cicuums cantI 0

Boundaries,ancl Management

trem the

Ninth Arcual ConferenceHeM June 16-19, 1885Center for Ocean Management StudiesThe Uxdversity of Hhod.e Maud

THOMAS A. GRIGALUNASI.YNNK CARTER HANSON

SChars NA.TIDNAL SM GRANT KPO,QTORYPEI L I IBRARY 3U'ILD!NG

VRI O'I'! ~.CAN',,'TT RAY CAN&.-'SHARRAGAHStH, 8f M%2

Ub > of qzqlrcss Cata&ging-in-Publication. DataThe Cont~ental She3.f,

;one}.nental shelf � Ecoaond.c a,selects-Aongresses.}tar}.ne resources � Congresses. I. Grigalunas,

Thomas A. IX. Ywnson, I~e Carter, 1950-ply. University ot' Rhode Island. Center for Ocean~aBenent Stud,}.es.Jj<13 $64 1986 333. 91 ' 6L 86-7OO16

ISBN U-938095-00-6

C ly ght ! 19B6&=ter for Ocean Management Studies

A}l rights reservedCenter for Ocean Management Studies

University of Rhode IslandKingston, Rhode Mand 02BB1

PuMiahed in 1986 byCenter for Ocean Mamagetnent Studiee

University of Rhode MandKingston, Rhode Island 02881

All rights reserve} Xo part of this publication may be reproduced ortranstnitted in any form or by «ny xueans, electrcntlc or mechanicalmcluding photocopy, recording of any information storage or retrievalsystems, without partnimon in writing from the publisher.

Printed in the United States of AmericL

Pre face v

Acknowlcdgemcnrs vii

PART ONE International Resources and Public Policy:An Ovorvicw 1THOMAS A. GRIGALUNAS

1 A Senator'a Overview of Continental Shelf Issues 3THE HONORABLE CLAIBORNE P13J

2 Offshore Resources: Past, Present. Future 7DON KASH

4 Aspects of Public Resource Policy in the North Sea 31ADAIR Mc~.'RE

PART TWO International Boundaries:Impacts on Shelf Management 41ROBERT BOWEM

5 DelUnitlng Continental Shelf Boundaries 43LEWIS M. ALE!~ER

6 UA Boundary Delixnitation Problems and Practice 49BREA J. HOYLE

Guinea/Guinea Bissau Case Study

Introduction 63ROBERT F. PIFTROWSKI JR�FSQ.

Leading to a "Compromis DArbitrage" 64FRAiVK WALSH

Legal Perspective on the Guinea/Guinea Bissau DisputeROBERT F. PIETROWSKI JR ESQ.

Technical Presentations 73LEWlS M. ALE3V&DER

The Evolution of Maritune Boundary Law 74MYRES S. McDOUGAL

69

PART THlkEK UW Continental Shelf:

Case Stnd.y in Jurisdictional Issues 81LYNNE CAR1XR HANSON

8 Interests and the UK Jurisdictional History 83ILH. BURROUGHS

3 The Continental Shelf: Evolving Definitional Images 13THOMAS A. CLINGAN, JR.

Qorxxertls

Reauthorixation CxeurtlLl ZQQe MankgerILent Act~ ~ S~~ Organization'e Vxew 91L GARY MAGNLJSON

The NOAA Fexspp~ve 95JAMES p B~~rr~lD

Raven~Sharing Legislation 101THOMAS R. 5ZZSOS

The Dispu,te Over ltd! FundsSection ~ Yesterday and Today

L POE LEGGEITELouieianas Pxsntxon Concemxng Sectxon ~

MARY ELLEN LEEPER

PMT M~ T e UW QCS Oil axtd Gae Leasing Prograxn= Yhe Sold'Bloohs for the Proposed Five-Year pl 121~'dKBS S. COmm

Aaexaxnent of Reeouxcee 123MARQ9lLL ROSE

Social Caste 137THOMAS A. GRIGALUNAS

Marino Productivity and Environmental Sensitivity 159FIB' DEWHT

The Integration of Data for Policy 167ROBERT SAMVELS

PART FlVR The US. OCS Oil axe Gae Gelling Policy and the PolicyProceaa A Variety of Perspectives 183LH. BURROUGHS

The DePartment of interior's Preliminary Decision on theFive-Year Pxogram ig5PAUL R. STANG

Coastal State Perspective 195MCHARD P. DELE~

The Oil industry Position 199ROBERT F HUNT

EnviroxLmental Perspectives on OCS LeasingSARAH CfVBIS

! Offshore Petroleum Eaploxatumt 1956.1991. 'll+ Last Hurrah? 2JAMES W. CURLIN

st of Registrants 215

The 1945 Truman proclamation asserted control over the nonrenewable naturalresources of the US. contiguous Continental Shelf. That position was subsequentlyadopted by ~ States and the principle was more fully developed in the 1958 and1982 Law af the Sea Conventions. In the intervening years numerous governmentalinitiatives have been enacted by thc United States aad other countries, pxovidiag apolicy framework for dealing with Continental Shelf isaxea Yet after 40 years,

portant issues remain concerning the jurisdiction, xnanagemeat, and distribution ofthe benefits and costa of exploiting Continental Shelf resourceL

In order to sumxnarize the complex yet fundamental. issues which must beaddressed in assessing the Continental Shelf, one could suggest the following.

What are the ail and gas resources of thc Continental Shelf,where are they, and haw much is there?

How can these xesouzces best be exploited, especiaoy thee indeep water or in hostile or environxneatally seasitive areas?What is the economic value of the oil aad gas resources of theContinental Shelf, aad haw sensitive axe these estimates tochanges in oil aad gas prices?

What zale can Continental Shelf oil aad gas be expected toplay in national energy policy?

How should thc resauzces af the Coatiaeatal Shelf bemanaged? This issue includes not oaly thc rate, size, andorder of lease sales but also the terms nader which leases aregranted.How will gains aad lasses be distributed? This issueencom~ among other things. thc determination ofinternational boundaries; resolution of state/federal resourceownership conflicts, the setting of leasing termxr, and theevaluation sad resolution of adverse environmental effects.

The above issues and others were addresed in detail in this conference, whichemzxalaed the resources. boundaries and management of the CantinmM Shelf. Theconference, in five separate sessions, exaxniaed various issues, moviag from the generalto the specific and from a prixnarily international perspective to a domestic focus.We began with a braad view af resources, concepts of boundaries, and basic publicpolicy considerations. We next turned to a moze detailed consideration of boundarydisputes and their impact an shelf xnaaagement. The papers in this session drew uponrecent international experiences, including boundary issues facing the United States.

y~ Osssr Conthcnsal Shelf

Ths following session of the conference a4dressed a variety of importantonai issues. Following a historical review of the jurisdictional implications

domestic federal legislation, specific attention was given to theauthorization of the Coastal Zone Mamqement Act, the sharing of OCS oil and gasrevenues with ~ States and issues concerning resolution of the Section B g!dispute between the federal government, and several ~ states, most notablyl~Iiana aod Tcx4L

The final two sessions of our conference focused on U5. OCS oil and gas policy.The first of these dealt with the development of economic and environmental

ormation used as building blocks for the Interior Department's Proposed Five-YearOCS Oil and Gas lssuung Program for the period. mid-1986 through mid-1991. Thefinal sesdon consisted af a panel discussion during whirh a variety of perspectiveswere presented on domestic leasing policy.

The subject matter of this year's conference was both timely and important. W' ewere fortunate to have such a 4istinguished group of speakers and conferenceparticipants to share in what was a very productive meeting.

THOMAS A. GMGALUNASConference Chalrnutn and Professor

Department of Resource EconomicsUnkversfty of Rhode Island

Elngsron, Rhode Island

0 0 0 0

$coccodings do not include the Cxllgscribed discussionsproceeding@ The participants were invited to comment on any session. The twocomments included hers were the only ones received in writing.

ACHBJOWLEDGEMENTS

A great deal of effort, by a great many people, goes into the planning andproduction of any conference and its foU.ow-up proceedings. All of them I thank fortheir efforts, while some of them I will specifically mention. Wc were fortunate tohave as planning cotnmittee tnembers: Thomas A. Grigalunas, Conference Chair andProfessor of Resource Economics at tbc University of Rhode Island; Lewis M,Alexander, Director of the Center for Ocean Management Studies, the University ofRhode island; Richard Burroughs, I~tant Professor, Graduate Prcgrant in MarineAffairs, the University of Rhode Island; and Robert Bowen of the EnvironmentalScience Program at the University of Massachusetts. Without their help in theplanning process and as session chairs, the conference would not have addressed sucha wide mope of topics nor run as smoothly as it did. Many thtudcs Were it not forthe speakers and participants there would bc nothing to put into print. Criticallyimportant to any project are thc funding sources. We gratefully acknowledgefunding support from: US. Department of the Interior. Minerals ManagementService and U8. Geological Survey; the American Petroleum Institute; and theNat>anal Oceanic and Atmospheric Administration: Sea Grant.

This has been a particularly difficult year for the staff of the Center for OceanManagement StudieL We have been without a secretary for nearly thc entire processbeginning with thc planning and ending with the production of these Ieexedings. Iwould like to especially commend Carol Dryfoos Hunter for her efforts to rise to theoccasion to keep this office functioning. Fortunately for us, her coordinator dutiesand abilities were precedent by secretarial skills that she called upon in our hour ofneed. I would also like to acknowledge and thank her for her copy editing of theseproceedings. Another in our office that deserves our gratitude for hcr painstakingtyping of thee pneeaMngs is our student helper, Susan Bolduc. I would like tothank a number of students from the Graduate Program in Marine Affairs whohelped with thc transportation logistics. And finally, a spemQ thank you to XcdBeaver, Stephen Ciesluk, and the staff of the GSO Computer Center for their timeand effort to develop the camera ready copy of these paxecdings.

LYNNE CARTER HANSONExeautivc Director

Genter for Ocean Management StudiesUnIva.stty of Rhode Island

Kingston, Rhode Island

Am Center for Ocean Management Studies was createdin the fa31 of 1976 for the purpose of promoting eff~ve

and ocean management. The Center identifies oceanmanagemtmt imues, holds workshops and conferences todiscus these issues, and develops reommendations andresearch prolpams to resolve them.

>T.K

Irttcrsorkma/ Rrsaarms and PubHc Poley

is intended to provide: �! an overview of Continental Shelftees, focuang on United States oil and gas; �! evolving definitional issues of

sod �! public policy concerns with bahnring multiple useLpLnel includes tbree ezeellgnt ~rs, snd we are indeed fortunate to have

with us.

THOMAS h. GRIGALUNASGm ferne Chatrman and Professor

De~ncrtt of Rcsoarcc Z~umoesUralvcrsfty of Rhode Is&md

Kingston, Rhode Ishrmf

A Seaatol's Overviem of Continental Shelf Issues

THE HONORAIILE CLAmORNE PELLUsirsd States Senate

Washington, DC.

INTRODU~ON

lt is a pleasure to be with you today to participate in the Ninth AnnualConference sponsored by the Center for Ocean Managexnent Studiea The subject ofthis year's conference, rhe Continental Shelf.' Resources, Boundaries, andManagement" is quite interesting, but might have been cast somewhat differently ifthe President had consented to sign the Mw of the Sea Treaty w'hen it was openedfor signature on December 10, 1982. Perhaps the title of today's conference wouldhave been something like Ihe lxnplications for Management and Exploitation of theUS. Continental Shelf with Entry into Force of the Law of the Sea Convention."

Much to my regret, the opportunity for the U5. to sign the txeaty has passed,since the treaty was closed to signatuzes in December, 1984. Of course should.President Reagan, or xnore likely some future President, dedde to baxxme a party tothe txeaty, the U5. could atways accede to it. I oontinue to believe that at some pointin time the US. will become a party to a comprehensive Law of the Sea Treaty sinceit is m clearly in our national intexest. President Reagan hixnself, after a year-longasscssnent of the then<raft convention, recognized that xnost provisions of the draftconvention were! acceptable and consistent with United States intezestL"

During the two years that the treaty was opened for signature same 1S9countries chose to sign, including some of our closest allies. To date only 18 nationshave ratified the txeaty-a far cry frozn the 60 required before the treaty wiH enterinto force. In the meantixne, the Pxeparatory Commission, commonly xeferred to asthe pxeICom, continues its work of drafting the rules and regulations which willgovern deep seabed mining. Here too the US, has ~ up an unportant opportunityto parzicipate in the work of the PxepCom as an otserver, which we are entitled todo by virtue of our aignatuxe of the Final Act of the Confezencc.

Some critics of the treaty may argue that the United States has survived quitenicely without such a treaty to date, and that thezefoxe our participation is reallyunne~ary, They might even point to the recent zesolution of an ocean-xelateddispute between the VS. and Canada as indicative of the fact that other avenues areavailable to the US. to resolve ocean-related pxoblexxsL

Jsrernsritansf Resrseces sruf ~ PoIJcy

you wiU recall that in October, 1984, the international Court of Justice QCJ!y reruiered its decima an the boundary dispute between the US. and Canada irk

the Gulf af Maine after three years of consideration of that case. We resorted to thelCf after years of effort to resolve it bilaterally failaL We and one of our claeert

were forced to turn to a third party to resolve a long-standing, ocean-related.dispute which had hammy an increasing irritant to our overall relations.

Unfortunately, the decision by the ICJ was less than a total victory for theUnited States since it rejected the UX assertion to total jurisdiction over the:~rce-rich Georgea Hant. Nor was it a total victory from the Canadian perspectives

lt also rejected their claim to the entire northeastern half of the Georges Banlc-Not ~pectedly, and in keeping with past practice, the Court essentially split the:difference between the two cMmants leaving the US, with jurisdiction overapproximately 75 pcrteat of the Ban? and Canada with 25 percent of the Ban3c-Bven with this final resolution of the boundary istue, the problem of how to managc'-

t fishing stachs stiU. nnnains to be worked out between the US, and Gtnada. Ibelieve that this too, will tahe years before it ia ultimately resolved.

While it is true that this boundary dispute has been resolved. it is hardly thssmodal af how to handle most productively and efficiently every ocean issue thL<arisaL l firmly subscribe to the view expressed by the former Secretary General ~the United Nations. Kurt Waldheim, namely', that "the nations of the world canno4~ ensiMy or safely face the future without a regime af law and order for the sea- nor can they! en~Lain any illusions that unanimity of practice on aQ aspectsapc ning to the graceful ~ of acean space wiU develop in the absence of a generalrule of Law.

TIE moaXXM OF amZme muSDrCHON

States' unilateral assertions of m~vancing claims to the Continental Sh~have been a serious problem for the United States and the world community as ~whole in the absence of a multilateral and definite agreement on the matter-United States 4 in part, ~snsible for the creeping jurisdi~ claims in this area-h, 194$, xeccgnimg the future irnpcetaaea of offshore ail and gas deposits, Preaident-Truman made a unilateral declaration, the ~ed 'lnrman Proclamation, reservingto the United States the exclusive rights aver the nonrenewable resources of ournContinental Shelf beyond ou.r territorial aaa. As one wonM have expected, thisthe stage far other nations tn assert, as wel4 maward extmlhme of their natio~jurisdictitssL

%be need to recnecile the ev~wing number af new'ly asserted rights by Staten'aver poe5oae af the oceans with existing intnrnationak law loi to the oonvening etthe first United Nations Canference an the Law af the Sea in l958, and to ttun:~ uccaaaful negotiation of fmr conventions daaiinI with various aspects af acean lawiraciuding tha Convention on the Continental Shelf. This convention attempted tocornify tha rights of the coastal States aver their continental ahalvea However, wham.resulted was a very open~ definition of what those rights are. This has led to

overlappinI chime, and conflict.Yet it was not Lantll l982. with the conclusion of the Third United Natiorua

Conf~ on the Law af the Sea LOS! that the warM cxmnmunity was able toagree «pon a fzatneworh for resolving the ambiguity of this definition The.provissrns in the treaty an this ~bJact which finally emerged, after nine years gEnegottattoaa, are L mkc19QRBl af w'hat tha Oanfersnca attempted to do with raspo<c %cd

A Serurror's Vkw 5

other ocean issues, namely to construct a carefully balanced tradeoff bctwecn theinterests of coast@ States and those of thc larger world community. In thisparticular case, articles 76 and 77 of the treaty recognize the interaror of some 40~ States whose continental shelves extend beyond 200 miles by reccgni'nng thejurisdiction of these coasud States up to 350 miles where the natural prolongation ofthe Shelf is truly vast, At thc same time, thc treaty also recognizes the interests ofthe world community by balancing thc explicit extension of thc jurisdiction ofcertain ~ States with a provision, which would recluire these States to sharc upto 7 percent of the revenue from the development of resources beyond 200 mileswith other nations.

Some critic of the treaty were unhappy with the revenue-sharing provision ofthe treaty, suggesting that this is nothing more than a grab by thc developing world.It is riuite easy, in fact, to pick out this provision or that provision in thc 192-pagetext for criticism. I happen to agree with Ambassador Elliot Richardson � the LOSnegotiator during the Carter Administration-who observed that, "any treaty that canwin widespread acceptance is bound to have costs ss well as benefits Its measurers whether it serves all our lnteress as well ss or better than th Mre interests %I'ould be

served in a trcatyless world."With respect to the revenue-sharing provision of thc treaty, it wss not the

dcvcloping world which first decided that some form of revenue.charing should bethe price for granting aoasbd States increasing jurisdiction over the far reaches oftheir continental shelves beyond 200 milea. In 1970 during the deliberations of theUnited Nations Seabed Committee it was the US, Representative who first proposedthat s socked "trurrtceahip zone be established on thc outer edge of the ContinentalShelf beyond 200 miles. This zone would have been administered by the ~ Stateboth for itself and for the international community with royalties to be paid into anew international fund %mt proposal was not accepted and the ambiguity of theouter limits of the Continental Shelf continues to exist today, and will until the Lawof the Sca Treaty enters into force.

JURISDICTIONAL UNCERTAiÃ1V AND RESUI.TING lHSXS

Unfortunately, so long as the US. remains outside of thc treaty, even with itsentry into force, US. jurisdiction over the outer limits of our continental shelves willremain amhiguous. I say this became I do not concu.r with the Prerrident's prcmimthat he can pick and choose fmrn the treaty's pro>de'ups, as if from a bowl ofcherrie, declaring those which he favors as customary in.ternationsl law" asrd thcsrewhich he does not as "contrrrctual obligations" binding only on those who becomeparties to the treaty. Quite to the contrary, the provisions of the treaty which dealwith the Continental Shelf illustrate clearly that this document has been carefullycrafted as a "package deal" of rights and obhgations which must be adhered to in itsentirety, lest States' practices vis-a-vis the oceans revert to anarchy. ~ US. csnclearly be challenged if it asert3 jurisdiction over our continental shelves up to 350miles but refuses to participate in thc revenue-sharing aspects of the treaty.

While the United States might bc successful in defending its assertions tojurisdiction over our Continental Shelf beyond 200 miles by virtue of the fact thatwe are dealing with an area that is relatively close to horne, it will not be so simplein the case of other ocean interests which may occur thousands of miles from ourshores. This will bc cspoMly the caw where navigation interests are concerned. ThcPrasidcnt seems to have forgotten, when embracing the premise that cusoomaryinternational law is sufficient protection for US. ocean interests, that three earlierpresidents viewed customary international law as too uncertain and changeable toguarantee protection cif UK interests. They chrxre instead to participate in

ISXerILsriOILal ResarIrces and PabNC Po4Cy

multilateral efforts working toward the establishment of conventional internationallaw-law based upon foxxnal international agreement-which would be subject tochalge oxtly thxough an agxecd-upon formal amendment process.

%hd4 the U~ may aNext its rightS tO the nCWlydefined COntinental Shelf, thepossiboity of legal actxIZN by other States is not going to create the appropriateenq~mt for the maximuxn exploration and exploitation of the resources locatedoa the far tea~ of cur Continental Shelf � resources which we believe to be

Lifirnnt althou.gh the tstimatea of the quantities of these resources have variedy. In &84, the VS Geaklgioal SurVey estixnated that possible, althOugh nOt yet

discOvered Oil and gas rOsXurcea off the cast COaSt Of the United States might amouxLttO 5,7 bioiOn barrehI Of Oil and 247 trilliOn CLIbic feet Of gaa. A May 2, 1955 studyby the Office Of Technology AssNmnent is less optnnistic with respectquantitiea aVaihLble. citing figures recently deVelOped by the Minerals ManagemexLtService which xeduoe the USGS estimates by roughly 50 percent. In any event, we

net hWW fOr sure urttil onmpanies carry out extensive SXploration activity. Yet,I vary much doubt that companies axe going to take the chanc» of investing biUionsof doQsxs to recover these resources froxn the outer edges of our Shelf if rights to dosx are subject to legal cha,'Ilenge.

Tgx I%%33RB OUTiA%3K

For the tmxe being, the U8. baa chosen to pursue its oceans policy outside of thefxaxxNwork of the Law of the Sea Treaty. Over the longer term, once the treaty hasentered lJ1to f~ it will bexane lncrcashxgl.y difficult to prGQct UX ocean interestsif we continue to pursue such a policy, This will be ~ unfortunate since I believethat tba Ooaana' WiH becLXma ineresaixLgly impOrtant tO Our Well-being. The xepOrt ofthe StxattOn Caaruniaainn in 1966 on US. Oeeana peijcy ezpxesNd this view best:How fully and wiseIy tbe United States uses the saa in tbe decades ahead winaffect prOfOundiy ita Security, ita eoXnOmy, ita ability to meet increaang demands forfoOd and raW materiaha >ta polonian aud influence in the wcrld COmmunity, and theIiuality Of the enVirnrLment in Which its pecple live. Clearly, if natiOns Of theworM camot agree on common goals for the peaceful LIN, and exploitation of the~ tietNL including thoN found on the oLtter limits of our continental shelves,then We aa citmens Of tbs wcr+ Will be ieLSI ~ and OLlr ]ives made pOOrer asIssCSXrcm On hand beexXme increasingly Scarce.

IntsrrurrfonNL Pcscxarces and AbQc Pohcy

~bility was the trigger for ~ previous two disruptions. The spreading inflfundarrrentalism is a fores w'e little understand, but it certainly does not

~ to the stability of that area. Although present discussions of the U~ tradelicit focus little attention on tbe chart of oil imports-they ~ us ~ hilton1984 snd will almost certainly gmw � restDcting import growth is powerful yattractive.

Eleven peroent of domestic US. production is now coming frompqgggates suggest that solmwhere between 21 percent and 41 percent of undiscoveredproduruble oil will come from offshore sourceL Further, most estirnators believe thatthe offshore has the highest potential for giant new fields. Most of this po»tialthought to be offshore Alaaha and in deep water. ln truth, if oil is produced in!ggdh areas. their oontributioos are likely to be significant since only lnrgeproduction will be a'bie to @Ratify the expenditures required to produce that H.the OCS is a great ttnkrsawn with regard to the nation's oil production futtrre-Redncing that uncertainty wouM be particularly attractive. if large new disa!veriesreasty they wing bc positive contributors bio both the nation's economic well-being eralits national security. Alternatively, if there is little or no oil to be had from eh+offshore the sooner the nation knows it the better since we will either need tnmodify our posture with regard to imports or, alternatively, work at devel~dorrusrric substitutes.

One other major pent needs to be ILde about where we are. The nation isocsnrmtted ta envirtrrtrnental prntecticsa. By this I mean that there is a built-in8Ãietsl eornrnitrnent to environmental protection that will be sustained for theforeseeaMe fuoLrL First, Americans are now environmentalists. Theysnvircsrnmntaiists because they generally perceive that environmental degrsdatiora isthreatening to their health snd wellbeing. Stood, protection oF the envircunnent hnrs50w been br0$4tly written into the law and translated into regulations.environmental laws are here to stay because they are the manifestations of the ~public attitudes l just mentioned. To underline this, let me note that I can f'ind fe~people who believe there is anything like majority sentiment in the Congress frrrma~ rnodificatiaas Of environmental laws. %Md, we are committedenvirorLrmnt because there is a broad range of goverrrrnental agencies cornrnitted ter'environmental pre4actian and there are organized and sustaining grotrps outeide-'Iovernment that exist whoUy or in part far the lntrlxse of environmental pron>=tloral

HKSH!RICA' SKETCH

~t, if anything, does the ezperieece during the last decade and a half withoffshore oil and ges have to tell us about how we should procede from the pressers<into the Futtare7 First, our experierea with marching far oil and. gas over the last <Syears has been stsik~ly disappointinl. Two significant new OCS fields have ~

1! point QpLeUw California; and, 2! the new field in the Beaufort SL.Although they are significant, their total addition to the nation's reserves is probabl~only about 20 percent af that added by the North Slope discovery. East ccsr~~ xpitnation has baca a total disappointanent and the offshore Alatka efforts. to dn~are leer than «mxatreipng. Thia ezperienee hss loi the hlinerais Management Sexvioeto reduce 1981 USGS sstirrLates of offshore oil reaatrces by 55 percent from 27 billionbarrels tn 112 billion terrela.

'nre search for new offshore reserves over the last 15 years has occurred irr ~contezt of continuing controversy, This rrzttroversy was particularly intense fromm.the time of the Santa Barbara blowout ultil the late 1970s. ln the late 1970s. ~moppcning forces began to estahUsh some sccommodatiorN and we saw lease sa3.~occurring with increasing predictability and stability. Beginning in 1981, the level cd'

Of fshore Resources 9

controversy increased again with the adoption by Secretary of the Interior JamesWatt of a new five-year leasing program which proposed to offer for lease all of theacreage within broad planning areas covering approxixnately one billion acres offederal offshore landa

Although the controversy over offshoxe oil and gas activities has had xnanyfacets, it has primarily focused on whet areas should be leased and the terms of thatleasing, The con trovexsy wss driven by two broad public concerxuc I! the perceivedneed for new oil sources; and 2! the perceived need for environmental protection.The controversy was especially intense over efforts to lease off CaUfoxnis and infrontier areas, particularly Alaska and the east coast. 'Ihis controversy led to anendless string of law' suits, the ultimate passage of a ma'am revision of the OuterContinental Shelf Lands Act, the establishment within the Interior Department of anEnvironmental Studies Prograxn, xnuch more stringent safety and environmentalregulations, and, finally, the new leasing pxogram based on broad planning areas,

When oae reviews this history of controversy, what strikes you is thar itinvolved a tremendous amount of wasted effort. The effort was wasted because wefound so little oil. Both tham concerned with finding energy and those concernedwith protecting the envimnment could, it tuxns out, have used their resources muchmore effectively in other arenas.

If soxneme from Mars were to coxne down and look at this history, he or shewould almost certainly come to a single and a simple conclusion. Major effort andcxsu could have been saved if the leasing of offshore oil and gas resources involved atwo-phase procew, that is, an exploration phase and a production phase. Theperception of the envircuxmental threat flowing from offshoxe oil and gas operationsslruxree oil wiII be discovered and produced.

Under the ~ that has been and remains in place, offahoxe acreage is leasedunder terms that authorize both exploration and production. Efforts to protectagainst potential environmental degradation coming f rom oil discovery andproduetim4 then, must be mobilized at the leasing stage.

If the efforts over the last demure-and-a-half to understand and mitigateenvironmental threats from offshore oil production had been restricte to theeinstances where pxoduciMe oil was discovered, the savings in tixne, money, Isusuon,and psychic energy would obviously have been suhltantiaL We, of axuxrm, didn' tknow thiL But does this experience have any Iessxos for us for the future? In theabstract, the lessms axe quite obvious. The nation should put in place a leasingprogram which separates exploration from production. 'Hm maje focus onenvironmental studim and designing mitigation actions should come afm it has beendetexxnined that producible oil and, therefore, a potential threat existL

Although this apprcsach same compellingly os,~sue snd would appear to be inthe interest of everyone involved, the facts are that everyone involved is oppcsed tosuch a g~ The industry doesn't want to touch such a ~rstem with a 10-footpole. There is absolutely no enthusiasm for this approach within the Departxxsmt ofthe interior. Tom states with a primary concern with the environment are opposedThe envixonxnental intexest groups axe oppcsscL In sum. aa this in' the otherwsmcontending parties are in u.nanimous agreement. How can this unanimity beexpiained7 All of the participants in the system see theam2ves as getting somebenefits out cxf the pxosent arrexlgcxnenuL, Difficult Cs it soxnetlnlcs ls to get the leasesand authorization to go ahead with exploration and production, the present systemeeuxcs the ail industry that if they find oil they csn go ahead and develop it. Thamwho axe concerned about the envtrccuxumt, on the other hand, axe fearful that if thereis a split between leasing and production ~ once oil hss been discxxvexed therewill be no stopping tbe producasxn. In sum, no one wants to talkee a gamble on an

10 pe~~ Msceross and Publk Facy

~wn aet of arrangements. Ln a legalistic, bureaucratic society, the known is~ always preferable to the unknown.

Finaliy, what does our experience over the last decade-and-a-half tell us about themfety of offshore operations7 The answer is clear and compelling. Offahreeoperations have been carried out with strikingiy few accidentL ln truth, the xeocxidis a good bit better than couLd be expecteci from activities carrioi out by huxnanbeings, ~ there ia evidexux af adverse eave nmental and social ixnpacta fromoffslsoxe operations those ixnpacts have been ahort-term and minimaL Irx tnxth,offshore operations have had significantly fewer impacts of an adverse kind thancrdhore oil and gas operations.

Whg hss ths record been m goad? Most offshore operators appear to believe that~ afe, accident-free c5etetions are in their best interests. The potential for costly~eterne fxoxn serious accidents axe m wideiy perceived within the industry thatany other course of action would be contrary to ite self-interest.

SMACK the Department of the interior s regulatory program hlia ixxiprovrsi~ ilnificantly and has had the effect cf putting a floor under the qualigr afopexatkes This regttlatiori has meant that these industry operators who may not becornxruttsd to high~uality performance have nonetheless been xtquixtd to perfarrnwelL

V%XRI SHOULD %R OO Papa@ alms

The OC5 program should be oriented toward an elephant hunting goaLGovernment shone pursue a strategy of encouraging industry to carry csitexploratory drilling in those areas judged to have the highest potential for discoveringgiant and axpe~iant fields. The record of the Last l5 years indicates that predxioingexploration technology in frontier areas iexnalns a highly ixnpreciae axt Expertxs desnot agree on where the great potential is.

Given the Limits of predrLLling exploratory activities, the OCS progxiixri shotxl<encourage industry to carry out exploraniry drilling in thcare areas where thnindustry thinks the greatcoat potenthxL is. !n principle, snowing the industry to selec-'tsnd lease tracts in large pLLxining areas at its discretion ss propcaxed in Secre~%att's five-year schedule saenas to meet these atandaxda Unforttinately,prc~pam, bxcauss of the way it wss implsrrsmtsd has generated much more oppcxritiM?than earns to xne to be warrantxxL Noxxethslesa, that opposition and the, mrs~about the nsw Lxasing proilxaxn axe facts and thenfoxe one modificauon seexns 4o bein order.

ANoxding to the Minerals Manaipewat ~re, depending upon which definiticmaof theirs csxs wants to use, then axe «srnewbere between 250 million and 500 xnilli~ exes with high potentiaL Given that i ~ the case, the plamiing areas used for Leaxxirigshould be restricQxd Co the brtNd bouxidaries af these high potential areas. Once againtha message is that the leasing pecgraxn ought to ba defined so as to reclnoe carelixnisate controversy over areas where no one thinks there is any oil or gas an~%'-Many af tbe areas where tbs states, tbs envixonxnsntal interest groups, or the xrnLi~axe opgmld to Leasing can be alixnisated without any real reetricticax in the ptixstxit. afhydxo~xbnis. To the calnnt that this xastric~ leasing could elixxiinate some of thecontroversy, it shag be foliowtd.

of ccaxrse, takes us beet to somstiiing Like the xsminations proces that ~place before the new ieaang proipani. The difference, however, sboulcL be thxat.

norninations follow etnicnixss rather than consisting of the accumulation of spcaoif ~blockL

'nie ~ thing that needs to be done is that tbe Federal Governxncnt shcmLclthink thxough undertaking a second-round leasing pn~ Recall that l indscattaC

Of fshgre resources

caxlicr xny belief that we need to accelerate a program which will find and produceoil or alternatively convince us that the potential for additional large discoveries onthe offshore is slight. In areas such as along the Atlantic coast, whexe a first roundof leasing and exploration has been carried out, xny scnsc is that the Federal6overnxnent should provide inoentivcs for getting the industry to go out on a secondround of exploratory testing. Such an effort probably means that the FederalGavcrnmcnt should xnove away from a leasing approach which requires largefrontwnd bonusea It seexns to me to be in the national interest for the FederalGovernment to thin3t about some Itind of INuung program which has thccharacteristics of thae used by the British and the NorwegianL That is, companiesshould. be allowed large acreage under terms that over a fixed pexiod of years requiresubstantia1 portions of that acreage be returned to the Federal Government. Thisapproach cncouragcs rapid exploration since companies naturally will want to retainthe most promising acreage.

