[Senate Report 105-229]
[From the U.S. Government Publishing Office]
Calendar No. 443
105th Congress Report
SENATE
2d Session 105-229
_______________________________________________________________________
MOUNT ST. HELENS NATIONAL VOLCANIC MONUMENT COMPLETION ACT
_______
June 26, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. Murkowski, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany S. 638]
The Committee on Energy and Natural Resources, to which was
referred the bill (S. 638) to provide for the expeditious
completion of the acquisition of private mineral interests
within the Mount St. Helens National Volcanic Monument mandated
by the 1982 Act that established the Monument, and for other
purposes, having considered the same, reports favorably thereon
with an amendment and recommends that the bill, as amended, do
pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Mount St. Helens National Volcanic
Monument Completion Act.''
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.--Congress finds that--
(1) the Act entitled ``An Act to designate the Mount St.
Helens National Volcanic Monument in the State of Washington,
and for other purposes'', approved August 26, 1982 (96 Stat.
301; 16 U.S.C. 431 note), required the United States to acquire
all land and interests in land in the Mount St. Helens National
Volcanic Monument;
(2) the Act directed the Secretary of Agriculture to acquire
the surface interests and the mineral and geothermal interests
by separate exchanges and expressed the sense of Congress that
the exchanges be completed by November 24, 1982, and August 26,
1983, respectively; and
(3) the surface interests exchange was consummated timely,
but the exchange of all mineral and geothermal interests has
not yet been completed a decade and a half after the Act's
enactment.
(b) Purpose.--The purpose of this Act is to provide for the
expeditious completion of the previously mandated Federal acquisition
of private mineral and geothermal interests within the Mount St. Helens
National Volcanic Monument.
SEC. 3. ACQUISITION OF MINERAL RIGHTS WITHIN THE NATIONAL VOLCANIC
MONUMENT.
Section 3 of the Act entitled ``An Act to designate the Mount St.
Helens National Volcanic Monument in the State of Washington, and for
other purposes'', approved August 26, 1982 (96 Stat. 302; 16 U.S.C. 431
note), is amended--
(1) in subsection (a), by striking ``and except that the
Secretary may acquire mineral and geothermal interests only by
exchange. It is the sense of the Congress that in the case of
mineral and geothermal interests such exchanges should be
completed within one year after the date of enactment of this
Act''; and
(2) by adding at the end the following:
(g) Expeditious Completion of Mineral and Geothermal Interests.
``(1) Definition of holder.--In this subsection, the term
`holder' means a company, or its successor, referred to in
subsection (c).
``(2) In general.--Within the period described in paragraph
(7), the Secretary of the Interior shall acquire by exchange
the mineral and geothermal interests in the Monument of each
holder.
``(3) Monetary credits.--
``(A) Issuance.--In exchange for the mineral and
geothermal interests acquired by the Secretary of the
Interior from a holder under paragraph (2), the
Secretary of the Interior shall issue to the holder
monetary credits that may be exercised by the holder
for payment of--
``(i) not more than 50 percent of the bonus
or other payments made by successful bidders in
any sales of mineral, oil, gas, or geothermal
leases under the Mineral Leasing Act (30 U.S.C.
181 et seq.), the Outer Continental Shelf Lands
Act (43 U.S.C. 1331 et seq.), or the Geothermal
Steam Act of 1970 (30 U.S.C. 1001 et seq.); or
``(ii) not more than 50 percent of any
royalty, rental, or advance royalty payment
made to the United States to maintain any
mineral, oil, or gas, or geothermal lease
issued under the Acts listed in clause (i).
``(B) Value of Credits.--The credits issued under
subparagraph (A) shall equal the fair market value of
all mineral and geothermal interests conveyed in the
exchange as determined under paragraph (4)
``(C) Acceptance of credits.--The Secretary of the
Interior shall accept credits issued under subparagraph
(A) in the same manner as cash for the payments
described in subparagraph (A). The use and exercise of
the credits shall be subject to the laws (including
regulations) governing such payments, to the extent the
laws are consistent with the subsection.
``(D) Treatment of credits for distribution to
states.--All amounts in the form of credits accepted by
the Secretary of the Interior under subparagraph (C)
for the payments described in subparagraph (A) shall be
considered to be money received for the purpose of
section 35 of the Mineral Leasing Act (30 U.S.C. 191)
and section 20 of the Geothermal Steam Act of 1970 (30
U.S.C. 1019).
``(4) Valuation of interests.--
``(A) In general.--Not later than 120 days after the
date of enactment of this subsection, the mineral and
geothermal interests to be conveyed by each holder in
the exchanges required by paragraph (2) shall be valued
by one of the following methods, as selected by the
Secretary of the Interior.
(i) Use of appraisal report.--The 1982 value
established by the report of the third party
appraisal completed on September 11, 1991,
shall be adjusted toreflect changes in the
consumer price index for all urban consumers published by the
Department of Labor as of the date on which the exchange is to be
consummated pursuant to paragraph (7), or such other value as shall be
mutually agreed to by the Secretary of the Interior and the holders not
later than 30 days after the date of enactment of this subsection.
``(ii) New appraisal.--
``(I) Selection of appraiser.--Not
later than 30 days after the date of
enactment of this subsection, the
Secretary of the Interior and the
holders shall mutually agree on the
selection of a qualified appraiser to
conduct an appraisal of the mineral and
geothermal interests.
