BRISTOL BAY FISHERIES PROTECTION ACT HEARING THE Y 4. M 53: 103-29 nography, gulf of CONTINENTAL SHELF Bristol Bay Fisheries Protectioa Ac... CUMMiTTEE ON MERCHANT MARINE AND FISHERIES HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON H.R. 705 A BILL TO PROTECT THE FISHERIES OF BRISTOL BAY, ALASKA, BY PURCHASING CERTAIN OIL LEASES, AND FOR OTHER PURPOSES JUNE 15, 1993 Serial No. 103-29 Printed for the use of the Committee on Merchant Marine and Fisheries iiWIfcfliJjcfliiOt-OUi,' ncwjRiTrtsy NOV 1 o 1993 '^S#bucu8barv U.S. GOVERNMENT PRINTING OFFICE nnP"MCMTCnCD/|DT#IWr 71-460±t WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice.Washington.DC 20402 ISBN 0-16-041423-7 BRISTOL BAY FISHERIES PROTECTION ACT HEARING THE nography, gulf of Y 4 M 53* 103-29 CONTINENTAL SHELF Bristol Bay Fisheries Protection Ac... UUMM1TTEE ON MERCHANT MARINE AND FISHERIES HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON H.R. 705 A BILL TO PROTECT THE FISHERIES OF BRISTOL BAY, ALASKA, BY PURCHASING CERTAIN OIL LEASES, AND FOR OTHER PURPOSES JUNE 15, 1993 Serial No. 103-29 Printed for the use of the Committee on Merchant Marine and Fisheries 'tttiwfcwufcftnofdoc NOV 1 o 1993 U.S. GOVERNMENT PRINTING OFFICE ^" nnP''MC&m?nCDdf4T4JinN 71-460fc* WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington.DC 20402 ISBN 0-16-041423-7 COMMITTEE ON MERCHANT MARINE AND FISHERIES GERRY E. STUDDS, Massachusetts, Chairman WILLIAM J. HUGHES, New Jersey JACK FIELDS, Texas EARL HUTTO, Florida DON YOUNG, Alaska W.J. (BILLY) TAUZIN, Louisiana HERBERT H. BATEMAN, Virginia WILLIAM O. LIPINSKI, Illinois JIM SAXTON, New Jersey SOLOMON P. ORTIZ, Texas HOWARD COBLE, North Carolina THOMAS J. MANTON, New York CURT WELDON, Pennsylvania OWEN B. PICKETT, Virginia JAMES M. INHOFE, Oklahoma GFEROARNGKEPJA.LHLOOCNEH,BRJrU.E,CNKeNwEJRe,rseNyew York AWRATYHNUERT.RAGVIELNCEHRLE,STJr,.,MSaoruytlhanCdarolina GREG LAUGHLIN, Texas RANDY "DUKE" CUNNINGHAM, California JOLENE UNSOELD, Washington JACK KINGSTON, Georgia GENE TAYLOR, Mississippi TILLIE K. FOWLER, Florida JACK REED, Rhode Island MICHAEL N. CASTLE, Delaware H. MARTIN LANCASTER, North Carolina PETER T. KING, New York THOMAS H. ANDREWS, Maine LINCOLN DIAZ-BALART, Florida ELIZABETH FURSE, Oregon RICHARD W. POMBO, California LYNN SCHENK, California HELEN DELICH BENTLEY, Maryland GENE GREEN, Texas CHARLES H. TAYLOR, North Carolina ALCEE L. HASTINGS, Florida PETER G. TORKLLDSEN, Massachusetts DAN HAMBURG, California BLANCHE M. LAMBERT, Arkansas ANNA G. ESHOO, California THOMAS J. BARLOW, III, Kentucky BART STUPAK, Michigan BENNIE G. THOMPSON, Mississippi MARIA CANTWELL, Washington PETER DEUTSCH, Florida GARY L. ACKERMAN, New York Jeffrey R. Pike, StaffDirector William W. Stelle, Jr., ChiefCounsel Mary J. Fusco Krrsos, ChiefClerk Harry F. Burroughs, Minority StaffDirector Subcommittee on Oceanography, Gulf of Mexico, and the Outer Continental Shelf SOLOMON P. ORTIZ, Texas, Chairman GENE GREEN, Texas CURT WELDON, Pennsylvania ANNA G. ESHOO, California JIM SAXTON, New Jersey GREG LAUGHLIN, Texas JACK FIELDS, Texas (ExOfficio) LYNN SCHENK, California GERRY E. STUDDS, Massachusetts, (ExOfficio) Sheila McCready, StaffDirector Robert Wharton, SeniorProfessional Staff Eunice Groark, MinorityProfessional Staff Lisa Pittman, Minority Counsel CONTENTS Page Hearing heldJune 15, 1993 1 TextofH.R. 705 15 Statementof: Albrecht, Dan, Coordinator, Bristol Bay Buyback Coalition 8 Preparedstatement 33 Fields, Hon. Jack, a U.S. Representative from Texas, and ranking minori- ty member, Committee on Merchant Marine and Fisheries 2 Ortiz, Hon. Solomon P., aU.S. Representative from Texas, and Chairman, Subcommittee on Oceanography, GulfofMexico, and the Outer Conti- nental Shelf 1 Rosier, Commissioner, AlaskaDepartmentofFish andGame 4 Prepared statement 20 Stewart, RobertB., President, National Ocean IndustriesAssociation 6 Prepared statement 29 Weldon, Hon. Curt, a U.S. Representativefrom Pennsylvania 3 Young, Hon. Don, a U.S. Representative from Alaska 3 Additional materials received: Albrecht, Daniel E. (Bristol Bay Buyback Coalition): response to questions submitted by the Subcommitteefollowinghearing 42 State of Alaska Department of Fish and Game: An Act relating to the reacquisition of oil and gas leasehold interests in Kachemak Bay; and providingforan effective date 45 Stewart, Robert (National Ocean Industries Association): response to questionssubmittedby Subcommitteefollowing hearing 38 Communicationssubmitted: Rosier, Carl L. (State ofAlaska Department ofFish and Game): Letter of July 28, 1993, to Hon. Solomon Ortizwith response to questions submit- ted toSubcommittee followinghearing 