So far as the Minerals Management Service is concerned thcrc are two things thatI thinjt are ixnportant. First, funding should be continued for an EnvironmentalStudies Pragatxn sufficient to give the environmental interest gxoups and the statesconfidenoc that a serious effort to understand potential adverse effects and how thosemight be mitigated is being conducteL Second, so far as its regulatory p~mun isconcerned, the Minerals Management Service needs to maintain a high professionalregulatory capability. Assuming that oil in producible quantities is found in thefxnntier areas, it will be nec~r to utilize technologies that axe different than thosepresently in usc. The Minerals Management Service needs to be able to stay abreastof these dcvclopmcnts and develop a regulatory in~ycction sysunn which maxinxizesthe safety and xeliability of this new technology. This requires on the part of theMinerals Management Service a high quality, professional organization axxd thccapability to operate with flexibility.

I underline the regulatory point for two reasona First, I believe regulation ofoperations has done morc to protect the environment than all of the environmentalstudies and lease stipulations put together. Second, in a period of regulation bashmg,the risks to all parties in weakening the regulatory ~paxn needs to be underlinecL

ln conclusion, it is my great hope that during this period when we have both anoil surplus and the beginning of a new dialogue among those concerned with theenvironment, the Department of Interior, and the industry we may establish soxneworltable procedures for the future.

The Continental Shelr: Evolving Definitional Issues

THOMAS A. CLLNGAN, JR.Professor of LaNUnluerAcy of hf4unl Scrod oj LawCoral Gabby. FLorfdo

INTRODUCTION

lt hae been said that to underetand the man, one must know hie memoriea andthat the same ie true of a nation. Lf that Le the eaea, then it would mam appropriate4f not ttecemary! to provoke a few institutional cnemoriee when eceteiderittg evolvingdefinitional induce with respect co the Cont}nental Shelf, Lt ia with that in mind that1 turct briefly to the hie@~ of Continental Shelf theory.

This paper is divided into four ~ ln the firet part 1 will examine the historyand evolution of Continental Shelf theory ae customary incarnational law.Subeequently, the 195S and 19LLQ Conventlotta wLLL be examined with rcepet:t co chiclaeue, and, finally, l ehaLL make maa comments tet US. policy on cbe Shelf, ae anon-aigttatory to the treaty,

HISIQRICAL EVOLUTION

LLeference herein to the ctnxepc of che Cancinental Shelf Le meant to refer to therecognition of the Shelf ae a Legal entity rather than ae a geologicaL pheneenenon.Although the geological Shelf e exietenc» hae been LUtown fram the earliest days ofocean expioration, legal consequent of that Phernmaecet did not arise until recently.Perhaps the earliest evidence of attempts to regulate aetivitim relating to the Shelfwae the Portugueee prohibition againec trawling by steam vcmcis over the Shelf topmtoct fiahe6m rceouteee in 1910.' %hlla other inetanoee foLLowed, the UnitedStatee, ae early ae 1918, refused to recognize any Legal rights with respect to its ownShelf' The Vnitei States cantinued co show Lntenec in the Shelf untLL the early1940e, when the cochnology for extracting pecrolettm frten submerged Lands began toevolvL %'hile Preee5eat Rooeevelt. ae early ae 1937. had shown interest in Uaimingextended juriedletioa co protect the fieheriee in che Pacific, it wae noc until 1943 thatHarold Lckee recommetMLed to Rooeevelc that a ecudy be done to Lay the greandwork"for availing oureel~ fully of the ridtee in this eu Land The ContinentalShelf extending arne 100 or 150 mllee from our shores and in the wacere overthem "~ This hegact the prtcem whidt Led to the now famous Truman Proclamation

iS I

~ 194' ~rtjng that "the United States regards the natural resources of the subsoil~ ~bed ef the Continental Shelf beneath the high mm but contiguous to the coast~ the United States as appertaining to the United States and subject to its jurjsdjction-~ control-"'

prochunatioo omtaiaed elements that were subsequently to becozneIaw~tural prolongation and the concept of coast@ State jurisdiction over thenatural resources of the Shelf. WMe the proclamation itself made no reference totha outer hmjt of the Shelf cbLimed, the accompanying press releases stated that'geaerallyi submerged land which is contiguous to the continent and which incovered by no more than >00 fathotne �00 feet! of water is considered as the

tal Shelf."

Ae might have been expecnx4 the Trulnan Proclamation triggered a series ofBetween 194S and 1955, ten nations declared some

form af Getjnental Shelf jurisdiction.s Despite growing practice, it would yet benate years before it could be said with amuranoe that the doctrine had been absorbedinto Law- ~iy jurists were cautiars. In Petrolatum Developmear Qatar! Wd. u-ggler of Qatar,' in 1950, Label Radcliffe decided that a concession granting to ~Anglo-persian M Company sole oil and gas rights "throughout the Principality ~Qatar did not include "the ae-bed or subsoB or any part thereof beneath the higlaNaa of QN persian Gulf contjfpmus with such territorial waters, which sea-bed ~~ ubscQ are more particularly mentioned in the aforesaid Proclamation " And a yeaslater, in Per~ Devehpnasnt Ltd. v. Shcfkh of Abu Dhabf,s lard Asquith was Msmy that despite the desirability of such a doctrine in law, it had not yet talc.en on thehard delineations required of a formal legal doctrine. Lord Asquith did not rule ou<ths penalty, eve pmb hiiity. that ~h a doctrine might aubsoqucutly emerge. Tj eaeaewhat inchoate nature of the h~e was noted by cygne writers of the day-aut the point in time at which a principle crystsdlires into a rule of cturtorna~international law is difficult to 4saern in roost caseL In any event, it was only wfew years later when the principle wae incoryarated into treaty by the adoption oZthe 1958 Conttnental Shelf Convention.'s The mere adoption of a princrple tnto ~treaty, however, does not resolve the questice of that principle's status in cuskunar FIaw, at hsaat in the Absence of a clear expresskst by the parties showing that 4! iso:their intent. That is, the paxtise might either have been codifying prior custom, ~developing new' law', binding only upon then. It was not until 1969 that. tlae-laternatkonal Court of Justice had ca~ to le@ at thi ~ qtn~

ln the North Sess Casrclrrsnrat She/ f cases, the precise dispute involved maritirrxesboutslariea on the Shelf, but in the course of resolving the dispu.te, the Court wsLssdrawn into a onnekderachu ef the state of the law regarding the Shelf in 3.958.While rejecting the contention that article 6 of the convention reflected a rule cancustonsary international law in 1958, the Court suggested that articles 1, 2 and art@le 1 deals with the outer lirnjrj" were then Qn 1958! regs as reflecting wrss crystallizing, reoeived or at least smeq~t rules of customILry international LawThis view was based on the fact that the Convention did not permit reservations ~those articles, a rationale that rests on rather shaty groutst However, this somewhat.cautious opinion shows at hest the probaMity that in 19SS the Continental Sh~doctrine had foursd a home in the law. %1th this background in mind, let us prow~to a conaIdcration of the 195$ Gmrvention.

Am 1958 Conference struggled with a number of difficult definitional prohle~regarding the Shelf. The fmst was the way in which to define in legal terms ~outer linut of the Shelf. During the conference, and in the International Lu~

The Gontlxreraral Shel f 15

Commission ILC! meetings preceding it, there was an amount of confusion resultingfrom the failure to rem~ that thexe is a distinct difference between spealcing of ageological shelf, and the legal language used to establish ju.risdictianal rights. Thus,attempts wcte made to define the latter utilizing physical attributes, such as depth.Thc depth test, standing alone, was found to be insufficient to establish outerjurisdictional Urnits due to the fact that xnany countries, having little or no physicalshelves, viewed themselves as disadvanraged by such an approach. This fact is wellreflected in the work of thc ILC. In its 19S1 draft the ILC used only the"exploitability" Test: that is, thc outcr limit of thc shelf was limited only by thetechnology of exploitation. At that stage, the Ccsnxnission was of the view that apure depth test would be unstable. In 1953, the Comxrussion reconsidered the issueand abandoned the exploitability test favored by narrow-shelf countries! in favor ofa fixed depth of 200-meters, because, they said, the 1951 Test lacked pxecision. It wasnot u.ntil 1956 that the depth and exploitability critcxia were combined.'x It was thiscombined test that found its way into the treaty as article 1.'

Much has been written on thc xneaning and application of this article. Onehelpful presentation of thc issues raisecl can be found in a 1958 U. N. Secretariatstudy.'~ That study posed and discussed the following questions:

Can the whole submarine area of the high seas become part ofthe Continental Shel&

%'hat is the relation between the criterion of depth and thecriterion of ezploitabilityf

What is the meaning of the criterion of exploitability7

The first question has long siam been laid to rest. While the language used in theaxticle could lend itself to the interpretation that as totuuarl capability develops. andenables exploitation to xnarch sea~ the coastal State may correspondingly extendits jurisdiction across the ocean floor until it encounters the limit of similrrrlyextended jurisdiction of the ~ State opposite. Such an intr~retatioa, however,ignores the "adjacency" requixexxumt and disregards the geographical phenosnenan ofthe Continental Shelf suggesting contiguity.

As to the second question, three interpxetivc possibilities arise. First, the twocriteria could bc considered to be independent of each other. If that were ~ theexploitability criterion would centrol since in all cases it would have to bc satlsfiexLOn the other hand, the two could be complementary, which would mean that thc~ State would automatically have juxisds~ to 200 xnetexs, and beyond that, tothe limit of the exploitaMity test. Finally, the exploitability criterion could besubordinate to the depth test, and, if so, the ceesud State would be aMe to extendexploitation activities if begun inside the 200-meter line. Conventional wisdom acmeto support the second interpretation

The meaning of exploitability" has never been very clear, xrzsxt likely bccarase in1958, technology was not forcing thc irsrue and there werc no conflicts reqrairingresolution of the problem. The Secretariat study did, however, pose the appropriatetheoreticrd. questions. Vfould exploitation by one nation at a depth in ezcere of 2GOmeters automatically extend Continental Shelf jurisdiction for all ~ States?Would the exploitation of one reseuroc beyond that limit automatically extendjuriahction for another resrNurce to the same depth? At what point in the prccessdocs exploration cnd and exploitation begins F'ortunately, these questiorrs have beenjnore theoretical than reaL

Prrticle 1 is also silent on the xnatter of hcnv to deal with irregularities in theShelf, such as degeexanons, troughs or canyoruL The Norwegian Trench is an example

I6 Inremekmel Reaecrces end Pubic Polky

of the fir». The irrelgularity in the Cabot Strait is of the ~d LUnd ~d cnsayrtesaahottnd along the Atlantic Seaboard of the United States.agreed, Atreanione abottld not be viewe4 as interrttpting Shelf +Nsdi~o aaxL]isaactbey are Vast Tha trOattttent to be nOQÃ%4Ãt Ugughe in l~ Clear CanyOatn nremnormally vieere4 as a part ot' the elope, and thus cause no real probletnn,»

4 fttrther defkmtiNLai ice oonterrting the 2958 Convention relates to the rightsthat e coastal State naay exercise with regard to the resources of the Shelf.is the oontmkling nrdcie:

1. Tha oonetnl State exercises over the Continental Shelfnrvereign rights for the purpose of exploring it end exploitingits natural rtnoumea.

i. The rights referred to in para. graph 1 of this articLe areexclusive in the mm that if the coastal State does not explorethe Continental Shelf or exploit ita natural resources, no onetnay tLntiertalte these ectivitiea, or make a dain to theGnttinental Shelf, withottt the express ootnsent of the coastalState.

3 The rights of the ooeetnl State over the Continental Shelf donot depenO on ootatpation. sffecdve ar notional, or any expressprorkatnatkoa,

4. The natural re¹ntrtsn referred te in these artlelm consist ofthe mineral and other non-Qvtng roe~ of the atebed and¹tbaoU. together with the living orlartisme which, at the1 nrvwtable etage, either are irnmckile on or under the seabedor ere ttnable to move tmept in oonetnnt physical contactMth the seabed ar the ettbeoLL

Meet of this langttaga ie quite clear. lbe ooaetal State'e rights are cacJatnivawhether tttklise4 or not. AG tnineraln tsa or beneath the Shelf are includotL. ~tan %Lnaplicatkrt Shelf jurisdiotkn does not extend to non-ntineral oh!acta, such na ~~~ships, that tnay be ttptm the Shelf ' ~ Living ~es are more probiexxaacaotdClearly, tbe Coaference intended that the relatively permanent sedentary sptecan¹the Shelf should fall wrlthin coastal State jurie4iction. Cianaa, oysters. e~~ nrsithe Like cienr!y fall into thin oa~, 'fbe «rorda ooetstant physical acltxnct,"however, create dkffioelthe in anoatstsly clattaifying mme other epeclee each nn cve4and Astern. Thh cause <LisagymsMtnte. For enample, while the US. vievtts ~bn ¹cteeth af the Shelf, that cialtn hae for yeats been rejactod by Japan. Lilac~~ cheUS. views hs aortltern lnb¹ers as sedentary spteisa, but at one time teak thenegockating position that the spiny lobsters Na the sahsmea beaks were stot bes=auathey oetdd, it wne said, "jun,p farther." Prior to the adopts of the 200-txtile fin]~none. ettch definitknal uncertain@en eatteed vary practical negotiating probiestns. htthe ~ of Japan, ita teftlal to eocortg sedentary etattte to the King crab Ln the BeringSea cotnplicated oat ratioa negotiatians betweaat the cwn aountriea, frun~tixtl theU8. objankve et tertninating Japanese crab Aa}ting in the area.

Finally, there ie the rnatter of otntstrttctioet af ineeallatjona and structurea oa, theSheif. Parslpnph l of artich 5 of the Causation provides that.

the eoestak State ie entitle4 to ocetstrucc and mainnaira erroperate on the Goathaentsl Shelf inntallatintN nnd ocherde neoemary for ite ezyhlntitnt and the enplcitatkn of ktn

lhe C~rcercrcd She f

natural remuras, and to establish safety zones around suchinstallations and devices and to tate in th~ macs measures

necessary for their protection.

paragraph I af the same article rnaltcs clear that while these installations anddevices fail under coastal State juriaiiction. they do not have the status of ialande andthus have no territorial ma of their own. Furthermore, they may not unjustifiablyinterfere with navigation or ferhing, nor may they interfere at all with fundamental

research. Any installation which is abandoned or disused "must be entirelyremoved

text mecca reference Only ta tbase installations and deVioee ~ry fOr theexploration and exploitation of natural ~rces. lt ie silent with respect to othertypes of construction. such as the emplaoetnent of defense-related structure, or thecocltructian of artificial ishr~ Since, it can be argued, sech installations orcorNtructhaa are not prohibited by the text, a coastal State may establish thara if itdesires. Tlu ~ interpretation i ~ suypceted. et least beyond the territorial sea. by thegeneral provisions regarding the freedom of the high seeL WhUe the high seasconvention does not epecifkaliy mention such ccetetruction an che Shelf, the article 2listing of freeclome is not meant to be exclusive and at least a credible argurr~t canbe made fof the rcght 'to construct them on the Shelf.'r

Lese clear. under interoetianal law, ie the right Of the coastal State to exercisecriminal and civil jurisdktion over foreign nationale at such eitea, The United StatesCong~ apparently sensitive to this element of unorrtainty, hae been carefui in thepast to limit US, ~rigid@~ to resotrroe-re4ted activitieL One example of eucb}egralation ie the Outer Continental Shelf Lande Act OCSIJk.!.'e This ect, coneiecentwith the Convention, declare it to be the yolky of the VS, that the subsoil aod~ csbed of the outer Continental Shelf appertain to the V nlted States and are subject toits jurisdictian, control, and poWer Of dispaaitian. It extends the Conetitutian andlaws and civil and political jurisdic<on of the V5. to the subsoil and mabed of theouter Shelf, and to ail artificial islands and fixed strucrurrs which may be erectedthereon "for the purpose of exploring fm. developing, removtng, and translatingrcsourccs tberefroen. ' ~ And the act extends the authority af the Secrecary of theArmy ro prevent obstruction to navigation through his permitting power! on theouter Shelf as though it were navigable wetsre of the United States,re

A federal court. interpreting tbi ~ statute. canfirrned the cangreeshseel intent taexercise ~riahction only OVer Xmroroe-rCLLated activitinL ln US. v. Pay," the courtheM that it wae illegal ta construct an artificial island on tbe Continental Shelf ofthe UA outside of 0» temtorial eea without a permit from tbe Corps of Engineers,and that the court's equitable powers encompassed injunctive relief to halt sucho~etioo. To reach this result, since tbe island in question was not deer.ined forrceourt» recovery ae such, the court relied an the fact that the island was beingconstructed of dredged coral and sand, and hence wse an exploitation of the mineralrceourore of the Shelf.

The distiaction between resourts and non-rcsouroe gria&~on wae empbardxed ina later case, US, v. Alexerccfer,» Under ~aj af the ISLA. the Secretary isauthorined to ~ rules and regulatione in order to provide for tbe prevention af

of the natural rmou~ of the Continental Sh4lf. Pursuantto that section, the Secretary issued a regu4tkrn prohibiting percsrne from damagingcoral without a permit. Alexander wae conVieted fof a violation af that regulationwhen be darrcaged a coral reef while engaged in a marine salvage operatiorL OnappeaL hie convktion wee revsreecL Tba appaoate court said that the Secretary badstatutory authority to regu4te only foMU~re4ced uses af tbe Sb&lf, and thus thisre+dation under which AJexaedsr wss convicted wes invalid.

The CorLdnerrtal Shel f 19

formulation for such revcnu~haring was yet to emerge, although some earlysuggestions were made. While some Sta,tes preferred a system of profit sharing. theUS. proposed one based upon a percentage of the value of production at the weIIhead. Also, during these meetings, debate was held over the formulation of the outcrlimit, and it was at Geneva that the US. proposed a formula that would permit the~ State to sct thC Outer limit Of the margin within 60 nautical miles Of the foOtof the slope.'4

While chc debates began to show growing support for thc elements of a finalformulation. this support was not strong enough Co result in a new text. As a result,the SKI' formulation was carried forward in the Revised Single Negotiating Text RSNT! ' and the Informal Composite Negotiating Text ICNT!.rs In Ncw York, in1977, a further refinement of the definition of the outer hmit began to emerge w'hensupport appeared for thc socallcd "Irish formula." Under this formula, the outerlimit of the Shelf would be dercrrnincd ac 200 miles or by a distance criterion fromthe base of the slope VS. propoaaQ or by a depth of sediment test.rs When the FirstRevision of the ICNT~s emerged, it contained the results of these negotiations, and thenew article represented the solid basis for a comprornie solution, only co bc slightlymodified in sulsequent text.

Thc informal Composite Negotiating Text, Rev. 1 contained a definition of"margin" and placed morc precise limits on the outer edge of the margin by the use ofthe combined U8. and Irish formulations. With regard to Chc Irish formula, orthickness of sediment test, it ahouM bc understood that the broad margin Statesintended this formula to be applied from seaward toward the shore, while the US.proposal is applied seaward from the foot of the slope. The distinction is important,because it is possible that the thickness of sediment test could be met in same areas acseveral diffcrcnt indications along a linc projecting seaward from the coach Bybeginning seaward, and working in, the result would be that the outcr limit of theShelf would be located at the point farthest seaward at which the test is met,regardless of whether this wOuld Cnclase a pOint or pOints shOrCWard ths.t wOuld notmeet the test

This revision also dealt with the view of some that the Irish formula, standingalone, was Coo generouL During the Seventh Session, for example, the Soviets hsdproposed an additional limitation.' that while ~ State jurisrUiction over the Shelfcould extend beyond 200 ~ in no case could it do so beyond an additional 100miles, or up to 300 miles all told. The Soviet proposal did not suggest how the limitshould be ascertained in the area between 200 and 300 rnilea. ' The Soviet suggestionwas to be further modified, and emerge in this revision as a subsequent cutoff far theIrish at 350 miles from the baselmcs or 100 nautical miles from the ~meterisobath. This revision also provided for thc establishment of a boundary reviewcommisrion which would receive and review tunits declared by the meed State inaccordance wrth the Convention, and would make recornrncndatmns to Chose States.The limits mt by the coastal State after taking these recommendations mto accountwould be final and binding. Hm Ccsnninion was men as a neoawary mechanirrm toachieve international stability of limits. A further problem had been raised withregard Co the treatment of amu6c ridges, and this was noted as a footnote to the text

This problem was generated by a misunderstanding of the 2~meter plus100-mile cutoff of paragraph 5 of article 76. A misapphcation of this formula mightbe used by some States to claim extension of Continent Shelf jurisdiction over largeareas of oceanic ridges formed of oceanic crust, particularly mid-aean ridges, eventhough these ridges in point of fact werc part of the deep embed. This situationresulced in a Soviet proposal to limit the Shelf in areas af oceanic ridges of whateverorigin to a rnrmmurn of 350 miles. The Margincers countered with a similarprcyaad, but narrowed the definition of the area of applicability to ridges formed

gg lrtranasriortol Pmogrcea awk Puhgc p~

only of ooeanic crust M rnid~ ridges3.~r 'nre resulting negotiationa, in w~both the Soviet and US. delegations were heavily involved, resulted in furtherchanges at the end of the Ninth Season when the JCNT. Rev. 2» was ~

Two changes were made. First, the last sentence of article 76, paragraph 3 weraamended to rearL "it does not include the deep ocean floor wfsh Its ocearric roger Mtha subsoil thereof emphasis added!, Secondly, a new paragraph 6 waa ~

Notwithstanding the provisions of paragraph 5, on submarineridges the outer Hmit of the Continental Shelf shall notexceed 350 medea flan the bsaelinee from which the breadthof the territorial aea ia measured. This paragraph does notapply to eubsLarine elevationa that are natural components ofthe continental margin, such as its plateaux, rises, capr, banksand apura

The last aenteooe rerkuirse arne etpianation. Thjough much of the negotia~focus wss upon two distinct Rinds of submarine phenomena: the continental rnnrgixaproper and or~ ridlnL These are geologically distinct. The amendment ~paraikraph 3 wss added to sLake it clear that it was not the intention to extend coaaOa3-Qate Jllriade~ to anything bLLt formations that were true geological prolongation+of the contnMmtak laa4 mam. Oceanic ridges, being geologically different, ~excluded from such jurleda~ Bet some were of the view Qn particular. the U~that there waa a thiad urs~ater fortnation that waa yet different from the frraattwo These formations, it waa argued, were ridges that extended seaward. frcnn ~continental NLarrgie bat were not gaologicalky the same aa that margin. An exarnpla-of such a ridge that wen alluded to waa the Walrus or Walvia! ridge on the W~Coast of Africa. To deal with any objection to this conoeivable extension of conserveQate j~~M the 350-mike cutoff waa added. To make absolutely clear that thxra

toff 4d not apply to sirnBar formations that in fact were geologicaily the same ~the margin, the reference te plateaux, etc was addrsL

This, of couraa, crnatee new' prrklans of interpreation. Geologicakky ai~Ira-'rformations are often given different nanMe on charta, leading to confusion over«sactly what a cap" or "spur, for exaxnpke, might be. The UX was af the vie~that tha exclusion would apply to the Chukchi Cap north of ~ Fig. 1!.emphaaiae this, Ambassador Richarderar put the foUowing statement on the record aaaPlamry Seaaioa on AprU 3, 1980:

Our support for the proposal ragaxtking the Continental Shelfcontained in Ambaaredor Aguilar'a report rests on the

that it ia roxqphad~ to the beet of ourknowledge there ia no contrary interpretation that featuressuch aa the Chukchi plateau sitnated to the north of Alaskaand. its onnpenent elevations cannot be considered a ridge~med by the ksat antence of the proceed paragraph

There were ao oontradir~ to this statement.Article 76 ie to be read, and ltn proviiona applied, in the order in which they

appear. Thus the provisions ef paragraph 4 are to ba applied first. If the applicati~af that paragraph does not result in a limit beyond 2OO nautical moea, chat ends ~issue, and no eubeaquent prmriaion csn serve to extend the pariadiction of the oaastaalState beyond the 200-mile limit permitted by paragraph 1. I' the application. can

Thc Consfncmsol SMf 21

l>rernedorrsf Resources and' Public PoQcy

paragraph 4 does result in a shelf seaward of 200 miles, then the additional iirruapplied in sequence, where appropriate, to establish the final limit.

The only rerorrininl change in the text was to appear in the Draft Conventiorr Informal Text! OX' ' in 19SO. This change, relating to the functionsboundary revue ccsntsdmu~ dumged somewhat the relationship of the ccsnm~with the coastal State. The prior text specified that before setting the final limits tlae'coastal State should "take into acorns" the recommendations of the commintion.the US and the Soviets fait this to be too weak, undercutting the importance Of tlsrscomrnisshan's rtrle. Accoa5ingly, the text was changed to sny that the final limits ~the coastal State must be on the basis of" the cornrninrion'e reaammendations. V~the corneaiaion can set no limits against the wishes of the ccestal State, this change n+Least adds substance to the role af the commirsnon in this procesL

Linked chwely to the question of the outer limits of the Shelf, as previouslmentioned, was the question of raven>~haring on the outer Continental Shelf- V~early in the aegotiations, it bemme abundantly clear that there wouiri be ~consensus on a relatively broad ooastal State jurisdiction over the Shelf unless sorry'form of raven~haring was a part of the package. During the Caracrrs seeion of tlsc-conferenoe, there was httle formal discussion of the package, although proposalincorporating One or ass~ ~~ of the principle were tabled by the US. and ~NetherlandLa' During the Thirti!~ the US. elaborated further on its ideas. ared~ ugpNd a schedtale of payments that would call for payments after the first f~years of production beyond 200 nautical miles. The proposal suggested 1 percent efthe value of production at ths site, increasing by 1 percent each year thereafter trntsI-the tenth year. and from then on at the level of 5 percent. Qlustratively, the V~explained that lMurning a field producing 700 million barrels of oil thrratgh~year depletion period, and amuming a value of $11 per barrel, the total revenaanwould be $140 rniKiion per fMd.» At the conclusion of the Third Session, the SAT

g an artichr which imposed a basic obligation to make payrnerx~production beyond 200 rnoeL 'De rate of payment, however, was left bjnraJs

sin« it did not yet appear that agreement had been reached on this issue.payments were to be made tn the international. Authority, which would also deci~the extent to which developing oountries w'ould be obhged to make such paymen.ta.

The Frsarth Sonorant produced the RSNT which further refined the formttln ~inompotating the five-year moratorium and the principle of an annual iru~ase Car

to the tenth years, but, again, the rare of increase was left blank to he1%7 the I KI appccrolg whisht included the rates prol'Nxsnd

initiaUy by the US. However, diacumhxN durmg that mmiaa indicated subrtsLntastlsupport for higher rats@" In addition, the ICNT intrtxiuced the thought. that adeveloping country which is a net importer of the mineral produced from its Sheik'

be exempt from making payments with respect to that mineralformulation was not popular with some delegations, particularly tha.t of the Uni~States which was of the view that removal of large areas of Shelf from ~reven~haring obligations wouM severely limit the total revenues available Wcxa'distribution.~e A. proposal by the United States that develolring ~ States be glv'aa.an option of nnnaininl within the revenueehreing system, paying in contribratmxxarsand receiving benefits, or of staying out of the system, neither paying nor reoeivimgbenefits, did not receive sufficient suppcet to be insert in the texts.~e The ICI'4T'.Rev, 1, issued in 1979. produced the final version of the reven~haring provisian. Itwaa identical except that the maxitnurn was increased ro amen percent in the ~elf ~year,

Only one or two comments need be made with respect to these pmvisioma Fixsst.the obligation to pay dmtee of raven~ is a coastal State obligation and net cxxas:falling upon the actual exploiter of Shelf rnirMmh. Mother that State wishes to pra~

The Continental Shet f 23

this obligation frOm ita genCral revenues Or pasa it alOng to the explOiter is a matterfor its internal law. Bacause exploitation beyond 200 miles is not likely to besubstantial for some years to come, this is not a pressing problem, and the sumsinvolved will bc small for the saxne period. Second. in the final tert, the obligation isto be paid thxough the Authority" and not to the Authority. This means that theAuthority will serve as the distribution mechanism, but the funds will not become apart of the Authority general. revenueL The Council of the Authority is chargedwith xeconunending to the Assembly rules, regulations and pxoceduxes "on theequitable sharing of financial and other economic benefits derived fram activities inthe Area and the paymeuta and contributions made pursuant to article 82, taking intoparticular consideration the interests and needs of the developing States and peoplewho have not attained full independence or other self~verning status".~language was one of the factors in the United States' decision not to sign thc treaty."

Moat of the other provisions contained in the Continental Shelf chapter arcself~phnatory. Some of the prior pxoblems xcmxun. The language concerning therights of the aaastal State over the Continental Shelf'z was taken flan the 1958Convention, thus the same dcfixutional problems are present, although tlNy axegreatly ameliorated by the intxoductioa of the exclusive economic zone concept. Somefurther commen.t is required, how ever, with regard to the question of instaUations onthe Shelf, previously discussed in connection with the 1958 Gmvention.

Article 80 Of the Convention provides that: "Article 60 applies xxturagQ mgrsxtd4to artificial ialaxtds, instaUations and structures on the Shelf." Article 60, found inPart V of the treaty dealing with the exclusive ccononuc zone, reads in part:

ln the exclusive econoxxxic zone, the ~ State shall have theexclusive right to construct and to authorize and regulate theconstruction. operation and um of:

a! artifidal islandxr, b! ixusallations for the purposes provided for in article 56

and other economic pu~ c! installations and struts which may interfere with the

CXeroiSC Of thC rights of the command State in the Zone.

The ~ State shall have exclusive jurisdiction over suchartificial iahuMhL, iastanationa and structures, includingjurisdiction with xegazd to customs, fiscal health, safety andimmigration laws and xegulationa.

Duc notice must be given of the coxxstxuction of such axtificialislands, installations ox stntctuns, and pextmutent means forgxvmg wqtxxung of thetr presence must be maintamctL Anyinstallations or stxuc~ which are abandoned or disused

shall be removed to ensuxe safety of navigation, taking intoaccount any gcnexally Nxeptcd international staadaxdsestablished in this regaxd by the competent internationaloqexuzation. Such removal shall also have duc regard tofishing, the proteron of the nuLrine environxnent and therights and duties of other Statea Appropriate publicity shaHbe given to the depth, position and dimemdons of anyinstallations or structures not entirely xexnovcd.

J~~foncci ~scsucsc grus pggfc Policyand srructures do not possem

They have Do terrttor151 sea of theirpreseltcs does not affect the delimitation of the

sea the exclusive economic zone or the Continental

specifjcaliy addresses sonic of the problems raisedplace, the scope of the provmon was enhegg t

i~ gjving the coastal State tile clear right to construct thetn gg~ on over them. This jurisdiction is not lonited to artificial isjatuh

row~roe pur~ nor is the right to construe't them~ structures, however, the right to construct them is limited to thon

for th, purpcsss provided for m article 56, and reference js nuuje t,'ves Article 56 assigns to the ~ State sovere1gn rights~ fur

of, Qatar ccgg, the seabed and subaotl Gf the escluav,conmrtent with the provisions of article 77 which gives tha

ts over the Shelf for the purpose of ezplorjng aniits natural resntreeL I't would ~ therefo~ thst in th18 CDB.ventjoa,

in I95g, the right to constns t installations or structulc54 and to ezercjse jurudjctioaover them remajjcs a right related to natural resources, as clef jaed by the trtslty, Theexercise of awstal State jnrlsdictsm over insufflation anci structures would have, oflaura important military oonseciuenccs, and for that restson, the language of articj60 was deliberately and carefully drafted. The coasted State would not havejurisdiction over instaUatjans and strucnuea, either in the economic zone or on theShelf having such characnmistjcs.