``(II) No agreement on appraiser.--If
no appraiser is mutually agreed to
under subclause (I), not later than 60
days after the date of enactment of
this subsection--
``(aa) the Secretary of the
Interior and the holders shall
each designate a qualified
appraiser; and
``(bb) the two designated
appraisers shall select a third
qualified appraiser to perform
the appraisal with the advice
and assistance of the
designated appraisers and in
accordance with the
instructions that were mutually
agreed on for the September 11,
1991, third part appraisal.
``(III) Date of valuation.--The value
of the mineral and geothermal interests
to be conveyed by each holder shall be
calculated as of August 26, 1982,
adjusted to reflect changes in the
consumer price index for all urban
consumers published by the Department
of Labor as of the date on which the
exchange is to be consummated pursuant
to paragraph (7).
``(IV) Costs.--The Secretary of the
Interior shall bear the costs of the
process established by this clause.
``(B) Timely appraisal report.--The appraisal report
resulting from subparagraph (A) shall be presented to
the Secretary of the Interior timely to permit the
Secretary of the Interior to determine the value of the
mineral and geothermal interests to be conveyed by each
holder. Not later than the date that is 180 days after
the date of enactment of this subsection, the Secretary
of the Interior shall notify each holder of the
determination.
``(C) Failure of process.--If the Secretary of the
Interior fails to make a determination under
subparagraph (B) by the date that is 180 days after the
date of enactment of this subsection or if any holder
does not agree with the value determined by the
Secretary of the Interior under subparagraph (B), one
or more of the holders may petition the United States
Court of Federal Claims for a determination of the
value of the mineral and geothermal interest to be
conveyed by the holders in accordance with this
subsection. Subject to the right of appeal, a
determination by the Court shall be binding for
purposes of this subsection on all parties.
``(5) Exchange account.--
``(A) In general.--Notwithstanding any other
provision of law, not later than 30 days after the
completion of each exchange with a holder required by
this subsection, the Secretary of the Interior shall
establish, with the Minerals Management Service of the
Department of the Interior, an exchange account for the
holder for monetary credits described in paragraph (3).
``(B) Initial balance.--The initial balance of
credits in each holder's account shall be equal to the
value as determined under paragraph (4) of the mineral
and geothermal interest conveyed by the holder in the
exchange.
``(C) use of credits.--The balance of credits in a
holder's account shall be available to the holder or
its assigns for the purposes of paragraph (3). The
Secretary of the Interior shall adjust the balance of
credits in the account to reflect payments made
pursuant to paragraph (3).
``(D) Transfer of credits.--
``(i) In general.--A holder may transfer or
sell any credits in the holder's account to
another person.
``(ii) Use of transferred credits.--Credits
transferred under clause (i) may be used in
accordance with this subsection only by a
person that is qualified to bid on, or that
holds, a mineral, oil, or gas lease under the
Mineral Leasing Act (30 U.S.C. 181 et seq.),
the Outer Continental Shelf Lands Act (43
U.S.C. 1331 et seq.), or the Geothermal Steam
Act of 1970 (30 U.S.C. 1001 et seq.).
``(iii) Notifications.--A holder shall notify
the Secretary of the Interior of any transfer
or sale under this subparagraph promptly after
the transfer or sale.
``(E) Time limit on use of credits.--On the date that
is 5 years after an account is created under
subparagraph (A), the Secretary of the Interior shall
terminate the account and any remaining credits in the
account shall become unusable.
``(6) Title to interests.--On the date of the establishment
of an exchange account for a holder under paragraph (5)(A),
title to any miner and geothermal interest that are held by the
holder and are to be acquired by the Secretary of the Interior
under paragraph (2) shall transfer to the United States.
``(7) Completion of exchanges.--The Secretary of the Interior
shall complete the exchanges under paragraph (2) not later than
180 days after the date of enactment of this subsection or as
soon as practicable after completion of the process described
in paragraph (4)(C).''.
Purpose of the Measure
The purpose of S. 638 is to provide for the expeditious
completion of the previously mandated Federal acquisition of
private mineral and geothermal interests within the boundaries
of Mount St. Helens National Volcanic Monument.
Background and Need
Public Law 97-243 established the 113,000-acre Mount St.
Helens National Volcanic Monument in 1982. Section 3 of that
Act directed the Secretary of Agriculture to acquire all lands
and interests in lands within the boundaries of the Monument,
except that mineral and geothermal interests were the only
authorized to be acquired by exchange. The bill also included a
sense of the Congress provision that mineral and geothermal
exchanges should be completed within one year after the date of
enactment. All inholdings within the monument are owned by
Weyerhaeuser and Burlington Northern (now known as Burlington
Resources Oil and Gas Company). To date, the Forest Service has
acquired all of the surface estate within the Monument
boundaries. In addition, approximately 27,000 acres of
subsurface estate was acquired from the companies in 1991.
S. 638 addresses the approximately 10,750 acres of
subsurface estate within the Monument remaining to be acquired.
Although Weyerhaeuser and Burlington Resources Oil and Gas
Company [the companies] have supported exchanging their
subsurface interests and the Forest Service is directed under
the Monument's enabling legislation to acquire them, and
despite extensive negotiations over the past 14 years, the
parties have not been able to agree on the value of the
remaining interests.
