[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
   H.R. 2187, TO AMEND TITLE 10, U.S.C., REGARDING MINERAL RECEIPTS 
                COLLECTED FROM NAVAL OIL SHALE RESERVES
=======================================================================

                          LEGISLATIVE HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             June 26, 2001

                               __________

                           Serial No. 107-45

                               __________

           Printed for the use of the Committee on Resources








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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                      Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana     Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
J.D. Hayworth, Arizona               Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

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

W.J. ``Billy'' Tauzin, Louisiana     Nick J. Rahall II, West Virginia
Mac Thornberry, Texas                Edward J. Markey, Massachusetts
Chris Cannon, Utah                   Solomon P. Ortiz, Texas
Jim Gibbons, Nevada,                 Calvin M. Dooley, California
  Vice Chairman                      Jay Inslee, Washington
Thomas G. Tancredo, Colorado         Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho          Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
                                 ------                                













                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on June 26, 2001....................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming...........................................     1
        Prepared statement of....................................     2
    Hefley, Hon. Joel, a Representative in Congress from the 
      State of Colorado..........................................     3
        Prepared statement of....................................     5
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin...............................................     3

Statement of Witnesses:
    Culp, Pete, Assistant Director, Minerals, Realty and Resource 
      Protection, Bureau of Land Management......................     6
        Prepared statement of....................................     7

Additional materials supplied:
    Norton, Jane E., Executive Director, Colorado Department of 
      Public Health and Environment, Letter submitted for the 
      record.....................................................    15
















  H.R. 2187, TO AMEND TITLE 10, UNITED STATES CODE, TO MAKE RECEIPTS 
 COLLECTED FROM MINERAL LEASING ACTIVITIES ON CERTAIN NAVAL OIL SHALE 
     RESERVES AVAILABLE TO COVER ENVIRONMENTAL RESTORATION, WASTE 
 MANAGEMENT, AND ENVIRONMENTAL COMPLIANCE COSTS INCURRED BY THE UNITED 
                  STATES WITH RESPECT TO THE RESERVES.

                              ----------                              


                         Tuesday, June 26, 2001

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10:45 a.m. in 
Room 1324, Longworth House Office Building, Hon. Barbara Cubin 
[Chairman of the Subcommittee] presiding.

 STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF WYOMING

    Mrs. Cubin. The legislative hearing by the Committee on 
Energy and Mineral Resources will come to order.
    The Subcommittee is meeting today to hear testimony on H.R. 
2187, to amend Title 10, U.S. Code to make receipts collected 
from mineral leasing activities on certain naval oil shale 
reserves available to cover environmental restoration, waste 
management, and environmental compliance costs incurred by the 
United States with respect to the reserves.
    Mrs. Cubin. I would like at this point to apologize to the 
Committee for my tardiness. I was on the floor for the swearing 
in of the new member from Virginia and I sincerely apologize 
and especially to you, Chairman Hefley, for being so late.
    As you know, under Committee rule 4(g) the Chairman and the 
ranking minority member can make opening statements. If any 
other members have opening statements they can be included in 
the hearing record under unanimous consent.
    I will make my opening statement. At today's hearing the 
Subcommittee will take testimony on a small piece of 
legislation that has been too long in the making. Our 
colleague, Joel Hefley of Colorado, and his delegation mates, 
worked years to effect a legislative transfer of management 
authority from the Department of Energy to the Department of 
Interior for lands within the Naval Oil Shale Reserves Numbered 
1 and 3 in the Piceance Basion.
    After much wrangling over jurisdiction and the like, Mr. 
Hefley persuaded the House to adopt an amendment to the 
National Defense Authorization Act for Fiscal Year 1998 which 
mandated this transfer. Moreover, that law specifically 
established a trust fund to be tapped in the future for 
environmental restoration activities, such as the clean-up of a 
spent oil shale tailings facility near Anvil Points, Colorado. 
The monies were to come from oil and gas lease receipts the 
Interior Department collected from an initial lease sale and 
subsequent royalties on natural gas production. After the 
Interior and Energy secretaries certify to Congress that number 
one, the environmental clean-up is completed, and number two, 
the DOE's infrastructure cost for well-drilling done prior to 
the transfer has been recovered, then the lease receipts 
remaining and those collected thereafter will be distributed in 
a normal manner; that is, as you all know, the State of 
Colorado will receive half of the gross receipts for 
educational purposes or other use governed by state law.
    This was quite a fight to get non-westerners in Congress to 
understand that this is how public land mineral revenues are 
treated--by operation of law. And I comment Mr. Hefley for 
tirelessly pursuing this for his constituents and for all 
Coloradans.
    Unfortunately, the trust fund established in 1998 in the 
act is not self-actuating and that is why we are here today. 
H.R. 2187 is designed to pull the trigger, as it were, on the 
mechanism established in the defense authorization act.
    Since I am on the board of the NRA I think these are cute 
little things that my staff put in this statement.
    Apparently the original provision merely loaded the chamber 
and cocked the hammer. This bill will amend Title 10 of the 
United States Code to authorize the BLM to reach into the trust 
fund which now has about $8.5 million in it and which is 
replenishing at the rate of about $1 million per year and use 
the funds to study and complete the clean-up needs.
    I understand the administration supports to concept but 
will seek a tightening of the authority to allay fears that BLM 
could begin contract dirt-work before knowing all the costs for 
restoration of NOSR-3. So be it. I agree with the author of 
this bill and I think it is high time we set about doing the 
clean-up work for which the trust fund was established in the 
first place.
    [The prepared statement of Mrs. Cubin follows:]

  Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on 
                      Energy and Mineral Resources

    At today's hearing the Subcommittee will take testimony on a small 
piece of legislation that has been too long in the making. Our 
colleague, Joel Hefley of Colorado, and his delegation mates, worked 
years to effect a legislative transfer of management authority from the 
Department of Energy to the Department of the Interior for lands within 
the Naval Oil Shale Reserves Numbered 1and 3 in the Piceance Basin.
    After much wrangling over jurisdiction and the like, Mr. Hefley 
persuaded the House to adopt an amendment to the National Defense 
Authorization Act for Fiscal Year 1998 which mandated this transfer. 
Moreover, that law specifically established a trust fund to be tapped 
in the future for environmental restoration activities, such as the 
clean-up of a spent oil shale tailings facility near Anvil Points, 
Colorado. The monies were to come from oil and gas lease receipts the 
Interior Department collected from an initial lease sale and subsequent 
royalties on natural gas production. After the Interior and Energy 
Secretaries certify to Congress that: 1) the environmental clean-up is 
completed, and 2) the DOE's infrastructure costs for well-drilling done 
prior to the transfer has been recovered, then the lease receipts 
remaining and those collected thereafter will be distributed in the 
normal manner.
    That is, the State of Colorado will receive half of the gross 
receipts for educational purposes or other use governed by State law. 
This was quite a fight to get non-westerners in Congress to understand 
that this is how public land mineral revenues are treated - by 
operation of law - and I commend Mr. Hefley for tirelessly pursuing 
this for his constituents and all Coloradans.
    Unfortunately, the trust fund established in the 1998 Act isn't 
self-actuating and that is why we are here today. H.R. 2187 is designed 
to ``pull the trigger'' on the mechanism established in the defense 
authorization act. Apparently, the original provision merely loaded the 
chamber and cocked the hammer. This bill will amend Title 10 of the 
United States Code to authorize the BLM to reach into the trust fund 
which now has about $8.5 million in it (and which is replenishing at 
about $1 million per year) and use the funds to study and complete the 
clean-up needs.
    I understand the Administration supports the concept but will seek 
a tightening of the authority to allay fears the BLM could begin 
contract dirt-work before knowing all the costs for restoration of 
NOSR-3. So be it. I agree with the author of this bill, it is high time 
we set about doing the clean-up work for which the trust fund was 
established in the first place.
                                 ______
                                 
    I now recognize the ranking minority member, Mr. Kind, for 
his opening statement.

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

    Mr. Kind. Thank you, Madam Chair. You will not be getting 
any potshots from me on this legislation today. I could not 
resist.
    I want to thank Mr. Culp for your presence and your 
testimony here today and commend Mr. Hefley for the work that 
you have done, along with your colleagues in Colorado--Mr. 
Udall and I believe Mr. McInnis has been very active, too, in 
moving this legislation forward. I think it has been a good 
bipartisan effort by the delegation in Colorado.
    Hopefully we will be able to achieve the stated purpose of 
what you are trying to do. I think there is still a little bit 
of work to do with OMB, with the administration side, but thank 
you again for your testimony and the work you have put in on 
the legislation. I look forward to the testimony.
    Thank you, Madam Chair.
    Mrs. Cubin. Thank you, Mr. Kind.
    The chair now recognizes the Honorable Joel Hefley, the 
Fifth District of Colorado, to tell us about his bill.

  STATEMENT OF HON. JOEL HEFLEY, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF COLORADO