Ths language concernmg the tarnoval of abandoned or disused installationsstructures js changed in the new Canventian. No longer is complete removal ~ujrniThis change is in response to the new technologies developed to establish structure iaever deeper water at high costs. It was argued that complete removal may not bcno~i to safeguard navigation, and the costs would be prohibitive. Accordingly,the language was chanel to tsciuire remtwal only to the degree necessary "to ensuresafety of navigation," and in conne~ with such removal, the ~ State stsciuirad to take into saint I@a@rally accepted international standards established bythe international Maritime Organization 0M'. The development of such standanja,however, i ~ not a precsmdition to the duty to anncnre, but they would be useful iae~ the coastal State m ascertainjng the kinds of structures to be removtd iavarious locations, and the degree to which they must be mnovecL It would leimportant to remember, however, that I't was always undl~~ that the"navigation" includes submerged navigation, thus that factor should be consbheralwhen Slaking these declsjonL PrelilBHNry djtCLMlons had begun among indelegations with regard to a subntission of proposed standards to IMO. It is to lehoped that these discustions would oontinue, and that MO would take early accjtnon any proposals that might emerge.

The final new pre~on of imp ebmce that etnarged in the new' Convention wssarticle 83. rehLting to the deiimitatjan K the Continental Shelf between States withoppcsite or adjacent coasts 'nus new pnmision states that delimitatian shaH baeffected by agreement on the basis of international lsw, as referred to in article 3$ efthe Statute of the International Gssrt of Justice, in order to achieve an equitshjs

~ history snd sseatunl of thts prcrrtsson. ts lang and complex and has bacathe subject of other meetmgs. It will not, therefore, be discuss' here. Suffice it tsmy that there is considerable jurisprudence on the subject

paper, in which I discuss questions arisingUnited States has not bcQRHc a signatory to the Convention

fme ?What will her policies be.

VS, SSM& LICY AS A NON-SIGNATOIIY

The outlines of future U+speculation.

'*" vep ~gr'h ~~ interesie and ~,

most 0well the mterests of all nations

the Press Secretathe Whiteproclamation o o uc Zone on March 10 1983

The President has ahs ~big that the United

prepared to accept and act in ~~as reflected

Convention that relate to traditional uses Qf the occLl% such ssnavigation and overflight. The United States is willing torespect the maritime claims of others, including economiczonea, that are oonsisitent with international law as reflectedin the Convention, if US. rights and freaks in such areasunder international law are respected by tbe coasted State.

With specific regard to the continental shelf. the Fact Sheet states'

Since President Trurniin proclauned US. jurisdiction andcontrol over thc adjacent Continental Shelf in 1945, the US.has asserted sovereign rights for the exploration andexploitation of thc rescerces af the Gmtinental Shelf,Fundamental supplementary legislation, the Outcr ContinentalShelf Lmds Act, wss passed by Congreni in 1953. ThePresident's proclamation today incorporates existing jurisdic-tion over the Continental Shelf.

read together, may on first glance appear %snewhatoantrehcbmy. The comment with respect to the Sheif seems to suggest that thecontinuation of US. policy toward the exploration and exploitation of the reicsuum ofthe Shelf relies for its legal foundation upon the Truman pztclamation. and.presumably, the 1958 Continental Shelf Convention, to which we are still a party.Iu the stra~ legal sense this is correct. Vfe are not bound by the provisions of the1982 treaty, but we are bound by the 1958 Convention. ln addition to the degreethat the 1958 Convention reflects custaamvy international lsw. that prides an

legal f~twr In a re t letter,~ U~ Secre~ of Dcf~ Fne Cljtle stated. -we are sll working for the sazne objective-maritime stability, aod we

full agreemcnt that the best way to achieve that objective is to reinfcseamsry international law status of the Convention's non~bed

+" The belier yolky declaration with regard to the non~beds provhaonsof the treaty. however, wraild seem to suggest that the US. ia prepared to respect thenew treaty with regard to thc Shelf, and will rexignim claims by others based uponthose provisions,

l¹rsrruxrfo¹csl Rexarraes cx¹d Ptblk Pottcy

The distinction between relying on the 1958 Convention and theQxnvention coul@ if emptuuized, be significant for the development of US. policy azthe serac that the definition of the ou.ter limit of the Shelf under the latter is xn~restrictive Adherence to the article 76 approach to that definition would mean ~+the UX presumably would abandon any intention of claiming the "last grain~ and," a clsuxn that arguably could be supported by the 1958 definition. Howe~~fxom a policy perspective, it is not xusceasary to make that choice. Clearly the 19S~definition is compatible with that adopted in 1958, thus the US. even if it fonmX>>relied upon either cusbxnary international law or the 1958 Convention as its IegsaIbasis would be free to shape ita claim in a way that is consistent with article 7&. I-~many xssscma, it would be wise to do so. As the panel on the Law of Ocean U~recently advled. the United States should refrain from making any claim excecdj~article 76 limits because failuxe to respect that definition would create uncertaixa~engender dispuxss regarding the regime of the Shelf, and would have the potential ~inviting disrespect for other limits and rules set forth in the Convention. This m~+disrupt the stated objective of reinforcing generally the customary law status of ~non~bede provillions of the treaty. Since the article 76 definition is generatesenough ro protect at least doxneatic production of Shelf xninerals, it would ~foolhardy Ch risk disruptNa of other areas of the law of importance to US. natio~intersata for a alight or xruxhmate incesase in Shelf jurisdictioxL

Another qucaltion the US. will have to answer, although not in the near future zswhether it can, or ~ avail itself of the arvicea of the boundary re~coxnmimion when, and if, that oornxoission becomes operative. It is xny view, as to ~fixst cluestiosx, that it can. WMc the US. i ~ not a party to the Convention, nozsignatory, the proviNons of the Gxnvention and its annezcs dealing with the sub~are not iiluited CO States parties, but instead speak of submissions by @metal Stalea-Thus the services of the cosnmimion seem to be open to all ~ Statea, whe~parties to the conventiost or not. This interpretation would be omuxomt with ~purpose of the eonLuxiMan, which is to provide stability to the dexxsaxcation~ietion between coastal States and the International Seabed Authority. Gapecreated by preventing nonsignatories froxn making subnusaions would not serve ~purpose

>ith regard xo the cluestim whether the US. shard make such a submissacm4there axe two possible points af view. It could be argued that utilization of ~cosnmimirm, in the light of its objectives, might constitute an indixect re~nitionthe lsgitinxacy of the deep seabed rqpxne, a concept rejected by the US. On the ot~hand, interxLatinaal review of U8. bounciaries would be in the interest of the U& assthat it would act aa arne restraint on extravagant claims of other States, and wc~give potential Lnvmtaxa in activities on the Shelf a measure of security. On balaxM-ethe opportunity to utilize the eomxnMion should not be rejected out of hand. XRhcdecision need not be made now, and, if the retluired ratifications axe not obtaixusd, ~question wUJ of coum be moot.

HN Question of US. policy tolMLIsl revsnQcHlharing is much more difficLLLC.Again. however, there is no urgency in addressing xhe i've. Yet ita implications E~overall lory and strategy is important enough to begin worrying about it.

back on the conference, it is clear that there would have been no consensus c%1the outer lixnita of the Shxdf, if there had not been oorxosl!qnding agreement eelxevsn~risLg. %hey were an important "xnixu-package" without which there tom~have been no consensus on the treaty as a whole. If the United States is serious a~tgiving c1edea& to the non~bed pxovisicsxs Of the treaty, either as customary law csremerging or cry' ' lng custcsnary law, it wouM be eztremely difficult topiecemeal selecting sosne pcutasos and xejectiag othexL Tedummlly, of course. Xtmight argue that some provisicsns, being contractual in natuxe, like the duty to xxLsa3te

TAe Gmti~xtral Shelf 27

payments, cannot become customary law; While this might be appealing on thepurely technical level, it may be bad policy.

On the other hand, the concept of distribution of Shelf revenues is closely tied tothe concept of sn international authority, an entity the US. would not wish torecognize. In that sense, there may be political resistance to US. participation in anyrevenue-sharing scheme. In weighing these considerations, the Panel on the Law ofOcean Uses con~luded that the U8, should accept the principle of nven~ringbeyond 200 miles, on the theory that fi6uxe to do so might create uncertaintyregarding global recognition of US. title to seabed minerals of the Shelf seaward of200 xniles sufficient to deter or slow investxnent-

lf the principle of sharing is accepted in order to advance the entire package,eventually the question will be raised ss to the mechanism that would be appropriatefor doing so. Again, this issue aced aot be addxessed for some considerable time in thefuture, but a few options do present themselves. Obviously, the US. would not wishto make payments through the Authority, aa called for in the Convention. This isparticularly true became of the reference, previously mentioned, to aon-self-governing bodice One option for the United States might be to approximate thetreaty as closely ss possible through the utilization of normal foreign aid channels.The Congress, ia appropriating monies for foreign aid could take into account thelevel of exploitation on the outer Shelf along the lines of the formula contained inthe treaty. While such a mechanism would not satisfy the specific provisions of thetreaty, the US. would not be seen as reneging on aa esseatial part of the package thatwas carefully negotiated.

The ixxxue of ixunallations presents no poHcy decisions for the UK It must notonly exercise jurisdiction in accord with the treaty, which it will because it is in theUS. interest, but it must insist that others do lBrewise. poHcies with regard to theconduct of marine scientific research on the US. Shelf should be developed in a waythat do not invite more restrictive such policies by other countries.

CONCLUSION

In this paper I have attexnpted to briefly analyze the evolution of ContinentalShelf theory, to discuss the way in which the Third United Nations Law of the SeaConference addressed certain definitional questions, and to make some xe~enda-tions for future UX Shelf policy. Whatever the future of the treaty itself, there waswidespread reaagaitioa throughout the confexeace with respect to the acceptaMityand the desirability of the rules reflected ia the noaseabed provisions. Whetherinternational law aow requires the application of any of them. these rules areworkable and practical, and provide an excellent basis for the development ofnational policies on a global sade

I view the shelf provisions of the treaty as a major key to the whole package-Surely, ao deep mabed regime, whatever its content, could have been agxeed to in theabsence of a clear understanding of the extent and Nature of ~ State jurisdiction.Oil and gas remain, for the foreseeable future, as important ~ State xeeurces,and thus a resolution of these problexns was an emntial prexequjsite to the conclusionof the conference and adoption of the treaty. Cmetal States, whether sigaatoxics ornot, must undezstand that to depart in any significant way from the rules containedia the txeaty will only result in destroying aay hope they might have for globalrecognition af the extent of their own claimL We will then xeturn to the greatoffshore land grab, with all its attendant difflcultieL

InternatkeLrrL Resources and Pubmc POLLcy

NQIKS

Grrford, T~ ContkMrLtaL ShcLf 1910-1945, 4 McGill Ll. 245 �958!

ln c letter to Mr. F~ Newton dated Sept. 10, 1918, Second A 1atant Scc ctaryof State Adce stataL the United States has no ju.risdiction over the oceanbctrom of thc Gulf of Merico beyond the territorial waters adjacent to the coastTherefore it docs not appear possible for the United States to grant you thelcsscbold of other propert rights which you desirc." 2 Hac3rworcb, Largest afIntcrn4rN~ Law, 679 �940!.

4 Whiteman, DfgcA of I&ernctional law, 752 �965!.

Presidential ProcIlaamtion No 2667 Scptcmbcr 28, 1945!, 13 485 �945!

4 %hite House Press Release, September 28, 1945, 13 Dcp't. State BuLL 484 �945%

For a listing, see Knight, Lmv of the See, pp.9-28 �980!.

�951j Inl'L L Rep. 161-163 Na98!.

~ Reproduced in 1 InA 4 Comp~ �952! 247, 253-260.

~ Far exajnplc: 'tw]h6a the unilateral declaration of chc United States [the TrtarnacrProcbLnra~ cannot in itself create any new rights or any new ruins trf'intarnatkaal law. ic may be regaled as providing the seed from which ench-righta and rules may grow. it ia submitted that general recognitionatMcance by states may perfect the rights chimed by the United States aarsgestablish new rules of international law based on the doctrine of the con~shelf." Vallct, X'he GontincstcL SMf, 23 Brit.YZ. hat'1 Law 333, 337 �946!-See, also, NecIorandust crt the Regfme of the B'Lgh Seas, prepared iry tbspSecretariat of the Urutel Nations for thc International Mw Gornxnisaion UW-Doc. hfCNA/32X1950!; Arudnoa, The Coetkceetal SheL f and ParM4clatenMQnud Xeno, 140, 143, �953!.

Coeventiocr an the Omtincntal Shelf. 499 U2l.TA. 311, 15 U5.T. 471, TWAS. Na5578.

North Se» Gmtinerrtci Shelf Ccece, �969j LCJ. 4.

For more of this history, see Study Prepared by the Sccrctarkrt of the UnkyJVcttoae far tht Ad Hoc Grssvaftrce to Steuty the PeeccfuL Uses of the Sce-BeefBryotug Ae Iknfte of Rational JrrriedLctLpn. U24 Doc. A/AC135/19, Amc 2X,196L

Far the purim of these articles, the term "continentalshelf ie used as referring a! to the seabed and subsoil ofthc subrnarhle areas adpecnt to the coast but outside theare& of 92hc territorial sca, to a depth of 200 meters oz,beyond that limit to where the depth of the supcrjaccntwaters admit of the cxplai1acion of the natural remuxccs

Thc Contfncntal Shelf 29

of the said arearr, b! to the Seabed and subaoiLl of similarsubmarine areas adjacent to the coasts of islanda

Supra, note 12.

For further discussion, see Sdcntlffc ConACcratlons Rebring to the ContinentalShd f, Memorandum by the Secretariat of UNESCO, US. Doc. A/CONF.13/2 andAdd.l September 20, 1957.

This waa the view of the ILC aa reported in its cotnmentary to draft article 68.

See. in the regard, the Convention oa the High Seas, 450 UNITS 82, 13 US.T.2313, TLJLR No. 5200.

33 USE. 1331 ct st.

33 UAC. 1333 a!.

33 USC- 1333 e!.

423 F24 16 �970!.

602 F2d 1228 �979!.

33 US@. 1501 ct seq.

Citations are to the 0 f ftckrl Text of the United Natfons Conventfon on the Laxof thc Sce Annexcs end Index United Nations, N.Y. 1983!.

See Reports of the Unltcd States Delation to the TMrd Unkind AatknsConference on the Law of the Seer, The Law of the Sea Institute OccasionalPaper No 33, Nordquist, Ed at 72. Hereinafter cited aa Report!.

Rcport, at 98. 128.

A/CQNFA2/WP.8, 7 May 2975.

A/CQNF.62.WP.S/REV.2, 6 hCay 2976.

Report, at 176.

A/CQNF.62/WP.20, l5 July 1977.

Rcport, at 210.

Report, at 334.

A/CONF'/WP,10/Rev2�21 April 2980.

A/CQNF42/WP.20/Rev@ 22 September 1980.

Report, at 72.

I~srnatkmal Resources and PabNc PoQcy

gyp', at 99.

yr ggpggf, at 1 76.

gepcrt, at 150.

jtsppfC, at 336.

Convention on the Law of the Sea, Artide 162�XoXi!.ln the Fremont's staterncat of July 9, 198?�announcing his decision, one of ~gems" cited. was "stipulaticns relating to mandatory transfer of privsL~technology and the posibility of national liberation rnovcrncnts sharingbenefitL" This concern w'as articulated mpzc strongly by Arnbmudor Ja~hbdcee before the House Foreign, Affairs ConUnittce on August 12, 1982. He said=fhe convention would allow funding fcr national liberation groups, such. as ~

Paleatinc Liberation Organization and the South West Africa People'a Orga~ticn

Convention on the Law of the Sea, Article 77.

Letter to Lotus Hen3Ul4 ChIlrrDI~ PIUlcl Qn the La%i of Ocean Uses,September 1984.

See Convention an the Law of the Sea, Article 76 8! and Annex Il.

Aspects oC Public Eh~eurce Policy in the North Sea

ALASDAIR MelNTYREDbector of F/sherries ResearchDeparrrssnr of Agrfadtere and FbhcrksTorry, Aberdeen, Scotland

INTRODUCTION

Wc are concerned at this conference with the resouxces on the Continental Shelfand related problems, among which axe the need to balance conflicting interests andthe impact that new developments may have on established yracticeL Miscontribution is focused on the Shelf of Western Eumpe and. particujaxly around theUnited Kingdom. The resources of that area arc obvious and well rect~3. Theyinclude fisheries with an annual yield in the North Sea alone of 3-4 million tons, andml, of which 2 1/2 million barrels pcr day were brought out last year makingBritain thc sixth largest producer. Thexe are also other xninerals although ofconsiderably less importance � sluxd and gravel, coal, and potash. ln addition, lookingat the concept of a resource in its 'teoadest terms, thexe ia thc use of the sea for wastedisposal, transpcet, recreation and defense.

I:~ands on these diverse rexayus~ from both public and private sectors arecomplicated not only by conflicting interests within any one country. but also bydifferences in international attitudes and xequirenMnts. While it could not be claimedthat the North Sea is unique in this reelect, it is undoubtedly complex in beingbordered by seven different countriea ~ complexity is enhanced by the existenceof the European Economic Community which, while in onc sense providing acoherent framework for expression of joint policy from many of the countriesinvolved. adds another layer of negotiations which must be penetrated in attemptingto resolve resouxce management issues in the North Sea.

This brief contribution does not attempt to cover the field in a comprehensiveway. Instasd, it ermines the most obvious of the problems � the impact of oildevelopxnent, and in particular, the Scottish experience on the potential disagreementsbetween thc txaditional fishing industry arxd the xequirements of offshore oilezpioitation. Much has already been said and written about this. Activities began inthe North Sea during the early 1960a with ~ernie pxetyacing, and 1964 brought thefixst full-scale work We thus have over 20 years' ezpcxienoe in the area, and thisdoes seem a good time to consider just where wc stand.

~~ g ~s atuf Put4c PoNcy

SCKX~X!NOMlC CONCERN

>~ to the detailed discunnon of the interaction of oil and fisheries, iCmay 1 ~t +, look for a moment at the broader issues of North. Sea oR

< Th background is that in recent years, half of the world's resources afOf f shura ~qg~pment and man puwer have been dep lOyed in the North Sea, mostly iit

To deal wich the oil we need a wide range of facilities-pipelirtes, ~s processing plants, storage, distribution and export instaUations, all on n.

~ve scale. lt waa, of course, reogputW that the discovery and development of ai1economic and environmental conflicts. On thc socio-economic

~ ide a ma~ concern was that the sudden ezpansion of activity w'ou.ld havedamaging effaces particularly at the interface between land and sea where oil warsbrought ashore

hss not occurred, l believe, ~ co careful planning long before the oi1began to flow, After a stLsdy of the entire ccsLstline of Scotland, specific conservation.

where oil developments would not be encouraged, andpreferred development zones were indicated where it was proposed that the OLlindustry ahouM seek to confine its onshore facilities Fig. 13. Where the oil waa leciinto the coast in areas of relatively low population density, the policy was to iselatetha main oU-related activitm ~ in selected areas ao that there was rninimurn.disturbance of the Lccal ~tion.

&us, in the Orkney Islands one relatively small area was proposed for oi1operations, «nd, in fact, the nil reception terjninal was located on an island close tobut weU separated fmn the main two Uohnsbm, 1981!. Further north, at theShetland isiands, with a normal population of approximateiy 17,000, the tenxunalreceiving arne of the oil from the richest fields in the North Sea is built weE awayftesn ths capital, Lerwtck Penwick, 1981!. It is worch noting that this She~terminal at Suilom Voe is the largest oil transit port in Europe, constructed for acauaetiLun of 30 orr companies, cclcing over f800 miUian and handling lA rniXUorabarrels of aU per day fxtma ten separate oil fields. One potential problem arcse frorrathe massive influx of immigrant labor for construction work This labor force was~ ccosnnedsted either in cruise !hips mot>red in the vicinity or in speciaUy buil<vUilqea, weU prOVided but tempOrary, which, nOW that the cOnatructiOn phaae iSover, have been taken doom and the land returned to its cxigim6 use. The nraira4Ntinl impaCt it Shetland has turned Out tn be a significant improvernerat iD

by air and road, in harbor facilities, and in education and sociaz~ ctivitiss but the ~tiai chanacter of the community has not been c4unagecLA similar favorable situation holds where oil was brought ashore or handled ora

tha Scolaiah «talniarui near huge towna. Here, careful planning and landscapingterminals and rensption facilities has resulted in the minimum of impact along theuuasta. Thus the pipeline frtmn the Forties field makes its landfall north of Aberdceraand ountmuss overland to Edinburgh, a distance of more than 200krn. with littleattention drawn to its fuessnce. 1t jains a tank farm in the Edinburgh area which irslO the tanker terminalhuuhsnpsd ahnnst to invtsiboity frosn the public view. and the underwater pipeline~~~ uf ~ in th, F~Offshore means that no undue gmmninence is given to cd

it aaedls leaaunabie to conclude then, after more than a decade of oQ exploitntiorr~t the pckcfea in relation to sceioe~omic ~ of offshore oil.

iepeet hich initially Was a putential cause foafsrct an the marine environment. The UX. policy in

Aspects of PuhQc Policy ka thc North Sca 33

Preferred conservafior, zones SHETLAND

Preferred

WESTISLES

0 40 $0>a

Figure I. The Scottish conservation and development zoncc foroil huluatry activity. Chashorc oil facQities are encouraged indevelopment cones and discouraged in conservation nones.

field in the carly days was dear � to develop North Sca ail with the speed required bythe nation, but at the same time to harmonize ixMinstrial and cnvironrnenM interests.

This policy of environmental protection was and is applied through the wholespcelxum af oil operations. On the purely pollutian ade, a formalized frsxncwork. of1cgishtioa haa been developed which amtxois efflucnts Johnston and Morris, 1980!,and procedurec for dcaUxq~ with spilis and incidents. In a more general amtcxt, thepolicy require careful specification of all equipment afnd tcchnical operations and

94 Iws~�~g ~ces arad PuRk Pc4cy

rigoxous and enforcement of regulations. It hss resulted in thebB~~t of codes of practice tailored to individual areas, so that oil-related

axe ail conducted in a way which xninixnires impacts and interference with

f iaheriel~ components of one of them, codes of practice, applying to the inner part af a

1 ~ bay on the Scottish east coast is shown in Table 1. It deals with everythingf xoxn the ixutiai misnuc surveys through to the clean-up of supply vesml routes and»eral good housekeeping practiceL I wo~ld not suggest that this concern for

and the marine environment on the part of the oil companies wouMny~arily be enthusiasuahHy maintained without continuous surveillance andpxemuxe, but in the ezisting cixcutxltances the concern does ezist and it is effective.

is partly achieved and focused by a consultative group of government officials,ustry repmentatives and fishermen which meets at frequent intervals and

examines common pxoblemL A. major part of the grou.p's activities is to considerimxnediate problems causing conflict between the oil and fishing industries.meetings serve both as a channel of communication and as a safety valve and they doised to the making of ezecutive decisionL In particular, there is the considexatmm ofI<m or damage to fishing gear, and lom of fishing tixne attributed to oil-relatedactivities A fishing shipper who feeh he has leeca due to offshore oil operationsmay claim for compensation. Over the past ten years, the nuxnber of such daixns hasbeen around 90 per year with sn overall annual compensation of about {9G43!I.150,000,

Table 1

Components of Code of practice BetweenFishing Organizations and the Oil Industry.

Appointment otf cooxdinating officerNotification of miamic surveysDrUling pxopcna]sI:lriUing in progressSettlement of claims

Fast~ling ratlulrnment3Suaymded wellsBuoysSupply voeelsCleaning up of supply routesSafety xonsa&xC houxs~JIIRplng practxoss

A number of other items earned, in the early days, likely to cause problexns. Theof ezoem gas, for example, was much in the headllxusL, 'Hm control of this

was of muxse. a major policy ixssue, since it represented a significant lass of energy,but it raised other iauea as welL Aaboxe at the termixude thexe was an obvious

nce in the foxxn of sooty deposits, to heal residents if the flare was not burnedpmperly. whDe on the platforxns at sea it was thought to do great damage topopulations of migrating bixdL But studies shcrwed that concexn for the latter wasunfouxuled and careful xnanayment of flaxe conditions on shoxe xemaved the soot

Abso, it was felt that ths greatly ixs~ed traffic in supply boats to and.

Aspects of Pubic Polky lrt the North Sea 95

from the offshore installations would so disrupt the harbors that fishirrg would beaffectecL Again, this fear has proved to be exaggerated, and it has been possible todevelop harbors to accomraodate all needs. Indeed, it is interesting that the changingpattern of fishing activities in recent years resulting largely from the establishmentof 200-mile EEZs, has led to a northward shift in the center of fisheries in the UX..so that now the major ports are in Scotland. Indeed Peterhead. one of the smallertowns north of Aberdeen, has aot only thrived as a result of oil-related activities, buthas also so extended its fisheries that it has become the top port in Europe.

It is of interest that whea exploitation of oil started, it was felt by many that asignificant early conflict with fisheries would develop in terms of marine pollution.Now, many years later, it is clear that this has not so far materialized and it seemsunliltely to do so Since driving started there has been one rnapr weHhead blow-out in the Ekofisk field! when some 30 thousand tons of oil were lost, and a largenumber of minor spills have been recorded at sea and around terminals, but theunpact has been negligible. Apart from direct pollution, the other major source ofconflict between the oil and fishing industries which I have already referred to, wasthat of interference, since there is no doubt that fishermen are at a disadvantage fromoU rigs and pipelines disputing their use of the seabed, and from oil-related debrisdisrupting their activities. This interferenoe, however, has not assumed theproportions that were expected' and it now seems to be accepted by the fishingindustry that the various mechanisms which have been set up at the interface of oilaad fisheries to ahem problems, to evaluate claims and to provide compensation areeffective.

It should be noted that the consultative group not only deals with currentproblems but also looks ahead to identify future ~ One mspr matter that is atprerent attarcting attention is the treatment of abandoned pipelines and offshoreinstaUations at the ead of their effective life. International law, in the form of theGeneva Canvention of 1958 and later, some provisions of the Law of the Sea, requireremoval of abandoned installations to prevent unjustifiable interference withnavigation, fishing or other raruriae users or to avoid pollution. Studies underway atpresent suggest that all ahaHow-water platforms will aced to be; totaUy removed toinsure safety of navigation. It will probaMy be cheaper to remove deep-waterconcrete platforms entirely, but deep-water steel platforms could be partiallyremoved by cutting and dismantling. However. there is the pasnbility thatabandoned insrtaUations may attract and concentrate fish and shellfish and studies areunderway to exarrune the advantages of maintaining selected units. Pipelines, ofwhich there are more than 180 ia the North Sea extending to over 3000km, would beeither totally removed or trenched and buried 'Ae crete of platform removal arecahuhted to be aboLtt the same as instaHatioa costa, while- mnoving pipelines wouldrun to one-half to two-thirds of their cost of installation, so substantial financialconsicleraQoas are involved. progress to~ Lgreemeat on removal polÃles weal beanother measure of the srao~ of the oonsultatioa.

As a result of these interactions, the tension that originally existed between thefishing and oil industries hss been replaced by a mtrtual respect and by cooperation tosolve problemL WMe there has so far been ao mapr confrontation, the price of thissatisfactory condition, as already noted in the context of interferea~ is men asconstant attentioa. 'Hm situation is a dynamic one. Novel approaches and techniquesare always being introduced, aad as the wells mature, the nature and volume of theirefflueats change, so that new problems emerge. It may be instructive to look indetail at one of the current issues aad how it is being resolved-the use of drillingmudrL

Irrrernsrio~ ~scstrces aruf Pd4k Pogcy

gIIL~Q MUKlS

Dripping muda serve several functions in oil exploitation � they provide cooling,lubrication and hydraulic power, their weight helps to control reservoir pressure sndthe sock cuttings are brought to the surface in the mudf low. When muds alang withcutthqp are xetu~N to the platform, they are subjected to various treatments taxseparate the valuable xnuds from the cuttings. The rnuda can then be re-used and the

from water-based mud operations returned to the sea, along with anyresidual mud- Bre envirorunentai effects of this disposal have been documented ixxearlier studies in California and the Gulf of Mexico which show that large quantitiesof mud and cuttings disposed of around riga have an immediate smothering effect onthe bottom Fauna bu.t that pOes of the material eventually become colonized byburrowing and enc~rting organisms, and constitute a viable habitat. More studies, anthe east coast of the USA, confirxned this Menzie et al 1980!, and in particular thework of M u er ct aE �981! on polychaete feeding guide suggested significantadverse effects would not be expecterL

[n the early drilling in the North Sea, muda were suspended in a water base, bELtthere are several circurrsrtanccs in which an oil-based mud offers substantialadvantages over a water-based mucL For example, nmne roc}c types can absorb waterand swelL causing instabihty in the bore hole. Oil-based muda combat this and alsoprovide better lubrication and speed up the drilling operation, particularly in caseswhere deviational rather than vertical drilling is rerluired, and eapeciaHy in deepwater. For these reastms, there has been an incxeasing preference for oil-based ratherthan water-baaed rnuda lt became obvious in the North Sea that while xigorousaontrols were exerted an. the concentrations and amounts of oil dischzLxges in watereffluents, much larger quantities of oil were getting into the environment via thedisposal of muds Fig. 2!. Thus the final washed cuttings xeady for discharge maycontain 6-17 percent weight af diesel oil Blsckman ar sl 1982!. In 1983, of 223wells drilled on the UX. shelf, 65 used oil-based muds so that about 18,000 tons afail w'exe discharged aaexmted with the cuttings Daviea et ol 1984!.

S~ in the North Sea show that the biological effects of ail-based muda dependon the hydrography of the area and on the way in which dirrpeeal had been opera.ted-ln general effects detected were an the benthic macxcAuaa with the elimination arsevere reduction of anirxrals close to the discharge and a clear gradient of effect awayfmn the ~ter.

'Bre conclusion from detailed studies in a range of North Sea fields ia that thefirst 50Gm around a rig discharging oil-based mud shows a strongly affected benthoswith ail in sediments at 1000 times the badtgxound level; 200-2000xn is a transi~sane, and beyond that there i ~ no abeevred effect, although out to about 4QXmhydrocarbon Qvela nay get up to ten times the backgrouxs5 level. Ne axe thusdetecting an effect on benthos in the Son xmm round these riga.

Aa a result of this work. it bo~re clear that the existing regulations to controloily discharges required xeriaion. In November 1984 the UX. Departxnent of Enerpir.the government departsxaat xeapcesible for the offshore control af xiga, brought intooperation an amerrdment to the Prevention af Oil PoHution Act 1971, so that it isnow an offcnm to discharge any oil used in oil-baaed driUing muda on the UX.Continental Shelf without an exemption from that deIsrrtxnent Bre conditians uxrderwhich an exemption will be issued prohibit the discharge of whole rnuds, require theuse of efficient solids aantxol equipxnent for lmv toxicity muds, and specifyadditional treatment ssIuipment w'hexe diesel based muds are used. Aaalyses of theoil content of dialed cuttuqp are required, and an approved toxicity test must bcconducted on both the whole xnud and the base oil befoxe a low toxicity mud is

Aspects of Pub& Polky ln the North Sea 37

TOTAL APPROX 44,000 TONNES PER ANNUM

based upon Royal Cornrnission 8th Report!

