oastal erosion rates are directly related to 
canal and spoil levee density.'' (USFWS, 1987, 28-29).
    Many, if not most, of these channels were built to facilitate oil 
and gas exploration, placement of pipelines, or transport of rig 
components out into the Gulf. As the Louisiana Coastal Wetlands 
Conservation and Restoration Task Force explained in 1993:

          The dredging of smaller channels for drilling rig access and 
        pipeline installation proliferated in the coastal wetlands of 
        Louisiana during the oil and gas exploration and development 
        boom of the 1950's, 1960's, and 1970's. When onshore fields 
        were developed, the marsh was broken up by dense canal 
        networks. Offshore fields also caused destruction as pipeline 
        canals were dredged through the marshes and barrier islands to 
        connect with onshore processing facilities. By 1978, more than 
        six percent of Louisiana's coastal wetlands had been directly 
        converted to open water or spoil through canal dredging 
        (Louisiana Coastal Wetlands Conservation and Restoration Task 
        Force, 1993).

    As the Coalition to Restore Coastal Louisiana notes, ``coastal 
Louisiana is laced with about ten thousand miles of canals excavated to 
service the oil and gas industry.'' (Coalition to Restore Coastal 
Louisiana, 1989)
Ongoing pollution from drilling
    In addition to the destruction caused in developing the 
infrastructure on and offshore for OCS drilling, routine platform 
operations create multiple chronic pollution sources, including: 
drilling muds and cuttings, produced waters/toxic oil brine, deck 
drainage fluids, air emissions of hydrocarbons (from the rig machinery, 
helicopters, and support vessels), naturally occurring radioactive 
materials (NORMs), and a large amount of trash produced during general 
rig operations.
    Toxic chemicals are routinely used to lubricate drill bits as they 
grind through the outer continental shelf. These fluids and lubricants 
mix with rock and mud to form a toxic sludge (or drilling waste) that 
is often found hundreds of meters from the rigs. This sludge is left 
directly on the ocean floor, where it both suffocates and poisons 
benthic species found in the area. It is estimated that up to 8,000 
square feet per well may be covered by up to a meter thick of drilling 
wastes. The National Academy of Sciences estimates that drilling 
produces an average of 1,500-2,000 tons of drilling waste per well 
(National Research Council, 1983). The waste contains toxic pollutants 
such as lead, arsenic, copper, mercury, petroleum hydrocarbons, 
selenium, and other heavy metals.
    Toxic brine or ``produced water'' is contaminated water brought up 
along with oil from the well. This ``produced water'' is generated in 
massive quantities by offshore oil wells and contains a variety of 
pollutants, including cadmium, benzene, napthalene, lead, and other 
carcinogenic pollutants. Additionally, naturally occurring radioactive 
materials (NORMs) found deep in the earth's crust leach into produced 
water and are then brought to the surface as a result of the drilling.
    ``Workover fluids'' containing oil and grease also include 
napthalene, ethylbenzene, toluene and zinc. While there are 
restrictions about dumping these work materials into the ocean, the 
limitations are only applied to the oil and grease directly. Other 
toxic materials are dumped into the ocean. Deck drainage of oil, 
grease, drilling fluids, ethylene, lubricants, fuels, biocides, 
surfactants, detergents, solvents, dispersants, coagulants and other 
substances are also believed to cause harmful environmental impacts 
when they leak or are disposed of in the ocean.
    Once in the ocean, toxics can remain suspended as solids in the 
water column where they lead to fish kills and interfere in the 
development of fish eggs and larvae. In fact, this waste can remain in 
the ecosystem for decades causing negative impacts to marine water 
quality and marine species (often by disrupting the ecosystem's balance 
through changes in species abundance and richness). For instance, a 
recent study found that increased levels of sediment contamination 
resulted in reduced genetic diversity of small copepod species found 
near the offshore platforms (Street and Montagna, 1996). MMS has noted 
that gray whales and other imperiled marine species may be vulnerable 
to adverse impacts from these drilling wastes--in particular, it is 
believed that it can cause eye irritation to gray whales migrating 
through the area. Filter feeders and bottom-feeders like corals, clams, 
oysters, and lobsters have been found to be particularly vulnerable to 
the effect of these toxics. This waste material strips surrounding 
water of its oxygen leading to reduced dissolved oxygen concentrations 
that interfere with fish egg development and cause other problems in 
the ecosystem (Holing, 1990). Toxics prove immediately lethal to some 
marine organisms, however they also are threatening when they 
accumulate in concentrated levels in the tissues of species at the top 
of the food chain--including species consumed by humans.
    Trash and debris, generated as a result of daily ongoing human 
activities has proven to be a significant problem on the sea floor and 
washed up as detritus on beaches in the Gulf. Remnants of construction-
related debris (e.g. pipes, tubing, hard hats, lumber) and non-
biodegradable environmentally persistent materials (e.g. plastic and 
glass) accumulate on the sea floor around rigs. The U.S. Department of 
the Interior recently issued a notice to lessees and operators of 
offshore rigs noting that ``marine trash and debris pose a threat to 
fish and wildlife . . . oil and gas operations in the Gulf of Mexico 
contribute to this chronic problem'' (DOI, ``Notice to Lessees and 
Operators 98-27,'' 1998). This trash can be fatal for species if it is 
ingested or results in entanglement, whether in open waters or along 
coastal beaches and wetlands.
    The production of these rigs also, at times, leads to the emission 
of toxic air pollutants such as hydrogen sulfide, nitrogen oxides, 
carbon dioxide, and sulphur dioxide. These air toxics are known to be 
harmful to humans and are probably harmful to wildlife species (DOI, 
``Notice to Lessees and Operators 98-16,'' 1998).
Accidents and disasters
    Accidents and human error lead to leaks, spills, blowouts, tanker/
barge collisions, burst pipelines, and explosions. Large spills caused 
by catastrophes such as tanker collisions, or platform blowouts are 
relatively rare; MMS statistics show that approximately 61,500 barrels 
have been spilled since 1980 (Year of the Ocean Report, 1998). When 
these larger spills do happen, however, their impacts are often 
catastrophic and long-lasting. Despite some improvements in cleanup 
technologies, often only a limited amount of the spilled material can 
be captured before it enters the ecosystem. For example, in a recent 
spill in Texas involving 2,950 barrels of oil, over 1,150 barrels were 
never recovered (Tunnell 1995). In drilling, pockets of oil are often 
punched through before the actual well is tapped, leading to leakage. 
Blowouts occur when a drill head pierces a pressurized pocket of 
natural gas, and the pressure forces the drill back out of the opening, 
in turn blowing the contents up to the surface and sometimes destroying 
the rig.
    More common are the smaller, chronic spills that occur as leaks. 
Approximately 16,000 miles of pipelines serve as the primary mechanism 
for conveying oil and gas from OCS platforms to the shore (Alvarado, 
Anderson, and Schneider, 1992). In the early 1990's it was estimated 
that spills from pipelines accounted for the release of approximately 
4,170 barrels of oil annually, usually as the result of pipeline 
corrosion or pipeline disruption by ship anchors (Alvarado, Anderson, 
and Schneider, 1992). These types of spills can go unnoticed for days 
(e.g. in January 1990, 14,423 barrels of oil leaked from a pipeline for 
13 days before the slick was noticed) (Alvarado, Anderson, and 
Schneider, 1992). It is expected that these types of pipeline leaks 
will increase as the pipelines in the Gulf of Mexico and elsewhere age 
and become more vulnerable to corrosion.
    A fair amount of spillage also occurs regularly during the process 
of ``lightering'' where crude oil is transferred from huge tankers to 
smaller ships. Off the coast of Texas, lightering operations have 
increased by 200% since 1986, raising the possibility of a big spill 
and ensuring chronic leakage.
    Cumulatively, the common and uncommon accidental spills affect 
water quality, coastal and benthic habitats, and wildlife. MMS has 
noted that oil spills pose a number of risks to cetaceans, and studies 
have shown that contact, inhalation, and ingestion of oil-related 
compounds produces behavioral changes and physiological damage (MMS, 
1999). In particular, it is believed that the toxic, highly volatile 
components of fresh crude is damaging to the soft tissues and mucous 
membranes in the eyes and airways of cetaceans, resulting possibly even 
in death (MMS, 1999). A study of the effects of oil on baleen, the 
plates that certain whales use to filter their food, found that it 
contaminated their plates and hindered feeding (MMS, 1999). Studies and 
analyses have indicated that when endangered sea turtles are exposed to 
oil they suffer from carcinogenesis, increased parasitism, decreased 
lung capacity, digestive problems, and disruptions to their sensory 
organs (MMS, 1986).
    Sea otters, sea birds and other marine species are particularly 
vulnerable to the devastating impacts that oil contamination has on 
their fur and feathers. Otters must maintain a layer of warm dry air in 
their dense underfur to insulate them from the cold water; even partial 
oiling of their fur leaves them essentially exposed to the elements. In 
the Exxon Valdez oil spill, well over 1,000 otters were killed as a 
result of pulmonary emphysema caused by inhalation of toxic fumes, 
hypothermia from decreased insulation (as a result of fur 
contamination), hypoglycernia caused by poor gastrointestinal function 
(from ingestion of oil), and lesions on other organs (from ingestion of 
oil and/or stress). Oil spills often also kill animals by driving away 
or killing crucial organisms lower on the food chain (e.g. krill, 
kelp.) that constitute their prey base.
    Some of these chemicals have longer-term, more insidious effects. 
Polycylic Aromatic Hydrocarbons (or PAHs) are a group of chemicals that 
are released into the marine environment as a result of oil spills, 
discharges from ships, and other methods. PAHs have received a great 
deal of attention recently because they have been found to have 
carcinogenic and mutagenic potential in finfish, shellfish, and marine 
mammals. They are also considered a priority pollutant by the World 
Health Organization, the U.S. Environmental Protection Agency and 
others because of their potential impacts on human health (Hellou, 
1996). PAHs and other toxic pollutants can remain in an ecosystem for 
decades after their initial release.
    Although some of the oil released in spills eventually settles into 
the bottom sediments, much of it is carried up to the coastal margin 
where it can cause numerous problems. Field studies have found that 
successive oilings of salt marshes, resulted in considerable changes to 
species distribution and balance, leading to slow recovery, even years 
later (Baker, 1973). A more recent study estimated that full recovery 
of a marsh habitat in San Patricio County Texas would take 8-10 years 
(Tunnell, 1995) despite fairly dramatic cleanup methods. Other studies 
found that after 3 years, marsh grass was still unable to re-establish 
itself and sediments continued to show high levels of hydrocarbons 
(Hampson, 1978).