    Mr. Hefley. Thank you, Madam Chairman. I will take a shot 
at it.
    You do not need to apologize to me for your tardiness here. 
It worked perfectly because I could chair a mark-up down the 
hall and got that out of the way and I appreciate it way it 
worked. We were kind of scrambling there.
    I do want to thank you for holding a hearing on this so 
soon after its introduction on June 20. It is my hope that with 
the passage of this legislation we can begin work on NOSR 
Numbers 1 and 3 and never have to bother this Subcommittee 
again with this subject matter. Gosh, we have been at this a 
long time and it seems like far too long for the purpose of it.
    I was author of the legislation, as you indicated, that 
transferred these two oil shale reserves from the Department of 
Energy to the Bureau of Land Management back in 1998. After a 
10-year, 10-year debate on the issue, even the Clinton 
administration came to agree that there was little future in 
using oil shale to fuel battleships and that these two reserves 
could be more useful to the public not as a Navy property but 
as a BLM property managed for multiple use particularly and for 
oil and gas leasing.
    The state agency charged with promoting such development 
estimated as much as $125 million in oil and gas reserves could 
be generated by the two sites, to be split equally between 
Colorado and the Federal Government. The early returns seem to 
confirm this, as the first lease sale in the fall of 1999 
generated $7 million. That amount has since risen to about $8.5 
million. At the same time, it was acknowledged that clean-up 
work needed to be done on the two sites, particularly at Anvil 
Point on NOSR-3, which was the site of a Bureau of Mines 
experiment years before.
    It was also acknowledged that a cost estimate for the 
clean-up could only come through negotiations. Strangely, 
whoever held the site seemed to feel it was an environmental 
hazard to all while whoever no longer had the site felt it was 
a matter of minimal danger, perhaps of no danger at all. 
Because it of this it was agreed that the state Department of 
Public Health and the Environment could serve as a mediator 
between the two agencies and that the clean-up could be 
conducted to state standards.
    All of this moved along until late 1999 when the BLM 
approached my office for help in funding the clean-up. An 
Interior solicitor had concluded that a specific authorization 
was needed to allow the BLM to access the leasing monies needed 
for the clean-up.
    This was further complicated by the question of just who 
the proper authorizing Committee was. The transfer came about 
through the Defense authorization of 1998, an Armed Services 
bill, but House Resources is the normal authorizing Committee 
for the BLM. But Interior Appropriations has often handled such 
matters in the past under BLM standing authorization.
    The bill before you, a Resources bill, will supply BLM with 
the authorization it needs to undertake the clean-up at Anvil 
Point and begin to realize the program first adopted in 1998. 
The authorization would be for 5 years, meaning the clean-up 
could be completed within that time. If it were completed 
earlier, the two secretaries could certify as much and the 
distribution of revenues could begin.
    It is my understanding the administration has suggested an 
amendment to deal with some concerns they have about this 
legislation. I have looked at that amendment and the only 
problem I guess I have with it is that I want to see dirt moved 
and things begin to happen soon and this study that they are 
suggesting in the amendment will take upwards a year and the 
BLM will speak to that. It may be that they would have to do 
this, anyway. I just hate anything that would slow the process 
up, but maybe this will not.
    I do think it clarifies underlying law and the BLM assures 
me they should be able to accomplish this clean-up within these 
strictures.
    About a year ago we were talking to Colorado BLM Director 
Ann Morgan about the problems surrounding the NOSR transfer. We 
thought we did this 3 years ago, we said. Her response was, 
``Welcome to public lands management.'' And unfortunately, I 
think she is right.
    With that, I thank you again for holding this hearing and I 
ask the Committee's support of the bill.
    [The prepared statement of Mr. Hefley follows:]

 Statement of The Honorable Joel Hefley, a Representative in Congress 
                       from the State of Colorado

    Madame Chairwoman, I'd like to thank you for holding a hearing on 
this bill today, so soon after its introduction on June 20. It's my 
hope that, with passage of H.R. 2187, we can begin work on NOSRs 1 and 
3 and never have to bother this subcommittee on this subject again.
    Madame Chairwoman, three years ago, as part of the fiscal year 1998 
defense authorization, we transferred Naval Oil Shale Reserves 1 and 3, 
located near Rifle, Colorado, from the Department of Energy to the 
Bureau of Land Management. That transfer completed--or so we thought--a 
10-year effort to make that switch. By 1998, virtually everyone--
including the Clinton administration--agreed that the NOSRs could be of 
better use to the nation if they were transferred to the Bureau of Land 
Management and their subsurface estates opened to oil and gas 
development. The Colorado Oil and Gas Association, the agency charged 
with promoting such development in the state, estimated as much as $125 
million in oil and gas revenues could be generated by the reserves in 
future, to be split equally between Colorado and the federal 
government. The first competitive lease sales at the site, in 1999, 
gave reason to believe these projections might be accurate. The sales 
generated a proffered bonus of $7.5 million, a figure which has since 
grown to approximately $8 million.
    It was understood at the outset that before the oil and gas 
revenues could be shared, environmental remediation was needed at one 
point on NOSR 3--Anvil Points, the site of an old Bureau of Mines 
experiment. Since whoever held Anvil Points felt the site was an 
environmental hazard and whoever held it previously felt it was a site 
of minimal concern, a cleanup cost was never specified but the bill 
stated that BLM would first cleanup the site, drawing from the revenue 
stream generated by lease sales. The amount of the cleanup was to be 
determined through discussions between the departments of Energy and 
Interior, with mediation by the Colorado Department of Public Health 
and the Environment. The authorization was to run for five years or 
once the secretaries of Energy and Interior had certified Anvil Point 
was clean, whichever was earliest. At that time, revenue could then 
begin to be issued to the state and federal governments.
    Or so we thought. In late 1999, the Bureau of Land Management 
approached my office for help in funding the cleanup. A solicitor's 
reading of the language in fiscal year 1998 had concluded that BLM 
needed a specific authorization to spend its own leasing receipts on 
the cleanup. The matter was further complicated by the question of just 
who held responsibility for supplying such authorization--the Armed 
Service Committee, under whose jurisdiction the transfer was made; 
House Resources, the nominal authorizing committee for the Bureau of 
Land Management; or Interior Appropriations, which often resolved such 
issues under the BLM's standing authorization. No resolution was 
reached during the 106th Congress.
    My bill, H.R. 2187, would provide the authorization for the 
Secretary of Interior to access the NOSR 3 environmental trust fund to 
enable contract work agreed upon by the BLM and the state of Colorado 
to be performed for the next five fiscal years, limited by the funds 
available from leasing. If further work is necessary beyond 2006, a new 
authorization will be required.
    While all these discussions have been going on, the BLM and the 
state of Colorado have conducted internal estimates of what needs to be 
done at the Anvil Points site. Four options--ranging from minimal 
remediation to a ``worst-case'' scenario involving complete removal of 
the tailings--were outlined with costs ranging between $3 million and 
$12 million, with annual monitoring expenses of approximately $30,000. 
It is realistic to believe the environmental cleanup can be done with 
the money on hand.
    So that is where we are today. A year ago, someone mentioned to 
Colorado state BLM Director Ann Morgan that we thought we'd taken care 
of all this three years ago in the defense authorization. ``Welcome to 
public lands management,'' she said. Unfortunately, I guess she's 
right.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. Hefley.
    The chair now recognizes Mr. Pete Culp and welcomes him in 
front of this Committee again. He is the assistant director of 
Minerals, Realty and Resource Protection for the Bureau of Land 
Management. Welcome. We recognize you to give your testimony.