In order to resolve all acquisition issues, S. 638 amends
the Monument's enabling Act to eliminate the requirement that
subsurface interests be acquired only by exchange. In lieu of
exchanging mineral and geothermal interests, it requires the
Secretary of the Interior to issue monetary credits to the
companies when the subsurface interests are acquired. The
companies would be allowed to use the credits for up to 50
percent of bonus bids or other payments made for mineral,
geothermal, or off-shore oil and gas leases, and up to 50
percent of royalty payments. The companies would be authorized
to transfer their credits to other qualified lessees, and all
credits must be used within 5 years after the account is
created.
Legislative History
S. 638 was introduced by Senators Gorton and Murray on
April 23, 1997 and was referred to the Committee on Energy and
Natural Resources. The Subcommittee on National Parts, Historic
Preservation, and Recreation held a hearing on October 29,
1997.
At its business meeting on May 13, 1998, the Committee on
Energy and Natural Resources ordered S. 638, as amended,
favorably reported.
Committee Recommendation and Tabulation of Votes
The Committee on Energy and Natural Resources, in open
business session on May 13, 1998, by a unanimous vote of a
quorum present, recommends that the Senate pass S. 638, if
amended as described herein. The rollcall vote on reporting the
measure was 20 yeas, 0 nays, as follows:
Yeas Nays
Mr. Murkowski
Mr. Domenici
Mr. Nickles\1\
Mr. Craig
Mr. Campbell
Mr. Thomas
Mr. Kyl
Mr. Grams\1\
Mr. Smith
Mr. Gorton
Mr. Burns\1\
Mr. Bumpers
Mr. Ford
Mr. Bingaman
Mr. Akaka
Mr. Dorgan\1\
Mr. Graham\1\
Mr. Wyden
Ms. Landrieu
\1\ Indicates voted by proxy.
Committee Amendment
During the consideration of S. 638, the Committee adopted
anamendment in the nature of a substitute, which made a number
of clarifying and technical amendments to the bill as introduced.
The amendment also added a new subsection 3(d) which allows
the Secretary of the Interior to consider payments received in
the form of credits as money for the purpose of section 35 of
the Mineral Leasing Act (30 U.S.C. 191) and section 20 of the
Geothermal Steam Act of 1970 (30 U.S.C. 1019). The amendment
further directs the Secretary of the Interior, within 180 days
from the date of the enactment of this Act, to complete a
timely appraisal report and to notify the subsurface holders of
the appraised values.
The amendment also directs the Secretary of the Interior to
establish, within the Minerals Management Service, an exchange
account and an accounting system for the holder for monetary
credits for a period of five years, at which time the account
will be terminated.
Finally, the amendment provides that upon the establishment
of an exchange account for a holder of subsurface rights, title
to any mineral and or geothermal interest shall be transferred
to the United States.
The amendment is described in detail in the section-by-
section analysis, below.
Section-by-Section Analysis
Section 1 designates the bill's short title as the ``Mount
St. Helens National Volcanic Monument Completion Act''.
Section 2 provides Congressional findings for, and
establishes the purpose of the bill. The findings are: (1) the
1982 enabling Act for the Monument required Federal acquisition
of all private inholdings within the Monument boundaries; (2)
Congress intended that the private surface estate and private
mineral interests to be acquired by separate exchanges to be
undertaken sequentially three months and a year after enactment
(by November 24, 1982), for the surface estate and August 26,
1983, for the mineral interests; and (3) the surface estate
exchange did occur in a timely manner but all mineral interests
have not been acquired fourteen years after the designated
deadline.
Subsection (b) states that the purpose of the bill is ``to
provide for the expeditious completion of the previously
mandated Federal acquisition'' of the Monument's private
mineral and geothermal interests.
Section 3 amends the Monument's enabling Act in order to
complete the acquisition of the private mineral and geothermal
interests within the Monument.
Section 3(1) eliminates the requirement in the enabling Act
that the private mineral and geothermal interests may be
acquired only by exchange.
Section 3(2) adds a new subsection (g) to section 3 of the
Monument's enabling Act which requires and establishes
procedures for acquisition of the remaining privately owned
mineral and geothermal interests.
Paragraphs (1) and (2) of the enabling Act's new section
3(g) reiterates the enabling Act's previous mandate to acquire,
by exchange, the private mineral and geothermal interests
within the Monument held by the companies.
Paragraph (2) also states that the exchange will be
conducted by the Secretary of the Interior rather than the
Secretary of Agriculture as provided in the Monument's enabling
Act.
Paragraph (3)(A) establishes how the mineral interests will
be acquired. In recognition of the difficulty previously
encountered by the Federal Government and the companies in
locating sufficient, suitable Federal mineral interests to
exchange for the private mineral and geothermal interests,
paragraph (3) substitutes the issuance of monetary credits for
subsurface mineral and geothermal interests as the exchange
medium for the Federal side of the exchange. The provision also
allows the Secretary of the Interior to consider payments
received in the form of credits as money for the purpose of
section 35 of the Mineral Leasing Act (30 U.S.C. 191) and
section 20 of the Geothermal Steam Act of 1970 (30 U.S.C.
1019).
Paragraph (3)(A) also specifies how the companies may use
the Federal monetary credits they receive in exchange for their
mineral and geothermal interests. Whenever the companies are
the winning bidders on Federal leases for coal, oil, gas, or
other minerals under the Mineral Leasing Act of 1920; oil or
gas under the Outer Continental Shelf Lands Act; or, geothermal
steam under the Geothermal Steam Act of 1920, they can submit
the credits in payment of up to 50% of the bonus bids or other
payments required to acquire the leases. If the Companies own
any such leases, they may also pay up to 50% of the payments
necessary to maintain them including royalty, rental, and
advance royalty payments.