The biggest externality: climate change and rising sea levels
    As substantial and diverse a set of direct impacts as OCS drilling 
has, surely the most significant long-term effect of OCS production for 
the coastal zone is its contribution to anthropogenic climate change 
and sea-level rise. At present, though climate scientists remain unsure 
how quickly to expect temperatures to increase, a strong consensus has 
emerged within the scientific community that human-induced climate 
change is real, is in progress, and will almost certainly lead to 
accelerated sea-level rise. The Intergovernmental Panel of Climate 
Change suggests that sea-level may increase by between 20 and 86 cm 
over the next century. EPA has calculated a range of estimates, 
suggesting that there a 50% probability that sea-levels will rise, it 
least 23 cm (one foot) by 2050 and 55 cm. (two feet) by 2100 (Titus, 
1998).
    Since the 1950s, humans have contributed to an 8% increase in the 
concentration of carbon dioxide in the Earth's atmosphere. Today, the 
U.S. is the world's leading emitter of carbon dioxide, contributing 
about 23% of ``global energy-related carbon emissions''--98.5% of which 
is attributed to the combustion of fossil fuels (U.S. Department of 
Transportation, 1998). To be sure, OCS production accounts for only a 
fraction of the fossil fuel consumed by Americans. Nonetheless, the 
marginal contribution of OCS oil and gas to climate change and sea-
level rise comprises an economic externality that effects the coastal 
zone disproportionately, and for which impact-reduction funds have 
never been made available. In particular, EPA has estimated that an 
increase in sea level of 50 cm could inundate more than 5,000 square 
miles of current ``uplands'' and 4,000 square miles of wetlands 
(Gardiner, D., 1996). For a point of comparison, that is six times 
larger than the State of Rhode Island--an area six times the acreage 
that Louisiana has already lost to accelerated coastal subsidence since 
the 1950s (approximately 1,500 square miles) (Boesch, 1994).
                     the coastal resources at stake
    Unquestionably, our Nation's important coastal resources face a 
variety of threats from sources other than offshore oil and gas 
drilling, however, the pollution and environmental degradation just 
described contribute significantly to the problem. OCS drilling 
degrades open water habitats--seagrass beds, coral reefs, and deep sea 
communities--through pollution and physical destruction that occurs 
during platform/pipeline construction and gas production. Additionally, 
OCS drilling and related activities harm coastal and estuarine 
wetlands, as well as barrier islands, through excavation for navigation 
and pipelines. These resources are also impacted directly by oil spills 
and trash that washes up along the shore.
    The section below describes five categories of distinct and 
valuable coastal resources, each of which is substantially impacted by 
OCS drilling. The purpose of describing these resources in some detail 
is to highlight their unique characters and values and to articulate 
the oft-overlooked ecological services that they provide.
Estuarine and coastal wetlands
    Coastal wetlands absorb and temper the impact of storm surges and 
protect economically significant coastlines. For example, according to 
one estimate, the elimination of one mile of wetlands along Louisiana's 
250 mile coastline would cause approximately $63,676 in increased 
hurricane damage annually (1980 dollars) (Farber, 1987). The low 
gradient of many shorelines and the capacity of wetlands vegetation to 
absorb and dissipate wave energy combine to counteract storm surges and 
prevent shoreline erosion.
    When Hurricane Andrew buffeted the shores of Florida and Louisiana 
in 1992, the Nation was reminded of the tremendous buffer coastal 
wetlands can provide. The storm hit both States with approximately the 
same strength, yet Florida, which has lost 9.3 million acres of its 
original wetlands (the largest acreage loss of any State), sustained 
between $15 to $30 billion in damage compared to the $1 billion 
sustained by Louisiana, with its large coastal wetlands buffer. The 
flood insurance claims that were paid in the wake of the hurricane came 
to $115 million in Florida, as compared to $30 million in Louisiana 
(Kusler and Larson, 1993). While other factors also played a role, the 
value of coastal and estuarine wetlands as buffers is evident.
    Estuarine and coastal wetlands provide important water quality 
benefits as well. Wetlands act as ``nature's kidneys,'' (Kusler, 1994), 
filtering polluted waters, removing and retaining nutrients, processing 
organic wastes, and reducing sediment loads to receiving waters. Water 
entering estuarine wetlands is slowed by aquatic vegetation growing in 
and around the wetland. Wetland plants and micro-organisms then go to 
work on wastes in the water, absorbing them into plant tissue or simply 
converting them into harmless forms. Compounds containing nitrogen are 
broken down into products useable by plants, and bacteria convert much 
of the nitrogen gas that escapes into the atmosphere.
    Finally, coastal and estuarine wetlands provide vital habitat for 
wildlife. The ``coastal fringe'' in fact provides habitat to a 
surprisingly large number of threatened and endangered species--as of 
1991, 20 federally listed species lived under the 10 foot contour (that 
is, no higher than 10 feet above sea level) and nowhere else, with 
another 33 species on the waiting list for listing as candidate 
species. As many as 122 listed threatened and endangered species relied 
on coastal and estuarine habitats (Reid and Trexler, 1991).
    Coastal and estuarine wetlands sustain the abundant creatures as 
well as the rare. Wetlands are the cradle of the Nation's seafood 
industry. Fish and shellfish depend on estuaries for spawning and 
nursery grounds, food production, and migration. Depending on the 
region of the country, the percentage of wetland-dependent fish species 
varies. For example, 98% of all species in the commercial seafood 
harvest in the Gulf of Mexico spend part of their lives in wetlands and 
marshes. In the southeastern U.S. this percentage is slightly lower--
94%. The connection between wetlands and seafood is most simply 
illustrated by a bumper sticker frequently seen in coastal North 
Carolina, which succinctly states the importance of wetlands to the 
fishing industry--``No Wetlands, No Seafood.''
    The annual economic value of estuarine habitats is presently well 
over $14 billion. In the late 1980's, commercial landings of estuarine-
dependent species contributed some $5 billion to the economy. In 
California alone, the value of commercial fish landings exceeds $126 
million per year, and the industry contributes $111 million per year in 
value-added products. The Great South Bay, a shallow tidal estuary in 
New York, has extensive naturally productive habitat that has 
contributed approximately 92% of New York's commercial hard clam 
landings with a reported dockside value in excess of $16.7 million 
(Fox, 1981). The marshes of Louisiana produce an annual commercial 
catch worth over $680 million (Boesch, 1994). Despite the tremendous 
contribution wetlands make to our economy, over half of the wetlands 
that historically supported America's fisheries have been destroyed.
    The economic and natural values of Louisiana's coastal wetlands--
which number among the American marshes hardest hit by OCS drilling--
are particularly striking. Louisiana marshes sustain nearly one-third 
of the nation's commercial fish catch, ``second only to Alaska in terms 
of total biomass of fisheries landings, and third in terms of economic 
value.'' The State's wetland-dependent furbearers (nutria and muskrat) 
account for 40% of the annual national fur harvest. Recreational 
hunting, fishing, and outdoor activities in the marshes contribute $338 
million to the State's economy annuals; about 4 million ducks, or 20% 
of the North American population, spend their winters in Louisiana's 
marshes (Boesch, 1994).
Seagrass beds
    Seagrass beds are underwater ``meadows'' that occur in isolated 
pockets offshore, where they provide vital foraging and spawning 
habitat for commercially important finfish and shellfish, and also 
sustain wintering and migrating waterfowl. Historically, seagrass beds 
flourished, as salinity and wave energies permitted, in sites along the 
full arch of the Gulf Coast, from the southern tip of Florida (Florida 
Bay) through the U.S.-Mexican border. Nonetheless, most estuaries in 
the Gulf have suffered a loss of between 20 and 100 percent of their 
seagrass beds, primarily as a consequence of declining water quality 
(Handley, 1995, 273).
    For over two decades, we have known that seagrass beds play a role 
in coastal ecosystems that their low profile on the landscape makes it 
easy to overlook:

          Documentation now exits which shows that seagrass meadows are 
        not only important locally, but also on a much larger scale. 
        For example, they are used as nursery grounds for commercial 
        shrimp in Florida; as a food source for migratory waterfowl, 
        particularly the black brant, along the Pacific flyway; and 
        [for] green sea turtles in the Caribbean; as a habitat for the 
        larval development and commercial bay scallops along the 
        Atlantic coast of the United States and fishes along all coasts 
        where the grass is present, and as a buffer from hurricanes 
        along the Florida coast (Thayer and Phillips, 1977).

    Seagrass beds are similarly important for softshell and razor 
clams, lobsters, and mud crabs along the Atlantic coast and for 
virtually the entire commercial fishery of Puget Sound (Thayer and 
Phillips, 1977). Off Florida, seagrass beds are key feeding grounds for 
the federally-listed endangered manatee, as well as the endangered 
Kemp's ridley sea turtle and the threatened green sea turtle (Weber, et 
al, 1992).
    Though seagrass beds have been in decline along much of America's 
coastline, Louisiana has experienced particularly extensive losses of 
its historic seagrass beds. Today, seagrass beds survive off the 
Louisiana coast at only one cluster of sites, Chandeleur Sound. Perdido 
Bay in the panhandle of Florida has also suffered substantial loss of 
seagrass beds, attributed to dredging, polluted runoff from 
agriculture, and residential, commercial, and industrial development 
(Handley, 1995, 274).
Barrier islands
    Coastal barrier islands are complexes of beaches, dunes, and 
wetlands that lie offshore of the main coastline. Their chief 
characteristic is change: currents deposit and carry away sand and so 
the islands are constantly shifting shape or even migrating along the 
coast. Some barrier islands are quite large, with complex and unique 
biological communities--the maritime forests of North Carolina's 
barrier islands are one example, other barrier islands are quite small 
sandbars submerged at the highest tides. All barrier islands help to 
protect waterfront communities; the larger islands also provide 
essential habitat for a variety of wildlife, including sea turtles, 
birds, and small mammals. Coastal barriers act as natural buffers 
against storms, erosion, wind and waves.