 STATEMENT OF PETE CULP, ASSISTANT DIRECTOR, MINERALS, REALTY 
AND RESOURCE PROTECTION, BUREAU OF LAND MANAGEMENT, ACCOMPANIED 
BY CARLTON LANCE, LEAD, HAZARDOUS MATERIALS MANAGEMENT PROGRAM, 
                          COLORADO BLM

    Mr. Culp. Thank you, Madam Chairman. I appreciate the 
opportunity to appear here today to discuss H.R. 2187, a bill 
to make available certain mineral leasing receipts for 
environmental restoration work at the Naval Oil Shale Reserve, 
known as NOSR-3 near Rifle in Garfield County, Colorado. I am 
accompanied by Mr. Carlton Lance, who is BLM Colorado's 
Hazardous Materials Program lead.
    The department supports this legislation but, as Mr. Hefley 
indicated, we recommend that the bill be amended to establish a 
two-step process for access to money from the fund. For the 
first step we recommend that the bill be amended to grant us 
immediate access for up to $1.5 million for completion of the 
additional analyses, site characterization, and geotechnical 
studies. On the completion of these studies we will be able to 
determine the ultimate clean-up that is necessary, the clean-up 
alternative, and a more precise estimate of the cost.
    For the second step we would be required to submit the 
findings of the initial study to the Congress before obligating 
the remaining funds for the clean-up work. Specifically, the 
recommendation is the bill be amended to specify that 60 days 
after the findings have been submitted to Congress the 
secretary would then have access to the funds required for the 
clean-up without the need for further congressional action. 
However, should the total estimate exceed the available fund 
balance, BLM would be prohibited from taking any further 
action. And what this does is give the administration and the 
Congress an opportunity to consult on the cost and funding of 
the ultimate clean-up.
    The administration believes that because the clean-up 
method remains uncertain, prudence dictates that the 
administration and Congress should be apprised of the potential 
cost before the clean-up begins.
    It is language in existing law that transferred the NOSRs, 
particularly NOSR-3, from DOE to DOI in 1997 that requires the 
enactment of this legislation to provide us with access to the 
funds that are already in the Treasury.
    We just note briefly that the NOSR is a 21,000-acre reserve 
that was originally established in 1924 under an executive 
order. It is in the Piceance Creek Basin of northwestern 
Colorado. It was originally created as a future fuel source for 
the Navy and this reserve and others were originally managed by 
the Department of Defense and then subsequently transferred to 
DOE.
    Since the 1980's there has been development of oil and gas 
in NOSR-3 and that development, as has been noted, has 
generated $8.5 million in the fund that is available now for 
environmental restoration. Future revenue growth is also 
projected.
    The Congress did transfer the administrative responsibility 
for the NOSR to DOI and BLM in 1998 and specified that the 
receipts for sales, bonuses and royalties from natural gas be 
placed in a Treasury account, used first for the reimbursement 
of environmental restoration, then to repay the original costs 
of the Department of Energy for development of the NOSR and 
ultimately to be split under the Mineral Leasing Act between 
the Federal Government and the State of Colorado.
    The shale pile that we are concerned about was built up 
over 40 years of experimental development of the oil shale. It 
consists of approximately 300,000 cubic yards of material. It 
is roughly 1,000 feet long and 350 feet high and it is located 
in a narrow ravine adjacent to West Sharrard Creek, a tributary 
of the Colorado River.
    The Colorado Department of Public Health and the 
Environment, as Chairman Hefley noted, and a BLM contractor, 
the Dynamac Corporation, have conducted preliminary analyses of 
the site and have determined that the pile is a source of 
arsenic and other heavy metals that are leaching into surface 
and groundwater and has a large potential for future 
disruption. So with enactment of this legislation we will be 
able to move forward with cleaning up the pile and I will be 
pleased to answer any questions you have.
    [The prepared statement of Mr. Culp follows:]

Statement of Pete Culp, Assistant Director, Minerals, Realty & Resource 
                 Protection, Bureau of Land Management