Paragraph (3)(B) establishes the value of the credits and
directs that exchanges must be for equal value.
Paragraph (3)(D) allows the Secretary of the Interior to
consider payments received in the form of credits as money for
the purpose of section 35 of the Mineral Leasing Act (30 U.S.C.
191) and section 20 of the Geothermal Steam Act of 1970 (30
U.S.C. 1019).
Paragraph (4) establishes alternative procedures for
determining the fair market value of the private mineral and
geothermal interests to be acquired.
The first procedure is to use the third party appraisal of
the mineral and geothermal interests conducted for the Federal
Government and the companies in 1991 and adjust the 1991 values
to current dollars, or to adopt any other value agreeable to
both the Secretary of the Interior and the companies. If the
Secretary and the companies cannot agree to use the 1991
appraisal or cannot agree on a value by other means the
alternative procedure would be exercised.
The alternative procedure would require that both parties
agree on an appraiser, or each party could appoint their own
preferred appraiser; the two appointed appraisers would select
a third appraiser, who would perform the mineral and geothermal
evaluations. If this alternative is exercised the appraisal
must be conducted in accordance with the appraisal instructions
which were mutually agreed upon by both parties for the 1991
appraisal; and the date of the appraisal would be August 26,
1982, adjusted for inflation to current dollars. This provision
also requires the Secretary of the Interior to pay the cost of
a new appraisal if the third party appraisal alternative is
exercised.
Paragraph (4) establishes deadlines for the completion of
the appraisal and a process for resolving any dispute over
value arising from the appraisal. The provision requires that
the first procedure of updating the 1991 appraisal or mutually
agreeing to a value be completed within 6 months after
enactment of S. 638. The provision sets an identical 6 month
deadline for the alternative procedure. If the alternative
appraisal procedure is not completed by the deadline; or, if
one or both companies disagree with the value of the mineral
and geothermal interests established by the Secretary of the
Interior, the Companies are authorized to petition the United
States Court of Federal Claims for a determination of the value
of the mineral and geothermal interest to be conveyed.
Paragraph (5) provides the procedures for use of the
monetary credits. The provision requires the Secretary of the
Interior, through the Minerals management Service, to establish
an exchange account for each company within 30 days after the
completion of an exchange, from which the company may draw
credits. Paragraph (5) also permits the companies to transfer
or sell their credits to other parties who, if they are
qualified to hold Federal mineral or geothermal leases, may use
the credits to make lease acquisition or maintenance payments.
Finally, the paragraph limits the use of credits within five
years of the establishment of the exchange accounts. Any unused
credits are to be terminated at that time.
Paragraph (6) requires that both the transfer of title for
a company's mineral or geothermal interests to the Federal
Government and the establishment of an exchange account are to
occur on the same date.
Paragraph (7) requires that the exchange process be
completed within 6 months after the date of enactment or as
soon as possible thereafter if the value determination is made
by the United States Court of Federal Claims.
Cost and Budgetary Considerations
The following estimate of this measure has been provided by
the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 5, 1998.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 638, the Mount St.
Helens National Volcanic Monument Completion Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Victoria V.
Heid.
Sincerely,
June E. O'Neill, Director.
Enclosure.
congressional budget office cost estimate
S. 638--Mount St. Helens National Volcanic Monument Completion Act
Summary: S. 638 would specify a process for valuing mineral
and geothermal interests within the Mount St. Helens National
Volcanic Monument and require the Secretary of the Interior to
acquire such interests using monetary credits.
CBO estimates that enacting S. 638 would result in a net
increase in direct spending of about $10 million over the 1999-
2003 period. Therefore, pay-as-you-go procedures would apply.
S. 638 contains no intergovernmental or private-sector mandates
as defined in the Unfunded Mandates Reform Act (UMRA) and would
impose no costs on state, local, or tribal governments.
Description of the bill's major provisions: The Secretary
of Agriculture manages the Mount St. Helens National Volcanic
Monument within the boundaries of the Gifford Pinchot National
Forest. Under current law (Public Law 97-243), the Secretary
may acquire mineral and geothermal interests within the
boundary of the monument only by exchange. For several years
the Forest Service, in cooperation with the Bureau of Land
Management (in the Department of the Interior), has negotiated
with the owners of about 10,750 acres of subsurface estate
within the monument to complete exchanges, but the parties have
not yet agreed on the value of the subsurface interests.
S. 638 would modify the methods used by the government to
value and acquire these interests. It would specify that the
valuation be based on market conditions as of August 26, 1982
(the year the monument was established), adjusted for
inflation. The agencies could base that valuation on either an
exiting third-party appraisal done in 1991 or a new appraisal.
If the Secretary of the Interior does not determine the value
within 180 days of enactment, or if any holder of interests
disagrees with the value determined by the Secretary, then a
binding determination would be made by the United States Court
of Federal Claims.
Once value is determined, S. 638 would require the
Secretary of the Interior to pay for the mineral and geothermal
interests by issuing monetary credits, rather than by exchange
as under current law. The monetary credits could be used over a
five-year period to pay bonuses, royalties, or rent for
mineral, oil and gas, or geothermal leases on federal land, and
would be transferable. S. 638 provides that credits accepted by
the Secretary of the Interior for such lease payments be
considered as money received for the purpose of calculating
payments to states.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 638 is shown in the following table. The
costs of this legislation fall within budget functions 300
(natural resources and environment) and 800 (general
government).