47 THE BRISTOL BAY FISHERIES PROTECTION ACT TUESDAY, JUNE 15, 1993 House of Representatives, Subcommittee on Oceanog- raphy, Gulf of Mexico, and the Outer Continental Shelf, Committee on Merchant Marine and Fisher- ies, Washington, DC. The subcommittee met, pursuant to call, at 10:00 a.m., in room 1334, Longworth House Office Building, Hon. Solomon P. Ortiz [chairman ofthe subcommittee] presiding. Present: Representatives Ortiz, Green, and Weldon. Staff Present: Jeffrey Pike, Staff Director; Thomas R. Kitsos, Senior Policy Analyst; Cynthia M. Wilkinson, Minority Chief Coun- sel; Suzanne J. Waldron, Press Secretary; Robert Wharton, Terry Schaff, and Greg Gould, Professional Staff; Eunice Groark and David S. Whaley, Minority Professional Staff; and John Aguirre, clerk. OPENING STATEMENT OF HON. SOLOMON P. ORTIZ, A U.S. REP- RESENTATIVE FROM TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON OCEANOGRAPHY, GULF OF MEXICO, AND THE OUTER CON- TINENTAL SHELF Mr. Ortiz. Good morning. This hearing will come to order. I would like to welcome you this morning on behalf of the Sub- committee on Oceanography, Gulf of Mexico, and the Outer Conti- nental Shelf. Today, the Subcommittee meets to examine H.R. 705, the Bristol Bay Fisheries Protection Act, which was introduced by Representative Don Young, who was apparently taken ill this morning and won't be able to be here this morning. In September 1985, the Federal Government proposed to offer tracts for oil and gas development in the North Aleutian Basin Planning Area. Following extended legal battles between the Fed- eral Government and local interests over the matter, a sale was held in October 1988 and the Federal Government accepted over $95 million in bonus bids for 23 tracts in Bristol Bay. However, in October 1989, as a result of continuing concern over the impacts that oil and gas development might have on the fisher- ies and other natural resources of the basin, Congress imposed a moratorium on leasing and drilling within the entire planning area, including the 23 leases issued as a result of the sale. This moratorium has continued through fiscal year 1993. H.R. 705 proposes to restrict pre-leasing activity in the North Aleutian Basin Planning Area until the year 2002, and to cancel all active leases in the area. The bill also authorizes the Depart- (1) merit of Interior to compensate leaseholders in the form of curren- cy or forgiveness ofthe lessee's obligations to pay rents or royalties on other leases. With this hearing, the subcommittee is beginning its review of the Nation's offshore oil and gas program. The purpose of this hearing today is to examine the buyback of the Bristol Bay leases, as well as the bigger issue of lease buybacks nationwide and the impact that his legislation may have on the Outer Continental ShelfLands Act. We had invited the Minerals Management Service and the De- partment of Justice to join us today to discuss the impact of this legislation on the offshore oil and gas program. Unfortunately, both agencies declined to testify due to a pending lawsuit brought by a number of oil companies holding leases which are under con- gressional moratoria, including those in the Bristol Bay area. The fact that both of these agencies, in particular, the Minerals Management Service, are unable to testify, shows how complicated this issue has become, and indicates that the entire process, as it is now set up, may need review. Mr. Ortiz. We will insert the statement of my good friend Jack Fields for the record; Mr. Weldon's statement for the record, he is having problems with his vehicle this morning; and Mr. Young's statement for the record and his questions. [The statement ofMr. Fields follows:] StatementofHon. Jack Fields, a U.S. RepresentativefromTexas, and Ranking Minority Member, Committeeon MerchantMarineand Fisheries Mr. Chairman, I am pleased that you are holding this hearing because the issue of lease buybacks is important to the future of the Federal Government's Outer Continental Shelfleasingprogram. While I understand the interest in protecting sensitive lands and important fish- ing areas, this Subcommittee is well aware ofthe envious safety record that the off- shore oil and gas industry has in this country. The OCS industry has operated for decades and has a superb record ofprotecting the environment. Let me also remind the Subcommittee that when the Bristol Bay planning area was included in the De- partment of the Interior's 5-Year Leasing Program, the amount of acreage eligible to be leased was reduced by the Department 83 percent in response to concerns ex- pressedby theGovernorofAlaska. Mr. Chairman, I