    Coastal development presents a severe threat to barrier islands 
(Pilkey and Dixon, 1996). On large islands, development includes 
residential, commercial, and public works construction, often heavily 
supported by federal subsidies. Indeed, much of this development would 
not be economically viable if left to the market alone. Both large and 
small islands, however, have been severely destabilized by human 
efforts to ``freeze'' the barrier islands with breakwaters, beach 
renourishment, and navigational dredging. While these techniques have 
managed to halt or disrupt natural processes along much of America's 
coasts, they have generally failed to conserve the barrier islands 
themselves: approximately 80% of America's barrier islands are eroding, 
at rates varying from 1 meter (3 feet) to 20 meters (65 feet) per year 
(Williams and Johnston, 1995).
Coral reefs
    Among the most diverse ecosystems on Earth, coral reefs community 
are often likened to tropical rainforests. In U.S. waters, coral reefs 
are concentrated around the Florida Keys in warm waters (averaging 70 
degrees Fahrenheit) that are also clear and shallow (under 200 feet 
deep), allowing sunlight to reach the living polyps that build the reef 
(Weber, et al, 1992). Reefs are rare in the areas of the Gulf open to 
OCS drilling, with an important exception: the Flower Garden Banks, the 
northern-most living coral reef on the North American continent. 
Sitting atop a salt dome in the middle of the Gulf, the Flower Garden 
Banks are isolated from smothering sediments coming of the mainland 
(Deslarzes, 1992). The Flower Garden Banks is home to at least 330 
species, some of which have never been found anywhere else.
Chemosynthetic ecosystems
    Within just the last few years, oceanographers and marine 
biologists have discovered an entirely new and unexpected set of 
natural communities under the sea. The so-called ``chemosynthetic 
ecosystems'' are, like land-based ecosystems, complex and elegant 
energy and food webs of micro- and macro-organisms. But, bizarrely, the 
bacteria at the base of these ecosystems, in the dark, piercingly cold 
depths of the ocean, apparently survive by consuming methane and 
hydrogen sulfide from frozen sea-floor deposits (MacDonald and Joye, 
1997). Specially-evolved ``ice worms'' and mussels live there too, fed 
upon by eels and more familiar sea creatures. Scientists have barely 
begun to research these rare ecosystems, spread out in isolated but 
richly diverse patches on the continental shelf, and no estimate has 
yet been offered to suggest how human activities are affecting these 
systems. Most of the chemosynthetic ecosystems discovered to date, 
however, are in the sections of the Gulf in which OCS operations are 
being conducted, and are vulnerable to physical destruction during 
platform and pipeline construction and smothering by drill wastes.
                       the need for conservation
    Coastal conservation efforts have been underway for decades, 
however, they have failed to address the significance of the threats in 
a systematic or comprehensive way. If properly crafted, S. 25, the 
``Conservation and Reinvestment Act of 1999,'' could help mitigate the 
damage to the environment that is created by offshore oil and gas 
development. It is entirely appropriate to reinvest revenues from the 
sale of non-renewable resources in the conservation of renewable 
resources such as land, wildlife, habitat, air and water. At the same 
time, it is critical that any legislation that is intended to meet 
these needs does not simultaneously create negative environmental 
impacts by encouraging more oil and gas development. ``Impact 
assistance funds'' for coastal governments should be explicitly 
dedicated to environmentally sound projects and programs that include 
public input. Further, allocation of these funds should be structured 
so that local communities are not encouraged to support inappropriate 
oil and gas development along their coasts.
    NWF recommends that coastal impact assistance funds distributed 
under Title I of S. 25 be designated for use by State and local 
governments to mitigate the environmental damage created by offshore 
development. The types of projects that we consider appropriate would 
include:
   amelioration of any adverse environmental impacts resulting 
        from the siting, construction, expansion, or operation of OCS 
        facilities;
   projects and activities, including habitat acquisition, that 
        protect or enhance air quality, water quality, fish and 
        wildlife, or wetlands in the coastal zone;
   administrative costs the State or local government incurs in 
        approving or disapproving or permitting OCS development/
        production activities under any applicable law including the 
        Coastal Zone Management Act and the OCS Lands Act; and/or
   the repurchase of OCS leases.
    Because revenues for all three titles of the bill would come from 
existing and new leases, and the allocation formula in Title I ties 50% 
of a State or local government's allocation directly to proximity to 
OCS production, States and local governments are likely to support new 
leasing as well as development on existing leases to increase the 
amount of money available to them. The legislation should be amended to 
exclude new leasing revenues or revenues received from production in 
areas that are currently subject to leasing moratoria. In addition, if 
the allocation formula to States and local governments is based on 
proximity to OCS activity then it should include a flat, static 
percentage allocation based on past leasing and/or production. This 
would acknowledge States that have suffered OCS impacts to date without 
providing an incentive for new leasing exploration or production.
    Oversight and accountability are critical to the success of an 
impact assistance program. Control and distribution of impact aid funds 
should reside with NOAA and/or EPA--not the Interior Department. NOAA 
and/or EPA should have the authority to review and approve in advance 
the annual plans proposed by each State and local government to ensure 
that the money will be used for the previously mentioned purposes, will 
not be inconsistent with the CZMA, CWA or other environmental statutes, 
will benefit the coastal environment of the State and are well-
justified in terms of demonstrated need, design and proposed manner, 
and cost of implementation. NOAA and/or EPA should also be required to 
monitor implementation of the plans.
    In addition, NWF commends the application of OCS dollars to two 
other conservation areas that have historically been underfunded--the 
Land and Water Conservation Fund and State fish and wildlife programs. 
Just as NWF recommends that the coastal impact title of the bill be 
tightened to ensure that the dollars are directed to the greatest 
conservation need, we also recommend tightening the language regarding 
wildlife funding to ensure that it emphasizes non-game wildlife 
protection. Attached is a letter signed by NWF and other leading 
conservation organizations that outlines some of these suggestions and 
concerns in greater detail.
    Conclusion
    Our coastal and marine resources are critically important and 
severely threatened. As outlined by this testimony, NWF believes that 
offshore oil and gas drilling has, and will continue to be, a major 
source of environmental degradation to these resources. Legislation 
that takes dollars generated from these activities and pours it into 
something positive would result in much-needed conservation actions for 
coastal and other natural resources.
    If amended to address the concerns that we have outlined, S. 25 
would constitute a lasting, historic contribution to the conservation 
cause.
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    The Chairman. Thank you very much, Mr. Van Putten.
    I am going to be very brief on questions. First of all, are 
you satisfied that this percentage, the 7 percent, which we are 
using in the terminology of the bill, to be used for State fish 
and wildlife programs is adequate and, in effect, is that an 
offset for the momentum that was behind the teaming with 
wildlife proposal?
    And the difficulty with that is where we found the revenue. 
Because there are those who objected to a tax on backpacks 
because the kids take them to school, or a four-wheel-drive 
vehicle because it was a necessity for the family. And so we 
never could come to grips with a revenue source. Of course, 
what we have attempted to do in this legislation is find that 
revenue source. While we have changed the terminology from 
``teaming with wildlife,'' clearly it fits in for State fish 
and wildlife programs.
    I want to make sure everybody understands the intention of 
the chairman. It is not to have these funds directed for 
extensive administration, but more out in the field to do real 
things relative to the renewability of this type of resource.
    Any comments?
    Mr. Van Putten. Mr. Chairman, the National Wildlife 
Federation was a founding member of the Teaming with Wildlife 
Coalition. And we have been a member of the steering committee 
since its inception.
    We support the approach that you have identified here for 
funding those underfunded wildlife needs. We would urge you to 
look at moving that to 10 percent, which is the amount that was 
in the House bill that was introduced last year by 
Representatives Young and Dingell. And we would also encourage 
you, as this process moves ahead, to emphasize the needs of the 
historically unfunded needs of State fish and wildlife 
agencies, especially for non-game wildlife.
    The Chairman. The other point I want to make very clear is 
you cannot bite the hand that feeds you. Some of the 
environmental groups are very sensitive because, on the one 
hand, they are opposed to OCS development, but they are happy 
to get some revenue. Unless we have a healthy OCS program, 
there are not going to be any revenues for what we want to 
accomplish here. And that is, of course, not only the issue of 
funding for wildlife, but for State land and water conservation 
funds.
    You cannot have it both ways. We have got to use the 
technology and the American can-do spirit to overcome and 
reduce the environmental risks. But, make no mistake about it, 
if this program is going to work, it is going to work because 
we have a healthy OCS program off our coastal States.
    Now, that does not mean that the States that do not want 
this activity should not have a right to prevail. The issue of 
equity comes in. And it will come in in future hearings. Then, 
as a consequence, have we directed the right kind of a formula 
for those States that clearly have the impact and are entitled 
to a greater share, and the others just get a free ride because 
they happen to have a coastline?
    Well, I am going to leave those questions up to future 
hearings and future input. But I do want to make the point very 
clear to the environmental community that this provides us with 
a funding mechanism that otherwise we would have to stand in 
line for, through an appropriations process. And that gets 
very, very foggy. It attempts to try and directly address the 
funds down to the local level, where the people have the 
capability, as well as the desire, to identify their priorities 
as opposed to a dictate from Washington, D.C., that suggests 
one size fits all.
    Mr. Van Putten. Mr. Chairman, may I respond to that?
    The Chairman. As long as you do it quickly.
    Mr. Van Putten. I will do my best.
    I think you are very astute to observe that the dispute 
over offshore oil and gas drilling has been long. It has been 
complicated. And it could sink this bill.
    As I alluded to in my testimony, I think you have an 
opportunity to navigate those treacherous waters here, as you 
have done in your recital of intent in this particular bill--
and we commend you for that--to tighten the language with 
respect to where the money comes from and what it is used for 
in the coastal impact assistance to remove any argument that 
this is in fact an inducement to additional offshore oil and 
gas drilling. And we have suggested specific ways, in my 
written testimony, that you might do that.
    The Chairman. Thank you.
    Mr. Palmer, you talk about a now-abandoned program under 
the Coastal Zone Management Act that provided for coastal 
impact assistance. What did you learn from that experience, for 
our benefit?
    Mr. Palmer. I learned how difficult it obviously is, Mr. 
Chairman, for a body like this to write a formula out of the 
air that then works on the ground. Again, you are going toward 
the correct goal to help States like Mississippi and Alaska. 
You fell way short of the mark because of the mechanism that 
you crafted to get to that goal. And I will not go back through 
the difficulties that the States had in making it work.