    Madame Chairman and members of the Committee, I appreciate the 
opportunity to appear here today to discuss H.R. 2187, a bill to make 
available certain mineral leasing receipts for environmental 
restoration work at the Naval Oil Shale Reserve (NOSR) 3 near Rifle in 
Garfield County, Colorado. I am accompanied by Carlton Lance, BLM 
Colorado's Hazardous Materials Management Program lead.
    The Department of the Interior supports this legislation, but 
recommends that the bill be amended to establish a two step process for 
access to monies from the fund. For the first step, we recommend that 
the bill be amended to grant BLM access to up to $1.5 million from the 
fund for completion of the additional analysis, site characterization, 
and geotechnical studies. The completion of these studies is required 
to determine the ultimate cleanup necessary for the site. For the 
second step, the bill would require the Secretary to submit the 
findings of the study to the Congress before obligating funds for the 
cleanup work. Specifically, we recommend that the bill be amended to 
specify that sixty days after these findings have been submitted to 
Congress, the Secretary would then have access to the fund for the 
cleanup activities at NOSR 3 without need of any further Congressional 
action. However, should the total estimated cost exceed the available 
fund balance, BLM should be prohibited from taking any further action. 
This will give the Administration and Congress an opportunity to 
consult on the cost and funding of the proposed cleanup work. The 
Administration believes that, because the cleanup method remains 
uncertain, prudence dictates that the Administration and this Congress 
should be apprised of the potential costs before the cleanup work 
begins.
    BLM wants to begin necessary on-the-ground environmental 
restoration activities at NOSR 3 as soon as possible, but cannot do so 
until this preliminary work is completed. Due to language in existing 
law that transferred administration of NOSR 3 from the Department of 
Energy (DOE) to the Department of Interior (DOI) in 1997, enactment of 
legislation is necessary to provide BLM with access to existing funds 
in a Treasury account specifically designated for these environmental 
restoration purposes.
                               Background
    NOSR 3 is a 21,000-acre reserve created by executive order in 1924 
and located in the southeastern portion of the Piceance Basin in 
northwestern Colorado. The site--like NOSR 1 which is also in Colorado 
and NOSR 2 in Utah--was originally created as a future source of fuel 
supplies for the U.S. Navy and to preserve the resource. The reserves 
were originally managed by the Department of Defense and were 
eventually transferred to DOE.
    In the early 1980s, private oil and gas companies began to develop 
natural gas reserves in the surrounding areas and, in 1985, DOE 
initiated a natural gas drilling program in NOSR 3. In 2000, production 
from 76 wells on approximately 7,000 acres at NOSR 3 was roughly 8.7 
million cubic feet of gas per day. Sold competitively on the open 
market in 2000, those sales generated approximately $1 million in 
revenues for the United States. Future revenue growth at NOSR 3 is also 
expected--with 26 Applications for Permit to Drill (APDs) pending at 
the site and industry projections for 140 additional wells to be 
drilled within the next three years.
    In addition to mineral resources, NOSR 3 contains substantial 
surface resources as well, including recreational, livestock grazing, 
watershed, paleontological, wildlife habitat and visual resources. It 
also includes natural habitats for several sensitive plants and 
animals.
              Transfer of NOSR 3 Administrative Authority
    Congress, in the National Defense Authorization Act for Fiscal Year 
1998 (P.L. 105-85), transferred administrative jurisdiction of NOSR 3 
from DOE to DOI. Included in the legislation authorizing the transfer 
is language specifying that all receipts from sales, bonuses, and 
royalties be placed into a treasury account to be used for 
reimbursement of environmental restoration, waste management, and 
environmental compliance costs incurred by the United States. The 1998 
measure specifies that enactment of additional legislation is necessary 
for the Federal Government to formally access the funds for the 
environmental cleanup activities. Furthermore, the 1998 Act also 
provides that no monies received from BLM leases may be shared with the 
State of Colorado until costs (including environmental restoration 
costs) incurred by the United States related to the site have been 
reimbursed. To date, approximately $8.5 million in lease sales have 
been deposited into this special treasury account. The account 
continues to grow with additional lease royalties and future sales.
                      Environmental Cleanup Issues
    The primary current environmental concern at the NOSR 3 site is a 
spent shale pile that was developed through 40 years of deposition from 
oil shale mining and processing activities. The pile consists of 
approximately 300,000 cubic yards of material, and is roughly 1,000 
feet in length and 350 feet high. It is located in a narrow ravine 
adjacent to West Sharrard Creek--a tributary which flows to the 
Colorado River in less than two miles. The Colorado Department of 
Public Health and Environment (the primary environmental regulator for 
the state) and BLM's contractor, Dynamac, have conducted analyses of 
the site and have concluded that the pile is the source of arsenic and 
other heavy metals contamination leaching into surface and groundwater. 
The pile's constituents also have been determined to be hazardous 
through direct physical contact. In addition, there are potential 
questions regarding the physical stability of the pile due to its steep 
slope, lack of vegetation, and proximity to the West Sharrard Creek. 
According to the Colorado Department of Public Health and Environment, 
these findings are considered threats to human health and the 
environment. Ancillary facilities in the area, such as open adits, 
sheds, and gravel roads, also require remedial actions.
                         Restoration Proposals
    In 2000, BLM contracted with Dynamac Corporation to conduct an 
initial evaluation of the site and provide various restoration 
alternatives and cost scenarios. The following four alternatives were 
proposed and analyzed: 1) removal and disposal at an off-site Treatment 
Storage and Disposal Facility (TSDF); 2) removal and disposal to an on-
site location; 3) in-place stabilization; and 4) beneficial reuse. A 
future detailed analysis of these proposed alternatives will have to be 
completed in accordance with CERCLA and a preferred alternative 
selected before BLM can report its findings to Congress. If the cost of 
the preferred alternative does not exceed the balances available in the 
designated account, BLM will then access the necessary funds and 
proceed with work under the oversight of the State of Colorado. 
Preliminary costs for the various alternatives range from a high of 
$19.8 million for removal to an off-site TSDF location, down to $1 
million either for in-place stabilization or beneficial reuse. 
Additional site characterization is necessary to provide conclusive 
estimates of the remediation work necessary at the site and their 
costs.
                               Conclusion
    Enactment of legislation is necessary to allow BLM to proceed with 
the pressing environmental cleanup projects at the NOSR 3 site. In 
turn, completion of these necessary tasks will put the Federal 
Government and the State of Colorado one step closer to sharing in the 
benefits of the receipts from the development of natural gas at NOSR 3.
    Madame Chairman, thank you for your consideration of this important 
legislation. I would be pleased to answer any questions that you or the 
other members of the Committee may have.
                                 ______
                                 