am also concerned about the precedentthat would be set ifthese leases were canceled and repurchased by the Federal Government. This precedent wouldtell companies interested in developinglandsoffshorethateven ifthey obtain a lease and make agood-faith effort to comply with all ofthe necessary regulations, they maybeprohibited fromeverdevelopingthis property. This fear is one ofthe primary reasons why recent lease sales have produced con- siderably less interest and revenues for the Federal Government, and this is why domestic companiesare leavingthe U.S. toexploreoverseas. If the Federal Government decides to cancel these or other leases, it is my firm beliefthat those companies which bought the leases through the open, competitive bid process should be fully compensated. These companies should be compensated not only for their bonus bids, interest, and rental payments, but also for the cost of exploring those lands. Ifthe Federal Government is going to be an unreliable part- ner, then it mustpayforthe rightto unilaterallyabrogatethosecontacts. It is also important to note that there are other sectors of the energy industry that will be penalized if the Federal Government begins to cancel and buy back leases. Numerousseismiccompanies, supplyboatoperators, drillingcontractors, and other service industries are dependent on existing leases being developed. In the case ofseismic companies, they may have spent substantial amounts of money col- lecting data following a lease sale. If the lease is then canceled, the data becomes useless and there is no provision forthesecompaniesto recovertheircosts. Putting aside the fact that the Federal Government is breaking its promise to the companies which purchased the leases, this type ofbuybacksends theworst possible signal to companies thinking about investing in our offshore exploration and devel- opmentprogram. Finally, Mr. Chairman, I am concerned about the potential cost of these lease buybacks totheFederalGovernment. Thankyou. [The statement ofMr. Weldon follows:] StatementofHon. CurtWeldon, a U.S. Representative from Pennsylvania Mr. Chairman, I would like to thank you for holding this hearing today. I look forward to hearing from our witnesses on protecting the fisheries ofBristol Bay, in- cludingH.R. 705, theBristol Bay Fisheries Protection Act. In particular, I would like to commend my colleague from Alaska, Congressman Young, for introducing H.R. 705. This legislation would protect the fisheries ofBris- tol Bay, Alaska,by restricting pre-leasing activity in the North Aleutian Basin plan- ning area until the year 2002. It would also cancel all other existing leases in the area. While I have never personallyvisited Bristol Bay, it is my understandingthat the fisheries in the North Aleutian Basin are among the most economically productive in the U.S. Furthermore, areas to the north and south of the basin also support large concentrationsofmarinecoastalbirds. As I am sure many ofyou know, the issue ofleasebuyback hasbeen discussed for several years. However, the case in Bristol Bay is ofparticular importance because ofthe potential precedent that could be set ifthis situation was to be resolved. Cur- rently, twelve oil companies have filed a suit requiring that the Federal Govern- mentbuy back the leases in Bristol Bay, offNorth Carolina and offFlorida. In each area, oil andgas activity hasbeen suspended dueto a Federal moratoria prohibiting these activities. While the Federal Government has denied that a "taking" has taken place, the oil industry argues that this is not the case. The outcome of this case will surely establish a precedent for future incidents. I look forward to examin- ingthis matter ingreaterdetail attoday's hearing. An issuethatI also feel shouldbe discussed today is, who is responsible for repur- chasing these leases? Should it be the Federal Government? Or are there some in- stances in which the States should contribute to buying back existing leases? For example, ifa State should raise concerns regarding a lease sale after adequate envi- ronmental impact statements are completed, which indicates that oil and gas activi- ty would not adversely impact the surrounding marine life, then should the State contribute tothebuybackbecause theyraised specific objections? Also, it is important that we understand what type of threat OCS oil and gas drilling activity poses to marine life. This should include examining efforts current- lyunderway to protectthe marineenvironmentfrom an oilspill. This isessential in ensuring that these activities do not harm existing fisheries or marine life in a spe- cific area. While all ofthese