[Congressional Record Volume 143, Number 126 (Friday, September 19, 1997)]
[Senate]
[Pages S9731-S9732]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS ACT, 
                                  1998


                Outer Continental Shelf Leasing Program

 Mrs. HUTCHISON. Mr. President, I would like to rise today, 
with my colleague, Senator John Breaux, to engage in a colloquy about a 
serious matter that has only recently come to our attention.
  Mr. GORTON. I yield the floor for your colloquy.
  Mrs. HUTCHISON. Mr. President, if these concerns are not addressed, 
one of our country's most successful programs, the Outer Continental 
Shelf Leasing Program, may be jeopardized. Under that program, the 
Federal Government has raised hundreds of millions of dollars in rents 
and royalties over the last 25 years, while at the same time developing 
safe and secure sources of energy for our country. Crucial to the 
success of that program is the ability of the private sector to conduct 
exploration of the Gulf of Mexico before submitting bids on the tracts 
offered for oil and gas leases.
  I recently learned that the Minerals Management Service [MMS] has 
proposed changes to the rules under which that exploration is 
conducted. These changes would potentially jeopardize the continuity 
and success of the Outer Continental Shelf Lands Act [OCSLA] program.
  Currently, geological and geophysical companies [G&G companies] 
conduct seismic surveys under MMS permits which require the permittees 
to provide the data they collect to the MMS under strict guarantees of 
confidentiality.
  The G&G companies then provide the oil companies access to the data 
through nonexclusive licenses. The licenses allow the oil companies to 
use the data for any purpose including re-processing the data using 
their own technology and data. These licenses are given on the 
condition that the licensee will not show or share the data with anyone 
else. In this way, the G&G companies are able to offer data to the 
largest number of possible users at the lowest cost.
  Under the proposed regulations, MMS intends to extend its ability to 
obtain data from just the G&G companies to all of the companies who 
have licensed and reprocessed that data using their own technology. By 
requiring all industry to share reprocessed data with the MMS, the 
threat of disclosure of extremely sensitive business data exists. Under 
any number of situations, including appeal of fair market values, it is 
unclear if the proposed changes would protect the confidentiality of 
that data. This threat to sensitive business data could ultimately 
threaten the success of the OCS leasing program.
  I understand and appreciate the need for MMS to have accurate data. 
However, I question the need of the Government to obtain reprocessed 
data that

[[Page S9732]]