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------
DIRECT SPENDING (INCLUDING OFFSETTING RECEIPTS)
Spending under current law:
Estimated budget authority..................................... 0 \1\ \1\ \1\ \1\
Estimated outlays.............................................. 0 \1\ \1\ \1\ \1\
Proposed changes:
Estimated budget authority..................................... 10 \2\ \2\ \2\ \2\
Estimated outlays.............................................. 10 \2\ \2\ \2\ \2\
Spending under S. 638:
Estimated budget authority..................................... 10 \0\ \0\ \0\ \0\
Estimated outlays.............................................. 10 \0\ \0\ \0\ \0\
----------------------------------------------------------------------------------------------------------------
\1\ Costs less than $500,000.
\2\ Savings less than $500,000.
Note:--Implementing S. 638 also would increase discretionary spending in 1999, but we estimate the cost would be
insignificant.
Basis of estimate: CBO estimates that enacting S. 638 would
result in a net increase in direct spending of about $10
million over the 1999-2003 period. We estimate that any
increase in spending subject to appropriation would be
insignificant.
Direct spending: Under current law, the Forest Service has
appraised the subsurface interests based on current market
conditions (rather than on their value in 1982, when the
monument was created) and estimates them to have a fair market
value ranging from about $2 million to about $4 million. CBO
assumes that, under current law, the federal government would
likely acquire these interests through an exchange in which the
private parties would obtain the rights to other federal
property of equal value. From a budgetary perspective, such an
exchange would result in a loss of offsetting receipts from
royalties and rental payments that otherwise would have been
collected from leasing the federal interests offered in the
exchange. Such income usually represents only a fraction of the
market value, and is collected over the life of the project,
which can span 10 years or more. We estimate that lost income
to the government under current law would total less than $1
million over the 1999-2003 period, net of payments to states.
Under this bill, the federal government would award
monetary credits, which are equivalent to cash, for the full
market value of the property. CBO estimates that, by specifying
that the value for the interests be determined as of 1982 (and
adjusted for inflation), S. 638 would raise the cost of the
property to be acquired. Based on a range of estimated 1982
values from the private interest holders, and adjusted for
inflation as provided in the bill, CBO estimates that the
private interest holders would receive monetary credits valued
at about $10 million.
The value of monetary credits counts as direct spending in
the year they are issued and as receipts in the years in which
they are redeemed. If the credits displace cash payments that
otherwise would have been received by the government, the use
of the credits results in a corresponding loss of receipts. For
the purposes of this estimate, we assume that the credits would
be issued in fiscal year 1999 and redeemed within five years.
CBO estimates that such credits would displace an equal amount
of cash payments that private parties otherwise would have made
for federal leases. Hence, we estimate that implementing this
bill would increase direct spending by $10 million in 1999 and
would have no significant budgetary impact in subsequent years.
Spending subject to appropriation: S. 638 provides that the
Secretary of the Interior pay for any new appraisal. Based on
information from the Forest Service, CBO estimates that
conducting a reappraisal would cost less than $50,000 in fiscal
year 1999.
Pay-as-you-go considerations: Section 252 of the Balanced
Budget and Emergency Deficit Control Act sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts. The net changes in outlays that are subject to pay-
as-you-go procedures are shown in the following table. For the
purposes of enforcing pay-as-you-go procedures, only the
effects in the current year, the budget year, and the
succeeding four years are counted. CBO estimates that enacting
S. 638 would result in a net increase in direct spending
totaling about $10 million over the 1999-2008 period.
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
Changes in outlays................. ..... 10 ..... ..... ..... ..... ..... ..... ..... ..... .....
Changes in receipts................
(10)Not applicable
----------------------------------------------------------------------------------------------------------------
Intergovernmental and private-sector: S. 638 contains no
intergovernmental or private-sector mandates as defined in UMRA
and would impose no costs on state, local, or tribal
governments.
Estimate prepared by: Victoria V. Heid.
Estimate approved by: Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
Regulatory Impact Evaluation
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out S. 638. The bill is not a regulatory measure in
the sense of imposing Government-established standards or
significant economic responsibilities on private individuals
and businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from
enactment of S. 638, as ordered reported.
Executive Communications
On April 30, 1998, the Committee on Energy and Natural
Resources requested legislative reports from the Department of
the Interior and the Office of Management and Budget setting
forth Executive agency recommendations on S. 638. These reports
had not been received at the time the report on S. 638 was
filed. When these reports become available, the Chairman will
request that they be printed in the Congressional Record for
the advice of the Senate. The testimony of the Department of
the Interior at the Subcommittee hearing follows:
Testimony of Robert Anderson, Deputy Assistant Director, Minerals,
Realty, and Resource Protection, Bureau of Land Management
Mister Chairman and members of the Committee, I appreciate
the opportunity to appear here today to discuss S. 638, a bill
to provide for acquisition of private mineral rights held by
Burlington Northern Incorporated and the Weyerhaeuser Company
(the companies) within the Mount St. Helens National Volcanic
Monument.