Figure X Estimated Annual OQ Input to the North Sea rlO' tonnes!.

acceptable. Further, a defined seabed sampling pro~paxn must be approved andundertaken befoxe ail-based muds can be used in all but single exploratory well+

PROBLEM SOLVIMO

'IMs approach to the cantml of oil pollution from driHiag muds in the North Seais new and we have yet to arserN how effective it will be. ever, in the oontextaf our discusLians this morning, l think the interestin feature is the

new regu tions were developed. First government ~tists rec~initM inthe incroraing use of oil-based muds a potential source of pollution. A group ofscientists from ywerruerent and industry then worked together to pmduce anobjective asrersrment of the problem. A xegulation that would minimize damage tothe marine environment but would permit the use of non-water-based muds w'here

8 r~~mm Jt x~~s ~ ~ Pm

~nxary wss established, thus producing a reasonable solution and xnixuxnilingbetween different in.teresta.

In conclusion, I would say that through constant attention to detail by allo~rned aud the maintenance of open channels of coxxnnuxiication, it hss becxiable to pcrmi't thc oil industry to establish itself in the North Sea and to developwithotxt maJor impact on. traditional activitieL

Blscltxnan. ~ Filetxian, T.W. and law, ILJ. 1982. Oil-Based Milling Muds in thcNorth Sca: The Use of Alternative Base-Oils ICES CM 1982/B13. 8 pp mimeo!-

JM�Addy, Jhl�HhMxnan, ILA Blanchaxd, JJ4 Ferbrache, J. E, Moore, D~Soxnerville, KJ�Whitehead, A. and WiHtinson. T. 1984. Environxncntal Effects ofthe Use of Oil-Based Drilling Muds in thc North Sca Marine Pollution Bunedxi1S. 363-370.

Fcn~ck, M. 1981. Shetland and the Building af the Sulloxn Voe Crude Oil TexmimxLProceedings of the Royal Society of Edinburgh, 8OB, 7-15.

Johnston, GS. 1982. The Hotta Terminal and its Effects on the Marine Environment.Proceedings of the Royal Society of Edinburgh, 8QB, 341-354.

Johnxxton, GS. ancl Morris, IU, eds! 1980. Oily Water Discharges � Regulatory,Techxoml and Scientific Consideration. Applied Science Publn�London. 225 pp.

Maurer, D Laathexn, W and Menzic, C 1981. Kc Impact of Drilling Fluid and W'cliCuttings on polychaete Fcedixg Guilds from the US. Northeastern ContinentalShelf. Mar. pollut. BulL 13, 342-34'7.

hkmsie, CA�Maurer, D�and Leathern, W. 1980. An Environmental Monitoring Studyto Assess the Ixnpsct of DriIIing Discharges in the Mid-Atlantic. IV the Effects afDrillling Discharges on the Benthic Coxnxnunity. In Syxtposfuxn on Zcsaarch onZnvkarutantcd Fata and 8 f facts of DrQQeg F4fCh axxd Cuttktgs 21-24Jan uaxy.

Aspects of Pubic Papacy in the North Sea 39

HOLUS D. HEDBKRG

Professor EmcrfsusDtpartmcnt of GeotogyPrincetort UniversityP~on, New Jersey

Professor Kaah has very interestingly suggested that offshore leasing should becarried out in two separate stagerc exploration leasing and production leasing. Thishas been a common procedure with petroleum concessions abroad but might havesome problems in application to the US. offshore. I hope that in his written paperprofessor Kash will indicate more specifically the mechanisms he would proprsreunder such a procedure for: �! the competitive award both of exploration leases andproduction leases; �! for providing the winners of exploration leases with sufficientassurance of production rights to give them an adequate incentive to spend the hugesums necerrsary for exploration; and �! satisfying the customary desires af thegovernment and the public! for large initial bonus payments even before grantingonly exploration ~

PABT TWO

InternatiomQ Boundaries:

Impacts on Shelf Management

The subject of this session concerns the impact of international boundarydelimitation on the management of Continental Shelf resources-ieracs that are criticalto oux continuoi successful development of the shelf's mineral vrealth. Thesequestions udge on their importance for one rather straightforward reafxon. lf we axeto develop effective, if not comprehensive, management strategies for the Continea,talShelf and its resources, it is necessary to be able to characterize the nature of those~xa What are the xesources, where axe the boundary, and to whom do theresound belong? Since substantial. xeaatrccs are located in axeas of bcsnu~r dispute,it is easily argued that a determination of such boundary is a prerequisite to theraticnal eVallxatiOn Of xnanagexnent strategieL

However, thee are not issues with the pxomise af easy or early xesoludoa. Theyraise campier and difficult questions of legal interpretation, his@eric use, andxntexrLational politica Farther, given the number of unxoelved boundary dispu.tes,the axnbiguity of the shelf provisions in the United Nations Convention on the Mwof the Sea, and the set of rather intxiguing rulings handed down recently by theInternational Court of Justice, it is also clear that thee issues wiII xexnain for ourconsideration for some time to coxxM.

To discuss these issues, we have a most distinguished paneL

ROBERT BOWER

EnvfronmentaL Sonance ProgramUniversity o f Massactuaexxs

Baston Harbor Campus%eton, Nassachuxsxxs

Delhniting Continental Shelf Boundaries

LKWlS M AL&~~ER

Dtrector

Gencer for Chan Iifanagernevtt StrafesUniversity of Rhode IslandKingston, Rhode Island

The law' of Continental Shelf boundary delimitation ia entering a new phase inits evolution. For the first time, there are court decisions affecting not only she1fboundaries beyond territorial limits but boundaries in the water column as weiL lnboth the Guinea/Guinea Bissau and the UMCanada Gulf of Maine Cases, the courtswere asked to consider maritune bOundariiSt fOr all purpma, and in each case th.eoppoaing parties, in their argumimts, drew On previous practice relating to shelfclairnL During this session we shall learn of what transpired during thee twodeliberations, but first l would like to consider briefly what the international law ofContinental Shelf boundaries appears to ha,ve been at the conclumon of th.eTunisia/Libya Case and just. prior to the decisions on maritune, boundaries for allpuxpcaoL

THE INTF3itNATIONAL LAW' QF CX>NTINKNTAL SHELF 8OUNDARIK!l

The three bases for the establishment of Continental Shelf boundary law seem tobe l! convention law, �! judicial decisions, and �! State pxactice. The firstdehmitation of a Continental Shelf bcenciary occurred in 1942 in the Gulf of Paria,thxough an arrangement between Venezuela and the United Kingdom acting for itsthen territory, TrinsdacL The boundary was based on agreement axLd did not fallowthe equidistamm principle.

Three years later, in the Tm.xmtn Proclamation, asserting US. jurisdiction anclcontrol over the natural resources of its contiguous Continental Shelf, it was statedthat the boundaries of the US. Continental Shelf with its neighbors would bedetermined in accordance with equitable principles"-a term which ~ as now,appears subject to various interpretations. The fixst Continental Shelf boundaryactually based an equidistance was delimited between Norway and the United

~ 1958 Geneva Convention on thc Continental Shelf-to which the US. is aparty~~tea, in article 6, that the Continental Shelf boundaries between opposite and

t States shall be deterxnined by agreement. !n the absence of agreement, asz d~ another boundary line is justified by agate& circumsbmces, the boundary is the

line " Note that this provision nudger no reference to equitable principles ass factor in the dellxnltntion geecem.During the ensuing 27 years since the Continental Shelf Convention was adopted.there have been three important Court decisions af fecting Continental Shelfbcssndariea, scores of bilateral agxecmenta, and a new Law of the Sea Convention text-The 1982 Law of the Sea Convention, which treats thc boundaries of both

tal shelves and exclusive economic zones, states in article 83, 'Thedelimitation of the Continental SheLf between States with opposite or adjacent coasts~ hail be effected by agreement on the basis of international law, as referred to inarticle 38 of the Statute of the international Court of Justice, in order to achieve antsiuitable solution Gone is any reference to the xnedian line, and in the place of"spocial circumstances" we now have a call for an equitable solution. The referenceto article 38 of the International Court of Justice QCJ! Statute offers few, if ~y.useful guidelines for pxtsnduxen to bc followed in the delimitation process.

propartforurNzy. A final factor to be taken account of theCourt wrote, "ia the element of a xeasonable degree ofprc@artionality which a delimitation effected accorthng toequitaMe principles ought to bring about between thc extentof the continental shelf appertaining to the States concerned,and the lengths of their respective oaastlinea"natarral prabagetJert. The dec. aan states delimitation shouldbe effected "in such a way aa to leave aa tnuch as paanble toeach Party aH those parts af the continental shelf thatconstitute a natuxal prolongation of its Jsnd territory into andunder thc ma, without encxtaachment on the naturalpn@ongation of the laxsd terntoxy of the others."oorsffglsratkn of rhs coast. 'The land dcsxunates the sea; it isconsequently neeemary to exsxnine closely the gtographicnlcenfiguration of the coastline af countries whose continea.tnl~ halves axe to be delimited what is unacceptable in thisinstance i ~ that a State ~ enjoy continental shelf rights

2!

3!

Of tha Court decisions, the fixst, chronologicaoy, was thc 1969 North ScaContinental Shelf Case: this Jmbably was the moat impoxtant of the threeeatabHahing criteria for Continental Shelf delimitationa Jn this case, thc Court forfend.that delinLitation should be effected "by Agxeemcnt in accordance with equitnbloprinciples, and talting account of all the relevant circumstancea." The Trutxxan.Proclamation'a 'equitable principles" are thus revived, and the "special circumstans:csof a decade earlier, are now relevant circumstanoeL" While it is difficuLt wJMxx-

ng the decision eo distingtlhh betwo;n what the Court felt were "relevantcircumsgtaocea" as ctsnpared with exluitable principles," thc decision did identifp'certain tresidexations," applicable to this area of the North Sea, which, the Cour%beUeved, xnitigated against the mandatory tuL of an equidistance Hne. Thesseoaaabhrations have been cited aa argument» in subsequent third-party settlementss.They are, briefly:

Delkrdxlng Gorat4ncntal Shel f Basaadarles 45

considerably different from those of its neighbors simplybecause in thc onc case the ccuLstline is markedly convex inform and in the other it is markedly concave, although thecoastlines are comparable in length."

4! unity of Chposfrs. "Q!t freciucntly occurs," the Court opined,"that thc same deposit of thc natural resources of the seabedand subsoil! lies on both sides of the line dividing thecontinental shelf between two States, and since it is possibleto exploit such a deposit from either side, it is reasonable totake this factor! into consideration in the coun+ ofnegotiations for a delimitation."

Thc Court did not feel that these factors were thc only ones to be taken intoaccoun.t in shelf dclimitations. Rather, it wrote WT!here is no legal limit to theconsiderations which States ms,y take account of for the purpose of making sure thatthey apply aquitable procedures, and more often than not it is thc balancing-up of allsuch considerations that will produce this result rather than reliance on one to theexclusion of all otherL The problem of rclativc weight to bc accceded to differentconsiderations naturally varies with the circujnstance of the case."

To the list of "considerations" developed in the North Sea ~ several othershave been added through later decisionL ln the 1977 Anglo-French ArbitrationAward, the Court dispensed with the dichotomy which seemingly had existed earlierbetween equidistance and other methods of delimitation by adopting an"equidistance-special circumstances rule" which had the object of delimiting aboundary in accordance with equitable principles, without arguing whether or not anoquidisbance line could, under certain conditions, be in itself equitable. Beyond this, aprincipal consideration adopted was that af giving half effect to basepoints whichmight otherwise exert a disproportionate effect on the location of an eciuidistance line.

Off Britain's Cornwall coast, the Scilly Islands form, together w'ith the Frenchisland of Ushant, to the southeast. the final besepoints for any equidistamm linedelimited seaward from the western end of the English Choax. The Court notedthat thc Scillies project considerably further a~vmd than does Ushant, and thatthe United Kingdom and France abut on the same Continental Shelf with coasts ofroughly similar length in relation to the shelf. Moreover, the ScHlies are a group of

with little land territory and a population af less than 3,000. Conscciuently.the Court held that the additional projection of the Scilly Islands into the Atlanticconstituted an element of distortion material enough to justify a boundary other thanthat of equidistance.

ln the TunisuLMbya Case, the Court identified another corumferatim whichmight be taken into account, namely the ~ front concept. Borrowing from the1969 decision's statement that "the land dominates the sea," the 1982 Cou.rt found" the factor of perpendicu1erity to thc coast and the concept af prolongation to thegeneral direction of the land boundary ~levant criteria to bc taken ~t of inselecting a linc of delimitation calculated to ensure an equitable solution."

Two other considerations that the Court alluded to in the Tunisiallibya Case arethe conduct of the parties, and economic considerations. Conduct of the parties wasseen here as indicia of the line or lines which the Parties themselves may have

red equitable or acted upon as such � if only as an interim solution affectingpart only of the area to bc delimited."

The reference to economic cctnsMerations had to do with the gael:Dce of oil wellsin an area to be delimiteL Such presence may depending on the fecta, be an elementto be taken account of in the process of weighing all relevant factors to achieve an

Zae~m~ ~~s

equita ble result." This obviously is not a reference to the relative economicdependIeace of coastal communities on the resources of the area in question.

At this point in time, three questions seemed to pose rhemselves; Mad thesequestiuestions could also pertain to maritime boundaries for all purposes. First, is eachGnttinental Shelf boundary case unique, or can some principles of equitydeveloped which would be relevant for a series of situations7 In the Tunis''Libyajudgment, the ~ wrote "Oearly each continental shelf case in dispute should bcconsidered and judged on its own merits, having regard to its peculiar circunmrtaucestherefore, no attempt should be made here to overconceptualize the applicatioa of tlaeprinciples and rules re>ting to the continental shelf." In other words, it is unwise to'dave}op a "shopping list" of equitable principles from which a party can pick araclchetne in order to bolster its argument. Yet, despite this, the 1982 Court dial ~rely on principles laid down in earlier ICJ decisions.

A second question. ia that of fairrms. In their de:isions the courts repeatedlyargued against equal diviabons of areas or of shelf resourceL Nor were they ooncesneclwith distributive justice, but rather with the norms of international law. Yet. wrier~reading these and subsequent judgments of the courts, one cannot help but %'orans'what the underlying motives for some of the courts' reasonings xnay have been-

Third, is the apparent dichotomy between equitable principles and an eqUits~~olution. Have courts reached a point where, in maritime boundary delirniM~they "geonounce the application of the law to the facts produced by the line theWseheM4 after Which they offer post hoe justifications7" In the Tun~'Li~judgment, the Court expressly stated that the result, not the means, should dominathe doision. tn its decima. the Court wrote:

Since the Court considers that it is bound to decide the case onthe basis of equitable principles, it must first ezarnine whatsuch principles entail nxe result of the application afequitabIe principles must be equitabl~t is the resaalt which

predorrlinant; the principles axe subordinate to the~'nrus! the term equitable principles" cannot beinterpreted in the abstract; it refers back to the principles andrules which may be appropriate in order ro achieve anequitable result.

A third source of law is State practice. Two questions are hnportant here= C13have States in their bilateral agreements, supported the ygnalderations mhichcourts held to be relevant ao the establishment of equitable soiutions7; arad �! ~there any new principles which have evolved from State practice which the cpu.~did not identify?

There are rclanvely few esamples of bi@terai agreennglts supportlxlg U3e ccÃ1~srrations. One notable exceleiaa is the French/Spanish agreement on

comnaon boundary in the Bay of Biscay. In this case, the delimitation is basedprol:ertionality between the leqlths of the artificial oaasttlines decided upon by ~two parties and the respective areas of Continental Shelf allotted to each country ixtthe Bay nf Iiiscay.

partial effect was given to islands in the ham/Saudi Arabia, and Etaly/~~maritime boundary alpeements; and in several South American axrangexnents. lisaeawere drawn roughly perpendkatiar to the general direction of the coast. But in n~eof the bilateral eetthnnents has a non~uidisnLnce line been drawn on the basia erE

Dellmfttng Contiraantal Shel f Bcendaries 47

natural prolongation, concavity or convexity of one of the countries' coasts, or ofunity of shelf deposits.

NEW IOUNDARY DELQAITATION PRINCIPLES

So far as new principles are concerned, the important ones seem ta bc, fixst, theuse of jotnt economic dcvclopmcnt zones, as between Japan and the Republic of Korea;and second, deciding upon different boundaries for thc shelf and the water column, aswas done between Australia and Papua New Guinea. A number of what might betermed "technicaL adjustments" have been made in bilateral agreementL Among theseare creating artificial @malines from which to measure the boundary, shiftingslightly the turning points of a line, exchanging small areas within the boundaryzone, and "smoothing out" an otherwisc circuitous line. Another technique is todescribe arcs of cixclea about islands located clam to an equidistance boundary, thebreadth af thc axe being equal to the State's claimed territorial ma The island isothexwiae ignored in the delimitation.

WHAT APPLIES To ALI PURPOSE BOUNDMHRX?

Whexu did all of this leave us in the summer of 1984. just before thc firstdecisions were handed down by ICJ panels on boundaries for all purposes? For onething, it might have seemed that parties to all-purpose boundary adjudicationa feltthat thc shelf arguments stiH prevailed and that to these could be added newconsiderations affecting the water column. In the USJCanuLda Case. for example, theUnited States, in its Memorial, alluded to proportionality, natural pxolongaUon,configuration of the coast, unity of deposits, the ~ front concept, and theconduct of thc partioL The Caewdians, arguing for an equidistance line, invoked thedisproportionate effect amaH land featuxes Cape Cad and Nantucket! would have onan equidistant lmc, as well as econoxnic consideratioea In its judgxnent, the Courtcocsidered only the factor of proportionality. as modified by granting half effect to asmall P~&m coastal islaxML

The International Court of Justice clearly has its task cut out for it in seeking toxnoid the law of Continental Shelf boundary delixnitations into thc larger frameworkof delimiting boundaries for aH purposca Persons interested in these matters mustawait the first decision to bc hmded down by the full Couxt on aH-gaarpaa: maritimebxendaxiea, in order to determine how much of the Continental Shelf judIpnents arestill xelevant within the new legal fnunetaerk.

US. BOuXIdary DelinI.itatiOn PrOblemS and Practice

SRhM J. HOYLELXrecze.

Off' af Ooeon Lcrw and PdfcyBuses o f Jinns and Inxenuxtkmal

Bnvfronrnmtak aruf Scfmtf fic Af fefrsDepartrnerLx o f StateW'asQngron, D<.

It is a pleasure for me to be with you today to share with you some thoughts onUX Boundary Delimitation in practice and discuss the significant xnainhmd boundaryproblems with our neighbors in light of that practim.

K2H'ENDED JURISDICHONAL ZONES

Establishment of extended zonca of jurisdiction over otff~ areas by coastalnations has become accepted international practice in the past decade. Fishery zonesor exclusive econcanic zones KEZa! of 200 nautical xniles bxeadth have bccnpxoclalzned by approximately 100 coastal nations. Within these mace, they asrertexclusive fights to resources � both living and non-living-found in thc water columnand oa or under the seabed. Additionally, contemporary international law nsocgnizesthe asertian by omtal States of jurisdiction over the full extent of ita ContinentalShelf ss Opposed to water column!. This jurisdiction is not necessarily limited to abreadth of 200 mileL

'Ihe extensic«L seaward of cosset State resouxce jurisdiction reflects, among otherthings, growing interest in offshore minerals, particu1arly hydrocarbons. This interestis s product of increased detnand for domestic «upply of such xescsrxcea andtechnological advances permitting rescue+ activities at increasingly greater waterdepth~

Orderly and rational offshore resouxce development-pnrticu1arly with reaIcct tothe Outer Continental Shelf-xecluires that there be precise definition of the areas inwhich such development may occur. Uncertainty over omrnership or title can bc amajor deterrent to reseaxce exploration and development. Whexe the continentalshelves or other maritime jurisdictions of neigh4ming States overlap, delimitation oftnaritime RKNlluhtxies between these zones is required in order to estabMah the precisionand certainty neceestxy fox xrmrine xtsasuxce uae and ezercire nf other maritime«ctivitics ss welL It has been. estixnated that establishment of 200-mile zonea creates

the need to determine more than 3OO such boundary situations including U~territoriea and pmcesicsas!.

Delimitation of maritiroe boundaries is required between countries wherecoastllnea are adjacent or opponte, that ls to say, where the permissible extent of theirezclustve eoononuc zones or contmental shelves pveri p. To cite examples mvolvtmgthe United St tea, the ccesthnes of the United States and Mexico are adjacent aa ~pacific coast, while the coastlines of the United States and Cuba are oppositeare boundary situations which include both opposite and adjacent elements, as is tivecase in the Gulf of Mexico between the US. and Mexico,

Under international law, the basic obligation with respect to delimitation ofunsettled maritime @~aries is that the boundary be fixed by agreement betv~the natitms involved. lt is US. policy that its maritime boundaries be established Wagreement in accordance with oluitable principleL The means by whichresults may be achieved varies according to the particular maritlnM boundaryQuesticNL. The scglwtiatlon of agreed maritijne boundaries in cases where $Gchbeers,'Acies are unsettled, therefore, is detailed and coznplex involving a wide range oflegal, political, economic, hsrtccicaL geological and geographic factors. The airrahowever, is to achieve mutually agreed boundaries.

ln exanuning in detail what mnstitutes current VS. policy and practice"estab~ its maritune boundaries by agreement in accordance with equiMbdeprinciples," l shall make a few general statements and follow up by an examijmtiexnof selected aspects of the Gulf of Maine Case. This examination, in focusing om w~tconstituted the maJrr elemenm of the UX position submitted to the Special Cham~.will reveal what the US. considered to be "relevant circumstances or specialcircumstances to lead to an equitable result. Unfortunately, the Chamber didfit to endorse them. Although granted that the elements were selected to apply to aparticular set af to the US. appealing/ circurnstan~ l still believe them revealing asto how the US. might approach other bilateral boundary isanea in the future.light of recent duanueions with the Dominican Republic regarding the US. puerto

boursdary biiaterals shall be multi~ and rraulti-faceted, reserving, ss itusufructs in perpetuity notwithstanding resolving a boundary otherwise sovereigmfor all purposeL

First, l believe the United States, as a general policy principle, wiB preferestablish a single boundary in common ocean space frontiers to be dispositive for allpurposes 4'4' Continental Shelf and EEZ jurist@;tlN1. Although granted ~t,~uiernicaiiy sls~ arguments naay be made militating for different results ameach category, as a practical matter it is not a feasible real-world result. How can theUnited States tell a fishing vessel the boumdary for fishing for ~ specie is LineA, while telling perhaps the same vessel that when trawling for sedentary ape ~a theboundary is Line B? Such a aenario will leaci tn wretched enforcement probleros nmcimns,'rable evidentiary onea. Any boundary resolution should ideally be based cm awell-rcaamed functional app h.

Second, given the difficulty inherent in distinguishing for practical perp"cenebetween the resound jurisdictional asIssctn of the EEZ and shelf regirneN inConvention, it is unreasonable to distinguish between thcne regimindependent boundaries. This is particularly true within 2OO miles of the caaata+where of course the vast majority af offshore coanmercial activity will take IaiaLce.

A trend toward this result can be ~ in tile ccsnpromds of the Parties in. theGulf of Maine case, w'herein both asked the Court to determine a "single maritixme

US, Basndary Detbaftatfon Prcbftnv axatf Practkc 5J

boundary," valid for all purposeL This case therefore is diffexent in a significantaspect from ail cases decided by the International Court of Justice QCg before,including the recent judgxnent in the Libya/Malta case, in that all cases heretoforedeterxnined the Continental Shelf boundary without prejudice to the KKL The case issignificant, given the trexnendous amount of EEZ practice which has recently becomecustoxnary law. The Special Chamber in a case of first impression could have gonefa.r in promoting the rational development of ERZ practice and boundarydelimitation, particularly insofar as it could favorably influence continental margindelimitation, especially in adjacency situations, which, with the exception of ourUSSR boundary in thc Bering and Chukchi Seas, constitute the buHc of our boundarydisputeL Unfortunately thc Special Chaxnber chase not to do so but rested on sterileground, reiterating without clarification or guidance geographic facts leading toequitable resultL

Befoxe easxnining the UX position in the case iruufar as it reflects the tangiblecoatcxnporary US. approach to equitable delimitation, let me mention a second UKpolicy in large part deriving fxoxn the failure of the Chamber to heed us. The UnitedStates will in all probability not agree again to arbitration in advance in boundarydelimitation disputes, particularly insofar as a single boundary will dispose of allsovereign and jurisdictional rights. Where this was the txend before the Gulf ofMaine Case it has in my view been reinforced.

ICJ DILM1TA'EON CMTX3tLK

On the eve of the Gulf of Maine Case, JCJ Continental Shelf delimitationjudgments had been based oxL 03 Article 6 of the 1958 Shelf Convention stressingthe need for agreement, and equidistance�unless another bouxubLry is justified by

cixcuxDstancoc �! the 1969 North Sea Continental Shelf Case judgrnemt,stressing natu.ral prolongation as thc applicable criterion; �! the 1975 Anglo-FrenchChanel ~ Award, providing for no lixnitation in the number oi' specialcixcuxnstancss which could bc taken into consideration which might xcquixe deviationfrom an otherwise purely equidistance solution; �! article 83 9 of the 1982 LOSConvention, somewhat reversing the 1958 article 6 order of priority, requiring thatdelimitation be effected by agreement on the basis of international law to achieve anequitable solution; and �! the Tunisia&bya judgment, stating there to be no lixnit onrelevant circumstances which nxay be taken into consideration in oxder to applyequitable principles.

As l interpret the decision, in the Gulf of Maine Case the United Statessu.bmuuon cam be ccesidered an example of what we considexed to be the relevantcircuaNCllmxa to be taken into ccsxsideratiom in any application of equitable principles.h. that this was to be a single boundary valid for all purposes, both EEZ and shelf,the V8, believed that concepts which gave risc to thc KEZ as a juridical phenomenonshould be taken into consideration in thc delimitation. First, the United Statesdeveloped as a relevant circumsnuxce the unity of deposit of resounds on Georges

'nxe ICJ had already referred to the unity of resource deposits as a specialcircumstance to be taken into account in its 1969 North Sea Continental Shelf Casejudgment. The US. posited in furtherance of this circumstance that resouxce andmanagetnent conservation would be pxoxnoted were the unity of the xescnuum onGeorges Bank preserved. As a second relevant cia.-umstance the UK underscored thedesirability ef avoiding international disputes. The third special circumstaxumprop~ by the United States was the meed to protect the envirxuxment.

These three pxoposdtions, funxhunental to UK thinking, were successively rejectedby thc Special Chamber. Rather, the Chamber primarily relied on purely surfacegeographic facts, configuration and other criteria in its AwaxxL lt ignored the

f srsrsarrcsuxt aauuroriss

interrelationship between the EEZ and Continental Shelf regimes, parts~lXresource iuterdependencieL The Special Chamber rejected the need to minimize thepotential for internatiotnal disputes, in that there was no ru.le of law that a Ieum&~~ make it possible to insure optimum conservation and management of livingrescsrrcss snd « ths earns time reduce the potential for international disputeL It alsofound it "unrewarding" to Look to general international law to provide a ready-xnanset of rules that can be used for solving any delimitation problems that arise.

This unimaginative, unnsrponsive and unconstructive approach has in my mindmade it extmmely unlikely that the United States shall again reert to bin~arbitratiao. In effect all US policy and practice developed du.ring the psst years waspolitely, albeit sumjmeily. rejecteL Agreement on unitary boundaries in the futurewLIL almost surely be worked out, between the Parties. The recent June 3, 1985Libya!'Malta Continental Shelf Award of the full Court, provides little solace. Tomy mind it results in yst another unpredictable result. Although the Cavortelaborated five familiar principles as governing criteria, its appiication of them leadsto a result I think we would be unhappy with were it to apply to US. boundaries.

CIEATIVE SOLVHONS

Given the above track mond, I believe in the future we shall reach agmmnerrtbilaterally in NLore creative, and in a certain sense, less traditionaL approaches. A. casein point is the recent US Rominican Republic maritime boundary negotiaticms.view of the traditionaL division in which all attributes of sovereigntyjurisdiction of a State fall on one side of a line, the negotiations delirniting ~maritime bouxdary letween the Dominican Republic and Puerto Rico takeaccount shelf aod EEZ aspects, weighing competing interests and roe!gnizirag +++conflicts satisfactorily while at the same time establishing a single maxitirrae'boundary.

Basically, under the 1983 draft, the United States would secure permanent acixsssfor US. recrestionaL and smaIL~ fishermen to the parts of the Dcuninican Repu.hlsoH2', that ars of gmatest Interest to UK fishermen. In addition, the United SMtcswould receive about one-half of the disputed area as well as areas north and south MMons Passage which it previously had not claisxd. The principal qaQ pro pro lcmths Qomisdcan Republic would be jurisdiction over aLL of GLbo Eugan~ 20 scluaxenautical miles of which we currently claim.

Such a creative reservation of um" or usufructary approach has as a precaklsltthe mors smteacing innovative approach adopted by Australia and papua New Guineain the Torres Strait Treaty. In an area marked with ~ geographic featuresinterdependent life styles of the local inhabitants who are ethnically dsrtanpresence of islands belorqpng eo Australia which are in instances well withia threemilss of the Papua New Guinea coast, an early attempt to arrive at a single maxi~boundary did not result in a workable ar bimah~ situation both sides. it isinteresting to note, cotuddered-but rejected-referring the dispute to the ICJ!. Rather,a Protected Zaee was established in a defined area of the Strait, the principal purE~of which wss to protect the traditiona1 way of life and livelihxxl of the inhabitaatsincluding their traditionaL fishing and free movement. In the aftermath of the UMposition in the Gulf af Maine Chse, it is instructive to new that another pu.re~ efthe Protected Zone was to preserve the marine en>~eat. A Joint Advia~Council was established to insure the effective working of the Zone. IJzxea

ting seabed jurie&tslr differ from those establishing fisheries jurisdictiaapoLLution and marine science remuch jurisdiction. referred to as residual

jurisdiction," each Party czatcis's fuLL jurisdiction with the concurrence of the otber

UZ Boundary De&tdtatfon Prcbltms and Pr actfcs 53

Party and both consult with a view to reaching agreement on the most effectivemethod of application of meesureL

The Treaty is highly provocative and may well prove a litmus for a future US.approach with its neighbors on delimitation ismee.

Assertion of a 2 &nautical-mile xesourte jurisdiction by the United States-firstin esteblishxnent of the Fishery Comervation Zone of March 1, l977, and later inPresident Reagan's Ezclusive Economic Zone Proclamation of March 10, 1983-has, asnoted, created approximately 30 potential maritime bcatmdaries to be delimited by theUnited States; 10 offshore of one or more of the 50 states and 20 offshore of US.territorieL Technically speaking, this need first aree with the 1945 abortion cf UKContinental Shelf jurisdiction. But until recently, activities ort the Gontinental Shelfin mcst of these areas were not immediately contemplated. Today, of course, we facea much different situation.

For the purposes of our dirs~ons today, I would like to concentrate upon thoseboundary situations which bear upon the new five-year Outer Continental Shelf OCS! oil and ges leasing program It is impotent that UA maritime boundarypositions be reflected, ~here appropriate, throughout the five-year prcgzam. At thisstage. this matter relates- mrsrt specifically to the descriptions of potential plarUtingareas for the new program.

With this in mind, I would like to describe briefly where we stand with regardto the delimitation of maritime boundaries between the United States and Canada, theSoviet Union, Mezioo, and Cuba and the &dmxnss.

The United States and Gtnada share maritime bounthuies ia four aresrc the Gulfof Maine region, between the New England states and the Canadian maritimeprovinces; the Beaufort Sea off Alaska and the Yukon Territory; the area of theDizen Entrance, between Alaska and British Columbia; and off the Strait of Juan dePuca, between Vfsshington and British Coluxnbia.

Cefj of Melee

The malrr emphasis with resfect to the Canadian boundaries has been upon theboLandary in the Gulf of Maine and over Georges Bank Fig. 1! which has been thesubject. of a two-year adjudication befme a special chamber of the Intezrratioaal Courtaf Justice QCJ! in the Hague. On Octcker 12, 1984, the Court announced its decision.