    The other big problem, which you have just alluded to 
moments ago, about the fogginess of the appropriations process, 
that is really what killed CEIP. The implementation troubles 
could have been worked through. They were tortured and 
torturous. But it is not going to work if you hang your hat on 
that appropriations process.
    Where you are going--and see, you cured that somewhat in 
the 8(g) resolution. Continue pursuing that track of 
distributing those revenues directly.
    The Chairman. Thank you very much, Mr. Palmer.
    Mr. Van Putten commented on the environmental damage caused 
by offshore activities. Are there offsets to that that add to 
the contribution? I am told that the fishing is better around a 
sunken rig or where there are some platforms or whatever. And I 
recognize that we can go down a lot of rabbit trails with this 
line of questioning. But, in fairness, I am wondering if either 
Mr. Palmer or Mr. Oltz--Mr. Oltz, can you identify any 
contribution that the offshore activity has relative to the 
environment, in the marine estuarine environment?
    Dr. Oltz. First of all, some of the commentary indicated 
that there were chronic problems with discharges from these 
platforms that are out there, and drilling rigs. In Alabama, we 
have a zero discharge rule, so there is no impact on the bottom 
or from any discharge on those rigs.
    The Chairman. So, simply have a zero discharge?
    Mr. Palmer. Yes, sir. We would not allow discharges from 
these operations.
    The Chairman. Louisiana?
    Mr. Caldwell. We have what is called a rigs-to-reefs 
program, in which old platforms are cut down and laid on the 
bottom for the very purpose of providing fish habitat. And they 
work fine.
    The Chairman. Do you have any discharge?
    Mr. Caldwell. But in the overall picture, this is such a 
small plus compared with the enormous losses, that while we see 
it as a benefit, it certainly cannot be characterized as an 
offset.
    The Chairman. Do you allow discharge on your rigs?
    Mr. Caldwell. No. No, sir.
    The Chairman. Mr. Whitaker, discharge off the rigs?
    Mr. Whitaker. No.
    The Chairman. So that can be addressed, then, through 
technology. Are there other areas, Mr. Oltz, that you would 
identify that need to be examined from the standpoint of either 
the environment or, more particularly, contributions that have 
been made to the environment because of the offshore activity?
    Dr. Oltz. You mentioned, Mr. Chairman, offshore fishing. We 
have a large charter boat business, obviously, offshore 
Alabama. And one of the most popular places to go is near the 
platforms. Because the fish school in very large numbers around 
the rigs.
    The Chairman. I think it is awfully easy to criticize OCS 
activity. And I think it is important that we try and balance 
it with whatever contribution is made, and recognizing that 
there is a bit of a give and take in the process.
    Mr. Whitaker, you are Chairman of the Oil and Gas Committee 
in the legislature. You are familiar with the impacts of the 
activities on our coastlines and our residents. Do you have any 
idea what the legislature would recommend that the State of 
Alaska do with funds from the coastline impact assistance 
monies, assuming this bill passes? Where are your priorities?
    Mr. Whitaker. Mr. Chairman, our first priority would be 
impact to the community. Certainly, the bill requires mandated 
set-asides for environmental concerns. But our biggest concern 
is our people, and their needs to be put first.
    The Chairman. Speaking of people, I understand British 
Petroleum announced the other day 600 layoffs in Alaska because 
of falling oil prices. And I anticipate that there might be, 
recognizing that the forecast for increased oil prices are 
pretty remote at this time. Could coastline impact assistance 
funds alleviate any of these budget strains?
    Mr. Whitaker. Unquestionably, yes.
    The Chairman. Mr. Oltz, your two coastline counties receive 
a portion of tax that is imposed on natural gas production. In 
your experience, what do the counties spend the money on? What 
is their current priority? Is it to offset the impact of 
offshore activities, or is it to fund infrastructure, or both?
    Dr. Oltz. Mr. Chairman, I would have to check on that. I do 
not follow how they distribute their money. But I can get that 
information to you.
    The Chairman. What about the viewshed associated with 
offshore oil and gas production? Viewshed means different 
things to different people. We had occasions in our State where 
the terminology was integral vistas, which was the creation, I 
think, of the Department of the Interior at some point in time, 
to suggest that you might be able to see a plume of steam if 
you were on the top of Mount McKinley at 20-some-odd-thousand 
feet on a clear day, which few people get to. But, in any 
event, I am curious to know what your viewshed issue is. Is 
this the issue of the offshore platforms?
    Dr. Oltz. We have two different sizes of platforms off of 
Alabama. We have a smaller platform and a very large platform, 
depending on where they are producing the gas from.
    There is a group of coastal people, usually represented by 
chambers of commerce and realty associations, who feel that the 
platforms that are offshore detract from the viewshed and the 
beauty of the area, and therefore have an impact on tourism, 
which they are worried about. They have gone to the State to 
request a 15-mile buffer from the coastline out, and not have 
any development in there.
    The Chairman. Mr. Caldwell, I am curious to know, as the 
erosion occurs, does it add to your State anywhere? I mean is 
the Delta area filling up? Pardon my lack of knowledgeable 
geography, although I have travelled your State a little bit 
and have been looking for some ducks and so forth.
    Mr. Caldwell. That is an excellent question.
    The Chairman. But your shores are going away somewhere and 
coming ashore somewhere. Is it a net plus to your State or is 
it indeed a substantial decrease in your State's land mass?
    Mr. Caldwell. Yes, sir. It just so happens I can give you a 
quick, short, accurate answer by showing you on the map.
    The Chairman. That is fair enough. All right.
    Mr. Caldwell. The answer to your question is yes and no at 
the same time.
    The Chairman. We have those answers around here, too.
    Mr. Caldwell. The yes is in the Atchafalaya Delta, which 
takes 30 percent of the Mississippi waters coming down. There 
is a buildup, and we just finished a large project that we 
think is going to add about 5 square miles fairly quickly. So 
the answer is yes.
    Unfortunately, over at the mouth of the Mississippi, which 
used to provide sediment to the whole area, the Delta has 
extended to the point where the sediment is now going off the 
outer continental shelf. And I am presently working on a 
planned project to divert some of that, so it will flow along 
the coast and help rebuild.
    The Chairman. Why has it changed? Has the Corps of 
Engineers done anything to change the flow, that would result 
in less buildup of the Delta?
    Mr. Caldwell. That is what we are working on a plan for 
now. It is very, very expensive. The problem is money. S. 25 
will give us the money to do these large-scale projects that we 
cannot do with $40 million.
    The Chairman. Why did it use to build up and not build up 
anymore?
    Mr. Caldwell. Well, primarily from the levees. That is the 
principal cause of the coastal loss. There are many causes--
navigation canals, offshore operations, sea level rise, natural 
compaction. But the principal cause is the fact that we built 
levees along the Mississippi and deprived the marshes of fresh 
water nutrients and sediment.
    The Chairman. Senator Sessions has been observing here, and 
I would be pleased to extend him a question or two if he would 
care to. Because I am about through. I have got a couple more 
questions, but I will submit them to you in writing. I want to 
end this at 11 o'clock, because we go into a caucus.
    Senator Sessions, please proceed as you see fit.
    Senator Sessions. I think it is accurate, is it not, Mr. 
Van Putten, that gas that we are discovering offshore does burn 
cleaner than gasoline and diesel fuel and that sort of thing? 
And, in fact, some of our powerplants are converting now to 
natural gas because it has much less polluting impact. So, I 
guess from an environmental point of view, if we could bring 
online more natural gas, that would be a positive thing, would 
it not?
    Mr. Van Putten. Well, Senator, we certainly are supportive 
of, for example, dealing with dirty coal-fired powerplants in 
the Midwest that are contributing to so much pollution. And 
conversion to natural gas is one of the alternative sources of 
energy.
    Senator Sessions. Well, we need to do that. And there 
appear to be substantial reservoirs offshore. And our 
technology has gotten so good that we are seeing very few, I 
believe, spills of any kind.
    Also, Dr. Oltz, Alabama has a trust fund that it has set 
aside for the income of oil and gas production offshore. And 
the theory was, some 20 or so years ago I guess--I know 
Congressman Sonny Callahan, and Governor James, who was in his 
first term, made that happen. And it avoids the boom and bust 
oil and gas thing.
    Would you share with us how that works and if you would 
recommend that other States consider that?
    Dr. Oltz. Senator, we did talk briefly about that in the 
presentation, but let me recount the model, which is probably 
something other people might like to use. All the revenue that 
comes off the 8(g), which is the combined State/Federal sharing 
area, and all of the revenues that are acquired from lease 
sales and rents and bonuses and royalties, all of that is 
deposited in an inviolate trust fund that was set up by then 
Attorney General Sessions, as I recall.
    Did you have something to do with that?
    Senator Sessions. I did not, but I have admired it over the 
years.
    Dr. Oltz. We make attempts to make sure that that remains 
inviolate in the State. It is now at $1.61 billion. And the 
interest and investment income off of that fund is deposited 
into the general fund for the operation of the State.
    Senator Sessions. Mr. Palmer, from Louisiana, do you wish 
that at least some portion of your monies had gone into a fund 
like that?
    Mr. Palmer. Well, I am sure Jack and the folks in Louisiana 
do so. In Mississippi, now, we do have a trust fund that, in 
the 1980's, was embedded in the Constitution, moved from 
statute. It is dedicated to funding education programs. That is 
one of the issues that we will have to deal with here as you 
move along with S. 25, and that is the character of these 
monies as they would come to Mississippi.
    Because there are so many other worthy things to deal with, 
as Mr. Van Putten has talked about, and others, that are beyond 
education. We certainly are not going to violate the principle 
of supporting public education. But there are these other 
needs--environmental and infrastructure and otherwise--that we 
believe these monies should be dedicated to.
    Senator Sessions. I understand that an amendment or a 
suggestion I made to the bill--and I believe it does this--it 
says if a State desires it can set aside a trust fund for these 
monies that come to it as a result of this legislation. And it 
has to be dedicated, the interest on it, to the same goals that 
this legislation provides, and not some other goal.
    So, to me, it would preserve the environmental character of 
the Act, but also it would guarantee a perpetual fund for 
environmental needs that would be perhaps better than just 
going up and down with the market and the production of oil and 
gas.
    Mr. Chairman, thank you.
    The Chairman. I would like to just interrupt, because I am 
going to have to leave.
    Senator Sessions. That is all I have.
    The Chairman. All right. Do any of you gentlemen want to 
make any concluding 30-second statements?