In 1982, the Congress passed and the President signed into
law Public Law 97-243, an Act to designate the Mount St. Helens
National Volcanic Monument. This Act, among other things,
directed the Secretary of Agriculture to acquire all of the
privately held lands within the newly created monument,
including the mineral estate. The Forest Service informs me
that significant progress has been made toward meeting that
objective. With regard to Weyerhaeuser and Burlington Northern,
the entire surface estate and over seventy percent of the
mineral estate previously held by the companies has been
acquired through exchange. This leaves approximately 10,750
acres of the mineral estate held by these companies at issue.
The BLM and U.S. Forest Service have had discussions with the
Weyerhaeuser Company and Burlington Northern Incorporated, but
have been unable to come to a mutually satisfactory agreement
to acquire these rights. The primary issue is the valuation of
this mineral estate acreage. S. 638 is intended to resolve this
impasse between the Federal Government and the companies.
However, S. 638 will not resolve valuation issues with regard
to the five other private inholdings covering five hundred
ninety five acres within the monument.
While the Administration would like to see the issues
resolved, we oppose S. 638 for several reasons. The bill:
Fails to recognize the complexity of assigning values
to mineral resources, particularly geothermal
resources;
Establishes a credit system for Federal payment and
involves the Departments of the Interior and Treasury
in implementation of the acquisition of resources
beneath lands administered by the U.S. Forest Service,
and
Sets an unrealistic time frame for completion of a
project which has been a source of disagreement for
eleven years.
I would like to briefly discuss each of these concerns.
valuation
This bill requires the Government to bear the full costs of
a reappraisal, stipulates that any reappraisal be completed
based on the same methodology which has already been rejected
by both the BLM and the Forest Service, and specifies that the
date of valuation for the mineral estate is 1982. This 1982
value would then be adjusted to reflect changes in the consumer
price index. We feel this is inconsistent with Department of
Justice instructions for federal appraisals.
Weyerhaeuser and Burlington Resources have stated their
belief that the value of their remaining mineral estate
consists primary of geothermal resources. The companies' latest
estimate of value establishes a range between $6,420,000 and
$10,746,000. This value is based primarily on a third party
appraisal, paid for by the Forest Service and the companies,
completed in September of 1991. That appraisal failed to meet
Federal Appraisal Standards and could not be utilized as a
basis of settlement. Neither the BLM nor the Forest Service,
which administers the Monument, have accepted this appraisal
because of the very speculative nature of the information used
to arrive at a final value. In particular, this appraisal was
based on a Discounted Cash Flow methodology, which assumed
economic geothermal resources exist at the site. This appraisal
did not correctly address the scientific probability of a
viable geothermal resource based on a favorable geologic
environment, nor did it reflect prices paid for similar
interests in the market place.
Appraisals based on speculation cannot be defended. In
fact, Department of Justice instructions prohibit the use of
speculative data for assigning value in Federal appraisals.
Significant technical and scientific information exists to show
that the area in question within the Mount St. Helens National
Volcanic Monument lacks several geologic features normally
associated with a viable source of geothermal energy. In
particular, U.S. Geological Survey investigations of geothermal
resource potential conducted before and subsequent to the 1980
eruption of the mountain conclude that no convincing evidence
is available of a high temperature geothermal reservoir beneath
Mt. St. Helens. The Administration believes that these facts
establish a level of speculation that prohibits the use of a
discounted cash flow methodology in assigning a value to the
mineral estate. Such an appraisal would not be in accordance
with the Uniform Appraisal Standards for Federal Land
Acquisition and the Uniform Standards of Professional Appraisal
Practice.
This is not to say that the mineral estate is without
value. Our preferred approach is to determine this value with
an appraisal based on comparable sales of similar properties.
To this end, the Forest Service, assisted by data supplied by
both the BLM and the companies, is completing an appraisal of
the property interest based upon potential comparable sales and
other technical data to arrive at a current estimate of value
for the mineral estate at issue. This reappraisal is scheduled
for completion in mid to late November. Unfortunately, until
this reappraisal is complete, I am unable to comment on any
specific value, or range of values, that may be assigned to
these holdings. We have, however, been informed that the entire
10,750 acres are speculative in character and are not known to
contain any minerals defined with current development
potential. Currently, the final decision on valuation is under
the authority of the Secretary of Agriculture. We have
conferred with the Forest Service and have agreed to discuss
the details and conclusions of the reappraisal with both
Committee staff and the companies once it is complete.
Our other concerns with the appraisal language involve the
cost recovery and requirements for future appraisals. S. 638
states that the Secretary of The Interior shall bear the costs
of any reappraisal required to establish a settlement value.
This is inequitable and inconsistent with Federal guidelines
for cost recovery. One-half of the costs of the rejected
September, 1991 appraisal were paid by the government. The
Forest Service is currently absorbing the cost of completing a
reappraisal that will meet Federal standards. If this bill is
enacted, and another, third party appraisal is required, the
costs should be borne equally by the Secretary of The Interior
and the companies.
The instructions for any new third party appraisal should
be mutually agreed upon by the Secretary of The Interior acting
through the Bureau of Land Management, the Secretary of
Agriculture, acting through the Forest Service, and the
companies. Such instructions should not be linked to the
instructions which resulted in the September 1991 appraisal. As
already noted, the methodology and assumptions used to complete
the 1991 appraisal led to its rejection by the Forest Service.
We acknowledge that the Discounted Cash Flow appraisal
technique is an accepted appraisal standard given the proper
circumstances. These circumstances do not exist at Mt. St.