At stake in the case, was maritime jurisdiction over an area betvreen 13@00 tollg00 square nautical miles m size. At the center of the dispute was jurirsdsctioaover the northeastern half of Georges Bank, containing rich fishing grounds andhydrocslrbon potentiaL During the dispute, the Umted States maintained that it wasentitled to a bcstndary line that would retain all of Oeorges Bank under United Statesjurisdiction, whereas Canada sought a bcamdary that would divide the Bank. in half,leavinl all of the northouttern portion under Canadian juxiliiction. The Canadianposition was based on their version of where an equidistant line should be drawn.We contended that as a matter of equity, the U8. wss entitled to the entire area crfGeormes Bank because of the centum+old fishing activities of U5. fishermencompaxed to the relatively recent activities there of Canadian fishermen.

The Cou.rt found that neither side's boundary ptsdtian was justifiNL Itestablished a line that crastes Gcxnles Bank caeatiaily midway between the clauns of

Figure 1. United. States-Catuula Gulf of Maine maritime boundarydetermined by the International Court of Justice.

the two States. Although the United States did not prooeed with any reeou.rexdevelopment activity in the disputed area, Canada had in fact issued some permits in1964. w'hich of course, no longer have any validity in the US. area. The line is norin force. implementation of that new boundary hes talten place in the atmosphere afcooperatioa that generally ctueacteriae US;Canadian relations. A rcrnair~problem ie the Continental Shelf boundary beyond the 200-mile EEL The Court leftthis to be negotiated between the UA and Canada.

The other three maritime bouaiariee with Canada await mttlement. To a largedegree, cooperation of these boundaries wae overshadowed by the Gulf of Maineproceedings.

With respect to the Beaufort Sea in the Arctic, the United States and Canathi ha~enunciated differing principles as the appropriate bash for the maritime boundary. In1977 the United States. ln establishing the limits to which it would enforue its200-nautical-mile fishery cotueervation zone and Continental Shelf, described ~hits ae an aquidistant line equidistant from the U8. and Canadian coLatjines!.Canada. on the other hand, argued that the internatiom6 land boundary, which runsalong the 141O meridian of west longitude. should be the maritime boundary. This

US. Bacaufary DeQmttatfoe Problems and Praatcc 55

results in thc existence of an area in thc Beaufort Sca which each country believes tobe Lade? its jurisdiction. This is iUustratcd in Figure 2

In thc Dizon Entrance between British Columbia and Ataalra, a dispute ezists overthe status of the waters. Canada views the waters within the entrance to be entirelyCanadian, while the United States believes that a maritime boundary is required, In

Fitme X United. Sta~meda elaixned boundaries in the Beaufort Sea

f rrrerrmtkeal Bamukwfcs

establishing the limit of its fisheriea enforcement in this area, the UX applied theequidistance method.

The dispute in the Dixon Entrance relates to interpretation of the secaHed A � ~which was referred to in the P~ boundary Tribunal Award of 1903. As ~

iQustrated in Figure 3, the A-B Line runs from the mouth of the Portland. Channel toCape Muzon, Aiaalra. Baaef on the 1903 award and earlier treaties, the United Statestrdres the view that the A-8 Line is not a maritime boundary and serves only todetermine «rvereignty over IanrL Therefore, the United States is entitled to cjannmaritime jurisdiction ia the Entrance. Canada argues that the A-5 Line is a maritimeboundary and that all waters south of it in Dixon Entrance are subject to Canadianjurirsiiction. With respect ro the areas offshore of the Dixon Entrance, the UnitedStates hss indicated that the equidistance method should be applied in deternumng themaritime boundary.

With respect to the area seaward of the Strait of Juan de Puca, both countrieshave indicated that the equidistance principle should be applied in delimimaritime boundary. There are minor technical discrepancies in the methodology ofapplying erluidistance relating to charts and base pointa. These differences are soalight that they do not even show up on a page-sized map.

The 20&nautical-mile zonss of the Unitecl States and the Soviet Union overlap inthree areas: the North Pacific Ocean, the Bering Sea and the Chulrchi Sea north of theBering Strait. The 1867 Convention ceding Alaska. established the maritimebxmdary between the United States and the Soviet Union. Figure 4 shows recurdepiction of the 1867 Convention Line. This is the longest maritime boundary in theworld, extending over F800 miles in lenllth.

The advent of extended fi~ jurisdiction out to 200 nautical miles in 1977first brought out the need for clarity on the maritime boundary in these areaL1977, the United States and the USSR confirmed that they intended to act with fullregard to treaties between them and would respect the 1867 Convention Line inexercising their fisheries jurisdiction. On March 10. 1983, President Reaip~

si a United Stares Baclusive Bcomomic Zone, which utilizes the samecoadinates ss the former 200-mile fishery zane, and on February 18, 1984, the Klecreeof the president of the Supreme Sovtet of the US53L on the Economic Zone srrss

80th countries prerrurne their 1977 understanding to apply to their new20&nautical-mile zonea3

Fsrberies onforceenent incidents in 1977 led the United States to believe that theUSSR might be depicting the 1167 Convention Line in a different manner from theU~ depiction- While no chart was steadied to the 1861 Convention, the UnitedStates practice has been to depict the ~vention Live by arts of great circles astraight line on a globe!. a practica which it believes best effectuates the intentions ofthe negotiators of the 1867 Conventlga and its purp~ the ceding of territory anddmrrinhm. Such a de~ represents the shcrrteet distance between two paints on aglobe, something that would. be natural zo have been intended in such a comicm3 TheSoviets were informed of thi ~ view ia 1977-

ln 1981, the first of four talons to date oa the maritime boundary, the SrrvietUnion informed the United States for the first time that it depicts the 1867Convention Line as a rhumb line {a straight hne on a mercator projectian3. Thisdifference results in an wedge-shaped area which each country considers to be under

U5. Boundary Dellmkagfon prop+ ~ p

Filme 4 United States-Roeeia Convention af 1867 line

its exclusive maritime ~urea ju.risdiction. Thee talks, the mast recent of whichteok place duang the auoumer of 1984 in Moscow; have focused on the correldepiction of the line and interpretation of the 2867 Convention. As noted b'�rPresident Reagan in September 1984, the United States haa proposed a fair amiequitable resolution to the ice. Both ceuntriea have agreed in principle to continuetheir talma, though it cannot ba pmlicted when they shall resolve their diffcrencen onthe 1867 Coavention Line. Gontinental Shelf tea!urcer, of course, are an important

US. Boundary DsNmttat4a ProRemr and Pracxkc 59

factor. At stake is part of the vast potential of the Navarin Basin and the ChukchiPlateau.

At this point, I should note that the current US. OCS leasing pxogram in theBering and Beaufort Seas has taken into account differences over the relevant UXmaritime boundaries with the USSR and Canada. Three sale areas in the Bermg andChukchi seas potentially involve the 1867 Convention Line the Norton Basin, theNavarin Basin and the Barrow Arch. Of these, only the Norton Basin and theNavarin Basin are affected by differences in the xhumb line-great circle linedifference over the 1867 Convention Line. The March 1953 Norton Basin lease salewas aot affected by the difference in the Convention Line. The area proposed forNavarin Basin Sale $3 did include areas subject to the Soviet chum. on its side of therhuxnb line depiction of the 1867 Convention Line. In the Beaufort Sea, the DiapirFiehi Sale 87 includes areas bahama the United States claimed equidistant line andCanada's claim of the 1414 w. longitude meridian.

After caxeful study and consultation with the Department of State, theDepLrtment of Intexior, as stated in its March 16, 1984, final notice of sale forNavaxin Basin Sale 83 April 17, 1984!, established special procedures for the tractsbeing offered between. the two depictions which were clearly identified onprckraction diagranuL Them procedures provide that the highest bidders on thesetracts meeting statutory criteria would be identified and the bid deposit placed in~ sLxow. No bids will be accepted nor leases issued unless the United States determinesthat it is in its best interests After the expiration of five years, if a hid has not beenaccepted, the highest bidders may elect to withdraw the bid money by giving noticewithin 60 days after such ezpiraxion. In all, highest bidders were identified for 17tracts in the area of special procedurea

As noted above, in the Beaufort Sea, the affected OCS area is the Diapir PieicL Ast out in its final notice of sale of July 23, 1984. for purposes of Sale 87 August 22,

1984!, the Department of Interior, in consultation with the Department of State,adopted similar proceduxea as in Navaxin Basin Sale 83. for the area between theequidistant line and the Caxusiian claimed line contained iu the lease sale offering.

We believe that the proosdures aclopted in both the Navarin Basin and theBeaufort Sea Diapir Field! lease sales are fully consistent with United States rightsand obligations under international law. Further, our approach supports US, claimsto the areas in question, yet does not prejudice mutually acceptable resolutions. Inboth instances, the USSR and Dmada wexe informed in advance of the saleproccduxea The pxocedures axe specifically deaignoi to provide fleaibi}ity inresolving the maritime boundary differences, while maintaining the US. position.The United States is fully comxnitted to reaching a settlement with both the USSRand GouLda and believes that the procedures it has tsdolxted serve well to manage theissue effectively.

MFXlCO

Maritime boundaries between the Unitecl States and Mezico, in both the Pacificand the Gulf of Mezioo, were delimited in a treaty signed in 1978 but not yetratified. The 1978 Treaty incorIsxrated provisional lines agni@ to by the twogovernments in 1976.! The boundaries, both in the Pacific ocean and the Gulf ofMesioo, axe based upon the equidistance method, giving full effect to islands. At thetixM of conclusion of the Treaty, it was agreed that the boundary would be delimitedin those marine axeas which axe within 200 nautical miles of both coasts Therefore.

Inrergggiyluxl B0QAdaries

a gap af approximately L29 nautical xnilea b t een the two segments gboundary in the Gulf of Mexico. This area is beyosxd the 200-nautical-xnile Exdmive~~c Zone of each country and has not yet been delimited.

As l xnentioned. the U~ Mexico ~dary TresLty has not received Senate sd~and ammxt to ratification. When the Senate Coxnxnittee on Foreign Relatsxrxsreceived testixxsxny on this treaty ln Jung l980; concerns were raised about thepropsxai bc' in the Gulf af <exim Tlxese concerns focused on the seabedresound~ of the Gulf and the methods by whuch the maritixndeveloped. The suggesnon %T8$ made that the xnethad of boundary deimutatxtxxxshould be the calcuLation of an equidistant line between the base of continental sltxyelines to the north and to the south. No effect would be given to any ctsltlixaesincluding that of xslands As a result the boundary is pushed northward in thesouthern part af the Gulf off the Yucatan Penins~ However, the reverse is true xxx-the Paul whexe the line swccj+ ~gnxfxcaQtly southward because of the proxixxntyof San Clejxxente Mand.

~x-'nxnittee favorably reported the'ip ment ~ ~ f 1 S'~te enough a ~ was ~ on the floor ea

defer final decision on the treaty until there was additional information about thepotential of mm-Living resources in the bouxxdary region. The pertinent axes in themjddh of the Gulf mnsists of very deep water, ~th depths ranging from L,NN trx2@09 fathoms NQO to 12,000 feet! � about tvvo miles of water coluxnn. Satrxebelieve that thexe is significant hydrtsmzbon resource potential in the central region rethe Gulf of Mexioo. However. xeiatively Little is known with ceruunty about thegeological formations in this deep water region. The US. and Mexico have agreedprovisionally to apply the bouxuiary line set out in their 1976 agxeexnent pendingratification of the treaty.

Lease sales in all three areas af the Gulf of' Mexico, the eastern, ~traL axxslwestern, take account of this provisional bouxxdary; As noted, there is an area incentral Gulf, beyond 200 nautical xniles froxn both ~ which rexnains to bedelimited.

F'ollowing extension of US. fiaheriea jurisdiction to 200 nautical xniles in 1970.tecluxsM dsxcumians beesreen tbs United States and Cuba were held to delixxxit ~emaritixns boundary. These dneuanons were able to resolve quickly technical isxrxMNrelating to the correct cartographic positioning of the Cuban coastline. A. xnaxx:campier question axaL' in xelation to the basnlines from which to xnoLsure ~offshore jurisdiction af each country.

'Ae United States msssuras its territorial sea and other maritixneLow-water line, as depicted on officially rss~pdzed charta 'Ate Urban goverxxxnsxxt.however, claims a straight baseline system arxaxnc% its mast. Under internatianal lawand under appxopriate geogxaphicaL conditions, tbe United States re~puzea the rightof coastal States to establish straight baselixuxs. Aocoxding to article 4 af the 1958Convention on the Territorial Sea and the Ctnztjpaaus Zone, a straight baseline syltcxa.

appropriate only "in localities where the coastline is deeply indented and cut Lxxttx,there is a fringe of islands along the coast" There axe sxess along the Cu.hen

coast where straight baselines meet tbe criteria in article 4, but the northern cosstlixxeneither indented nor fringed with islands. Vm af the Cuban straight baselines ixa

the final calculations of the boundary yield have produced a hxxe further to thenorth with, in our view, an Lnexluitable divisicm of the maritime axea in qucetsarx.

During the technical disctue4gg, mmparable artificial "mnstrtu~m linesdrawn along the southern Florida coastline. Axx ~uidurtnnt line %res then calcularAsd

US. Boundary De&mttarIoe PrabLems and Pracrke 61

by use of the Cuban straight baselincs and the artificial construction linc of thcUntied StateL AJ10thCE equtdtstant linc Was calculated by usc of the relevant basepoints on the low-water linc of the coasts of the two countries. A third line wasthen created between thtwc two lines, which was not equidistant, but which dividedequally the area between them. Thc final boundary represented a negotiatedsettlement based on equitable principles. The two countries signed a maritimeboundary agreemcnt on December 16, 1977. The treaty was submitted to the UnitedStates Senate on January 19, 1978, and wss subsequently favorably reported out bythe Foreign Relations Committee in 1980. Full Senate action, howcvcr, has stalledover questions rcla,ting to thc broader issue of US;Cuba relations. The treaty stillawaits action in the Senate, and pending such action, we are observing the boundarylinc on a provisional basis.

BAIiAMAS

Mere have been no formal negotiations between the United States and theBahamas regarding the maritime boundary. Twwhundred-nautical-mile zones fromboth countries overlap in the Straits of Florida and in the region of the Blate Plateau,ae. area of the Continental Shelf which enends off the southourtern mast of theUnited Stares. Neither the US. nor the Bahunas have elaborated forrnal positions onthe location of thc tnaritime boundary. The delimitation of this btatndary, therefore,awaits future action

Sales in the South Atlantic area need to reflect United States maritime boundaryintcxesta. 'Ihe area now under consideration for sale 90, to talte phd in 1986, docsnot include tracts affected by a potential boundary bCtween the United States and theStlumtaL

CONCLUSION

Aa I noted at tbe beginning of my presentation. the 1982 Law of the SeaConvention provisions concerning delimitation of boundaries do not contradict earlier1958 Continental Shelf Convention provisions. Both article 76 and article 83 areconsistent and elaborate on the earlier Convention provisbms. The US. is comfortablewith this approach and is engaged in constructive discntstions where such issues ariseworMwide. Boundaries are essential for orderly and rational offshore resourcemanagement. The US. is committed to this goaL

GuineaJGuinea Bissau Cue Study

INTRODUCTION

Oa February 14, 198S, three Judges of the World Court in the Hague haadefdown their decisioa ia the Guinea/Guinea Bissau Case. The case was noteworthy iamveral respects. It was the first case ever in which two sub'Salutran African Stateshsd submitted a dispute of any kind to international arbitration or adjudicatioa. Thecoxamltxneat to arbitrate survived major governnMntal changes ia both oountries,including a military coup in Guinea. Finally, the case showed how an oil companyand a government. working together, can bring about the peaceful and expeditiousresolution of a. bound~ dispute, thereby perxaitting the parties to pm' with thedevelopment of natural resoamxa

This case, like most contemporary boundary disputes, was triggered by oiL Nowthat the case is over, Guiaea and Guinea Bissau have one of the oaly Is;ttlef maritixaeboundaries in Africa. From start to finish, the cue took less than two years, whichcompares very favorably with other cases such as LibyaTunisia which took almostsir years, Sharjah<lubai which took. five years, the xeoeatly decided Libya/KataCase which took seven years, aad the Beagle Channel Case which now appeaxs to beover sane l4 years after the parties submitted it to arbitration.

We will review the Guinea/Guinea Bissau. Case from start to finish. Wc arefortunate to have with us Mr. Frank Walsh, who wss the General Manager of the oiloperatioa in Guinea from the inception of the boundary dispute through itsconclusion. Mr. Walsh will descxibe how the dispute arcane and the events that led upto the aigaiag of the agxeemeat to arbitrate � the "coxnpaamis d'arbitrage." I will thendescribe the preparation and presentation of the cthe and meatioa some of thepractical problems we encountered during the course of the arbitration. Thea Dr.Nezander, who append as aa ezpert witness for Guinea, will say a few wordsabout the technical presentations made to the GNrt. FiaaQy, Myres S. McDougal,Sterling Professor of Law Emeritus at Yale Law School, will describ the award aadits implications for the law of maritixne bouadarieL Profawor McDougaI, who hasbeen iastruxaeatal in creating much of the international law that governs xaaxitiraeboundaries, presented Guinea's opening arguments during the oral procaxbags at thePeac» ~.

ROIERT F. PIETROVTSKI, JIL ESQ.BraceweQ k Patterson

W asMngton, DC.

64 lnxcrsatforud Bacuufaries

S~ D'~ITRAGS

FRA?6C WALSHGeneral ManagerSeckre Gainecxuae Des HydrocarhcrcsCoeakryRtptxbNc of Guinea

F~ I wMd Mc to give you my personaI views on certaua ~t of 0y MIa tc ctween the Republic of Gtxixxea axx< ««publ,c p f G

or to make it simple, Conakry va, Iiissasc thc stage an establish how the dispu

facts and talk about the cvolutiaaxd dpi Q up to x~ axb~~ ph Th. d. I wul derive a few ~~r~ ~~

could bc of gcncxai applicaMity.

Foz many years I have been mvolved in ixxM~ ~ my ~y h ve ~ ~

"xench~kmg countxies in Af rica.and I have been directly and deeply inthe late seventies and early eighties, international oil exploration was bcanxizsg-Demand was high and the price of crude was high. In brief. it was a hot exploxn~climate. In mid-l979. I wes involved. in the actmuisition by Union Texas PctroletarxxCorporation of a large permit offshore GuixxcaMoxxakxy.

As you might expect a thorough pxoject evaluation was conducted Araong ~fLctora considered werc the geological xnerina, af arxurse, 'but also the eccsxoxrux» cf ~play, the political and businem cnvixtzrxmexxt. axxd. the size and precise limits of ~permit area. When you conasier the axmsunt af zxaoxaey that xnust bc invested ixx exaltto find oiL you. can appreciate that any project evaluation team does a very tbrxzt:aa.gh.job. Tbe team also must ~" that project ttx each level of management, all the ~yto the final authority � not where the buck stops but where the buck comes f~

KvcatuaUy, a document setting fozth the agreed.-upon views of both parties ~negotiated. in Ccsxakry, with the Ministry af Mines and Geology. This "caaveaticmwas signed and duly ratified by the National Pebbly in early l980

Conventions and ~ documents sucIx ae concoction agxeexnents rcprcxxexxC anegotiated equilibrium between the desires ~ the stigaatories. First of aII they grazxta specific permit azea for a period of tixne, thea addrewx other factors such as wxxrWobhgations, taxation. distribution of pztxfits, mays and means of oonductlxag busixx.eaa.etc.

SlGNIHCANT CKhKWCrl~CS OF THR GUIN' CO~GMtXON

A Uafqm Joke Vexagsrs

Fizst, the Convention estaMished a rather xxmque form of joixxt-vcxx~Guinean Societe d%coxwsns~Mixte between the FtNcign Partners and the Republic. -ag

Gtdrtea/Guten BSssass Case Study 6$

Guinea in co-ownership. Thc Minister of Mines and Geology would be the Chairmanof the Adminisustive Council of that Societe, and a general manager, nsxned andappointed and rcrnovable by the Foreign Partners, would execute the j>intly agreed-towork programs financed solely by the Foreign partners.

The joint venture called for a symbiotic relationship between paxtnexs. Trainingwould be provided for the Guinean counterparts of earh American employee.Learning would tak.e place through exposure. The constant flux of technology sndoil ntanagement procedures would offset in part the isolation of Conakry from therest of the world.

Zxe second pertinent aspect of the Convention was the contractual workobligation, which had two phaseL For the first two years, so many miles of marineseismic and exploration work would be executed, followed by an option to relinquishthe permit, to withdraw or formaU.y declare the intent to drill an exploratory wellwithin the next two years.

During the summer of 19&0, Union Texas planned and directed a seismicreconnaissance campaign which was duly executed. In the course of it, an innocuousincident took place that was to have dire consequences,

The Ministcx of Mines and Geology of Conaltry in an action entirely separatefxotn our joint venture, had contracted with a non-American aerial xeoonnaisnancefirm to conduct an aerial survey of the entire country, both onshore and offshore.The non-American local manager of that firm took it upon himself to go to Bissau tores}nest authorization to implant a navigation station on the Island of Orangio. Bissauadopted a hosstQe pcsstuxe, clsuming that the water in which unsaid firm wss toconduct its survey was theirs, theirs alone and that no one was to conduct a surveyof any kind in those offshore areas. Theze were news media reports of mobilizationof thc Armed Forces, of a march onto the land boundary � of the Air Force beingpieced on alert, etc�and I, personally, and the Axnerican Oil Genpany, were of courseerroneously accused by Bissau of having precipitated a boundary dispute.

Meanwhile, the seismic campaign having been completed, I returned to the homeoffice irs Houston and discussed the situation with management. There was little orno recourse against the aerial firm. We had great confidence in our projectevaluation. Further, we felt protected and secure under the provisions af theconvention, which guaranteed the limits of the permit axot. But the vitupcrations ofBissau had been picked up by the State Depsxtsrsntt. The UA Axnbaassdors to bothEissau and Conakry had repccte4 the happeninls.

ln csssence, the issue now was that a disputed axes had been created by Bissau; sndUnion 'Texas Petroleuxn, an American aorporation, held petxnleuxn rights in thatdisputed area. The State Deyaetnlnt, as it logically and diplomatically does in alls'unilar cases, hsd but one xssxstrse which was to inform Union Texas that thexc wasa bouxsdary dispute; there were three,ts and mertatxsc prceection could not bc given toAmerican nationais or American interests; ergo cease all activities in the disputed areauntil the dispute is settled. For illustrative purposes note that in 1983, as Petro~ moved a rig onto their Senegal permit, Bissau which also claimed that areaeat in their last two MIGs to scare away the platform-it worked On the way backto the airport both MIGs crashed, out of fuel.

That position of the State Delstrtment was not, of course, an endorsement nor agment on the merits of the dispute, nor should it have been. But it did create a

conflict for us in that we could no longer execute our full contxssctuai obligationsunder the convention,

66 Ixxrerxxcak na} Saaadarfcr

DKVEXOPhKNT OP A POSITIONTo support the verscxty of our ppsl.txon an+ s.

jo partner in ~n~tioxxex} prevxousiy I had bee

periphery of other boundary d}sputes in os~connectxon hsd becoxne acquainted with Mr. px+t

bsex}uently retained by Union Texas tcx reach a negotiated settL

dispute That legaL oplnxan dclxvexec} tSoc}ete ln March 1981.

exploration ctsxt with, of course, xndeeply involved~ent. Mr. Pxetrows}tx and I unearthed arch vWashington.

Duxxng the years 1981, 1982, and 1983, ~v ~between the twa sovereign governxxxents. Th+ loxnpenA prixnary contribution.

Tours- He was also the Mixtistehe joint ventute, so by the convention..

ugly, he sought my advice an the bou ~ . MOf course was the proper~v~~n ~ ~ p ~~ of ~ ~~t

highly sensitive to the finn Linexny Iduciary obligations

R ~d a offee pofamily quarxeL but rather an evm.t grave ixx political ixnplications and Loaded with.econcsnic consequences, not only in oil but in any other comxnercial ventures ixxwhich Guinea was then ar couM become ixxvolved

In the suxnxner of 1981 we executed a xlxcoxxx} se}smjc campaign, planned. ancIon9ained in Kaustan, to detail the results of t}xe previous year. 'lucre was no overlapbetween the xone which we ccuxsidered to be of ixxterest and the alleged disputed. arexx-The execution of the campaign was quite peaccfuL

In late spring 1982, Union Texas faxxnod oxxt a large percentage af its intexesxtsunder the canventica to Superior Oil Company. I ccxnt}nued an as general xxuxnager afthe joint-venture in ~ry.

'Ihat sumxner, in August 1982, at a xxxee~ of the Adxninistxative Couxxl~Gammy, the Foreign Partners Mted the drilling option and officially declared theirintention to drill a weLL during caixmdxLx year 1983, after the coxnp~asx axe}interpretation of a short highly detaQed seinxxxia pegmuxx to be erecuted immediatelyand comp}et}on of the logistical support blxe thexx in full construction.

Aga}n, we executed what had} been p~nec1 by Houston. Notwithstanding the.xnmt eztrexne dahn of Ehsau, t}M n}te of the agsxxxic' activity was still quite a distaxuoefrom the aoeged contested axes. Nonetheless I ~ invited to carne to the MMEmbassy where the Axnbsssu}ox lxafaxxned gag; cxf ruxnblings in B}ssau, as xep&tihck tlathis col}eague there. Maps in hand, I ~~'ed that w'e had heeded the retltxexa ofWashington.

TWO CRITICAI. HAPHPGN3S

The responsible M}xtister af Bissau, Crt' pixx~ ~ m H ~nDecember 8, 1982, to affer his petroleum pTxxxxpeotn m Ne ind y ~e he ~ ~

Gula/Gable Bissau Case Study 67

town, he wss told that the companies operating in Guinea had planned no activitynorth of the 225' demarcation line claixned by Guinea Bissau as the true boundary."

Secondly, perhs,ps with a causal relationship. on December 29, while! was inHouston, Conakxy's MinbMr of Mines and Geology, Isxnsel Touxe, signed a documentwith Cruz Pinto, in Bissau, whereby the two Guineas agreed to subroit the boundarydispute to arbitration. The negotiations hsd failed to resolve the dispute and bothgovernxnents had chaexx to refer the matter to an international arbitration tribunal.

The decision to go to arbitration was not without disadvantages. By going toarbitration, Guinea clearly jaopardized the limits of the permit area that wereguaranteed by the convention. In fact, we now had a non-perxnit permit. If youkeep in mind that size alone ia an important element in the evaluation of theeconoxnic parameter of a play, you can understand that this document signed inBissau inherently upset the baLance between petroleum risks and eventual economicbenefits; that very balance which had been so carefully negotiated and agreed to atthe time of the convention. Also, that document was executed without ~tationor cooxdination with the Foreign Partnexs and woxst of all without benefit of properlegal counseL We, the Foreign Partners, could no longer fulfill oux obligationsvis-a-vis the Guinean Partner. We negotiated a suspension of the drilling obhgationantil final settlement of the dispute and a document. to that effect was signed st ameedng of the Administrative Council in August 1983.

THE ARBIT3bkTION

The agreexnent to arbitrate. the precise questions to be decided, and certainprocedural aspects of the arbitration were set forth in a document, the "CompeymhO'Arbitxage," signed in Bissau on February 18, 1983. The arbitratoxs rendered thei~deciskrn on February 14, 1985, three days short of two years. perhaps setting a xecoxdfor such action.

The two superbly-qualified lawyers of this panel who participated in thearbitration will address the legal happenings of these two years. I have merely setthe stagL

OHIKR TBAELY WANTS

f should perhaps also note several other events that occurred during themchallenging times. There were changes of government in each of the two countriesinvolved, both brought about by pxactically bloodless coup d' Etat. The worMwidepetroleuxn ezploxstion clixnate went fxom hot to cool as a. result of the econoxnicsevolutioL.

All of this started in 1979 with one oil company negotiating on friendly businessterms with one sovereign governxxunxt. Amt's two entitiea. Then came a catalyst, theaerial surveying acrobat; his visit to Bissau precipitating a very haxsh White Paperand a bona fide boundary dispute-that's number three and four. Then came the StateDepartment; that's number five.

Then the legal opinion, that's six. 'Ihe Compmxnis, the legal ~ the Nd hoctribunal, the judges, the friendly meddlers, the press, that's seven, eight, nine entities,

Each. and every one nibbled at the contxol of the permit area, obxtructed, in manyways, the execution of the mark obligations, and destabilired the negotiated.equilibrium of the convention.

Meanwhile, as the yeaxs wexe going by, money was invested in normalexploration activities and logistical preparation for the first well, the explorationclixnate turned cold, the play that had begun in euphoria beatxne a bit of a headache,

68 Irrreraarional Bcacndarfrs

good baalim less attractive, the unattractrvc b dthe good baca'Today, 5 1/2 years ter sis=.afte sls tufe of the conventionstill uaf ulf illed.

When faced with a boundary disptxte a d ~ to tm~ be ~ ss arly as possiblmthe earber, the

~p ld perhap e better- Regrettably, that decisionm~ be ~ ~ ~"e P dgrnenta and not on binary fagsthat caa be cycled through a computer. This is a bit tougherthan it seems; many uncontrollable factors will impact on thefuture; aad the ecrmoraic equilibrium may be affectecL

If you decide to act positively, to stay oa, do your utrnart tobring in competeat legal counsel aa early as possible Even themost developed countries, including the US�avail them«.'Ivesof the services of the handful of international legal experts onboundary matters. Bc cautious as to the selection of theneiges who will sit oa the TribunaL Pay clam attention tothe educational ~ of arbitrating the dispute. Thesedjsputea aze azbitxated in a legal anti procedural context«emingly known by all but, in fact, mastered by very few-

Should it be aeceeary, depatding On your part of the worldyou may rrmaider providing some or all logistical and.coonhaatjoa support, such as: roreaxch, geography, carto-graphy. history, transhtions, typing, zeprod~ aerial aad~ ateIIite pjs~paphy aad interpretation thereof; and coor-

of the legal and technical toamr~moat oil companjeahave such jn-house capability, and providing that service wiLLgive you some control.

Treat a bourulary problem as you would any other problexnnegatively on your permit-a dzy hole, a

blowout a windfall profit tax. lxnpoaed changes in price orrate, natirmalization~ you work. international oiI.

you ~ go at it with your eyes open.today 75 percent af the worM xnazitjxne

are not finally settled by treaties aad that the 25percent that are may aot be mUch better off. 'ALUlk ofEurope as mapped before World %far I. after it, and as it istoday.

3,

So far, nothing~ has been lost but tune, sometions arbitration wss a far be

solution than whatever was in second or third~ tlataejghbors ve remaing'~ h'"'"~~ idly an ~' ~tive9f~gg]e foz

g and Re Foreign partners have done theirpartner has off>cially stated its

arbitration.In concludtng. I would like to identify a few ~~

matter of thl ~ ca«; study pl/+JAN these suggestwere aot all foxseeably a part of it.

GaJnea/Guinea 25ssaN Case Sttcdy 69

Thc dispute will eventually be resolved Your beha.vior, yourcontributiona, will be remembered by the host country andmay affect the nature and duration of your relationship. It isdesirable to take a position and to stick with it,

If you have a contract or convention with one country, andanother country disputes your pertnit area, don't ever, evertalk with the other country. First, you'd be tneddling directlyin relations between two sovereign nations, and second, youwill be caught at it. Whatever you say will bc used. by thedisputing party if they sce some gain out of it.

7.

LEGAL PEAS'PZCTIVE ON THEGUINEA/GUINEA BISSAU DISPVTE

ROBERT F. PIETR0%'SKI, JR RSQ.Bracewdl 4 Patterson

Was7dagtoe, Dl..

In January of 1983, I was in Manila when I received an urgent telex from Mr.WaJsh saying that Guinea and Guinea Bissau were about to sign an agreexnent toarbitrate atsd asking that I return to the United States at once to diacua the xnatter.Accordingly, I flew back to Washington, where I met with Mr. Welsh and membersof thc oil company's legal dcpartxttcnt. Because the aontenta of an agreement toarbitrate can have grave ~uenccs for the ultimate outcome of the arbitration, weprepared a mensorandum cxplainung what ahouM be in the aipeexnent, as well aswhat should not be in it. Mr. W'sjsh then took this memorandum and returned toGmakry, arriving there on the evening of February 18. Hc got thcxe about six hourstoo Jate. Early the saxne day, the Governments of Guinea and Guinea Bissau hadsigned an agreement, submitting their boundary dispute to arbitration.