    Mr. Van Putten. Mr. Chairman, I cannot resist the 
opportunity to again say that obviously there is a lot of 
dispute about the environmental impacts of OCS drilling and 
expanding it. We would like to work with you on S. 25 to 
navigate those waters, so that it does not provide perverse 
incentives for additional drilling, so this bill does not get 
laden down and caught up in that larger and unnecessary 
development. And we look forward to working with you on that.
    The Chairman. Well, I concur with that. And we do welcome 
your input. I have had members come up to me and say, well, I 
am from a State that has got a moratorium, and we want to 
maintain that moratorium, but we want your money.
    Now, I do not think we have to resolve that here because 
this bill is clearly designed to provide a sharing mechanism on 
a disproportionate basis, depending on whether there is an 
impact or not. This seems to be at least a fair way to get 
started with the process.
    So I assure you on that. But I do not think we ought to 
have any misunderstanding--this is oil money, this is gas 
money. And it is doing something positive for the environment 
and for the environmental movement.
    Now, if they say it is tainted and want to use that as 
rhetoric, so be it. But I think we have to be basic and 
understand the reality that we need energy, we consume energy. 
We are either going to import it or we are going to have a 
reasonable domestic segment in the United States. And with it, 
we can use the proceeds to offset concerns that we have and 
would have to pursue in the appropriations process, which is a 
lot tougher.
    Now, make no mistake about it, this is about a $4 billion 
pot. And this has been going to the Federal Treasury. And we 
are proposing to take half of it and distribute it under a 
formula. And there are a bunch of tiers that are not going to 
be very happy with that, because where do we come up with the 
other $2 billion?
    Well, that is not necessarily an obligation of this 
committee at this time.
    [Laughter.]
    The Chairman. But I pass that out for your consideration.
    I want to thank the panelists for, I think, a meaningful 
contribution to a significant effort that could dramatically 
change the way in which the impacted communities have an 
offset, if you will, to meet their own priorities, and also to 
fund a very worthwhile effort. I am very, very disappointed 
that, in spite of the base of support from the Council of 
Mayors and all the others, the Land and Water Conservation Fund 
has not seen fit to be funded by this administration. This 
would take care of that. And it would certainly take care of 
the concerns over the wildlife, fish and wildlife, within the 
States.
    So it is an effort to try and do something that I think has 
more pluses than minuses, but we will have to add those up as 
we go along.
    I want to thank you, gentlemen. And I want to thank the 
audience. I want to assure the States that are affected by a 
moratorium that it is not in our interest to set up a funding 
decoy out there for you. This is just the first shot at a 
formula. And we will have plenty of opportunity to kick it 
around and discuss the equity of it from here on out.
    So, with that profound observation, I wish you a good day. 
And thank you for coming.
    [Whereupon, at 11 a.m., the hearing was adjourned.]

    [Subsequent to the hearing, the following statement was 
received for the record:]

     Statement of Mike Navarre, Mayor, Kenai Peninsula Borough, AK
    My name is Mike Navarre and I am the mayor of the Kenai Peninsula 
Borough in Alaska. I am also the current President of Alaska Conference 
of Mayors. I want to thank Chairman Murkowski and the Committee for the 
opportunity to present this testimony on an issue of great import to my 
community and to the entire State of Alaska. I also want to express my 
support for S. 25, the Conservation and Reinvestment Act of 1999. I 
agree with Chairman Murkowski that while this bill, in its current 
form, is not perfect it is a worthy first step in the effort to finally 
resolve the inequity of the current federal leasing program. I also 
applaud its provisions to direct a portion of OCS revenues to State and 
local government land conservation programs.
    The Kenai Peninsula encompasses approximately 10,000,000 acres in 
south- central Alaska. It is surrounded by the waters of the Cook Inlet 
and the Gulf of Alaska on the east. It includes the communities of 
Homer, Soldotna, Kenai and Seward, among others. It is home to the 
1,970,000 acre Kenai National Wildlife Refuge and the 567,000 acre 
Kenai Fjords National Park as well as portions of Katmai National 
Monument, and Lake Clark National Park. The Kenai River, one of the 
premiere sportfishing rivers in Alaska and the world flows through the 
Peninsula.
    The Kenai Peninsula Borough, of which I am Mayor, is the primary 
municipal government for the area and has a permanent population of 
approximately 49,000 people. However, during the summer tourist season, 
we see as many as one million visitors to our area. Many of our 
residents depend upon the attractions of the Kenai River and its 
resources for their livelihood as fishing guides, outfitters and 
campground operators. Still others support themselves through 
commercial fishing and salmon hatcheries. Seward is the disembarkation 
point for many of the thousands of cruise ship passengers who visit 
Alaska each year.
    As you know, Alaska is one of six States with active oil and gas 
exploration and development of the outer continental shelf (OCS). While 
there is currently only a relatively small amount of offshore 
production activity in Alaska much of what there is occurs in the 
waters of Cook Inlet just west of the Kenai Peninsula. In fact, one of 
the largest private employers in the Borough is the Phillips/Marathon 
LNG facility which exports Cook Inlet natural gas to Japan. The 
Borough, in short, is not just a coastal community, it is many coastal 
communities, all of whom are affected by the development activities 
which occur in nearby waters. Moreover, current exploration and 
development activities are expected to result in more OCS oil and gas 
production in Alaska in the near future.
    The vast majority of the residents of Alaska and of the Borough are 
in favor of OCS oil and gas development. We recognize the many benefits 
that onshore development has brought to our State and, particularly 
now, want to continue to develop our natural resources in a responsible 
manner. However, as in the case of onshore development, OCS activities 
also have other impacts on the State and nearby coastal communities 
such as ours. Such impacts have economic costs and the burden and 
responsibility for dealing them falls disproportionately on the nearby 
communities. For one thing, OCS oil and gas development activities 
place increased demands on our roads and coastal infrastructure. 
Federal OCS activities also increase the demands on our local public 
services, including schools, police, fire protection, search and 
rescue, and utilities. It also increases the nature and extent of 
environmental monitoring and regulatory functions that must be 
performed by the State and local governments. Under the current federal 
system, however, we derive no direct economic benefits from federal OCS 
oil and gas development to assist in dealing with the very real impacts 
which such activities create. That unfairly places the burdens, and the 
risks, of such development on our communities while denying us a share 
in its benefits and rewards.
    Allowing coastal States and communities to share directly in the 
economic benefits of federal OCS development will also assist in 
addressing a variety of important needs and functions regarding our 
coastal resources. The State of Alaska and the Borough have an 
extensive Coastal Zone Management Plan designed to protect our 
resources by, among other things, allowing only responsible use and 
development. We regulate any and all activities which impact the 
coastal environment. Unfortunately, the costs of such regulatory 
activities make it more difficult to engage in an adequate and 
comprehensive monitoring and planning program. If we were to receive a 
portion of the Federal OCS revenues which are produced from nearby we 
would be better able to do so. In addition, local communities like mine 
would be better able to participate fully and protect their interests 
in the extensive federal and State environmental planning process which 
precedes OCS development.
    In conclusion, let me reiterate my support for responsible 
development of our rich OCS oil and gas resources. Doing so is vital to 
the long-term economic health of our communities, our State and our 
Nation. At the same time we should not be made to bear so much of the 
responsibilities of such development while receiving none of the 
rewards.
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

                              National Wildlife Federation,
                                         Vienna, VA, April 1, 1999.
Hon. Frank Murkowski,
Chairman, Energy and Natural Resources Committee, U.S. Senate, 
        Washington, DC.
    Dear Chairman Murkowski: I deeply appreciated the opportunity to 
testify before the Senate Energy and Natural Resources Committee on 
January 27, 1999. Attached is my response to the questions posed by 
various members of the Committee. Please let me know if I can provide 
any additional information to you or other Committee members.
            Sincerely,
                                           Mark Van Putten,
                                                 President and CEO.
              Responses to Questions From Senator Landrieu
    Question 1. First, I want to thank you for testifying before the 
Committee today. We have met before to talk about this subject, and I 
appreciate your input and the input of others in the environmental 
community. In your testimony, you make a very thorough accounting of 
the effects offshore operations have on coastal areas: on wildlife, 
fisheries, habitat and communities, particularly in Louisiana where 
activity is greatest. Would you agree that the Louisiana Delta area is 
of national importance and deserves national attention to its 
conservation needs?
    Answer. The National Wildlife Federation recognizes that the 
Louisiana Delta (Delta) is an area of tremendous ecological importance 
with conservation needs that warrant national attention. The Delta is 
part of a complex network of saltwater marshes, coastal wetlands, 
estuaries, and barrier islands. These ecosystems serve as nurseries for 
fish and shellfish species that are ecologically and economically vital 
to the Gulf of Mexico and the rest of the nation. Gulf fisheries 
constitute nearly 40 percent of the country's commercial fishing 
industry. This area also provides essential habitat for millions of 
migratory waterfowl, including many endangered species.
    Unfortunately, this biologically rich region is being destroyed at 
an alarming rate. Louisiana contains 40 percent of the coastal and 
estuarine wetlands found in the Lower 48 states, but accounts for 80 
percent of the nation's estuarine wetlands loss. In some cases, 
wetlands are being drained or filled in order to promote coastal 
development. Elsewhere, levees, navigation channels, and pipeline 
construction lead to accelerated erosion and subsidence that literally 
causes the region's wetlands to sink into the Gulf. With over 20,000 
wells off its shores, Louisiana has also been hit hard by the negative 
environmental impacts of offshore oil and gas drilling. The direct 
effects of offshore drilling, as well as the impacts associated with 
the transport and refinement of petroleum products have been 
devastating to the Delta's natural resources. Sea level rise caused by 
climate change and a variety of other threats promises to cause 
additional losses to these resources unless conservation measures are 
used to intervene.
    The coastal impact assistance portion of S. 25 (Title I) directs a 
substantial amount of federal funding to Louisiana and specifically, to 
the Delta. The current bill language does not ensure that these 
precious conservation dollars will be spent on improving and protecting 
Louisiana's vital natural resources. Instead, the bill allows these 
dollars to be directed for other purposes, including infrastructure 
development that might actually promote environmental degradation. The 
National Wildlife Federation strongly recommends that the bill be 
amended so that coastal impact assistance funds are directed toward 
projects that ameliorate the environmental impacts of offshore oil and 
gas drilling and related development activities. Rather than 
subsidizing unwise development, the bill should require a demonstration 
that each impact assistance project will benefit the natural 
environment and is consistent with federal environmental laws like the 
Clean Water Act and Coastal Zone Management Act. The bill should 
require that priority be given to efforts that directly offset the 
impacts of offshore drilling, protect and enhance fish and wildlife 
habitat, and support the repurchase of Outer Continental Shelf leases. 