    Mrs. Cubin. Thank you very much.
    I would like to start first by asking about the arsenic and 
other heavy metals that you say are leaching into the 
groundwater at Sharrard Creek. Do you or does the BLM know how 
much arsenic is being leached at this time? And does that pose 
any immediate environmental threat to the Colorado River?
    Mr. Culp. We know that there is arsenic leaching. Our 
contractor determined that but we do not know the precise 
amount. The threat, I believe, is more in the nature of 
potential, particularly if the pile were to collapse or be 
impacted by heavy rains, that kind of thing.
    Mrs. Cubin. I do not mean to be too elementary but how big 
is this pile?
    Mr. Culp. Well, it is about three football fields long and 
350 feet high. It is--
    Mrs. Cubin. Oh, it is a big pile.
    Mr. Culp. It is a big pile, yes, ma'am.
    Mrs. Cubin. There has been other big piles around here but 
not that big.
    The BLM anticipates that there will be other environmental 
compliance activities and restorations and hazardous material 
clean-ups on NOSRs-1 and 3, in addition to this one. Do you 
have an estimate, just a ballpark figure, of what monies will 
be required to clean up those other sites?
    Mr. Culp. We do. There is some other work to roads. There 
are old transformers, battery stations, et cetera that will 
need to be cleaned up and that estimate is about $750,000. That 
will be included in the clean-up process.
    Mrs. Cubin. The last question I have. The national Defense 
Authorization Act of 1998 provided that Colorado be able to 
share in the royalties after the secretaries of Interior and 
Energy jointly certified certain things that we have spoken of 
earlier. Do you have any idea when Colorado is going to be able 
to start sharing in those royalties?
    Mr. Culp. Not precisely, Madam Chairman, although we do 
have a rough projection that ultimately the reserve could 
generate as much as $100 to 120 million of revenue from oil and 
gas so that the ultimate revenues to the Federal Government, 
even after the clean-up and the repayment of DOE's investment 
costs, would be substantial both for the Federal Government and 
the state.
    Mrs. Cubin. For you, Mr. Hefley, I have had leg counsel 
draft a substitute to your bill which appears to satisfy the 
OMB in that another study would be done before committing to 
the Anvil Points clean-up. If such a study can be done within, 
say, 6 months or a reasonable time like that, do you think you 
would be able to support that substitute, or do we need to talk 
behind closed doors later?
    Mr. Hefley. Madam Chairman, the sooner the better. The BLM 
seems to feel, and they can speak for themselves, seem to feel 
that it will take up to a year and that a year is a good term 
and I have no basis to argue with that but I would encourage 
them, if we get started on this thing, to complete this study 
as soon as possible so that we could move forward with it. It 
has hung on there too long and I will let them speak for 
themselves about the timing but I would not object to your 
substitute amendment because I think that we need everybody on 
board as we move forward and I think that does it.
    Mrs. Cubin. Did you want to respond to that, Mr. Culp, to 
the 6 months?
    Mr. Culp. Well, I would just say we will move as quickly as 
we can. It may take, as the Chairman said, approximately a year 
to finish the study phase.
    Mrs. Cubin. Well, we want you to have all the time you need 
so it can be done right.
    Mr. Culp. If we can finish it quicker, we will.
    Mrs. Cubin. Thank you.
    The chair now recognizes Mr. Kind.
    Mr. Kind. Thank you.
    Mr. Culp, I understand further studies are being 
recommended or required for the clean-up but do you have a 
preliminary cost estimate right now, what the clean-up is going 
to entail?
    Mr. Culp. Actually, we had an initial study done by the 
Dynamac Corporation and they looked at a range of clean-up 
alternatives, ranging from a beneficial reuse of the pile, 
which does not seem feasible, to shipment to an off-site 
facility some distance away, a facility that is authorized to 
take that kind of material. The cost estimates between those 
two are from $1 million to $19 million.
    At the moment we believe that the much more feasible 
alternative is in the middle and would be the development of a 
disposal site that is within the NOSR and reasonably close to 
where the pile is now but in an environmentally safer place. 
Roughly in the vicinity of $6 million for that alternative.
    Mr. Kind. And I understand there is roughly $8.5 million 
from lease receipts that are sitting in reserve right now that 
would be applied?
    Mr. Culp. That is correct.
    Mr. Kind. Is there any containment being done right now on 
the tailings pile to ensure there will not be any run-off or 
leakage into the Colorado River?
    Mr. Culp. Carlton, can you help on that? This is Carlton 
Lance, our environmental protection specialist.
    Mr. Lance. No, there is currently not at this point in 