As it stands today, the dispute between the xwo Guineas is over. I%ere is ayoung, pragmatic, well-disposed new government in Conakry. Union Texas whichbegat Superior which begat Mobil is or are the highly capable and coxnpctcnt Foreignpartners in the yint venture. The permit is now a little bit smaQer, perhaps, butthere is security of tenure, which morc than xuakcs up for thc lost area.

Recently Mr. Murray, President of Mobil, expressed his views in Tbsp Magazinesaying, and I paraphrase: now that oil supplies are plentiful, this is the time to lookfor more oil in this favorable exploration climate, so as to prepare for the future

So perhaps everything is going to be for the best. I am thrilled to have been a.bleto share in that adventure. I wish all concerned the best of luclr.

70 IsrerrtarfrNtul Becndarks

THE TalmuHAI.

The a br tlnn agreement Iteelf dI not n e tcase, but msteed allowed 30 days for th partres tjudges tn NleCt a third judge tO act ss presitle

As It turned out, it took, several monthsudge Mhye, ho had recentl

lrQIn Senegal This ChOice Was acceptableBedlstsu, Algertas Judge on the World Court a +Judges faye and Bedjaoui then se]ectedWorld Court, to be President of thc tribunal. TheOctober 14. 1983.

THE LEGAL TRIM AND STAFF

~ ~~8 constituted, the legal delegations ofand Guinea Bissau werc being esscmbletL I mas salted to come to G,ruby by

~ter dis~g the case vritb theadv~W wc beg M put ogether the team that would. presentThat teem would eventually include lawyers from prance.

~~m+~8 professor McDougal and his colleaguee also brought in several geogzapbcrs,

g - ~ ho ~ much o Guinea's cartographical worlr. and also'~ Pro'~~gIL And wc were very Fortunate

~ of $~ l~~~ who actccl as a procedural and. a~stradvewe ~ p off m m he Hague. Stan had been the Registrar OF the

on procedure and matters relating to theFinally, because the cam WSIS

e ~taint translatOrs, interpreters, and a speciILl,multilingual Ncretarial pool.

ting the work, of various lawyers and experts who are Nattered ov~Four countries is Mhously not the easiest of ~ba. Fartunately, most ef us, lncludixLg.profcmarr Mcoougal and Dr. AlexlUldcre had %fQTlMCL together on other ceuma

fact contributed greatly to the overall efficiency of Guinea's preparntimxof the caN. And, as it turned out, cf ficiency became critical because, of the very ah~

by the agreemcnt to arbitrate. Under the terms of tha.~maxunum of four months from the date on which ~

'bunal was Cetabhahed tO Me and exchange rrlerncmals and a mlIXunum Of Garne.months frem the date the megZgials Were eXChanged tO file countermeInorisLlS

started the case with one ma~ ggf vantage: Guinea's lawyers, workirtg Fcmthe joint venturC in 1980, had IXXuplcted much of thC necereary rcseltrcltpreparation of arguments long before the cawe mas formally submitted to arbltratimaWhen Frame and POrtugal puoed Out Of COnltlr,ry and Bissau, reel:ectiVely, they let L.little behind in the Way of dOCuments, COSIsequeatly, Virtually all of the calonieLl.documents relating tO the 4$puted Offshore area %Ters located ln natiOtLal llbrltriCS aXXCXgovernment archives in Paris, ~ Loetdon and Mashington. Copies of all of th~documents were obtained while we were preparing the opinion for the ydnt ven~

Th~ a great deal of time was saved '%Fben we began preparation oflly, some of thc documents which were obtained in 19'

would have been unavailable after thc dispute mes formally submitted to arbitratimxa

Guinea/Guinea B4saxx Case Sxudy 71

This wss due to the sensitivity in the French and Poxtuguexe foreign offices to thepolitical implications of thc case, after the case was submitted to arbitration.

Guinea also started the case with two major disadvantages. First. its claim, onthe surface, was somewhat ixnplausible for several reasons. Whereas Bissau's claunwas based on equidistance � the mast frequ.ently employed xnethod of maritimeboundary delimitation-Guinea's ciaim was based on a 19th century oalonial treatybetween France and Portugal. This treaty established the land boundaries betweenPortugucsc Guinea snd the surxounding French colonies, including French Guinea. Italso referred to a lin» running out to sea for a distance of slmast 90 miles along theparallel of 10' 40' north latitude. It wss this line which Guinea clauned es itsmaritine boundary with Guinea Bissau. There was no precedent in the contemporarylaw of the sea for such a boundary.

The plain language of the treaty clearly could be construed to mesxx that the linedescribed therein was intended to be a maritixne boundary. But that bmguage couldalso be construed ta the effect that the line wss not intended to be s boundary, butsimply a line of reference for purposes of allocating islands. Unfortunately, therecords af the treaty negotiations and the subsequent conduct of France and Portugalshed little light on the intended purpasc af thc line in question. None of the otherl9th ocntury treaties by which the European powers carved up Africa puxpaated toestablish a maritime boundary of any kind. Compounding the problem was the factthat Guinea itself did not claim the treaty line as a maritime boundary until 1980.Indeed, from 1964 until 19SO, Guinea claimed an entirely different line as itsmaritime boundary.

The other major disadvantage confronting Guinea st the outset of arbitratianumcerncd the oil concession. Boundary cases by their very nature invite the tribunalto compromise the overlapping claixns, Yet Guinea did not claim beyond the northernlimit of its oU concession. The concession. wss bounded on the narth by the hnedescribed in the 1886 treaty and clsixned by Guinea as its maritime boundary, Thus,to the extent that Guinea's claim would be compromised by thc tribe@ Guinea wesalways certain to lac part of its concession. Our job ss Guinea's lawyers was tosuggest to the tribunal a compromise that would do minunum hsrxn to the concession,and would keep the arcs of interest within the ju,risdiction of Guinea.

Guinea had appointed ss its agent in the case its Minister of Justice, Dr. SekheGunaxa. As agent, Dx. Camara hsd overall responsibility for the cae. However, Dr.Gemara had participated in neither the negotiation of the arbitration agreement northe boundary scttlexxlnt negotiatioaa Nor had the government of Guinea ever beenInvolved in an international arbitration of this type before. Thcxefore, in addition topxepaxing the case, we had to devote considerable time to educating the governmentabout the arbitration fmxesx and what to expect in terms of a result

Thc parties exchanged menxorials in the Hague in January of 1984 andimmediately began working on the countermemorials. Theo, at about six o' clock themorning af March 26, I received a phone call from Michael Reismaa wha had justheard an the news that Guinea's President, Ahmed Sckou Toure, had died in theCleveland Clinic af a heart attack. Telephone cxsxxmunication between Washingtonand Gsnakry is virtualiy nonexistent, and even telex communication is pxoblexnatic.We were able to contact the US. AmbssssLdor in Conakxy through the StateDepartment and leaxxld that Prime Minister Beavogui had assumed the role of Chiefof Goverxxxxumt, and that Ismael Touxe, thc President's half-brother, continued to serveas Minister of MixMs 4 Geology.

Zsrsrnseuaal ~~

~zciated both the agreement tO arbitrate and the oilconvention, we

that the g»ermnent mould continue to honor its~~t +, arbitrate, and we cOntinued With otlr preparation Of the caIS.

3 there Was a cOup In ~naltIy Ale tnilitary had seirgci pOwcn TkC~m were closed, the Internattonal airport in Conaltry waa closed, and

commugjjcations were slurp endoL~ t come out of Canary. We learned that representatives of thet ~ ~~ to the U5. and French Ambassadors in Conakry that ail

~t nts made by the previous government would be honored.~ ~ th tel~ lines were opened I received a cable asking us to come toto ~ th new government on the arbitration. I phoned Manfxed Lachs, the

~d t 4 th tribunal and tOld him that it appeared the new goverrlInent WOuid~~ ~~ th arbitration, but that certain delays could be expected as a result of

the coup. Gslaltry, I found that the neW gOVernment had put theAttorney General MIunIugl DjaWara, Bl charge Of the case Af ter discQSMLg the caa+w;th Mr. ~wars and his staff, Mr. Walah and I briefed the Prime Minister anti~ members of the ~tary Council on the case. Once again, we had to go throughths ~ of exp4ining what arbitration entailed, the problems inherent in Guinea'nCasa and hOW we p4nned tO deal with them Following th4 briefing, w'C receiveckinstructions to continue with the arbitration.

THE ARBITRATION PROI~

I rcnlrned to %ashington ance' we ctnnpletod the countermemorial,filed at the Peace Palace in the Hague on June 8, 1984. The coup in Guinea had thttscaused a delay of only three weeks in the arbitration.

The oral proceedings were conducted in two seseiona The first session. ran fromAugust 21-28, 1984, and the second snsnon from September 10-15, 1984. Du.ring tendstime, we set up offices at a local hotel in the Hague. This arrangement pertnitted anaround-theckoclr. operation.

Guinea presented its caw in alternative terms. First Guinea argued that the 1S86treaty Mcablished a maritime b~dary. Guinea then argued that the line describecgin that treaty-the parallel 10' 40' north latitude � also conformed to contempo~rules of law governing maritixns boundary delirnitations, in that it produced an.atluitablo result in light of SH of the relevant circumstances. Realizing that thetribunal would try and reach a compromise tgecision satisfactory to both parti~Guinea structured ita artuments in a way which sugpsted a comprornin: that wou1dleave the important part of the aoncesstice. intact

Bissau'a lawyers argued � successfully, as it turned ou.t-that the 1886 treary ~intended only to establish a 4nd bourngary and that the maritime limit describeagtherein waa intended to be used solely aa a reference for the aUocatNn of the Bi3hgoe44nds to Portuguese OuineL As to the maritime boundary, eau argued that ~relevant rules of 4w retlujred the application of the etiuidlstance method-

Not surprisingly, the conduct of oQ cornpazdes in and near the disputed arenafigured prominently in the case. We shippog boxes full of AAPG bulletinsPetrooansultants reIOrts tO the Hague fOr uSS in rjae tel proeeedinga Maps shO'wilagthe location of ~ wort done in the area were placed in evidenoe. We xepmatesg1~emphasized the investment that had been In<de by Guinea and the American caiIcompaniea in the con~ areL W'e wanted to impnss upon the tribunal thanGuineas tone~ was an accomplished fact which should not as a matter af pa~be undone by the tribunaL

Gutnea/Grdeea Bissau Case Srady 73

THE DECL%ON

~ t bunal rendered its decision February 14, 1985. As anticipated, the decisioncomnprortusL The tribunal reacted Guinea's argument that thc 1886 treaty

boundary. Jt also rejacted Bissau's argument that equidistance~ tribunal delimited the boundary in two segjncnts From the

ce of about 50 miles, the tribunal adopted the line in theeven though it had held that the treaty itself did not establish a

The remainder af thc boundary was delimited as a straight lineuth of 236o, which the tribunal perceived as being normal to the general

~n of the coast. This result gave Guinea about 60 percent of the area in disputeu about 40 percent. Guinea retained about 80 percent of thc disputed oil

the entire area of interest.

UM;Al. IZ,LSONKNG AND EXPERT TESTIMONY

to ask Profeser McDougal to conunent on the legal reasoning~~ by the tribunal, and the implications of the award for the solution of otherInamtune is~dary disputeL Befoxe doing so. however, I would ask Dr. Alexander tomy a few words about the technical presentations made by the gstrtieLp~sier appeared as an expert witness for Gutnea, tcstlfytng to the effectthese wss ran I recehmt in State practice for the equidistance boundary claimed by%ma,

%re survived efforts of opg~ng counsel to have him duslualified on the novelhe was on the payroU of Guinea's lawyers, he could not possibly be an

've crpert. His testimony was instrumental in establishing that etluidistance didnot produce an etiuitable result when applied to the geographical situation of Guineaand. Guinea. Bseau-

TSCIINICAL PABST ATIOlVS

NgRNO3lrsssmCoeur je Dcssm Management StadksUabsrafty of Rhak IslandElapasL, JEha4r Iskuut

XlWHMK IOUMDAXY MhPS

First was thc difficulty we encountered~ bassa Map whaeh %9tLM show rn some detail the ooastai fest ~ ~ GW Owhca R8%ll, partllcsklafly 1n thc area where

d d ~~~a ch d~~eb d~

Of f ehOre ln the end We Md W h <VC a spec ial map prepLre ycartOgraphcre we were umng irL

A ~ probietn Was related tO agreetner1t With the cartographerS SerVtrLg Wltb-u delegatiOn ss tO th n1<P the COurr, WOuld Lue in delinti

th b ~dary arrived at in the judgment- ~t ellipsoid would it be based on>ahOuid be used~ What about the vertical datum? There are Frencit

portuguese, and UE charts of thc collstal area. within the boundary area theh W ~ nuLrahy and the features are SLLbject tO periOdlc change as seditncnt ls

the shLUOW Watera by the GebcL, CotnpOny and other riVerS, nnd thetLThe exa 1OQ tiOtt Of CoasULI features, Cs shown On he

Of particular LmpOrtance tO QLLinea gjwsau since some Of thef~n na Were used by thenL as bmcpOUlta ln d,eternLining thc cqutdlstant tVpebOun~ -WhiCh they favOrcd.

t is that we had With ua at The <ague What I felt Was alay of specially E~> rnaptL, illLLstrating graphically thc in~

which would be wrought on the people- of Guinea. should the Court rule in favor ufKggaus boundary clsitn Many of the maps were transparent overlays ~ >

pe~nally bCIICVC that Our aLrtographic materials, sOmc Of Which We rnamLged tOleave on display even after oLLr presentatiorLs, may have helpedCOnaiderably, ~ Qssau [ ntlght nOte had no special maps WhetcVcI'

gape are by nO zLCLLns neutraL Different prOyctionS sh~different perepeetiVts of reality. Notions of concavity and conVCxity Of a aXetlirLe

layed through judiciOLLS SeleotiOne Of end points of a CurVing line.cnlnrs can carry a partbmlar nLOCCLge. ~ this is part of What a geOgraphcr, nuyean aga referral to as "l3Lrcohypnoais.

TZS ZVOLUTIOlV OE MARITIME BOUNDARY LA&

MYRER S. McDOUGAL

QerNn.g PrOfCCSOr of Law, ZmCrftuSYale Law SchoafNew Eleven, CarMteatfact

lNTRODUCT10N

My ctmunitnent to prefeaLor lexander far tOday Wes simply tO rcsimnI might hear. I am grateful to Mr. FietrO~ atLCI Mr. Welsh for having invited crtcintO this Guinea/t3tLinea hssau Case. It was a fascinating case and to Watch it unfalsewas a trenurndOuS pleasure for a teacher My asaigtLrnent is tO lOcate this decnLinn inthe larger cuntext Of all the dLfferent ~ thar. eagre referred tO this rnOrning and tantahe prujeLticets into the fLLture, Itt Order ~> de this I will, in sonLC tneasuze, have tOrett1unt tbe same histOry that prnfesans Cling~ and AlexlLnder and Mr. HOyle ha~egiven you I ~ however give a very diffcecnt cmptuuns to some of

lt iS my theia that this IaW otL boLLndary delimitatiotL is nOt nearly ancotnplicatcd Or difficult CS haa been tnade tO appnLLr. The laW has evolved in v&ry

Grdnea/Gcchea Bbsau Case Study 75

s:nsible and reasonably clear patteras. The problem ia, however, an extraordinarilyimportant oae for the reasons we heard this morning. ie the probable future~ty of oil and the importance of finding out as quickly as passible whatraeurces there are in the ocean+

Lct me ssy, preliminarily, that I can speak to you either as a hired gun or as amholar. Frankly, I have played both sides of the street and still have clients on bothsidea Hence, I think I caa present the problem in a fairly objective way.

THE DWrELOPMKNT OF BOUNDARY LA%

I w'ould begin some 20 years ago. I had a client that happened to have manyislands ci~ to the shore of another State. This client wanted to establish that theboundary ran between these islands and the coast of the other State. We went intothe Irrecodcats and the prior decisions aad discovered that equidistance waspredoruinantly the rulc that was rexsnmcnded in mast damioas and in mostwritinga. This recommendation cxtcadcd from thc seas even into internal waters, inthe ca@, 'of freshwater lakes and rivers. A mediaa line between States with oppositecoasts or an equidistance linc between States with adjacent coasts were thereccsnnmded solutions. The reason given wss that this produced equality in thedisputed areas and hence a distribution that was equitable. You will find a lot ofauthority for this in the pleadings in the Norwegian Fisherics case and elsewhere.

Pert@ Sae Cestgfnsatet Sled Case

Then along came the North Sea Continental Shelf case the case much discussedearlier by Profcaer Alexander aad Mr. Doyle!. That case demonstrated thatequidistance was not always equitable. There was a concavity ia the coasts thatwould make the share &mnany would get completely disproportionate to what theNetherlands aad Denmar]c. would get if thc equidistance principle was applied. Iathis case the Court rejected the equidistanm principle, finding that it was notcustomary international law. Thc holding of the Court was, further, that article 6 ofthe Continental Shelf Convention had aot become customary international law asagainst Germany. The Court reyeted equidistance because, if projections were raadefrom the sides of the three States iavolved, the areas of overlap of Coatiaentsl Shelfin aauud confrontation would produce a most inequitable result as far as Germanywas concerned. Inequitable because of the size of Germany, the length of Germany'scoLst and many different features!. The Court did not perp~ to state all of thefactors that might affect equity. As professor lexander pointed out, it stated manyfaccors but only as illustrative.

incidentally, if you are interested in this history in addition to what was saidthis morning, Judge Grcsc in the Gulf of Maine case gave a ccecisc history of thedevant. I mention this because I mould differ with Judge Gros on hisurterpsetation of thc North Sca case, Judge Gros appears to say that the North Seacase reaffirmed equidistance. It did nothing af the kind It explicitly rejectedequshataacc because of the concavity aad the ensuing inequity. This doctrine of thecase was that the decision ehouM be in mxerdance with equitable principlea Anotherexposition of this history, if you are interested in raore detaU is given by Judge adain the Tunisia'Libya Case. That opinion has an exceQeat history of the devclopnentsI sm talking about. In aay event, there is in thc North Sea caw aa explicit rejectionof equidistance sad the promulgation of equitable principles as the customary law forthe delimitation of certain sea boundaries.

s~~~ ~~'

Vnited E4ngdos/Prencjt,4rbttrotfors

The next important case was the UK/Fren IFJ1 lish Chants Again, there are certain pojntFrance had agreed upon the equidistance pring

been undehmited. The Court had to deiixnithe $tatcs had already agreed upon equidistenflIst two or three segments involved, but Ipersuasively. They didn't argue, as some did gpdm~ between the island and thc opposite codrawn beP44f the C2uLnnel Islands not between thso the GNrt of cour' so heM. The result

~cs which they would haas underlying territorial sea. Hence this dccisi

tal Shelf. This the fixstgct.

+yond ths GMUonel tiself, canto the reaches of ~ A~OLfuirhstence line giving partud affect to ~~

the 1llw was equidistance a ~ ~ be 6 of the 1958 Convention.

has separate pxovsnons for adjacent $tatcs ~d4'axWs"m~ is the rule with rrpecinl

circumstances invoked to modify the line that equidistance indicatcL I confess I maclethe mistake in studying this case for one client of saying, as the Court said in theUK/French case, that it makes no difference whether you aay equitable principles Ca'whether you say equidistance as xrmdified by special circumstancea Ixx theGuinea/Guinea Bissau case I discovered that there mns a difference and I would iijcs-to share this understanding with you. because I think it is importaot

By44&r PHadptes or Bqekfhtoace NecNJhaf by Speekrl

As Mr. Pistxowski indicated, Bissau argued equidistance with a venIea.nce. TheVpurlerted to aocept equitable principles, but they cold the tribunal that one has tobegin with equidistance. The tribunal has to draw an equidistant line, then gathxough all the featnxes of the matext asking if this fcatuxe or that makes ndifference. Should the tribunal alter the equidistant line becatue of this feature7They find that this feature does xmxt alter the line. 'Hmn they go to the ~ feana-reand ask: should one alter the }inc because of this feature7 'Hmn they go to the thirdfeature, the fourth, and the rgth. The result of uus approach is that the cuxnulativeimpact af sQ factors upon equitablcnee is xxever examined in context

ln cnntrast, what Guinea xeozsnrnendqd was that the tribunal look at sLIl thefeatures of the contest that might affect cquj~ and then chooe an appropriatemethod to give effeot to the line that the ~nination of all the featltres w'Goalsuggest aa eqLntabie between the par1oce. Wc did smxt want the tribunal to begin wxth

and thea cut oLxt every featuxe one by one as alone being

Qpxuung with an equjdsstant IUIe and by evaluating xollxh.yfactors.

about equidistance, repeated this morning, that I thinlc Ishould char up. Eqnidsrtance is not a criterion of equity. It is a method of drawlxxga line. It may in amne cams indicate equality of division. In many cases, however. n

not ULdjcate tK[ulty> as it does not in n concave sltuatum H&xe axe QLLxx+

G~Gubaca Bissau Case Stucfy 77

methods for drawing a linc. One method is thc perpendicular line as used partiallyin the Tunima case. Another xnight be parallels of latitude or longitude.

The function of equitable principles is to point to those features of the oontextthat may affect an equitable solution. There was a good deal of confusion about thisin this morning's discussion. Equitable principles requixe thc tribunal to look to thefeatures that affect an equitable solution. Onc can refer to thee features ss crftsrfaor as prtndpfes. It xnakes no difference. The cquitablc solution is what you come toafter looking at aII the features in theix total context. There is no confusion in thislanguage if you understand it. The confusion is in some measure introduced by thecourts themselves. Thus, thc courts keep repeating over snd over "the court cannotalter nature." Of course "nature" has no meaxung exoept through human pcrceptioassnd has no legal meaning except thxough legal concepts. Hence, a statement thatcourts cannot alter nature is just onc of these noises that fill up opinicuxs. Sixnilarly,courts often say that they cannot do equity in fact. They suggest that what theyseek are pxecisc rules which will automatically ixuxuxe equity. This again is a bunchof lammas. It builds upon an old Auxdlnlan notion of law that gives judges litt?ediscreticxa in evaluating the features of a context. Tbis is a notion of law that mastpeople have abandoned today. Most people know that rules axe always ambiguous,incomplete. The function of equitable principles is ro point to features of the contextthat xnay effect equity in fact.

There is no machine that can grind out axL equitable solution. What is anequitable outcome has to be a human judgment. That human judgment is lessarbitrary if the tribunal systexnaticslly locks at all features in context and assessestheir importance to an equitable outcome than if it makes a misguided effort, anillusory effort, ro worship rulcL Thc whole of thc law of thc ma is in fact basedupce reasonableness as determined in context. K A. Smith pointed this out years agosnd. Burke and I built a 1,000 page book upon it. This probleru of boundaries is nodifferent from any other part of the law' of the ses. What E am trying to establish toyou is, even though courts may not always recognize or admit it, we do have today agood law of the sea about boundaries built upon xelenahleness and genuine equity.

To continue with the development of this law, after the UK/French decision thesext ixupcxrtant decision wss the Turd!uLCibya ~ The Tunisu~bya case took upthe prescription from the North Sea csee that equitable principles were to be appliedm achieve an equitable outcome. In the meantime this language hsd gotten into the1982 Conventicm with respect to both the new economic zone and the ContinentalShelf,

En the Tunisia'Libya case the Court said to forget the questicsx of base hnes.They did not care where the base lixxes were. The important lines wexe thcsxe in thegeneral direction of the ~ To xeach sn equitable outcome one needs to knowwhat sxea is to be divided. What are the mugh paxamcters of the area to be divided?Even though some of the boundary lines had not been drawn with respect to Malta,Italy smd others, what was the probable axes that the Court was asked. to dividebetwceu Tunisui and Libyan Vfhexe did projecticms from the coast in this areaoverlaps The Court was not confxcmtcd with great concavity in this me. Hence itfirst chew s line that was roughly perpendicular to the general directice of the coast.It wmt out amxe distance following an old fishing line that the parties hsd observed.It xegsxded the way the parties had behaved, ss a part of equity. As it got out alittle further it said this is getting just a Iitt1e too cicse to the coaK on the left, so wewill vary off of an equidistant line. It established a lixl that it thought produced arelatively fair Axiom between Libya and Tunisia

7g grgsrnsr4oraaJ

this case I wia to ernphasim is that the Court gave only half~ght +, the Kerkennah Islands. T '++ re huge islands, much larger than theSi ' ' hl~ ~f d ~ of Tu~~ The Co un gave only h~ eff~ to suc

m drawing rts frnai aquidistance line. The irrtportant point was the entptuuasth h th, ~~~ on ~Mt ble p~ciplm as Po inting M fm~~ Df the Mnmt

~t ' ht affect Nluity In this case the Court stuck pretty much to physics'all g't mig

fcatuzeL

How we conte to the GuinWGumea I~~u case. As counsel for Guinea. if I hadb n ~ to contest the case further, I would have concentrated on the first half uf

opiruon where the tribunal Cs~ of the 1 I 86 line. I think the tribune. did~~~ it interpretation of the 1886 line. The mterpretation of international

not, however, one of the problems that this conferenc» is ~ilyconcerned with and I will not h ger m We point.

Let us turn to the second half « this opinion which will I hope sooa be Enadeavailable to you in Intsrncrioztcf ~guJ ~~~!. Here the tribunal sought to~ stabjish a line in accordance with the tnternationnl law of the sea. The tribunal didfollow the procedures for boundary delirnitatioa that Guinea roxnnmended ratherthan those recommended by Guinea Bisrau- I have no desire to make inviduzLts~nt upon either the decision or the opinion. Judge Lachs, the president Gf theTribunal, a former president of the Internaticnzal Court of Justice, is one of theworld's greatest international lawyers. Judge hfBaye and Judge Hcdjsoui axe two cxfou.r most distinguished and deeply dedicated scholars and statesmen. The opinion inthe case is highly sophisticated, exhibiting an emraordinary level of profossiorualcrafMnsjlhip. 1 mtend to criticize it in certairt ru~~ in a few' moments, but I wars'it known that I do tremendously nsspoa the craftsmanship and creativestatecnrarukip with which it was done.

The tribunal began by prelimncarKy identifyirtg the area that had to be divided.and it focused upon the area that Guinea had reoomxnended between oertain pantHe&af latitude. The area selected projects outward. from the land boundary betweerr.Se~ and Bissau in the north to that between Sierra Leone and Guinea in the southThe wss roughly the area with which the tribuaal had to concern itself.

Thc tribunal then ~red what might be the relevant law, and ended uy wit31the content of thc 1982 Convention-that is equitable principles to achieve ax>er}ultablc snlutmn. It rejected equidistance as the relevant law' and as the relevnrlzbeginning point. Its inquiry wcs not to begirt snd cnd with equidistance. It its~ito examine all the relevant features of the context

Thc first features of thc context tbe txlbrUMtl e~uzuned were the geog P~physieaL The Coaata in Quests' Were of sdjaoerscy, nOt Of opposite pO ~ ~ecoasts exhibited a concavity, just as in the North. Sea casL The only Quarrel tha< Imight express i ~ that tbc tribunal did not sufficiently emphasize1886 Treaty line dropped down at least ten rnilcs below the parallel of Latitude thatwould run out from the land boundary betw'eeza Guinea and Guinea Ihssau. C~elfor Guinea thought ten miles down for two hundred nLaes out was enough con~nto make for the presence of the Iijsgcs lsialds ~ tribunal, however, did not aguaIt ran the linc out to the island of ~traz, became everyone believed that iairtrsbelonged tc Guinea It gave ~traz no territorial sea whatsoever to the mrrth. Tire1886 Treaty line was two miles north of ~~ Thc tribunal did say it woathigive Alcatraa a 12-tulle tcsritoriai saba to the ment. Hence it ran its line for 12 nsiienbeyond Alcatrax Qn the ~ of the the 1586 Treaty linc. 'Ale tribunal prooxKScci.then to drop a line roughly perpendicular to the general direction of the coast to

Guktcef6draea Bfsxcst Case Study 79

complete the required distance, One of thc reasons the tribunal gave f' or dxawing theline in this way was that any other line would encroach upon Bissau because Senegalmight get a line running in the same general direction, perpendicular to the crNst,

Bissau. Bissau was claiming a line on the parallel of latitude in the north, ssGuinea was claiming in boch the north and south. The line aught by Guinea wouldbs an encroachment only if the tribunal assumed that the line between Bissau andSenegal wss going to be something other than the parallel of latitude. Thc tribunalsaid chat though Guinea had announced that it would give the paxaQel of latitude toSierra leone, that announcemcnt might not necssxarily stand. Guinea might change.and drop its line down in the same perpendicular to the direction of the coasL

It should be noted, thus, that the tribunal in coming to its decision as to whatwss aa equitable solution in this case presumed two lines that hsd not beenauthoritatively drawn. I would criticize the tribunal's perceptions of equity both onics failure co give complctc effect to the tremendous concavity and for dropping thiscutoff line on the basis of the two presumed lines that right ultimately be drawnvery differently.

The tribunal came next to the criterion of proportionality. Guinea has a coastline about 20 mules longer than that of Bissau. The tribunal came up with exactlyequal coast lines by measuring around the Bijagos Islands. This wss to give sn almostcoxnpleca effect to these islands, instead af minnsxizing them as islands wexexclinixnized in the Tunssia'Libya case, in the UK/French case, and in other cams. TheBiygas Islands were given ~ equality for determirUng pxcyortionality in leqphof coastline.

Though I would disagree with the tribunal's evaluation of xnany features, IwouM emphasize that it did employ the correcc appxcssch. It began withoutpre-weighings, looking at sll the potentially relevant features of the context. h thenchose s meched of delimitation that it felt would give effect to thc significance of aQthese featurcL What it mught was a genuinely equitable solution as between thepsrtieL

The Cuff of Nahae Gsss

This brings us co the Gulf of Maine case. I have for a variety of reasonspxitx atty studied the opinion of Judge Gms and reed a number af articles. I have notparsed the majority opinion as carefully as I will eventually attempt co. Butapparently thc Caurt did state the law to be the same that we have just been talkingabout equitable principles to reach an equitable ouxnoxne. I have heard this casedimmed by counsel on both sides at least twice. I was at The Hague on another case the Nicaraguan caw! at the time the decision on thc Gulf of Maine carne down. Thething that astonishes me is that the ultimate line drawn was m nearly an equaldivision between the last claims of the parties, The Court would appear to havedrawn the linc, as scsncone suggested eaxlier, to "split the baby. The various featuresof the context could have been examined to justify this decision. This is the onlywsy esne cssuid account for taking inco account the Bay of Fundy for determiningpn~rticsaality of coastline. Proportionality is supposed to depend upon the length ofcessna that xnay overlap.

In terms of future law I do not think the Gulf of Maine case adds much ofUnpofcsnce. I think. amtrary to what was said earlier, this wiU not be a preceden.tfor future decdsionL It could bc che last cue whexc one gets a unified hearing for a

80 lnrernaa~~ Baaadartcs

Continental Shelf and a simple fisheries zone,decide the new economic zone in the Gulf of ~

In the future the great zun of casesbcauzdazleL It is a little absurd to offer policies th t

vs< as in the language of the 1982Convention. The featur« that will be zelevnnt ~

with respect to the new economic oneto the Continental Shelf alone.

econesnic and social considerations. Thus faz thse they explicitly rejected sucb

features saymg that these are too changeabledemand a comprehensive and system ~

featuzes of the context of any controversy.