These changes to the bill would ensure that the Louisiana Delta would 
receive funding for the environmental protection and restoration that 
it desperately needs.
    Question 2. We have spoken today about the Gulf Coast area and 
impacts from activity there. There are also coastal environmental needs 
that deserve federal assistance in other parts of the country. In the 
Northwest there are habitat and fisheries, along the eastern seaboard 
shorelines are disintegrating. Do you believe that these areas of the 
country should benefit from impact assistance?
    Answer. The National Wildlife Federation supports the use of 
coastal impact assistance funds to address the significant coastal and 
marine conservation needs that exist around the country. In general, 
coastal states that have oil and gas drilling off their shores suffer 
from the most chronic and direct impacts of this industry. The recent 
oil spill from a grounded tanker in Coos Bay, Oregon, however, clearly 
illustrates the hazards that oil and gas related activities pose to all 
of the nation's important marine and coastal resources. Fragile coastal 
ecosystems around the country face threats from development and other 
types of human disturbances. Our coasts are now home to half the 
populace, which places incredible pressures on these ecosystems. As our 
population continues to expand, it will become more difficult to 
maintain intact, functioning coastal ecosystems. If we do not protect 
these coastal resources, we will lose economically valuable fisheries, 
irreplaceable outdoor recreational opportunities, and unique 
assemblages of species. Our nation's marine resources face similar 
pressures. Increased pollution, climate change, over harvesting of 
fisheries, and other factors are threatening the survival of many 
marine species--including endangered marine mammals like the gray whale 
and Hawaiian monk seal, and commercially valuable fish species like red 
snapper and bluefin tuna. These are resources we cannot afford to lose. 
As a result, the use of coastal impact assistance dollars to support 
coastal and marine conservation work in areas with, and without, 
offshore drilling is both appropriate and necessary.
               Responses to Questions From Senator Wyden
    Question 1. S. 25 provides that Outer Continental Shelf (OCS) 
impact assistance money can be spent by States and political 
subdivisions on a broad variety of programs, as long as those programs 
are consistent with State coastal zone management plans. On the West 
Coast, and perhaps in other areas of the country as well, one of our 
biggest problems is the lack of basic scientific research on marine 
fish species. Obviously, OCS development could have an impact on those 
species and on the coastal communities and industries that rely on 
those species. Does the phrase ``fish and wildlife'' in section 
704(a)(1) of S. 25 include marine fish research? If not, how would you 
suggest modifying the provision so it clearly covers marine fish 
research?
    Answer. The National Wildlife Federation supports the use of 
offshore oil and gas revenues to address the conservation needs, 
including research, of marine fisheries in the Northwest and elsewhere. 
Like our coasts, marine fisheries around the country face substantial 
threats from a variety of sources and many have declined dramatically. 
Inadequate data regarding the status of marine fisheries has hindered 
our ability to protect these species. The collapse of the Georges Bank 
fisheries, which was once one of the richest fishing grounds in the 
world, is a sobering indicator of how quickly these resources can 
disappear and how serious the economic losses are when an entire 
fishing fleet is forced to shut down.
    The negative effects of offshore oil and gas drilling have, in some 
cases, contributed to these declines. The Exxon Valdez oil spill, for 
instance, caused a complete shutdown of the region's salmon fisheries. 
Fish are also negatively affected by chronic exposure to toxic 
pollutants that are released as a result of the drilling process. 
Furthermore, drilling platforms and their cable anchors occupy a great 
deal of space that can prevent commercial fishing in areas up to 20 
square miles. The harmful impacts that offshore drilling have on fish, 
the need for increased understanding of the threats to marine 
fisheries, and the importance of the resource at stake are strong 
justifications for using S. 25's coastal impact assistance funding for 
marine fisheries conservation work.
    Title I of S. 25 is currently broad enough to allow states to use 
these funds for marine fisheries conservation. States, however, have a 
limited role in the protection of marine resources. If these funds were 
to be used for things like marine mammal conservation, or deep sea 
fisheries conservation, then a federal program would either need to be 
created or an existing federal marine conservation program identified 
as the recipient of these funds.
    Whether or not a federal marine provision is added to the bill, the 
National Wildlife Federation recommends against the addition of bill 
language that specifically directs funds towards marine fisheries. If 
marine fisheries were mentioned without highlighting other distinct 
categories of fish and wildlife species that face comparable 
conservation challenges, it would place an undo emphasis on marine 
fishery needs that is not biologically justified. Coastal impact 
assistance funds should be directed to those coastal and marine species 
and/or ecosystems where there is the greatest conservation need; and 
these needs will vary greatly from region to region.
    Question 2. As you know, during the consideration of the Endangered 
Species Act reauthorization in the Committee on Environment and Public 
Works last year, I worked with the unlikely alliance of the Farm Bureau 
and the Environmental Defense Fund to find a source of permanent 
funding for the landowner incentive provisions of the Kempthorne-Baucus 
legislation.
    I continue to believe that our lack of serious, dedicated funding 
for the purpose of working with private landowners on the conservation 
of endangered species habitat remains a major flaw in our approach to 
the conservation and recovery of endangered species.
    Legislation introduced by Senator Landrieu--S. 25--proposes to 
earmark a substantial portion of the nation's outer continental shelf 
oil drilling receipts and dedicate those to funding of state fish and 
wildlife programs. What are the Federation's views about this as a 
priority for federal spending on wildlife? Should Congress consider 
making a portion of these funds available for the direct conservation 
of endangered species habitat? And if so, how much?
    Answer. The National Wildlife Federation considers the funding 
needs of state fish and wildlife agencies for nongame wildlife 
protection to be of the highest priority, and wholeheartedly endorses 
the use of Outer Continental Shelf revenues for these purposes. State 
fish and wildlife agencies are responsible for the management and 
protection of the majority of fish and wildlife species that inhabit 
their borders. Yet, the amount of funding available to these agencies 
typically does not reflect their broad mandate; and, all too often, 
important programs are limited due to inadequate funding. Substantial 
new funding would provide a shot in the arm to state fish and wildlife 
agencies for improvements in on-the-ground management of wildlife 
species. Title III of S. 25 provides desperately needed funding for 
state fish and wildlife conservation efforts; however, it should be 
amended to ensure that the funds go to those species that have the 
greatest conservation needs.
    Roughly 90 percent of wildlife species are ``nongame,'' which means 
that they are neither hunted or fished, nor federally listed as 
threatened or endangered. Early intervention when a nongame species 
begins to decline is the best way to keep the species from plummeting 
to the point that it must be listed as threatened or endangered. 
Proactive protection is more cost effective than waiting for the 
species to reach a crisis situation when recovery measures become more 
extreme and more expensive. Nevertheless, protection for these nongame 
species has historically received minimal amounts of funding. Instead, 
the vast majority of state wildlife dollars are spent on the protection 
of game species. Annual funding for all state nongame programs amounts 
to less than $100 million compared to more than $1 billion spent for 
state game programs. This is not surprising given that hunters and 
anglers pour millions of dollars annually into the state agencies 
through excise taxes that they pay on hunting and fishing equipment and 
sporting licenses. The time has come to remedy this funding imbalance. 
To accomplish this, the National Wildlife Federation recommends 
strongly that Title III of S. 25 be changed to clearly indicate that 
priority should be given to the historically underfunded nongame 
species protection programs.
    The National Wildlife Federation has consistently identified 
nongame species as the area of greatest wildlife conservation need and 
would oppose any effort to reduce current funding provided for these 
purposes under Title III of S. 25. The National Wildlife Federation 
recommends that the Committee amend S. 25 to increase the percentage of 
Outer Continental Shelf revenues for state fish and wildlife programs 
under Title III--from 7% to 10%--to match the levels provided under 
H.R. 701, the companion bill in the House. Beyond this increase, 
additional Outer Continental Shelf revenues set aside under S. 25 
should be directed towards the protection of threatened and endangered 
species. A long history of inadequate funding for the federal 
Endangered Species Act has made it extremely difficult to recover 
threatened and endangered species.
    For years, the National Wildlife Federation has called for a 
dedicated funding source that could provide reliable dollars for 
endangered species habitat protection. The use of Outer Continental 
Shelf revenues for private landowner incentives programs--programs that 
get landowners more engaged in endangered species protection efforts--
would be a particularly sensible and beneficial application of these 
dollars. Many threatened and endangered species depend heavily on 
private lands for their habitat, yet the Endangered Species Act has 
been relatively ineffective at improving conditions for species on 
these lands. Moreover, current implementation of the Act has left many 
private landowners antagonistic toward endangered species. Positive 
outreach efforts could help minimize their hostility toward the Act.
    If it can be done without jeopardizing funding for the existing 
Title III state wildlife programs, the Committee should amend S. 25 to 
include an endangered species provision similar to that found in S. 
446, a bill introduced by Senator Barbara Boxer. This provision 
allocates $100 million annually to fund landowner management actions 
that promote the recovery of endangered species. The funds would be 
used only for management actions that go above and beyond the existing 
requirements of the federal Endangered Species Act. This ensures that 
the federal government is not paying landowners to comply with the law. 
This type of program would make an important contribution to our 
national effort to protect threatened and endangered species.
    Question 3. Should Congress decide to move forward on legislation 
to utilize a share of Outer Continental Shelf (OCS) revenues to fund 
Land Water Conservation Fund, coastal impact assistance and wildlife 
conservation. What safeguards do you believe are necessary to protect 
the current moratoria on OCS leasing and to prevent incentives for 
states to advocate for increased oil and gas development?
    Answer. Some essential safeguards should be added to S. 25 to 
ensure that it does not create financial or political incentives for 
coastal states to accept inappropriate offshore oil and gas 
development. Under S. 25, the allocation of Outer Continental Shelf 
leasing revenues to coastal states and their local governments is based 
on a formula that rewards increased production and closer proximity to 
production. To ensure that this bill will not create incentives for 
drilling, the allocation of funds under all three titles of the bill 
should be de-linked from new leasing, exploration, production, or 
geographic proximity to such activities. Representatives Don Young and 
John Dingell have taken some significant steps towards addressing this 
issue in H.R. 701, the House companion bill to S. 25. Specifically, 
H.R. 701 excludes from its coastal impact assistance funding stream any 
new revenues generated from areas currently covered by drilling 
moratoria. S. 25 should be amended to exclude funds from all areas (not 
just those covered by moratoria) where drilling is not currently 
occurring. In addition, the exclusion of these funds from the bill's 
revenue stream should apply to all three titles of the bill.