belongs to the business community especially if it could potentially be 
released to competitor companies.
  It is my understanding that my colleague, Senator Breaux was an 
author of the original OCSLA. Do you believe the MMS' proposed 
regulations accurately reflect the purpose of that legislation?
  Mr. BREAUX. Mr. President, as one of the original authors of the 
Outer Continental Shelf Lands Act, I can advise the Senate that we 
spent a great deal of time and effort in developing a law that would 
result in the information, data, and interpretation remaining 
confidential. Any steps that would put that confidentiality at risk are 
contrary to the spirit and intent of what we were trying to accomplish 
in 1972.
  At that time, geophysical contractors were particularly concerned 
about the data sharing and confidentiality provisions of the OCSLA 
because they felt any breach of that confidentiality would destroy the 
market for the data, which is the geophysical contractors' sole asset. 
To protect that confidentiality, provisions were adopted requiring MMS 
to make sure the agency obtained permission from the permittee and 
anyone to whom the permittee sold the data under promise of 
confidentiality before sharing any data obtained from the permittee 
with a State government.
  Shortly after the amendment of the OCSLA, MMS promulgated regulations 
spelling out the mechanics of how data was to be made available to it 
and how it was to be protected once it had been turned over. Among 
those rules is one that mandates that the permittee, who had agreed to 
make its geophysical data available to MMS as a condition of the 
permit, require any party to whom the data is transferred to agree to 
the terms of the permit regarding data sharing as a condition of the 
transfer. Industry contends that when that regulation was proposed, MMS 
proposed to define the term ``transfer'' in a way that included 
nonexclusive licensees, but dropped that requirement from the final 
rule. Industry believes that MMS has now proposed to extend its data 
sharing requirements to nonexclusive licensees and to amend its 
regulations in several other significant ways.
  MMS contends that, in the 25-year span of its statutory 
responsibility to hold geophysical data confidential, this 
confidentiality has never been breached. And, MMS believes its current 
rulemaking is fully consistent with its authority under the OCSLA. In 
other words, MMS is going forward with its rulemaking without further 
public input.
  Mrs. HUTCHISON. I share your concerns regarding the intent of the 
original OCSLA and the effect of the MMS' actions.
  MMS is threatening to implement regulations without adequate 
discussions between the agency, industry, and the original authors of 
the OCSLA. By utilizing a negotiated rulemaking, we have a unique 
opportunity to avoid the problems that MMS' current course of action 
will create. There are many stakeholders in this debate that have valid 
concerns which deserve to be addressed. The exploration contractors, 
the oil and gas companies and the MMS all have a lot to lose by pushing 
through regulations that will cause more problems than they will fix.
  Each of the stakeholders can make significant contributions to a set 
of regulations that will accomplish the goals of the OCSLA, the MMS and 
the industry. I am frankly at a loss to understand why MMS has refused 
to engage in substantive negotiations on these issues when it is clear 
that substantive concerns remain unaddressed.
  The notice and comment rulemaking that surrounded this proposed rule 
was insufficient. Significant disagreements continue to exist where 
solutions seem eminently reachable. It makes sense to get the 
interested parties together to see if they can find a mutually 
agreeable solution. I strongly urge MMS to abandon the current 
rulemaking proceeding and to negotiate immediately with the affected 
parties to avoid placing the OCS lease program in jeopardy.
  Mr. BREAUX. Mr. President, I am very concerned about the tenor of 
these proceedings. MMS is the Federal agency charged with the 
responsibility to manage the mineral resources of the Outer Continental 
Shelf in an environmentally sound and safe manner and to timely 
collect, verify, and distribute mineral revenues from Federal and 
Indian lands. So, I want to know that this proposal is the best way to 
get at the objective that underlies it--a fair and reliable royalty 
system. But, I also want to ensure that the individuals and businesses 
affected by the MMS proposal are accorded every opportunity to have 
their concerns heard.
  I agree that MMS needs access to G&G information to discharge its 
important duties. But, it ought to accomplish that duty in a way that 
does not risk disrupting one of the Federal Government's most 
successful revenue programs. The G&G industry estimates that the 
proposed regulations will, if adopted, require the renegotiation of 
thousands of existing license agreements and, until that renegotiation 
is complete, no data can be licensed. This renegotiation process may 
take several months, if not years. During that time, there will be no 
exploration. Thus, the process that recently led to another record oil 
and gas lease sale on the Gulf of Mexico Outer Continental Shelf, 
providing needed revenue to the Federal Treasury, will come to a 
grinding halt. This is an interruption we cannot afford.
  For 50 years, oil and natural gas have been produced from the Outer 
Continental Shelf [OCS] underlying the Gulf of Mexico. This production 
represents more than 83 percent of total OCS oil production and more 
than 99 percent of all OCS natural gas production. In 1995, production 
from this area accounted for 15 percent of all oil produced in the 
United States and about a quarter of the natural gas.
  Maintaining public trust in our royalty system is critical to the 
future of oil and gas leasing, both onshore and offshore. Federal 
royalty policy must balance the need to encourage public resource 
development with the need to ensure that the public gets its fair 
royalty share. That balancing act requires government and industry to 
work together. The OCS leasing program is one example of government and 
the private sector working together--reflected by the recent record 
leases, records bonus payments and increased exploration in the Gulf of 
Mexico.
  I hope we can advance that partnership here. Let's take another 
opportunity to learn from each other what is working, what is not 
working under the current system--and how the MMS proposal addresses 
those problems. Then, we can move forward with a balanced policy that 
assures timely and accurate royalty payments for the people of the 
United States.

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