CONCLUDKHG RKhhlRKS

KeL me in conclusion say a few more general words about the future. I do note ~ «do sozne of our ~rs. I azn not sure that

1982 Convention as such will ever becozne lnw, will ever be ratified by enoughStates lo make it the law. I have grave doubts whether the +sited States wiLI everratify- I happened to hear Senator Pell's conclutllllg zemarks when we arne m thia

about aa far from ~ty now as he was on the value of aLaw of the sea conference 19 years ago. I think roost of the imp!re t pmvmiom mthis 1982 Convention, apart from the deep

~ polici«genuinely serve common interest they have s wa~of benumbing customary law and working thezxuselv«pure in terms of ayagn~interest, thxough a pzoezss of reciprocity axld retaliation in a continuous flow Dfmany different Rinds of decisis and communications. I think that future boundarydellmitations wUL invoke the Language of articles 74 and 83 of the 1982 Conventionthat require the use of equitable principles to achieve an exluitable solution Ecluitableprinciples wiLL be made to refer not only to geographic features but to mezz~economic and social cotunderations. If States cannot agree among themselves on what.i ~ an apgeol'piete fusion of these features into na ecluitab}e outcome they will have xaaalternative exoept to go to third party decisiog.-znsLkezs, each as the InternstiozLzLLCourt of Justice, or to a Chamber of the Court or to a specially constituted tribuzuaL

Almost ell law requires the judge to eznxzxixae a complex set of cizcuxzMrtan4oes, acomplex sst of facts, and eo come to a decision which is reameLable. There axe marules that can compel these decisions. The rules znezely point to facts and stategeneral poiici«. In a democratic cxnmauniry, cherislhing pluralistic values, the ruleswill always be complementary and they grill always be incomplete and aznbiguoLxsz.4 law ia human judgment that seeks to clarify and secure the aoznznoa interest af'the people in a community. I do not regard the search for coznmon interest as a

however, that if I represented the United States in ~ptntant boundary delimitatioe. I probably would not go to the whale af ~e

internationaL Court of Justice. Since the Nicaxnlpsaa decision I do not have quite ~much meLfidence ¹s I once had in ita ability eo come to a legal conclusion in commaxxinterest. I think I would go to a paneL of that Court or I would aet up a spc~tribunal where [ could join in I' ' 8 the judges. It is important to have judges w'Ixowill Look at every feature of the context szxxI will try to clarify and secure t?xemmmon interests of all the parties to the Litigation.

US. Continent.tal Shelf:

Case Study in Jurisdictioml Zs,m.es

Now that we have heard a global pemgective on the ContixMntal Shelf in termsof the defimtion oF the shelf, the resources, some ixxternational public policy issuesand Ixlternational shelf boundary concerns, we will be narrowing our perspective tothe United States Shelf. In this session we will addxess some particular issues thatarise from the history of regulatory power changes that have occurred between theFedcxxU and State governments.

As Pxofeaer Clingan mentioned, prior to 1937 state ownership of adjacent tideand subaxcxged lands, to a distance of three xniies fxon ahore, wss virtuallyuaqucstionexL Even though title resided with the states, however, the Federalgxvernznent maintained some limited powers in relation to national defense audcoxxuncrue, The contmversy over ownexahip can bc traced back to 1937 with a bill,promlxted by then-Interior Secretary kkes, declaring the marginal seabed within thenational domain. However, no legislation ar legal action was taken until the 1945Truxnan Pxoclamation which seemed to be mostly instigated by a desire to control thexesxuxees, xnainly ail and gas, located on or within the subsoil and «abed of the Shelf.

ia 1953, the passage of both the Submeqpd Lands Act and the Outer ContinentalShelf Lands Acts Q~%! established a geographic dual federalism" � to use a phrasecoined by D. S. Miller. The CAB~i. soured slate authority out to three nUes andfederal authxmity beyond that on the outer abelf,

%he pendulum ~ in 1972 moxc towards the middle with the pelage of theCoastal Zaac Management Act CZMA! which promoted more oooperatioxx or acolorative federalism"-again a term af Millehs-in OCS development. The 1976

CZb4A Ajmaximenxs and the 197$ OCSLA Amendments reaffirxned this cooperativexcisteaahp and the greater state mle xn 05C devIJoprncnt.

Sj

Ug. ~ggtg~al Shelf- ~c S"y l~ Jurlszlcrlanal Issues

The g9S4 Supretne Court de mo~ in urer~ of rhc Iygcrlor v. CaQfortCkt,; oil and gss lease sales are n ~b~ ~ he consistency provisions in the CZI14A.,r be interpreted as a return of the penciu.lum, reducing the State role in OCSelopmcnt.The issues of ~ ~u ho~+on ~itb ita consistency retluirerneets, atLcl:nue-sharing either in the form of a le~tivelyestablished fund pr the divhiea5 g! raonies, at leam in part etna e orn these shifts in regulatory power. A

detailed jurisd!ctional history and ~e other particular issues mentioned ~ 5csubjacts of this session

LYNNE CMLTER HANSOMExecute ve IKrectce

~rarer' for Occam' Management StadiumUrdverAty o f Rhode lskrrad

X&gston, Nwdc Islarad'

Intimests and the US. Jur.L<Aictionsl History

R. K IURROVGHSAssistant Pro f assorGraduate Programma ln Marine AffcdrsVQversfty of Rhode IslandLtagsxon, Naadc Is4xnd

My presentation examines the domestic jurisdictional history as a raqense tospecific interests in the ocean. An overview of selected govexnxnexltal actions duringthe periad 194G-1983 will serve as a basis for these observations. In essence I willargue that we have a single-interest-based jurisdictional record which must confrontxnuitiyie and interconnected issues in thc oem'. Petroleum on the Continental Shelf,a theme of this conference, is often at the center of these jurisdictional disputes.

MXZVANCE, DESERTION, AND KMKRGKNCK OF INTEXESTS

If jurisdictio is viewed as authority or cantxoI. often with a territorialcomponea.t to it, one may reasonably sik what the relevance of interests might bc toour discussion. The legal framework for donxestic ocean issues is an outgrowth ofinterests and at the same time a mediator among interests, As far back as theRdailist papers, government in this country has recognized the roles of factions orgxoulxI of ctuxexN uxutcd wxth ooxnxxum objectxveL' In the ocean settxng today thesegxoups include agnmexcial and recreational fishermen. oil developers, vessel operators,and waste disposexs. among others. When conshhring an Interest gxou.p, the modifierspecial" is often added, and the emphasis is on attempts by forxnaUy organizedprivate organizations to influcncc public policy. Thus, in jurisdictional. tcxxns thexestxuxce or activity xcgulated, the geogxaphic axes. and the leveL or agency ofgmrerntneat involved are the results of the interplay of interests before theLsguLIaxive and Erecutive branches of governxnent. Here I have adopted a proceduralapi:mech and will examine the impact of intexcsts on the govexnxnental system.~~ impacts are recorded in Legislative and Ezccutivc actions over the period1940-1983,

Before mnaidexlng the recent xecoxd in soxne detail, l would like ta observe thatsoxM of the ocean interests I have selected are virtLudly as old as the country. Threeof thexn Table 1! axe xeflected in legislation enacted during the Late 18th centurywithin a few years of the founding of the country. They include shipping. security,and cusuma. Each was focused on facilitating relatiomhips that this country had

84 VS Conrfnsnral Shdf. Case St j' A J~djcrk!mal 1ssues

mth its neighbors. Ln the 19th centu y fmherics and pollution issues emergedLe p teen~~. ~duf~ ~~ ~d energy, md ~rch h vc dl b

added TO Tbe list Of US. Ocean jntere ~e reflection Of interests in the early lairs~ e~t ve ~ons of the US tnthcates the Long history of soigne of these jntensos

te the more recent periocj

Table 1

Interests and Date of First A.ppearancein Federal Legislation

1789

179417991818

1888

1900

1945

1959

Sh ppmgSecurityCustoms

FisheriesPollutionWildlifeMinerals R EnergyResearch

HISTORIC~ DVlELOPhQKI'S 1940-1983

This yssr marks the fortieth anniversary of the Truman Proclamation on th.cOutcr Cantjnental Shelf. That document claimed subsoil and seabed resources of ~Continental Shelf of the United Statea This aascrtion of jurisdiction had with it aseparate proclamation to establish fishery conservation zones on the high seas ae!u.rsvpthis country. The course of action initiated in 1945 reached a recent plateau throughthe Reagan Exclusive Economic Zone Proclamation of March 1983. This slice af

purposes considered to te 1940-1983, is the sub~t of ~~per.

To portray this period 1 have compiled the principal ocean related laws and/orexecutive s Ts~ First, Let me indicate my approach to this synopsis. Utilizing ~primary interests Ke shipping, security, customs, fisheries, pollution. wildlaf'e,minerals snd energy. an4 research} for each decade, I have tabulated sjgnif ical la~an4 ereeutiVe actjnns that fall Within the purVie~ Of each speCific jnterert. G~szrjaws have been compiled a number of times and this task is currently being done +Ythe Fejeral Gordjnating council on Science snd Technology-Immmittee cmATSlwphere an4 OceanL3 Sorting them by specific jIlterests, mp objective, ~~additional interpretation. By ~piling the Legislative and ezecutive actions per4ecade and displaying then by decade pig. I! one gains an appreciation for the

Exanunjng The historic reeortj, jt is apprrent that totaL activity varies fraKL c45cadeta decade. Wc can reflect on the djfferen~ between the 1960a, w'hich merc calledThe Decade of Ocean Rbetorjc and the 197/~ which were considered ~ Domde

prng Ocean Action. The f scads culn ted th tbe StIkttic83.Comnimsrn Report and the latter produced the major elemmts of ocean legjslaticmln ~trasTI the current decsde which is not 4fvnr +et hss produced little IheTAKN oIaction. However, if one remains positive, it may beccsne 'The Decade of CleanRationalization. Rationalization jn the best ~ of the ~ wUL encorILpcL88

Interests and the US. JurisdktiotauI HIstory 85

a

zoU'LijO

g! 10

0 O

01940 1950 1960 !970 1980

DECADES

Figure l. Total legislative actions by decade 1940-1983 From1940 through 1%9 the government, influexaced by oceajx interests,produced an increasing number of legislative and. executive actionsin each suocesaive decade.

adjuaeaxsnt af coxnpsting claixnL The legislative record or lsd' of it in thc 1980s maywail be shaped by forces beyond the»e of an individual adxnbnistration Specifically,if Legislation is viewed as verification of compnxmises among interest groulxx,5 thenthe incrcaing nuxnbexs af cJaimants far a finite ocean could well lead m stalemate onCapitol HiilL In such circumstances alternatives to legislation for mtcrgroupnxgaciatioa becoxne important. Thc fiveycar pianxxing proces for offshore oil thatwc axe dining is an important forum for just that reason.

In addition to observing the total nuxnbcr of «ctioxxs, we can examine the aznouutcf activity within specific interests by decade Fig. 2!. ln exaxxrxce the number ofindividual legislative action within a specific interest can be vievwd as an index ofthe importance of that interest during the decade. The scale uu the left of thc figureshows ths dcaules of 1940 to 1980. Thc vridth of the blocks for different decadesiUustxatca the magnitude of activity for the identified interest.

Let xsc xevtew soxnc ma jm clemente of this history. In the 1940a the stage wasact by ths Truxnan ProcIlamations on minerals and fisherics. In the succeeding xhmMsubstantial ciexnents of current ~ oil and gas law were provided through the

Lands Acc ax@i OCS Lands Act. Fisheries dcsnlnated in tcxxns Qfxx»gaitude in both the 1950e and 1960<, In xnx»t cases fisheries prtsnotious withinindividual geographic axeas and/or, for specific speciea wcxe the subjects of the laws

Interests and the US. Jsrlsdk6orxtxI 8'/story 87

A second type of expansion is in the number of interests that effectively claim arole in the oakum. In the compilation of first occurre~ minerals and energy aswell as research appeared in the 1940-1983 time periacL Continued xefinexxsmt, forexample comxnercial versus recreational fishing, and strengthening of interests maylead to finer divisicsxs in future policy deliberations.

A third axea of expansion is in thc intensity of usc. Some, but not all, measuresof ~ of the occam show substantial gains in recent years. Beyond that, however,even the perception of potential future gain through greater um of the oceans is oftensufficient to catalyze groups.

Expansion hss as a corollary thc potential for conflict. US. oil and gas resourceshave baca a highly visible central theme in thee discussions. Conflicts over the~ Zoae Management Act, revenue-sharing, and 8 g3 disbursements-aU topics ofthis session � may bc traced to expansion of ocean interests that overlap with offshoreoil interesta My point here is to indicate the jurisdictional backgxound within whichthese conflix~ might arise.

Separation, both geographically and functionaUy, is also an important part of thisjuiadi~ history. Iu fact separation hes been important, at least in the past, as adevice to satisfy the gxowing number of constituexscieL In tcrnn of functions,separation is a Iogicsd outcome of how interests are converted into laws and in manyinstancsxx, subsequently into governmental pro@nuns. At the outset there is no clearreaasx for fishermen and oil interests to confer on their ocean objectives. Nox shouldaae expect that their objectives should indeed be mutuaL The result is fish Iaw andtxil Iaw as wcU as agencies that reflect thee different ocean interestL 5imiiarky,Coalixeeional oomxnittees and executive departments seldom have strong incentives toxatioMLIixc scree interests.

&acti:sutl separation may be bridged by embracing moxe than one interest ixx alegislative or ~aistrative action. The OCS ~ds Act amendments ccntain such anexample. In preparing the five year plan for offshore oil and gas leasing theSecretary of the Interior is requixed to cxauxine pxixn~r pxoductivity andenvixcemental sensitivity.' This information which reflects a fishery interest, amongothers, ia to be considered along with the interest in oil and gas development.However, to date this approach has not met its potential to mediate among demandsof diffexent constituencicL

Geographical separation, another attribute of this jurisdictional xtcor4 may benatural ox man-inducexL In the first instance the highest quality xos~xs or usesxoay not occupy the same area of the ocean. Fortunately, this is often the case. Inthe second csLse, a subtle form of zoning occurs where different users proclaim if notex|elusive at least pxefcrxed use of certain parts of ocean space. For example, securityconsiderations have pxedudcd the ~ of large areas of the Outer ContinexttalShelf for oil development and have also resulted in the delay and possible rejection ofpint fishing ventures that employ Russian vessels near US. coasnL

THE MUL'HPLE INTX3QST DKLKMI8A

So fax I have avoided confronting directly the multiple interest dilemma that isintegral to this jurisdictional history. Stated simply, this dilemma is recognition ofthc fact that xxMNt aman activities intertwine many intexestL The ocean environmentitself is parts~ly conducive to them interxelaticsxshipL The dilemma comes aboutwhen one considers how the interests either axc or should be interrelated in thc

' anal xecorxL

One may bc either optimistic or pessimistic about resolving the multiple interestdUemma in the oceans thxough revisions in the jurisdictional framework. Thepaeixnish-those who believe systematic large-scale acoznnxodation is uaxeaii!rQc-

88 V8. Contfxtctttal Shelf: CcLxe Study tn Jurisdtctfonal Issues

observe that society does not have collectively agreed-upon objectives. Ocean interestsaxe united only in some relationship to saltwater, not in any other wayFurtherxnore, as expansion continues and separation becomes less feasible, thedivergence among intexests may become dearer. Stated alternatively, once the outerlimits of the ocean frontiers have been reached, attention wiH increasingly turret toallocation within that realm. A second discouraging observation is that irrespe~veof the political issues, the complexity of the problexn exceeds our abilitiesintellectually and adxninlstxatively. A commonly repeated theme allied to this is tharour scientific understanding, w'hile well developed, is inadequate to portray in detailinteractions within and among uses. Finally, there are the arguments that the cartsof adjusting this system wiQ far outweigh the benefits.

comnunity � believe that the ocean may be used as a central focus for jurisdictionaland adxnuxistxative systems. The Stratton Commission advocated a single focus foxthe oceans in the government.' Since that time a variety of agency pn~xaLIs orpolicy and ceordinating groups have appeared. The optinrists are supported first bythe interxelated natuxe of the ocean itself. Secondly, one can point to a variety' ofstalemates i» government, aspects of oil and gas development being one, w'here theoverlap and conflict between existing policies axe unsatisfactory to aH parties.Pueceiated with thi ~ is the feeling that present piecemeal solutions, often of a judicixLlnature, sxe irLadequate.

What are the realities and txrhere are the realista7 l believe many of the realisesaxe here today. The prtxaxnt xeality is one of small and incremental chaageL Oneneed only look at the recent debates over reauthorixatioa of the Ccssxtal ZcmxcManagement Act or the balancing provisions of the OCS Lands Act Amendments tosee that the accornmedatiotN among interests at the legislative level are becaxnixxgincreasingly difficult. An alternative approach, such as an Ezclusive Kazxaxxic Zonel aaaganLent Act, appears distant at best. However, interagency coordinatingcommittees, memoranda of understanding, and planning pcs~ such as the one thatwill be discussed in subsequeat sections of this conference are in my opinion thefabric of the current xeaUty.

The tash of resolving these conflicting interests is complex and one can orriswonder whether the current "realistic" approach will indeed be adequate.

1n the Federalist No 10, Madison describes a faction as "a number of citizens whoaxe united and actuated by some common impulse of passion, or of intense%,adverm to tbe rights of other citixens, or to the pexxnanent and aggregate intereetxsof the annmaxnity." New Fork Pocket November 23, 1787.

Sea James N. Rommu, 1980. The SctcxLtt ac ~y of EoreEgxx Pohcy pp253-283for a dlmussiaa of the use of society's political priest as a means of identifyingpredoxninanl lntexeseL

The xatiacah for the pxesent compilation may be found in Natitxnal Ad;vino~Committee on Oceans and Atmosphere, May 1984, The Zxcfasfvs Zc~sxafc- Zaraeof the United Statest Sosas Injxscdkrte Pohcy Issues, pp.93-100.

Jahn Norton Moore..'icptssnber 1976, in an addxtssx entitled OqyLnizixxg for aNational Oceans Pxogxaxn" characterized the 1970s in this way and. referred. toSenator Expert Holllngs' description of the 1960s.

Interests and the U5. JarfscfkMctcd Bbfory 89

See for exantplc VJ3. Kcy Jr�1964, PoDtks, Partes, amf Prcssgrc Grips p.145.

Sects 18 aX2XG! of the OCS Lands Act as Amended. details the Department ofthe 1ntcrior's obligations in this regard.

Sce the Rcport of the ConUnisuon on Marine Selene», Engineering and Resources,1969, Our Aarfos cd rhc Sca, Chapter 7, Organizing a National Ocean Effortgx227-249.

Aekt~~grntcass. l thank L M. Alexander for proposing a look at thejursshctianal history af ocean issues and L Juda for conUncnts during preparation ofthe. paper. This presentation wss supported by a grant from The Andrew %'. MellonFcendatxm.

Beau.thorization. of the

G!astal Zone Managemen.t Act

THB COASTAL STATBS ORGANIZATION'S VlZW

R. GARY MAGNUSQNerectorCoastal States OrgardsatfonWasMagtoa, DC,

Our country's need for coastal management hsa never been greater at any point inhistory than today, Sixteen years ago, thc Commission on Marine Sciences,Engineering and Resources, better known as the Stratton ConUnilrion, predicted thatman's use of and movement toward coastal areas would continue te inertiae. Thatprediction came true beyond the Commimion's cxpectationa.'

Today, our oceans and Great Lakes are horne to more than one out of every toroAmericans. By the year 2000, nearly SO peasant of the US. population wUl h.vewithin sn hour's drive of a seashore or lakefront. In Florida alone, population expertsctlculate that 5,000 people a week. are streaming to its shoreL And, on a single day,nearly half a million people will visit California's beaches.

Shoreline construction-ranging from beach. resorts and vacation homes towaterfront restoration and marines-ia bc@ming. South Carolina has men a 300percent increase in coa:rtal permitting activities over the last four years. Moat of it isattributed to a dramatic me in condominium and resort development. Likewise,residential. and hotel development has expanded in neighboring North Carolina, wherepermitting activities have increasll 400 pedant. 'The same is true in Delaware,Maine, Massachusetts, Mississippi, Ncw HamptLhire, New York, the Pacific territories,and thc Virgin laULnds. The rebirth of many urban waterfronts aa new centers ofcommerce and tourism from New York City to Port Angeles, Washington has alsosignificantly added to thc use of thc coastal zone.

Support facilities for offshore oil and gas development, commercial fishing, portand harbor operations, and other industrial uses of the coastal zone axe also escalating.

92 US. Corgtncaral Shelf: Case Study lrr Jurfsdkrlonal Issues

Califoxtris alone is expecting $6-10 billion in construction of offshore and onshore ailand gas facilities within the next decades

The burgeoning growth of ~ uses, although predicted years ago, hss broughtwith it unprecedented pressures and demands from diverse, often competing interests.Conflicts center primarily between water- and non-waterdependent uses of the~ zone and the need to make trade-offs between protecting natural rerouxces orexpanding econoxnic development opportunitieL These onshore activities, important irrtheir own right, axe paralleled by actual or prospective increasrs in offshore activitiessuch as largesse OCS oil and gas leasing, st-sea incineration of hazardous wastes,and ocean xnining. Combined, these land-based and ocean-based activities present thegreatest challenge to ~ management yet.

Clearly, the predictions of the Stratton Commission have come true. Uses of the~ xone are increLslng, Problems of coast management are moving seaward sswell as tnlaud. flatus, the vrsronary reconUnendatrons of the Comrxu.'rston m 1969.which called for a governmental framework. to effectively manage the nation'scoastal xone, axe as valid today as they were then.

The Cornreemon's xoxsnmendations became the law of the land in 1972, whenCongress rats~ized the urgent need for fedexai~te cooperation in efforts to

mixe increasing developxnent pressures on the nation's coasts and enacted theCtsurtal Zone Management Act ClZW3.

The ~ rhxcirrxes that it is in the national interest to help rmttes pxemare.protect, develop and, w here possible, restore ox enhance our nation's corurtrLI resources.giving full consideration to ecological, cultural, historic, and ~tic values as wellas to needs for ecomlric development. In 1980, Congress unanimously reaffirjrredthat federal comxnitment for five yeaxs.

WHAT LlES MEKU! FOR THE C~QAA7

Despite overwhelming evidence of need snd support, the future of the na~~ management program xemains uncertain. Most provisions of the D%VL,unless xeauthorixed by Congress, will expixe on September 30, 1985. What m~btsAsne of the national ~ management proiparn if Congress is unable to enactlegislation to xeauthorixe the CZMA7 What is the position of the Administration axrclthe states regarding the extension of the CZMA7 These are certainly questums whichneed to be addressed in any presentation on CZMA reauthorization.

lf Congresr is unable to xeauthorize the C;94A, funding authority for federaLgrants to states to maintain their federally~pproved coastal management grroglaxxsswill end. Man.y of the 28 federally-approved state and territorial CZM progntxns

be forced to shu.t dow'n completely. All will be forced to substantially retracetheir CZM effort, eventually leading to unwise, imbalanced, and irresponsi.hie use crfcoastal xtseume.

The ressrlt7 An overall curtailment of planning and regulatory activities dtxe tolm of staff. Ctestal development permit pxocessring and federal conrristen~determination reviews would be subject to lengthy delays and/or a lower rate oEapproval due to lack of time and resources to negetiatc or mitigate. litigation is mlikely result- Perxnit monitoxing and enforcement would aha be cut hack Man~states would be forced to eliminate special management planning effortx, such asrshore protection, urban watexfrtmt development, dredged material disiesal siting amimitigation, water quality irnpxovetnents, public access improvements, and aheUfisr1xmanallemeut. Publir. participaticst programs w'ould hs,ve to be reduced or elitnixratad.altogether.

In many states, local governments are the recipients of a significant portion trf ~federal grants money for coastal planning and xegulatory activities to help thesxr

Reauthorfzatfott of the Coastal Zoos MaItagestsnt Act 93

address resou.rce and land use conflicts on thc local LevcL If federal funds aresignificantly reduced, states would no longer be able to share their grant money withlocal governmentL Without this funding source, local ~ planning efforts, whichare key to state pxogram initiatives, would be sevexely disrupted. Since ~pn~ in thc territories are funded almost entirely by the federal government, areduction ox elimination of federal grants would have an even moxe serious ixnpact.Without federal funding, ~ zone management in Guam and other territorieswould come to a standstill, just as the island tou.rist industry and its related coastdevelopment are rapidly expanding.

The likelihood of states being able to bear the entire cost of the national coastaltnsnagement program-even if appropria~ generally not encou,raging. This isbased on the projected yesr-end balances of many coastal state budgets and thecompetition over state funds to mitigate anticipated federal budget cuts. Sixnply put,if the CZMA is not reauthorized. it would be just s matter of months before thenational coast management propmen would bc reduced to a few state CZMprograms, operating individually with txtlrmsxal attention to the national interest tosustam their federal certification and consistency authority. ls this what we want tohave happen?

THE ADMINISTRATION'S REAUTHORIZATION PLANS

The Mnuaistration supports a thxee-year extension of the estuarine sanctuarygrants aod federal pxogram management but oplcses any further continuation ofCZM grants to states after Scptembcr 30, 1985. To me, the Adxnlnistration's positionis no better than killing the CZMA outright. The xesults and ixnpact upon thenational coastal xnanagement program would be just as devastating.

In this year's budget analysis supporting thc elimination of CZM grant funding tostates, the Adxninistration attempted to portray federal funding for state ~management as sml" money that is no longer needed or appropr~~ It contends thatthe federal state coastal xnanagexnent partnership embodied in law has been suamefuland is complete, that the couch management mecbuusms are fully and equallyimplemented by a vast majority of coasts states, and that fectexal funding can bewitMrawn without undue harxn to the partnership.

Nothing could be further fxotn the truth. 4. fact, when the Admuxistxationtesttfied befoxe Gmgress this Spxing on the CZhCA reauthorization, it hsd noinfoxxnation about the fiscal or progxtunmatic impacts on the states in the event CZMgxants were eiixninatNLLn response to congressional inquiries on this point, NQAA conducted its ownsurvey of proposed budget cuts on coastal states. The xesult of this survey confirmedwhat the G~l States organization already knew, which I have already sharedwith you,

THE COASTAL STATE PERSPH FPM

Caeud. states support the enactment of a strong, multi-year CZMA reauthorim-tion. This action would reaffirm the federal govcrmnent's conxxnitment to states, its

to all Americans that the partnership under the CZMA would continue andthat our nation's ~ xescaxrces would have the protection and management they sorichi.y deserve,Thc xesu.rgence of economic and environmental vitality in oux nation's ~areas since passage of the LI&IA 13 yeaxs ago is no coincidence. There have beenmany su~ stories, w'hich I am proud to say axe documented in a report recentlyissued by the ~L States Oqpuuzation entitled, Axnerica's Coast+ Pmgress and

gg, CoratisenroL SheLf: Gssc Study Ln J~dictforud Issues

p ~" The report describes a record of success achieved by thc states to tailor tbe~ to meet not only their uniclue resource needs but much broader national

'ycs, Wc hays scen the forms~ and expansion of capital investment in Hecvcwork City's waterfronts, the restoration of industrial corridors along the DctrcatRiver, the proem of 3 milton acres of ~uisiana wetlands, expanded beach acne'-e

other states; the supporting actions to clem up Boston Harbor.and reduced bureaucratic red tape and permit procmaing time for coastal projects inHawaii. Coastal state managemen"cans sjl this-and more-for the nation.

Over the past decade, Congress hss appropriated roughly $187 million for thcdevelopment and implementation of 2~ state Col programs � an investment whichamounts to httie morc than six cents for every man, woman and child in the UnitedQateL It seems such a small price to pay for so much in return.

Coastal management is at s, co~w4 On cme hand, the usc, of our coast hasnever been greater. The federal government, on the other hand, is on thc verge afembarking upcn many oew ocean ventures w'hich will certainly have far-reachingimpacts on coastal resourcea. What can and must be done to face these challcngea7

First, we must reauthorize the Coastal Zone Management Act to keep in place theonly comprehensive tool which allows feden4 state, and local governments tomanage amperatively thc beachea, bays wetlands, ports and harbors, estuaries islandsand fisheries cf our nation's ~ areas,

Second, we must provide ad«luate funding for the national coastal managementprcgnxm at both the federal and state levels to enable these governments to meetfully their obligations under the CZl&c

Third, last year's Supreme Court ruling on the federal consistency provisionshould not bc aUowcd to drive a deeper wedge between thc federal government andthe states over future u«s af the oocan. Resource management for the cleans, as mellas for the amtlinc, must be conducted as a federal-state coopcrativc effort.

It is imperative for federal, state, and local governments and industry to try' towork together if we are ever to realize the potential of our ocean and ctsustal~rccL The CZMA and the national coastal management prcqpmn were foundedon principles of oroperation between government and the private actor. Its sua.-cssand gsocnise are chsLr. CZM is good government. It has potentiaL It is the rightthing to do W let'a get start«L

NOTES

Our Nation and the Sea, A Report by thc Commission on Marine SciencesEngineering and Recco~ 1969,

a telephone survey in 1955 of 28 states and territoriee.pating in the federal Gmatal Zone Maxuqpment Prcqmm on thc impacts of

Federal budget cuts on state coastal program s,

Reauthorizattan o f the Coastal Zone Management Act 95

THE NOAA PERSPECTIVE

JAMES P. BLIZZARDDepttty Dk.sctorOffke of Ocean and Coastal Resource ManagementNatfattal t'tcsenk and Atmospheric AdtninfstratfonVashfagton, DC.

I axn happy to bc herc today on behalf of Dr. Anthony Calio, DeputyAdministrator of the National Oceanic and Atmospheric Administration NOAA!.Kahancing the ezchsnge of information on Outer Continental Shelf OCS! activities isa laudable goa4 and I connnend the Center for Ocean Management Studies in their~ fforta,

While I have been asked to speak to you today conoerning the Federal CoastalZone Management Act Ci9AQ I would like to first teH you about some of ouractivities relating to thc OCS.

We represent thc Department of Commerce on thc Departmentof thc Interior's D09 OCS Policy Board as an ez-officioFederal agency member.

We represent NOAA on DOPs two non-energy mineral taskforces-csM with the States of California and Oregon forpolymetallic Sulfides at Gorda Ridge snd one with the Stateaf Hawaii for Cobalt Crusts in the Pacific.

3. We coordinate OCS coxnxnents for NOAA, and

* Wc encourage», through the ate ~ prcgrazns, stateparticipation in OCS activities.

To facilitate these stated activities, it is our policy to allow Section 306 of theCZIdA3 funds to be expended for OCS participation. Further, we, on Congressionalapproval wiii be allocating some re~ning Section 308 of the CZMA! funds forthis purpose.

I believe thc answer to those two questions is yeL The CiBAA was enauxi in1971 to encourage and assist states, territories and the Commonwealths in managingincreasing and competing demands on the um of the nation's coastal areas. Ihe actestablished a national program to provide fltuLndal and technical aadsuuLe as well aspolicy guidance to states for the establishment of comprehensive ~ zonemanagement planL Each state's participation is voluntary. The CZMA Amendmentsof E976, 1978, and 1980 refined and strengthened the authority vested in the

96 US. Conxfnexlxsi S~f: ~e ~rxufy > J~dkdonal Issues

Secretary of Commerce to carry out the act's purpose and cxpandcd thc range ofamisntxsm available to states for developing and implementing cxmed zonemanagement plans.

CZM implexnentation during the psst 11 Years has been successfuL When the actwas reauthorized in 19S0. 19 states had federally-approved programs, Statestructures are now in place to deal with cxesud issues and ixnplernexxtfederally-approved ~ management programs in 2g of the eligible 35 cxxaeMstates and territories, covering over 90 percent of the 95,000 mme ccsLstline of theUnited States. Virginia has proposed the >9th progmun, which is currently beingreviewecL

Ths pxqpuns' accomplishxnents are due to the hard work and dedication of statecoasted proimuu staffs, pubhc support, and substantial contributions of ~ andmoney from federal, state, and local governnzntL From FY 1974-1979, Section 305geqpam development funds totalling approxixnately $70 million were provided to 35states to develop management programs for federal approvaL Of the 35 statesreceiving these funds, six voluntarily chose not to continue to mek federal appraval-ln l979 Congress did not xeauthtmxe Section 305 because the states had developed orwere well on their way toward developing CZM plans. Similarly, we beheve thepurpose of Section 306 program administration grants hss been mrved. Since FY1974, 28 states have received over $180 xoillion in adxnini~rtrative funds Section. 306!from the Federal Government. Twenty-five states' pxograxns have received fundixxgstarting in or befoxe 1980. Grants to 11 of these states began in 1978, and in the cdof Washington and Oregon, in 1976 and 1977. xmq~ively. We believe that tlxisll-year, Q50 million federal investmextt has achieved the goal of the eNtabliahmentand ixnplementation of state ~ xoanagcment prograzns.