time. The pile is at an angle of repose--very, very steep, and 
not vegetated. It is exposed to all kinds of precipitation and 
run-off, which is carrying small particles from the pile into 
the adjacent West Sharrard Creek, which is less than half the 
distance from you to me.
    Mr. Kind. And there have been some positive tests for 
arsenic in the groundwater?
    Mr. Lance. Arsenic and other heavy metals. And, as Mr. Culp 
also said, another primary concern of the State of Colorado is 
the proximity of this pile to the West Sharrard Creek. It is 
very close, like I said, half the distance between you and me 
right now. And the West Sharrard Creek is starting to meander 
into the shale pile, which is causing the shale pile to sluff 
off into the creek and eventually end up in the Colorado River.
    Mr. Kind. Who created the tailings pile to begin with? If I 
understand this right, you inherited this from the Department 
of Energy, who inherited it from the Department of Defense. Who 
created the tailings pile to begin with?
    Mr. Culp. It was created during the experimental work to 
develop oil shale by contractors who, at the time, were 
primarily working for the Bureau of Mines.
    Mr. Kind. There were private contractors involved?
    Mr. Culp. Yes.
    Mr. Kind. Okay. It is also my understanding that BLM 
awarded a competitive lease to the highest bidder, Barrett 
Resources, who paid a bonus of $7.5 million but as part of the 
sale, Barrett now acquires ownership of DOE infrastructure. 
What type of infrastructure are we talking about?
    Mr. Culp. Mr. Kind, DOE actually drilled the original gas 
wells in the reserve, so it is the wells, it is the pipelines 
within the field, the tanks, et cetera.
    Mr. Kind. Okay.
    Mr. Hefley, have you had any conversations with our 
appropriators in regards to this legislation? Have you gotten 
any feedback from the Appropriations Committee and how they 
feel about this?
    Mr. Hefley. No, I have not. In reality, I do not think they 
have to appropriate this. I think that is already done by the 
lease process that we had here. But we do need an ability to 
access those funds and that is what this bill would do.
    Mr. Kind. Concern about any points of order being raised in 
light of setting up this separate reserve for this stated 
purpose? Is there potential for a point of order to be invoked?
    Mr. Hefley. It is possible but I have heard of no one who 
wants to do that.
    Mr. Kind. Okay.
    Mr. Hefley. We have had a checkered history with oil shale 
in Colorado and I do not know, Barbara, is you have gotten into 
it in Wyoming, as well, but I can remember when Mr. Tancredo 
and I served in the legislature. My gosh, there was going to be 
an oil shale boom.
    I remember before that, Tom, I looked at a ranch out there 
very near this place to buy years ago, over 30 years ago, and 
they said oh, there is going to be this great oil shale boom. 
In fact, we built highways to the Western Slope based on the 
fact that we need those highways because of the oil shale boom.
    So it has been kind of a boom and bust experience over the 
years. At first, no one paid much attention. It is kind of like 
with the gold mining, silver mining, and other things we had in 
Colorado. You did not pay much attention to the slag piles. You 
just kind of shoved them out there where it was convenient.
    Now we are much more environmentally sensitive to those 
kinds of things and the arsenic and the heavy metals in the 
Colorado River, the river that supplies not only for Colorado 
communities like Grand Junction but all the way to Los Angeles, 
you want to minimize the run-off from these kinds of things if 
you can.
    So this is something I think that desperately needs to be 
cleaned up. There are a lot of slag piles in Colorado that need 
to be cleaned up, as a matter of fact, from various mining 
operations where we just simply were not very environmentally 
conscious at that time.
    Mr. Kind. Thank you.
    Thank you, Madam Chair.
    Mrs. Cubin. The chair now recognizes Mr. Tancredo.
    Mr. Tancredo. Thank you, Madam Chairman.
    I understand, Mr. Culp, that industry has shown a lot of 
interest in some of the unleased lands within NOSR-1 and -3 and 
that the BLM has done some preliminary studies on those 
properties. Could you tell me when you expect the plan to be 
completed and when the lands can be made available for leasing?
    Mr. Culp. Yes, I can. We are in the early stages of a new 
land use planning process for the area under the Federal Land 
Policy and Management Act that we need to complete to do 
additional leasing and we expect that within approximately two 
to 3 years there will be more leasing.
    Mr. Tancredo. Thank you. I have no other questions, Madam 
Chairman.
    Mrs. Cubin. Mrs. Napolitano was here first.
    Mrs. Napolitano. Thank you, Madam Chair.
    It is with great interest that I am listening to you 
gentlemen talk about the removal of a contaminated site in 
Colorado because I have been working on a bipartisan basis to 
try to remove the uranium contaminated pile in Moab.