issues may not necessarily be addressed attoday's hearing, I do feel that they should be discussed at some point. It is my understanding that this is the first in a series ofOCS oil and gas drilling hearings that this Subcommittee will behosting. I commendyou, Mr. Chairman, for takingthe lead on such an important matter. Finally, it is my understanding that neither the Minerals Management Service nor the Justice Department could testify today. I find that to be unfortunate. I do, however, lookforwardto hearingfrom our witnesses. Again, Mr. Chairman, thank you for holding this hearing. I look forward to work- ing with you and the other members ofthe Subcommittee on these matters in the upcoming months. [The statement ofMr. Young follows:] StatementofHon. Don Young, a U.S. Representativefrom Alaska Mr. Chairman, I want to express my thanks and the thanks of the people of Alaska for agreeing to hold this hearing so quickly. The issue of leasing in Bristol Bay is one that we in Alaska have worked hard to resolve, and with your help we may finallysolvethe problem. Let me say up front, I do not oppose offshore oil and gas leasing. I have supported several lease sales in my State, and worked hard to open up onshore areas as well. 4 However, there are places where we can all agree that leasing should not occur, be- cause the area is tooenvironmentally sensitive. Bristol Bay is one ofthose areas. It contains the largest red salmon fishery in the world. It has significant crab and groundfish resources. It is home to several species of marine mammals, including many that are used for food by Alaska Natives. While I believe that permit restrictions can often solve conflicts between oil and gas exploration andenvironmental concerns, in thiscase theywill notdo thejob At the same time, we cannot let the oil companies, which have leased tracts in Bristol Bay, continue to sufferthe loss oftheir capital investment. I note that sever- al companies have filed a "takings" suit against the Federal Government, in order to recover the bid money which has been held in escrow. I do not know ifthat suit will be successful. Therefore, in fairness to the fishermen, in fairness to the oil com- panies, and in fairness to the environment, I believe a way should be found to cancel existing leases and compensatetheoil industryfor its loss. Mybill seeksto do thesethingsby allowingcompanies, whohave leased in Bristol Bay, to recovertheir money through cash, leasecredits, orother compensation. This language is nearly identical to what was passed by the House last year in the energy bill. I think the testimony today will show that we need to pass it again and see itenacted into law, sothatall partiesare treatedfairly. Thankyou. Mr. Ortiz. Let me introduce our panel, which consists of Repre- sentatives from the State of the Alaska and industry, who are wel- comed this morning. First is Mr. Carl Rosier, Commissioner ofthe Alaska Department of Fish and Game. In addition to working for over 20 years with the Alaska Department of Fish and Game, Mr. Rosier has worked for the U.S. Fish and Wildlife Service and the National Fishery Service in Alaska. Next is Mr. Robert Stewart, President of the National Ocean In- dustries Association. NOIA is a trade association that represents, roughly, 250 companies that are engaged in all aspects of exploring for and producing oil from the Nation's Outer Continental Shelf. Last, but not least, is Mr. Dan Albrecht, Coordinator of the Bris- tol Bay Buyback Coalition, a group seeking the cancellation and buyback of OCS oil leases in the North Aleutian Basin. Mr. Al- brecht is currently a Marine Policy Specialist working with the Alaska Native Fishermen, for the Bering Sea Fishermen Associa- tion. I welcome all of to you this subcommittee. We appreciate your being with us. I can feel sorry that some of our colleagues are not in good health or have been otherwise detained this morning but we will begin with Mr. Rosier's testimony. STATEMENT OF CARL ROSIER, COMMISSIONER, ALASKA DEPARTMENT OF FISH AND GAME Mr. Rosier. Thank you, Mr. Chairman. It is a pleasure to be before the committee. I appreciate the op- portunity to testify this morning. I would like to start offby saying the State ofAlaska has consist- ently supported the Federal Outer Continental Shelf, OCS, leasing program, with the exception of leasing in the North Aleutian Basin, NAB. The State's opposition to leasing in Bristol Bay dates back nearly 20 years, and is based upon the region's extraordinary biological resources and the social and economic value of those re- sources to both Alaskans and the residents of the other 49 States.