    Funds generated from future exploratory efforts and/or drilling 
that occurs in areas excluded from the funding revenue stream (i.e., 
areas where these activities are not occurring at the time the bill is 
enacted) should be set aside in a ``catastrophic response account'' to 
be used for emergency costs associated with oil and gas accidents.
    Additionally, the share of coastal impact assistance provided to 
each state and locality should be set at the time the bill is passed 
(i.e., fixed at the rate of current production levels) or based on an 
average production level over the last 20 years.
    Question 4. With the increasing number of listed species in the 
Northwest and around the nation, it would seem to be smart to use 
revenues provided by S. 25 for accomplishing preventive wildlife 
conservation. States and local governments could employ increased 
resources in an effort to get out ahead of future endangered species 
listings. How would you view the use of these resources to enhance 
conservation of those species which are candidates for Endangered 
Species Act listing as either threatened or endangered?
    Answer. Funding provided under Title III of S. 25 can and should be 
used to address the conservation needs of species (including 
``candidate'' species) that have declined, but have not yet been 
federally listed as threatened or endangered. Candidate species, in 
particular, deserve conservation attention because they are generally 
in dire condition. These are species that have already declined to the 
point that they should be listed, but have been precluded from listing 
for a variety of reasons, including insufficient funding and a lack of 
political will to add them to the list. As candidates, these species 
receive no protection under the Endangered Species Act, and several 
candidate species have gone extinct while waiting to be listed.
    A number of states have begun to develop plans that address the 
conservation needs of candidate species. Some of these state plans will 
prove beneficial to the species; however, many are based on voluntary 
conservation measures and unproven conservation strategies that are 
unlikely to achieve recovery of the species in question. State plans 
that provide meaningful conservation measures--including clear 
biological goals, monitoring programs, funding for implementation, and 
enforcement provisions--are the types of efforts that will benefit 
candidate species and should be funded under Title III of S. 25. In 
some instances, states have generated these plans with the express 
intent of avoiding a listing. State plans that will not contribute 
significantly to the recovery of a candidate species or that are merely 
an excuse to avoid a listing that is warranted and necessary, should 
not be eligible for funding under S. 25.
    Question 5. Currently, money collected from offshore development 
under the Mineral Leasing Act is supposed to be used for land and water 
conservation. However, only a portion of the funding collected actually 
gets appropriated to the Land and Water Conservation Fund. Is this 
legislation going to ensure that all of the funds collected from 
development of lands currently covered by the Mineral Leasing Act that 
are supposed to be used for conservation are actually used for 
conservation? If not, should Congress, as a ``truth in budgeting'' 
issue, also address the existing funding problem with the Land and 
Water Conservation program?
    Answer. S. 25 is designed to ensure that a portion of offshore oil 
and gas revenues are permanently and automatically appropriated for 
coastal impact assistance, the Land and Water Conservation Fund (LWCF), 
and state fish and wildlife programs. Titles I and III of S. 25 need to 
be amended to ensure that all of these funds go for conservation 
purposes. The most significant portion of these Outer Continental Shelf 
revenues are directed to the coastal impact assistance program in Title 
I. As currently written, the bill would allow these funds to be used 
for infrastructure projects that may promote environmental degradation. 
Title I should be amended to ensure that coastal impact assistance 
dollars are used to fund projects that ameliorate environmental impacts 
of Outer Continental Shelf oil and gas development and related onshore 
activities. Rather than subsidizing unwise development, the bill should 
require a demonstration that each impact assistance project will 
benefit the natural environment and is consistent with federal 
environmental laws like the Clean Water Act and Coastal Zone Management 
Act. The National Oceanic and Atmospheric Administration and/or the 
Environmental Protection Agency should be given the authority to review 
and approve state plans for spending these coastal impact assistance 
funds to ensure that the proposed actions are consistent with these 
laws. The bill should require that priority be given to efforts that 
directly offset the impacts of offshore drilling or associated 
development activities, protect and enhance fish and wildlife habitat, 
improve air or water quality, protect and restore coastal wetlands, and 
support the repurchase of Outer Continental Shelf leases.
    Title II of S. 25, which addresses funding for the Land and Water 
Conservation Fund (LWCF), also poses some substantial problems that may 
preclude all of the funds from being used for conservation purposes. S. 
25 includes a provision that requires any federal LWCF land acquisition 
exceeding $5 million to be authorized by Congress. This requirement 
will force many LWCF projects to get Congressional approval; and, in 
turn, subject them to the political process that has always hindered 
the LWCF program. Currently, LWCF is authorized to receive $900 million 
annually, but the average appropriation that Congress has provided over 
the last thirty-four years is only one-third of that amount. Although 
S. 25 provides LWCF permanent and automatic funding, the requirement 
that projects receive Congressional approval creates a substantial 
hurdle that will hinder land acquisitions and may prevent those funds 
from actually being spent.
    Additionally, Title III of S. 25 requires that 2/3 of the LWCF 
funds be spent on lands east of the 100th meridian. The requirement 
that 2/3 of the funds be spent in the East is an arbitrary restriction 
that will limit the ability to prioritize land acquisition based on 
conservation needs. The National Wildlife Federation strongly 
recommends that these restrictions be eliminated from the bill to 
ensure that LWCF dollars are spent for land acquisitions that respond 
to the most serious impending conservation threats.
               Responses to Questions From Senator Graham
    Question 1. Can you provide an example of the coastal impacts that 
offshore drilling can cause on a day-to-day basis?
    Are the effects the same for oil and natural gas? If not, what are 
the differences?
    Answer. On a day-to-day basis, offshore drilling results in the 
regular release of toxic compounds used in the drilling process, air 
emissions that violate Clean Air Act standards, and the chronic seepage 
of petroleum from pipelines into the surrounding coastal marshes and 
sea bottom. These impacts are not always immediately visible and may 
seem less significant than the dramatic impacts of a catastrophic oil 
spill, yet the cumulative effect over time is a buildup of pollutants 
that have corrosive effects on the region's ecosystem, resident 
species, and species that migrate through the region.
    Offshore drilling for natural gas produces many of the same effects 
that result from oil drilling on the Outer Continental Shelf. Platform 
placement, which disturbs the seabed; drilling discharges, which 
release toxic materials into the area around the drill site; noise 
disturbances created by platform construction and ongoing activities; 
and trash produced during daily activities on the platform are negative 
impacts common to both oil and gas drilling. The effects of a natural 
gas spill, however, are less detrimental than that of an oil spill 
because natural gas is less toxic to the environment and dissipates 
more rapidly from the ecosystem.
    Question 2. Can you provide an example of the coastal impacts that 
an unanticipated event (for example, an unanticipated discharge of 
fluids, a tanker collision) could have on fragile coastlines such as 
those in the state of Florida?
    Answer. Unanticipated, catastrophic events like the recent tanker 
spill in Coos Bay, Oregon can have immediate and devastating impacts on 
marine and coastal ecosystems. Despite some improvements in cleanup 
technologies, often only a limited amount of the spilled material can 
be captured before it enters the ecosystem. Frequently, these spills 
cause the closure of important commercial fisheries. Shellfish and 
other sedentary organism are particularly vulnerable to the impacts of 
an oil spill and can be killed outright or rendered unfit for human 
consumption. A spill off the coast of Florida, for instance, would 
wreak havoc with the area's coral reefs; which, in turn, would threaten 
all of the resident fish and marine species that rely upon those reefs. 
Oil slicks have proven deadly for sea otters, seabirds, and other 
marine species. Migratory species like whales often avoid areas where 
major spills have occurred, sometimes for years after the event. After 
a major spill, oil, tar and other petroleum byproducts can wash up on 
beaches for years leaving them inhospitable to people and wildlife. 
Furthermore, the oil and its associated compounds will persist in the 
ecosystem for years. Ten years after the Exxon Valdez oil spill, the 
region's coastlines and marine species are still suffering from the 
impacts of oil residue that remains in the ecosystem.
                                 ______
                                 
                                State of Louisiana,
                           Department of Natural Resources,
                                Baton Rouge, LA, February 17, 1999.
Kelly Johnson,
U.S. Senate, Committee on Energy and Natural Resources, Washington, DC.
    Dear Ms. Johnson: I have enclosed my responses to written questions 
from Senators Landrieu and Wyden. If I can be of further assistance to 
the committee in any way, please do not hesitate to call me at 225-342-
4503.
    Again, thank you for the opportunity to be heard on such pressing 
issues.
            Very truly yours,
                                          Jack C. Caldwell,
                                                         Secretary.
              Responses to Questions From Senator Landrieu
    Question 1. We have heard a great deal this morning about the 
importance of Louisiana's wetlands to the state and to the nation. In 
your dealings with other states, have you encountered similar 
expressions of concern regarding coastlines and coastal economies?
    Answer. Yes. I speak to groups on coastal issues in different parts 
of the country. Most recently, I addressed coastal conferences in 
Williamsburg, Virginia, Washington, D.C., Galveston, Texas and 
Monterey, California. In these and other places, the concerns raised 
most often are about preserving marshes, sustaining fisheries and 
stopping beach erosion.
    Question 2. Louisiana depends heavily on the oil and gas industry 
as an integral part of its job base--fully 50% of the economy is based 
on petroleum. In light of this dependence and historical boom and bust 
cycles, has the state contemplated taking any steps to diversify the 
economy? What are the factors, in your view, that have affected efforts 
to diversify the economy?
    Answer. Governor Mike Foster's Louisiana Economic Development 
Council is putting together ``Vision 2020'', a strategic economic 
development plan that sets aside six clusters to be targeted in the 
state's efforts to diversify its economic. The clusters include: 
Medical and Biomedical; Micro-manufacturing; Software, Auto-regulation, 
Internet, and Telecommunications; Environmental Technologies; Food 
Technologies; and Materials (catalysts, composites, electronic 
materials and bio-compatible materials). Public input from the 
scientific community, higher education, business and industry have all 
played roles in the plan and the development of these targeted 
clusters.