    That kind of brings to mind your discussion or your 
statements that the site has been owned and operated by 
Interior, prior, Defense, and prior, Bureau of Mines. Were 
there any private owners that were involved in this mining 
operation?
    Mr. Culp. There were private contractors that--
    Mrs. Napolitano. Owners.
    Mr. Culp. I do not believe there were private owners.
    Mrs. Napolitano. And the total removal cost over the 5 
years will be approximately about--what was the figure?
    Mr. Culp. The most likely alternative we think is about $6 
million.
    Mrs. Napolitano. 6. Now does that include the 
transportation? I am assuming you are moving this pile onto a 
nonleaching site, a rock bottom or something to that effect. Am 
I correct?
    Mr. Culp. That is correct.
    Mrs. Napolitano. The cost would be more involving the 
actual transportation, if I remember correctly because we have 
been through this from the other end. Is that fair enough, that 
amount of money that you are talking about? Because if you are 
talking about a pile that is exceedingly large--what did you 
say?--three football fields and 350 feet--to be able to move 
it, is the site already found?
    Mr. Culp. We are looking at alternatives and we believe 
there will be a suitable site within the reserve.
    Mrs. Napolitano. Right within the reserve?
    Mr. Culp. Within the reserve. You are absolutely correct 
that the distance that you have to move the material is--
    Mrs. Napolitano. Is the cost.
    Mr. Culp. Is the primary cost-determining factor.
    Mrs. Napolitano. That is why I am questioning the amount 
that you have indicated might suffice. But this is going to be 
enough for it to be done properly?
    Mr. Culp. To illustrate how sensitive it is to distance, 
the upper cost estimate that came out of our study, which was 
close to $20 million, looked at a location that was 250 miles 
away?
    Mr. Lance. Yes, outside the State of Colorado. The vast 
majority of that is transportation costs and that was to go to 
a TSDF facility.
    Mrs. Napolitano. That is why I am asking have you found the 
site and how proximate to--
    Mr. Lance. We are looking at a site, a potential site right 
now within about two to two and a half miles away from the pile 
where it currently--
    Mrs. Napolitano. But it has not been determined.
    Mr. Lance. With that type of transportation, the cost would 
be minimal. And the area that we are looking at is a 60-acre 
tract of land with a pile on it 15 feet high for 60 acres that 
would suffice for disposal.
    Mrs. Napolitano. The next question I have, and it is more 
of a statement, is I am looking at information given to us by 
our staff that DOE owned the wells. Am I correct? So the output 
was their own? I am talking about they owned the wells 
outright?
    Mr. Culp. They did own the wells, yes, when they were first 
put in in the 1980's.
    Mrs. Napolitano. It says the agency appeared to be losing 
money because the appropriated dollars to contract drilling and 
production operations exceeded receipts from the sale of gas. 
And that is a very important point to me because we have been 
discussing with gas operators that the Federal agency should go 
into the royalties in kind, if you will, and that, to me, is 
very salient, what you are saying here. We have not operated at 
a profit before.
    Do you have any comment on that?
    Mr. Culp. Well again, that was DOE's operation during that 
period. I could just say that overall, our revenues for 
managing oil and gas on Federal lands are about 20 times what 
we--this is on a national basis now--about 20 times what it 
costs us to administer the program, so it is a--
    Mrs. Napolitano. A losing proposition?
    Mr. Culp. A revenue positive proposition.
    Mrs. Napolitano. Oh, positive.
    Mr. Culp. For the government, yes.
    Mrs. Napolitano. Interesting.
    I am just very glad that you are taking a very active role, 
Congressman Hefley, on this issue because to a lot of us, it is 
important that we be able to address contaminated sites. They 
are possible time bombs when it comes to rains or other types 
of activity that will disseminate that to nearby areas and 
affect not only people but other areas that are so sensitive. 
Thank you.
    Mrs. Cubin. And I thank Ms. Napolitano. Your district 
drinks some water from the Colorado River, as well, a lot 
farther down the pike but still.
    We do not have any other questions. I would like to thank 
the panel for their testimony and look forward to moving this 
bill, making the changes that are necessary that are suitable 
to you and to the administration so we can get some dirt moved 
and start the clean-up. I know that is what everyone has in 
mind.
    So the Subcommittee on Minerals and Energy Resources is 
officially adjourned. Thank you.
    [Whereupon, at 11:20 a.m., the Subcommittee was adjourned.]

    [A letter submitted for the record by Jane E. Norton, 
Executive Director, Colorado Department of Public Health and 
Environment, follows:]
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