Helens. To base a new appraisal on the same discounted cash
flow methodology would be faulty due to the speculative nature
of the interests. To reiterate, in our opinion, another
appraisal beyond those which have already occurred, and the
reappraisal currently being done, is not in the public
interest.
The final issue regarding valuation is the date of any
agreed upon settlement value. Offices of both the Department of
Interior's Regional Solicitor and the Department of
Agriculture's General Counsel have stated that any valuation
date should be current, that is, based on the date that title
is acquired by the Federal Government. S. 638 sets a 1982
appraisal date and makes the government liable for the costs of
inflation. We believe the costs of inflation constitute a form
of damages to the companies which are unwarranted.
credit account
S. 638 would establish a credit account once a settlement
value is reached. This credit settlement would be contrary to
the original Act of 1982, which provides only for exchange for
acquisition of mineral and geothermal interests. The proposed
compensation mechanism could present serious constitutional
difficulties under the Just Compensation Clause. The proposed
mechanism calls for the U.S. to acquire mineral interests and
provide, in exchange, consideration potentially worth less than
fair market value. Moreover, it is not clear if the use of
credits in future mineral leasing would result in the Federal
Government having sufficient funds to pay the States their
share from receipts. At a minimum, the issuance of credit will
result in a net loss of revenue to the Federal Treasury.
However, if a credit account must be established, we would
recommend this account be managed by the Mineral Management
Service (MMS) and not the Department of the Treasury. The MMS
currently is the recipient of Federal payments and distributes
receipts to the States. BLM works closely with MMS and can
track and exchange required information easily. To duplicate
this process at the Treasury Department would result in lost
time and increased administrative costs. In addition, the loss
of revenue in the form of credits is not offset in the
legislation. As such, S. 638 would increase the deficit and
contribute to a sequester of mandatory programs under the pay-
as-you-go requirements of the Budget Enforcement Act.
unrealistic timeframe
Finally, S. 638 requires that if determination of a new
value is required via a new third party appraisal process, all
work must be completed within 120 days or the companies may
proceed directly to U.S. Court of Federal Claims. In the event
a new third party appraisal is required, the work cannot
reasonably be expected to be completed within this time
constraint. We acknowledge that completion of this exchange is
long overdue. However, in order to assure we can meet required
Federal appraisal guidelines and protect the public interest, a
time frame of at least six months is required.
conclusion
The Administration supports the expeditious acquisition of
the privately held mineral rights. However, the value of the
mineral estate must be based on available factual data such as
comparable sales and scientific findings. A current reappraisal
by the Federal agencies, scheduled for completion in just a few
weeks, will assist in the establishment of a value which can
both fairly compensate the companies for their investment and
protect the public interest. The Forest Service and the BLM are
working cooperatively and view this reappraisal as a key to the
potential resolution of this issue. Determination of such a
value could allow this transaction to be completed under
existing authorities of the Forest Service, negating the need
for this legislation.
This concludes my statement. I will be happy to answer any
questions the members may have.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the changes in existing law made
by the bill S. 638, as ordered reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman);
(Public Law 97-243 as amended--August 26, 1982)
* * * * * * *
Sec. 3. (a) The Secretary shall acquire all lands and
interests in lands within the boundaries of the Monument by
donation, exchange in accordance with this Act or other
provisions of law, or purchase with donated or appropriated
funds, except as provided in subsection (c) [``and except that
the Secretary may acquire mineral and geothermal interests only
by exchange. It is the sense of the Congress that in the case
of mineral and geothermal interests such exchanges should be
completed within one year after the date of enactment of this
Act'']. Any lands owned by the State of Washington or any
political subdivision thereof may be acquired only by exchange.
Those mining claims in the Green River-Polar Star area shall
not be acquired without the consent of the owner.
* * * * * * *
(g) Expeditious Completion of Mineral and Geothermal
Interests.--
(1) Definition of holder.--In this subsection, the
term `holder' means a company, or its successor,
referred to in subsection (c).
(2) In general.--Within the period described in
paragraph (7), the Secretary of the Interior shall
acquire by exchange the mineral and geothermal
interests in the Monument of each holder.
(3) Monetary credits.--
(A) Issuance.--In exchange for the mineral
and geothermal interests acquired by the
Secretary of the Interior from a holder under
paragraph (2), the Secretary of the Interior
shall issue to the holder monetary credits that
may be exercised by the holder for payment of--
(i) not more than 50 percent of the
bonus or other payments made by
successful bidders in any sales of
mineral, oil, gas, or geothermal leases
under the Mineral Leasing Act (30
U.S.C. 181 et seq.), the Outer
Continental Shelf Lands Act (43 U.S.C.
1331 et seq.), or the Geothermal Steam
Act of 1970 (30 U.S.C. 1001 et seq.);
or
(ii) not more than 50 percent of any
royalty, rental, or advance royalty
payment made to the United States to
maintain any mineral, oil or gas, or
geothermal lease issued under the Acts
listed in clause (i).
(B) Value of credits.--The credits issued
under Subparagraph (A) shall equal the fair
market value of all mineral and geothermal
interests conveyed in the exchange as
determined under paragraph (4).
(C) Acceptance of credits.--The Secretary of
the Interior shall accept credits issued under
subparagraph (A) in the same manner as cash for
the payments described in subparagraph (A). The
use and exercise of the credits shall be
subject to the laws (including regulations)
governing such payments, to the extent the laws
are consistent with this subsection.