    In the past, in my opinion, economic diversification efforts have 
been hampered by the lack of an educated workforce. Education is a main 
component of Vision 2020, and the issue is addressed throughout the 
plan.
    Question 3. As mentioned in the testimony of several witnesses 
today, the OCS Policy Committee, which is one of four advisory 
committees of the Minerals Management Service, made recommendations to 
the Department of the Interior in 1993 and again in 1997, asking for 
consideration by the agency of a coastal impact assistance package. To 
date, have you had any response to your request?
    Answer. No. However, the MMS has been working with President 
Clinton on his Lands Legacy legislation. Together with the Department 
of the Interior, they have worked to incorporate portions of certain 
aspects of the legislation.
                Response to Question From Senator Wyden
    Question 1. S. 25 provides that Outer Continental Shelf (OCS) 
impact assistance money can be spent by states and political 
subdivisions on a broad variety of programs, as long as those programs 
are consistent with State coastal zone management plans. On the West 
Coast, and perhaps in other areas of the country as well, one of our 
biggest problems is the lack of basic scientific research areas of the 
country as well, one of our biggest problems is the lack of basic 
scientific research on marine fish species. Obviously, OCS development 
could have an impact on those species and on the coastal communities 
and industries that rely on those species. Does the phrase ``fish and 
wildlife'' in section 704(a)(1) of S. 25 include marine fish research? 
If not, how would you suggest modifying the provision so it clearly 
covers marine fish research?
    Answer. In my view, the phrase does include marine fish research 
and would certainly be permissible if a state's governor includes it as 
part of the plan to be funded.
                                 ______
                                 
           Mississippi Department of Environmental Quality,
                                        Jackson, MS, April 6, 1999.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, Washington, DC.
    Dear Senator Murkowski: With humble apologies for being so late in 
responding to your February 1, 1999 letter which poses additional 
questions from the Committee regarding my testimony on Wednesday, 
January 27, 1999, I am pleased to submit for the record the answers set 
forth below.
    While I hope that my responses to these questions can be made part 
of the official record of our January 27, 1999 Committee oversight 
hearing, I certainly understand if my tardiness prevents that. 
Nevertheless, we are vitally interested in passage of S. 25, and stand 
ready to assist you and your staff in any way possible to that end.
            Sincerely,
                                      James I. Palmer, Jr.,
                                                Executive Director.
                Response to Question From Senator Graham
    Question. In your testimony, you discuss the fact that the growth 
of industrial activity in the Vicksburg area due to the construction of 
new, state-of-the-art drilling rigs has led to growth issues with 
infrastructure development for water supply and wastewater disposal, 
control of air emissions, and transportation arteries. In distributing 
funds under S. 25, do you plan to identify the growth needs that were 
generated by OCS development and those that were generated by other 
sources of growth in your state?
    Answer. Because the principal purpose of the Coastal Impact 
Assistance title in S. 25 is to compensate coastal states for costs 
associated with infrastructure and other burdens attributable to 
operations in federal waters within the specified proximity of their 
states, I believe there must be some rational effort to identify and 
quantify these pressures, separate and apart from other, and very 
similar, pressures in the economy, in general. In some states, 
including Mississippi, where we have realized substantial economic 
growth in recent years, this will be a complicated exercise in which 
great precision is likely not possible. However, to deny assistance 
because the nexus between offshore operations and coastal impacts is 
real but not subject of minute precision would be a gross insult to the 
entire concept. By way of example, that would be tantamount to saying 
that both ``direct'' and ``circumstantial'' evidence may be utilized in 
the courts of our nation, but the latter will be disallowed in the 
administration of federal revenue sharing programs.
                Response to Question From Senator Wyden
    Question. S. 25 provides that the Outer Continental Shelf (OCS) 
impactassistance money can be spent by States and political 
subdivisions on a broad variety of programs, as long as those programs 
are consistent with State coastal zone management plans. On the West 
Coast, and perhaps in other areas of the country as well, one of our 
biggest problems is the lack of basic scientific research on marine 
fish species. Obviously, OCS development could have an impact on those 
species and on the coastal communities and industries that rely on 
those species. Does the phrase ``fish and wildlife'' in Section 
704(a)(1) S. 25 include marine fish research? If not, how would you 
suggest modifying the provision so it clearly covers marine fish 
research?
    Answer. The Coastal Impact Assistance title in S. 25 was generated 
by the OCS Policy Committee, which has been advising the Secretary of 
the Interior on OCS matters for many years. The national fisheries 
industry has been prominently represented on the OCS Policy Committee 
for a very long time, and, because the Coastal Impact Assistance 
recommendations to the Secretary of the Interior were generated by the 
OCS Policy Committee during my term as chairman, I can say without 
hesitation or reservation that the phrase ``fish and wildlife'' in 
Section 704(a)(1) of S. 25 is intended to cover marine fish research. 
The most important modifier in the phrase ``air quality, water quality, 
fish and wildlife, wetlands, outdoor recreation programs, or other 
coastal resources. . . . is the word ``coastal''. Necessarily, that 
includes both freshwater and marine fish species. As you properly note, 
extensive marine fisheries research associated with offshore operations 
along the West Coast has been ongoing in recent years, and hopefully 
will continue. Similar programs for the Gulf of Mexico and adjacent 
state coastal waters should receive similar attention. We have 
outstanding scientists at the Gulf Coast Research Laboratory and other 
facilities in our Institutions of Higher Learning in Mississippi who 
eagerly await opportunities to participate in this much--needed marine 
fisheries research.
                                 ______
                                 
                        State Oil and Gas Board of Alabama,
                                 Tuscaloosa, AL, February 12, 1999.
Ms. Kelly Johnson,
Counsel, Senate Committee on Energy and Natural Resources, Washington, 
        DC.
    Dear Ms. Johnson: The following are answers to the questions 
submitted by Senators Bob Graham and Ron Wyden as follow up to the 
Wednesday, January 27, 1999 Committee hearing on Coastal Impacts of 
Offshore Drilling.
    I would be pleased to provide any other information the committee 
may require.
            Very truly yours,
                                            Donald F. Oltz,
                                                   State Geologist.
               Responses to Questions From Senator Graham
    Question 1. In your verbal testimony, you indicated that the state 
of Alabama has a zero discharge policy for all drilling rigs in your 
coastal waters. Have you ever issued a violation for that zero 
discharge policy? If so, how many violations have you issued in the 
last year? Which companies received those violations? Did you complete 
an analysis of the environmental impact of the discharges involved in 
those violations?
    Answer. Alabama's zero discharge policy was violated twice, early 
in our program. Mobil Oil Exploration and Producing Southeast, Inc. was 
sued by the Alabama Attorney General in 1982, fined ca. $2 million plus 
clean up costs. In 1983, Superior Oil Company was fined ca. $80,000 
plus clean up costs which were estimated to exceed $2 million. There 
were no violations last year. The lead state agency for environmental 
impact assessment is the Alabama Department of Environmental Management 
(ADEM).
    Question 2. In your written testimony, you indicate that currently 
natural gas produced in the Gulf of Mexico that is brought to Alabama 
originates from offshore Alabama, Mississippi, and, to quote, ``soon, 
possibly Florida.'' Have you received any indication from the federal 
government that there has been a decision on the Chevron appeal to the 
Department of Commerce?
    Answer. I have not received nor asked about Chevron's appeal to the 
Department of Commerce. The Destin Dome discovery is rated at or near 1 
trillion cubic feet of gas. Because it is close to an existing pipeline 
infrastructure, it is highly probable that the gas will come onshore 
Alabama ``if possibly'' it is produced. My comment was to point out 
that federal gas, Mississippi gas, Alabama gas, all come ashore in 
Alabama and that Florida gas, if produced, could add to the Alabama 
mix.
    Question 3. You go on to state that, to quote, ``Alabama 
infrastructure needs for maintaining current and future Gulf of Mexico 
drilling and production include: New Pipelines. As projected production 
increases occur, new pipelines will need to be brought onshore Alabama. 
In some areas, they may cross coastal wetlands or other environmentally 
sensitive areas. The current plans to add natural gas liquids plants 
will also increase current daily throughput and the need for new 
pipelines.'' What is the source of your projections for production 
increases?
    Answer. Exploration in the central and eastern Gulf continues to 
expand. Lease sales conducted over the past couple of years by MMS have 
been impressive in terms of industry interest and bids on leases. There 
will be discoveries and thereby increased production. The fact that 
each of the two new NGL plants being constructed in Alabama will 
process 300mcfd initially but are being built at a 600mcfd capacity 
also adds to the argument. Overall, in the U.S., NGL production will 
increase at 1.9%/year. The demand for ethylene is increasing at about 
3.8%/year. (cf the Oil and Gas Journal, (OGJ) June 8, 1998, p.50 ff)
    Question 4. Given these projected increases in production, what is 
your estimate of the increased motor vehicle traffic that will result? 
What route do these vehicles normally take away from the Alabama 
coastline? What is your estimate of the change in ozone and particulate 
matter that will result from this increased traffic? Has Alabama 
performed a plume analysis to identify the path that these pollutants 
will take? If so, what are the results?
    Answer. ADEM is the agency that conducts analyses of the air 
quality in Alabama. Mobile County could be in non-attainment as early 
as this summer. According to ADEM, the addition of the NGL plants is 
not a significant element in modifying the air quality in the area. We 
have not studied potential increase in traffic.
    Question 5. Has the state of Alabama begun planning and budgeting 
in anticipation of development of natural gas leases off the coast of 
Florida? If so, what types of activities have you already undertaken? 
Were these projects conducted independently or have you partnered with 
private firms or other organizations?
    Answer. No.
    Question 6. How many additional natural gas liquids plants 
(referenced in your written testimony) are you anticipating will be 
constructed in Alabama? Who do you anticipate will be constructing 
these plants? How much of an increase in daily throughput would you 
anticipate? What is the source of that estimate?
    Answer. We only know of the two under construction in Alabama, and 
one in Mississippi. In addition to the statistics in my answer to 
question 3, LPG consumption has expanded at nearly twice the rate of 
world petroleum demand (OGJ op cit, p. 50). It comes down to supply and 
demand. If the U.S. population requires more MTBE for gasoline, for 
example, plants will need to meet the demand.
    Question 7. Would you anticipate that potential funds from S. 25 
would be used for pipeline construction costs or for restoration of 
coastal wetlands that are destroyed in the process?
    Answer. Restoration.