(D) Treatment of credits for distribution to
states.--All amounts in the form of credits
accepted by the Secretary of the Interior under
subparagraph (C) for the payments described in
subparagraph (A) shall be considered to be
money received for the purpose of section 35 of
the Mineral Leasing Act (30 U.S.C. 191) and
section 20 of the Geothermal Steam Act of 1970
(30 U.S.C. 1019).
(4) Valuation of interests.--
(A) In general.--Not later than 120 days
after the date of enactment of this sub-
section, the mineral and geothermal interests
to be conveyed by each holder in the exchanges
required by paragraph (2) shall be valued by
one of the following methods, as selected by
the Secretary of the Interior:
(i) Use of appraisal report.--The
1982 value established by the report of
the third party appraisal completed on
September 11, 1991, shall be adjusted
to reflect changes in the consumer
price index for all urban consumers
published by the Department of Labor as
of the date on which the exchange is to
be consummated pursuant to paragraph
(7), or such other value as shall be
mutually agreed to by the Secretary of
the Interior and the holders not later
than 30 days after the date of
enactment of this subsection.
(ii) New appraisal.--
(I) Selection of appraiser.--
Not later than 30 days after
the date of enactment of this
subsection, the Secretary of
the Interior and the holders
shall mutually agree on the
selection of a qualified
appraiser to conduct an
appraisal of the mineral and
geothermal interests.
(II) No agreement on
appraiser.--If no appraiser is
mutually agreed to under
subclause (I), not later than
60 days afterthe date of
enactment of this subsection--
(aa) the Secretary of
the Interior and the
holders shall each
designate a qualified
appraiser; and
(bb) the two
designated appraisers
shall select a third
qualified appraiser to
perform the appraisal
with the advise and
assistance of the
designated appraisers
and in accordance with
the instructions that
were mutually agreed on
for the September 11,
1991, third part
appraisal.
(III) Date of Valuation.--The
value of the mineral and
geothermal interests to be
conveyed by each holder shall
be calculated as of August 26,
1982, adjusted to reflect
changes in the consumer price
index for all urban consumers
published by the Department of
Labor as of the date on which
the exchange is to be
consummated pursuant to
paragraph (7).
(IV) Costs.--The Secretary of
the Interior shall bear the
costs of the process
established by the clause.
(B) Timely appraisal report.--The appraisal
report resulting from subparagraph (A) shall be
presented to the Secretary of the Interior
timely to permit the Secretary of the Interior
to determine the value of the mineral and
geothermal interests to be conveyed by each
holder. Not later than the date that is 180
days after the date of enactment of this
subsection, the Secretary of the Interior shall
notify each holder of the determination.
(C) Failure of process.--If the Secretary of
the Interior fails to make a determination
under subparagraph (B) by the date that is 180
days after the date of enactment of this
subsection or if any holder does not agree with
the value determined by the Secretary of the
Interior under subparagraph (B), one or more of
the holders may petition the United States
Court of Federal Claims for determination of
the value of the mineral and geothermal
interests to be conveyed by the holders in
accordance with this subsection. Subject to the
right of appeal, a determination by the Court
shall be binding for purposes of this
subsection on all parties.
(5) Exchange account.--
(A) In general.--Notwithstanding any other
provision of law, not later than 30 days after
the completion of each exchange with a holder
required by this subsection, the Secretary of
the Interior shall establish, with the Minerals
Management Service of the Department of the
Interior, an exchange account for the holder
for monetary credits described in paragraph
(3).
(B) Initial balance.--The initial balance of
credits in each holders account shall be equal
to the value as determined under paragraph (4)
of the mineral and geothermal interests
conveyed by the holder in the exchange.
(C) Use of credits.--The balance of credits
in a holder's account shall be available to the
holder or its assigns for the purposes of
paragraph (3). The Secretary of the Interior
shall adjust the balance of credits in the
account to reflect payments made pursuant to
paragraph (3).
(D) Transfer of credits.--
(i) In general.--A holder may
transfer or sell any credits in the
holder's account to another person.
(ii) Use of transferred credits.--
Credits transferred under clause (i)
may be used in accordance with this
subsection only by a person that is
qualified to bid on, or that holds, a
mineral, oil, or gas lease under the
Mineral Leasing Act (30 U.S.C. 181 et
seq.), the Outer Continental Shelf
Lands Act (43 U.S.C. 1331 et seq.), or
the Geothermal Steam Act of 1970 (30
U.S.C. 1001 et seq.).
(iii) Notification.--A holder shall
notify the Secretary of the Interior of
any transfer or sale under this
subparagraph promptly after the
transfer or sale.
(E) Time limit on use of credits.--On the
sale that is 5 days after an account is created
under subparagraph (A), the Secretary of the
Interior shall terminate the account and any
remaining credits in the account shall become
unusable.
(6) Title to interests.--On the date of the
establishment of an exchange account of a holder under
paragraph (5)(A), title to any mineral and geothermal
interests that are held by the holder and are to be
acquired by the Secretary of the Interior under
paragraph (2) shall transfer to the United States.
(7) Completion of exchanges.--The Secretary of the
Interior shall complete the exchange under paragraph
(2) not later than 180 days after the date of enactment
of this subsection or as soon as practicable after
completion of the process described in paragraph
(4)(C).