VifHKllm X!ULD OR SHOULD THE C29dh BZSYRKNG

The Administration does not want the Gmrtal Zone Management Act to beweakenetL On the contrary, we believe effective ixnplementation of the CZMA caxxcontinue without the support of substantial funding fxom the Federal Governxnextt.

G

As l mentioned earlier, we believe the purpose of Section 306 progxnxxxadministrative grants hss been served and should not be xeau.thorizesL TheAdxnuaistxation'a position not to reauthorize Section 306 grants should not come as a

During the 1980 xeauthorization hearing@, the pxevious Administratioxtproposed an eight-year phasedown af federal funding. The Congxon passed asupplemental appropriation at that time based on this phasedown approachBeginning in fiscal year 1981, thi ~ AdxrtixListration has, each year, prcyeed no furtherfunding for these grants. As part of the gxant application pm' in fiscal Year 198?states were quired to xeccasader alternative sources of funding and staff levehsnecessary to continue their CZM pxograxxN in the absence of federal funds.

State coastal programs have been institutionajIizad and sts.te and local finalcapability to absorb these ctets is stronger than that of the Federal Government.ou.r opinuN, the states have the ~reea to continue their CZN pxcgrams withoutfederal funds The National Governors' Axe!dstioo Report of February 1985 s1hwsrsthat the states ended FY 1954 with a $5,8 biUion budget surplus. Surpluses in c ~states averaged $164 ntillion ~ same report estimates that 48 states will end fiscalyear 1985 with a total surplus exceeding $$ billion and iodicatea that a number af

money in "rainy day funding" funds to be used in the future as

ReaNthortzadan o f roc Coasts Zcmc ilfcrnagcmeaf Act 97

needecL While we commend their prudence, the Federal Government should not haveto borrow xnoney to support state programs when sufficient state funds are available.

On April 24, 1985 the House Subcommittee on Oceanography ~ a MI toxeauthorize the CZJAA with phasedown funding for Section 306 gxants as follows:

$40,000,000$38,000.000$36,000,000$35,000.000

19861987

1988

1989

Resource Managexnent Improvement Grants-achled to the act in 1980-providepants to be used for several purple � to acquire fee simple or other interests in land,tc implement appropriate low-cost construction pxojccts, to xodevelop certaindeteriorating ox underutilized urban waterfronta and porta, and to provide access topublic beaJxcs and other public ~ areas. The Congress provided no funds forthis section until fiscal year 1985 when a combined appropriation of $34 million wasmade available for both Sections 306 and 306A. The Ml proposed by the HouseSu.boomxuittee on Oceanography proposes to authorize $16 million each year thxoughfiscal year 1989 for Section 306A. However, no funds are being roquested in theAimimistration's current bill in keeping with the goal of reducing federal spending.Bcaidea, a number of states already support activities similar to those under Section306A- For exaxnple: in the area of ~ the pennsylvania Fish Ccenxnissionprovides boat launching areas. The South Carolina Coasbll Council has recexved$500,000 of state funds for beach access projects RecxeationaL and coasts access bond

have been passed in Massachusetts, New Jexmy, and CaLifornia Other stateswhich support such activities are New York, with its scenic Hudson program, Maine'srivers pxogaLxn, and Oregon's xnulti-agency coastal accon proIpun. The CZM programshould never be turned into a public works program.

Na SSS ra N~~ a~~~ SmLctxsery tmgr !

Section 315 provides 50 percent matching grants to states for acquisition,development and operation of national eettuccine sanctuaries. These sanctuary+provide natural field laboratories to study and gather data concerning the natural andhuman Processes occurring within coastal zone estuariea. Presently 15 nationalesttueiae sanctuaries have been established. The Administration has proposed adecrease of Slk5 million fram the current level of Q.93 xnillion to a level of $128xnillion for the next three years. %e remaining funds are sufficient to provide for aphased acciuisition of one new site per year, to support sanctuary operations, snd toconduct research in these sanctuaries. ln contrast, the bill passed by theOceanography Subcommittee propceed $9 million each year for the next 4 years.While the Administration supports Section 315 aUocadons. we doubt that this muchwill anally be allocated.

Now' to arne unfunded sections of the CZh4A.

9S US- ~bMrataL Shelf: Case Study Ln Jurisdlcdorurl Issues

Ssc¹oa Ã7 mLafetssacy!

The Coastal Zone Management Act of 1972, as amended requires each federalagency conducting or supporting activities directly affecting the coastal zone toundertalte those activities in a manner which is, to the maximum extent practicable,amistent with approved state management programs. The CZMA also requiresfederally hceruld or permitted activities af fecting the ~ zone, includingactivities described in detail in OCS exploration, development and production plans beconducted in a manner ccsuleent with federally-approved state ccsastal management

Section 307|.d! of the CZMA requires that federal assistance be granted tostate and local governments for activities affecting the coastal xone only when suchactivities are consistent with federally-approved ~ zone management pregrarna4NOAA's current regulations interpreting Section 307 were promulgated in 1979. Webelieve these oonsistency provisions, not money, to be the incentive-the carrot. ifwill-for state participation in the CZMA program. The Administration does aotsupport any chute to the CZMA's consistency provisions.

On January 11, 1984, the United States Supreme Court ~ its decisian iraSecrersry af the Xraterfe' er aL v. California er aL The Court held that the sale ofOCS oil and gas leases is not an activity directly affecting" the ~ zone withinthe nleaxung of Sectiora 307 col! of the Coastal Zone Management Act of 1972 asad,therefore, a consistency determination is not required before such sale is made. Weuruiertaok a review of our regulations to deterrrune which may have to be revivedand what new aegulatitsLs should be promulgated as a result of the Supreme Court'sdeciioar. Our proposeci final rule makes thee changes clearly necessitated by theSupreme Court's decision. ~ Supreme Court's holding did not address whetherother federal activities landward or seaward of the ooemQ xone were subject to therequimments of Section 307 cX1! of the Cir>IA. ~ final rule leaves the scope andsubstance of the Section 307 cXl! requirements open for further interpretation.Federal agencies must continue to review their activities on a case-by-case basis todetermine whether they "directly affect" the ~ zone within the rnea~g ofSection 307 cX1!. If a federal agency concludes that a proposed activity dixectlyaffects the rsoastal xone, the federal agency must provide a consistency deterrmlnatiamto the affected, state s! and must conduct the activity in a manner which is consisteratto the maximum extent practicable with approved state ~ zone managenaent-programs.

During the spring of 1984, the NOAA Administrator initiated a comprehensivestudy of the experienors gained to date in applying the federal consirrtency proviskalsof the CZAR The Federal Consistency Study wss designed to ymvide infarctionuseful in evaluating the federal consistency proces. NOAA will um the resultra toconsshx whether new apprcs eh% or improvements are needed to increase theefficiency and effectiv~ of coastal zone nuuaagement and the federal cmsistea.cyp1QC5%

The oh~van of this study are:

1. To dccument the exlerimces of state and federal adam~~ asWeQ as affected patltiea, with the irnplernentation of thefederal consistency provisions of Section 307 of tbe C'.QA4and

2. To identify any issues surrounding the implementation of thefederal consistency feocess and to document any areas ofconflict.

Rearuhortzatlorx of the Coastal Zane Nanagexaextt Act 99

NOAA provided for full public awareness and participation in the study. NOAApublished a notice announcing thc study in the Fafsral Regfsrer and mailedannouncexnents to state ~ management agencies and affected federal agencies; toall individuals who attended hearings or provided testimony on thc proposed federalconsisusncy rulemaking, xo individuals. agencies and organizations known to beinterested in coach zone management issuexr, and to over 300 major busineaes,indsxstries and trade organizations. In addition, NOAA held follow-up interviews andxnectings with interested and affected parties.

NOAH' compiled statistical and desctiptive inforxnation. from agency files, fromstate coasted management agency performance reports, from specific follow-upqu~ons and interviews with state and. federal agencies, from the public commentsreceived in xesponse to NOAA's Advance Notice of Proposed Rulemaking on FederalConsistency, froxn testixnony presented to thc Congress during the spring of 1984 onproposed legislation to axnend the CZAQ from misting studies and articles on theconsistency proccw, and from the legislative, regulatory and litigation histcey of thefederal consistency provisions.

'Ihe Draft Study currently out for review! presents and exaxnines statlstiinforxnation on the implementation of the Federal consistency procea. It describee thehLws. xeguhttions, and policics which gtside the federal consistency proosss fxoxn the~ arly stages through informal negotiations to reach agreements and, finally, theforxnal mechanisms available to resolve clisputeL It also contains reports on comxnentsand concerns received by NOAA regarding the federal consistency prxscess andprovides case studies which illustrate both the problems and the suoosaxes encounteredin the federal ozlsistency proclaim

The Federal Consistency Statistical Data Base combines statistics informationprovided by state coastal zone managexxsent agencies and by affected federal agenciesfor activities conducted durmg the federal fiscal year 19$3 FY 83 includes October 1,198?� thxough Scptexnber 30, 1953!. NOAA concluded that compiling inforxnation forFY 83 would yield a representative sample based on the most recently available data,waul provide an adequate sample size, would allow inclusion of states whose ~management programs were approved ixs 1982, and would impose the least burden onpaxticipating state and federal agenciea However, fiscal year 83 was unique in one

In August 1982, the Ninth Circuit Court of Appeals required cxnsxixxtencyreview for OCR lease sales under Section 307 cXI! In January 1984. the Su.premeCourt reversed this decision During fiscal year 83, while the caw was on appeal tothe Supreme Court, the Department of thc interior prepare consistencydetexminations for the lease sales scheduled during that time.

lxL order to ~re a broad review of the implementation of the federalconsistency process, NOAA examined specific cases and examples from the entirehistory of the C49kA For example, becatue the total nuxnber of came involving theSecretarial mediation and appeals proceeds under the CZMA is relatively smalLNOAA douxxnented all cases.

The statistics collected include the xxumbers of concurnmces and nonconcurrenceson consistency detexxninations and certificatianL The statistics axe organized by stateand federal agency and by the appropriate Section 307 category for types of federalactioxnL. 'Where available, the statistical information includes time periods for review,location of the activity ie in the cxsustxd xxxne, landward or seaward of the mssbdroue, or on federally excluded lands within the mmeQ zone! and notes on cases in%'hich initial state objections were resolved as a result of further negotiations,litigation and/or project modifications. In the statistical summaries, there was neitherweighting of the statistical sumxtlrles, nor was thexe weighting of the statistic forproJsct ~ sLxe of impact

100 pg- C~inenral S~f: CNre Shady ~ Xurbdlcr&nal Is@ms

orxnation in the study neither allo+ra for objective mathexnaticalef the implementation of the federal consistency prcoesx~ nor provides the

for a cuxnulative evaluation of th«>perienoee of states, federal agencies Or otherinterested partiea. As a result. the raw statistical data offer little insight into howthe process could be ixnproved to mcrease efficiency and effectiveness. The diverseand unixiue character of the states o~ zone management programs made tbe

i and campujscm of information difficult. The inforxnation provided toNpAA from states, federal agencies and private individuals was unweighted andOften incomplete ox incompatible- Therefore. subjective analysis is xexiuired tointerpret the available information.

provided li Ktle insight i to the costs axxdbenefits of the federal consistency ponce' Np~ ~~i~on the econrxmic inxpacts of the Federal c ~ ~ S~

w s provi rd on y y a few oil companieL Thus, the avadableinforma40n on the ecoremxc nnpact of federal

p vied y i dustry or generic information inferred frtmn xeefforts attempting to analyze the costs of coxxxplinnce with various eniimennentallaw» and regulationL The benefits of federal co~cy, which also are.Qntlllantifi4d, derive from increased intergoverILGlexltal coordination and ~tatwxnand from wise management of coastal resources.

FtPVURR OF THE COASTAI ZONE MANA,GEl~~ pROOIiAM

%e beHeve Goastal Zone Management will continue to be ixnpleaeatodsuccessfully but that the states and territories have the xesourcee to continue theirpxogranxs without federal funds. The states axe and will be receiving fiscal year 85funds later this year. %le Office of Ocean and Coxuxtal Resource Managemexxt CORM! will review closely the applications for these funds to insure that long-terxaprojects x»cluiring extended federal. funds are discouraged.

OQUI4 will continue lI1 its role of provldixxg technical Sxslstance to Nates 'vFltb.xnanq~nent pxegrams on inca such as federal coxsxistency, public information axxd.education, Permitting, and special axes xnanagenmnt planning. The ~m 312pxqpam Evaluations will also continue and we are now seelxing contacts aac%inter»~e with a breeder repxeanxtation. of individuals and groups during theevaluation process in order to xefine the objectivity of the evaluations. No doubt thecooperation of sotne of you wUl be vital to the sutxcos of these evatuatiomL

With the eiinunation of federal funding for coastal pxograms, the federal rcde irxcoastal slxe mana!+meat will focus on technical aaislmme and moxe xefined, timelypnsgraxa evaluationa,

~ 10

Revenue-Sharing Legislation

THOMAS R. KITSOS

Ltgtslatlve AnalystUS. Hcesc of kcprcsentattvesGmamfttee On Merchant Markae and EbhcrfesÃasQegtoe, DC.

At approzimately 180 ~ an October 9, 1984, Senate Manity ader Howard8aiter rtne from his desk on the floor of tbc Senate and addressed the presidingofficer.

Mr. PrcaMent, as I indicated earlier today, it is the intentim ofthe leadership on this side to go to a privileged mattertemporarily laying aside the present pending business and thepending question. Lct me hasten to ssy, however, that eventhough the OCS jcvenucaharing conference report is privi-leged and is available at this time, if we have not finishedthat measure by later this afternoon, ssy 430 or SSG, itwould be the intention of the leadership on this side to aakthe Senate to return to considcratiem of the debt limit

with the anruranoc that we axe going back to the debt limitscenctime today, I submit a report of the cammittc» ofconference on S. 2443 and ssk for its immediate consideration. Cangresskmal Reaord, October 9, 1984, p. S 13844!

Thus, after more than three years of intense Congressional deliberations andIsunsgc on three different oocasbms by thc House of Representatives, the US. Senatebegan its debate about a bill that would allocate a portion of the federal revenuesreceived from the sale of offshore oil and gas leases to ~ states for a variety ofpurposes, including the admirustratinn of coastal zone management CZhQ and ~energy nnpact programL,

Yet, it was all over in less than twomo-n-half hours. Senator Robert Packwocd,the Chairman of thc Ccsnmittee on Commeroc, was the floor manager for theconference report. Despite hia efforts, the legislation was subyct to a "minifllibmee." 'Hme supporting the position of the Reagan Admizustration in opposition

201

102 US. Ccnlkental Shelf: Case Study kt J~dfcrjorux/ Issues

to OCS raven~ring held the floor and precluded the opportunity for a ve» onfinal passage.

When the situation became obvious, Senator Baker returned to the Senatechamber. After briefly conferring with Senator Packwood, the Majority ~stated:

The situation that has developed here is not altogetherunexpected Vfe all hoped that this conference xeport, whichis privileged, Blight be disposed of. It appears, to say the leastunlikely

ln view of that, it would be the intention of the leadership on.this side to ask the Senate to return to the consjderatioa of thedebt hmit resolution. Congrcssioncd Record, October 9, 1984.p. S 13889!

No objection was made to Senator Baker's unanjxnous consent motion and the OCSrevenue-sharing issue was deed for the 98th CongxesL Although the MajorityLeader's motion could have been challenged because a confexence committee report is"privileged," there was ao enthuajasm on the part of the supporters of the bjjl to doso in the face of a filibuster threat. The 98th Congress was already well beyond jtsself-imposed de»dljne for adjournment it adjourned three days later! and electionswere approaching. The momentum to get out of Waahjngton in an ejection year isfax stronger than that for puahing legislation which ia, as in the case of the ~revenlus-sharing bill, the target of strong veto threats from the AdministrationCZM affjcionahae had suffered what was perhaps their most significant setback jn adecade of generally strong su.pport from the Congress.

The congressional debate in the 97th and 98th Congresses was simply the mostxo»nt in a long rich history af national consideration of this issue. lt is an issuewhich can trace its genesis to the waters of Santa Barbara at the end of the lastcentury, to the Gulf of Mezico, to the hans of Congress and the 1952 prntjdentjal

to court rooms in Ussisjana and Tezas, and back again to the committeerooms and floor of the United States Congxesa.

h BRIEF BL'iTORY

Tbe fust offshore oji and gas production occurred in 1896 when dev~~drilled 400 wells to a depth of 600 feet from wooden piers off of Santa Bar~~California. In 1938, developers undertook the first succcssxfui venture in open watersjn the Qujf of Mezjon. ~ nezt year, the ~ssjsjana state legislature ~ a bjjl toezteod its bmadary 27 miles into the Gulf and, in 1945, the state granted an ojj leasefor land eztendjng 30 miles into the Gulf.

On Sejxtexnbex 8 &45, President Truxnan issuoi Proclamation 2667 in which hedeclared. on behalf of the US, jurjsdictjon, contxol. »nd power of disposition over thena«raj resources of the subsoil and seabed of the Continental Shelf.

In 1947, the first offshore operation not vjsible from land was carried out in 16feet of water, 12 nules offshore in the Gulf of Mexico That same year, the SuprexneCourt ruled in U4. v. Qgtfornle �32 U~ 19! that the Federal Governmentcontrolled the land mawaxd of the baseline, Based on CaQf ornfa, the kauijsisna clajxnto a portion of the Outer Continental Shelf OCS! was overturnoi US. v. Lcssjsf~339 US. 699 �950!!.

Emcee-Sharking Lcgfshtkrn 103

The Truman Proclaxnation and the 1947 GdJfornfa decision led to efforts byGovernors to convince Congress to pass legislation. that would give states some controlover the resources off of their coastL

ln fact, at least one House Committee and the US. Supreme Court noted that stateabortions of jurisdiction to the edge of the OCS, prior to 1945, helped give support toUS. claixns under thc Truman Pxoclamation. The Home Judiciary Committee, in its1953 report on KR. 5134, thc oxiginal Ch.ter Continental Shelf Lands Act, state>:

H3t, 5134 does not vest in the States the power to take ordispae of the natural resources of the parts of the ContinentalShelf outside the original boundaries of the StateL The poweris vested by KR. 419 S Subxnerged Lands Act! in theSecretary of thc Interior even though some states haveeztendcd their boundaries as far as the outcr edge of thc shelf.Section 9 a! of EUL 5134 asserts as against the other nationsof the world the claim of the United States to the natu.xaixeeurces in the Continental Shelf. This Nation'a claim to thenatural resources was stxengthcned by the earlier action ofarne of the States in I~ and consequently bringing aboutthc actual usc and occupancy of the Continental Shelf. Thcbenefits flowing to the United States fram such State actionwas recognized by the Supreme Court in the Lmusiana case.for it said:

So far as the issues presented here axeconcerned, Louisiana's enlaxgexncnt af hcrboundary emphasizes the strength of the claimof the United States to this part of thc oceanand the resources of the soB under that area,

including oil.

lhlls were introduced in every session of thc Congress from 194$ thxough 1953 tosettle jurisdictional matters between the Federal Government and the states overoffshore territory. Many of these bills involved soxne type of financial settlementbetween the two aides. For the fact of the matter is that a major dixnension of the

nal dispute among levels of governmnxt in the United States has involved,and continues to involve, the question of money.

RESOURCE 9~3GKTION BERATE

At the very end of this conference, we are all going to be chastised by ray friendand colleaIpua Jim Curlin. We will be told that we have reduced the national debateaver offahore leash' to esoteric imucs such as the "alxnighty lease sale dollar" andthat we axe, in part, shaexefully focusing our attention on "scrapping over thexevcnues from federal oil and gas leases" rather than looking at thc more globaleaergy picture. As usual, Jim is playing his devil's advocate role as the oceanccmxnuni~ thoughtful ma~nxoe and, as usual, Jim is largely right.

Yet, it xnust also be pointed out that under our system of governxnent the processof political decision-making with respet to the allocation of xtaaxtxxces is as importantas the substantive policy outcome that results from that procoe. Ours is a federalsystem of govcrnxnent which began ss a very loose cenfcdexation of indepcndent-misdad states. A cursory review of portions of the Eafcralbr Papers reveals quiteclearly that, as we moved toward a Constitution to establish a stranger central

Ug ~nriraerxral SheLf: Case Srxufy 4. Jurisdfcdoruxz Issues

of responsibility between such governmeM~~t~t ~~~e~erent t on bt ~ the g~~entglNel,We have a system of divided authority tha4 Ul pa~ ev'olved from our confedextt.~

part, wss designed to ~ the national interest. 51 other w~we should not be surprised that the conflict over the allocation of reve ~ bb ~ ~ of the fabric of the OCS political debate.

bach as faz as 1920, we can see how political accommodations w~tension with respect to xesource deve]opmeot

federally~wned land. 'ice Mineral Lands Leasing Act, as originallyprovided that 375 percent of the federal revenues received from the lessin< <federal lands within state borders would go back to the states ~yApproximately ten yeaxs ago, this proportion was in~Additionally, other pn~Lms such as the National Forest Receipts Acts, tbe TaylorGrazing Act, and various payment-in-lieu-of-taxes prcgrarns have resulted <payments to states, primarily in the West, of some $900 million per year.

ln 1953, the most significant debate on the conference xeport establL~dncgoriginal Outer Continental Shelf Lands Act focused on a so-called "oil foz educationamendment. In the first passage of the OCS bill in the Senate in 1953, Senator Lister

of Alabama suceessfuQy offered an amendment to put OCS receipts into s, spxciaiacoount in the Treasury dedicated to federal grants to states for primary, secoadary,and higher educational puzlxcneL The Congress would have three years to pa»legislation to carry out the mandatee of the amendment. 'Au: Hill amendmeat waxpassed by a vote 4$ to 37.

However, in conference, the House conferees would not accept the amendmentand it became the most contentious point in the xxMe~g between the two chamberLOver ths vitriohc opposition of the congressional delegations from Loubuana aodTexas, the OCS Lands Act was agreed to and became law, without the HillamemhoMnt or any type of revenue-sharing provisioxL.

'Hereafter, a relatively quiet period followed in which OCS developmentproceeded slowly in the Gulf of Mexico and, to a les»er extent off the coast ofsouthern California, but never reached significant heights of general public visibility.Nevertheless, legislatioa waa continually introduced in the Congress to tap OCSrevenueL

Foz example, 16 biUs were introduced in the 90th Congress �967-1965! ForOCi revenues for diffezent purposea ~ most significant of these amended

the Laad and Water Gssxervation Fund Act of 1965 with the provision tbst ~receipts be used as a source for this fuaL Eventually, P J 90-401 authorized tbe s»of federal receipts from the OCS pIogzaJzl foz an axracalnt equal to the differeMebetween the existing revenue fxtsn outdoor recreation fees and a ceiling estabisLbedin the bilL ln meat yeaxa, the QC5 oontribution to the fund has exceeded NNmillice.

ln 1969, as a result of the Santa Barbara blowout aml the resulting emergence oFthe Nation's environmental CG6%47llsness, a flurr of activity in the Congxoa ~ +the 1972 Co astal Zaire Lhmaagement Act. After the Arab oil embargo of 1973-74, ~CZM was amemied to ~bbsh the ctxastal energy impact pro1~ CHP! in 1976 Mthe OCi Lands Act was»xbstantially rewritten in 1978-

CBP was a type of categorical impact grant pro1pmxl for ~ states to ~the social, eaonomic, and environmental consetluenozs frtxm OCS develol'anent. 1be distinguished from pure OCS receipt~ring legislation because >t wentitlement program, ic it was based on a anxgressionaUy establishedleveL not on OCS revenues cgglhqr into the Federal Tx'cssuxyi

h~ ~Spurring

Cfl

between 1981-84 saw the most vigorous effortsuratcjy referred to, as OCS

~ cuts by the Reagan Administration, the Chahm~ pishezics Committee, Coagresnnan Walter B. Jones of No~ G

that wouM draw a linkage between an accelerated OCS ~~ funding for coastal znanagement and energy impact effort

~ - t t of the Jones be was to respond to the seemingly ineo~Ad ~ratjon, ~ the termination of federal support foz CZM cap

~ coastal programs at the carne time that the Interim Depaztzmut ~- u a~Jr~~t ~off@'omoucndg 1 g- Lh ymt~%rt%,

~ outside the Congress, questioned the advisability of tcrztuna~ which provide the states with their primary vehicles for OCS participatio

rzILUBLtlgg

d when competing me conflicts could be czpectcd to escalate.A further premise of the lcgzslatmzn was that exlsflng federal~re turixdlctionxd OCS should not be altered. Specifically, ~ states wouM not be granted

ral prod uctjon» ln contrast to the tarmg authority nownd to states with respect to some onshore federal mizs~ lcatnng

tbe 97th Congress» Congressman Jones with some 60 cosponn~ introducedln gers~ the biU provided that the Secretary of the Treasury would

pgy into a fund thc lesser of $300 znzHlon or ten percent of the amount by which~ccs fram OCS oil and gas lease sales during each fiscal year examfei revenues

1982 7he Secretary of CQmmezee wolLM be directedfzcra tbc fund to provide each ~ state with ocean and ~ zcsourtecujnlicmcat block grantL

~blc uses for the block grants included activities of coasts states authcsixedby the CZMA and the CEIP and thae required far the enhancezmmt and zmulgemcntcf living marine and natural red.rcea. The formula by which the block grants wererc bc allocated among all coal states included equally weighted criteria involvingattsai OGS leasing activity. future OC5 lease sales, aaastd-related energy facilitiesand, for those states with approved CZM programs, shoreline mileage, and coastsctnaty population. In other words, only 40 percent of the state's allocatiou vras basedN whether it participated in CZM � a significant dcparlture from earlier impact aidpmyaeh like CHIP.

Ou September 22, 1982, the House of Representatives passed ER. 5543 by a vote4 X0.134. Although thxee cxnnpanion OCS revenue-ahaxing biUs were introduced intbc Senate, and the Commerce Gznxnittee conducted two days of bearings on thei.ae, neither the Couunittee nor the full Senate acted on any of the Senate biUs or onds Htaue-passed macxure.

0a the opezung day of the 98th Congress, Qumrznan Jones with 117 cespccznm,rciatroduxd the OCS reven~Lring bill as KR. 5. Me House passed the bill onSclsxmbsr 14, 1983, by a am~ of 301-93.

Ia the Senate, a companion bill was repceta9 by the Cozzunezce Committee by a1$-1 vetL However, because af strong Administration opptsitiou there ~ little~hbotd that a bill would be scheduled foz Senate floor consideration-

Coascqueatiy, after the House passed KR, 5, staff representing interested mcmbefran beth chambers met to work out an acocptabie compromise~ to hold an mformal otxnferenoe that wouM resolve the differezwna between the

azMI Smate and thus facilitate the pelage of the compramia: bill by one bodyk fnsLI aco:ptance by the other. Thus, a formal crznferenae comxnittee coul< be

l~

J06 US- G~xtxeJ >Jtelf: G c St&y <+ Jurisdk6onal Issues

Negotiations lasted for a number of weeks during thc fall of 1983 and resulted ina compoznise OCS revenue-sharing bill that generally conforxaed to the structuxe ofthe House legislation. One maJor change provided that four percent of all OCSrevenues averaged over the pxeoading three years would make up the fund framwhich stare allocatioas would be made. The funti would initially be limited to $300xnillion but could incream by five pexcent in subsequent years if OCS revenuesincxeamd.

Some relatively technical changes were xnadc to the formula and to thc eligibleum section. One of the more sigxuficant modifications was the establishment of a"minimum floor" for states wi«ppxoved ~ pv~s. Such states wouM receiveno less than 152 pcrccnt of the amount appropriated froxn thc fund for the blockgrants. A ceiling af 15 percent of the ma~urn allocation for any individual statewas also added.

As the first sestion of the 98th Congress came to a close, Senator Stevens ofAlaska unsuctassfuQy attempted to add thc compxoxnise to legislation pending in thcSenate. Senator Stevens then mct with thc ncm Secxctary of thc Interior, WilliamQark in January, 1984. Secretary Clark indicated he would take the issue underadvisement. In May, the Secretary announced that hc was urging the Adxninistxationto revisit" the OCS revcn~tharing issue.

!n the middle of June, the Secretary xnet with the President and othexs to discussOCS xcvcn~hariag. 'Hm initial stories coming from that meeting noted thepossibihty of the Adxninistxation reversing its earlier opposition. However, within amatter af a few days subsequent activities ind.icated that thc White House wouldccsxtinue to oppose the bilL Although Secretary Clark reportedly had the backing ofthe Depaxunents of Goxnxnerce and Energy, his support for a new position on thelegislation was opposed by OMB, and the Treasury and Justice Departments.

Gaol~ then decided to take further action on its owa. On June 26, 1984, theHouse axneaded a Senate fisheries bill with the teat of KL 5 and mquested aconference Two days later, thc Sctulte took. the ne~xy action to agree to aconference. Therefore, although the Senate had not taken up OCS revenue-charinglegislation as an individual bill, a formal conference on the subject was convened on.August 8. The conference committee approvecl the coxnpxomise bill that had beenworked out the prior falL

Sotae of the confexeea, feeling that a White House reversal of position was stillpossible, indicated their intention to delay signing the necessary papers until theAdxnbaistration had additional time to subxnit any reccenmcnded ameadm«nts thatwould guarantee ths President'a signature. However, as the mexnbcrs vrexc leaving

otsnmittcc +mice. they were handed a letter by an InteriorDepartment representative that again reiterated the Administration's opposition to thc

by Secretary Clark, Secretary of Energy Hodel, Secretaryof the Treasury Regan, and Director of OMB Stockman-

'Dds action ultimately led aQ of the conferees to sign the report and the Houseconsidesed it on September 13. It pajled the be by a veto-override margixt of 312-94.After the House vote. Caagxetaman Jones telephoned the President to discum the

Mr. Reagan to support and sign the bilL The-preaident agreed to discuss it further with hia cabinet but made no coxxunitment tothe Gongremxxan.

AII that was necessary for final congxeasiCxnal action and tranatnittal to thePresident was Senate approval of the conference report. As noted at the beginnjng ofthi ~ paper, such approval was not forthtexning-

At the beginning of thc 99th Cangxtxss, Conlr~nan Jons reintroduced Hy the test of thc same bill that had passed the House 1xl Scpte?Q.bere

1953. Senator Stevens reintroduced the conference biii as S 55 Presently. both bii-is

Revenue-Sharing Legfxlatkxx l07

sxe pending in the House Merchant Marine and Senate Comxxxerce Committees,xespectively. Future progress on either bill is uncertain given the pzeent debate overthe budget remlution and continued opposition of the Adxniaistration.

Additionally, congressional consideration of general OCS revenue-sharing ia likelyto be subsumed by the debate over the release of OCS escrow funds pux3uant tosection 8 g! of the OCS Lands Act. Yet, it is likely that at some indeterxninate pointin the future, Congress will once again turn its attention to the issue of sharing someOCS-related revenues with the coastal states. It is ixnpossible to predict the precisenatu.re or timing of that debate other than to indicate that it will happen.

NOT PURELY OCS REV%2AJE-SKMHNG

Finally, it is important to note that the OCS revenue-sharing legislationoonsidered by the Congxess between 1981-1984 was xnisunderstood by some as pureOCS revenue-sharing. The legislation that passed the House on three differentoccasions wss an ooean and ~ block grant pxogxaxn. One of the kcy premises ofthe legislation was that a modest portion of futuxe incxeases in federal xevenues fromthe extraction of publicly-owned, non-renewable ocean energy resotxrces should beallocated to ~ states for the continued sound management of renewable oceanand cxwstal rosmram

Them was never a precise one-tonne nems between the use of ~ revenues andOCS-related impactL Only some of the formula criteria and eligible use provisions inthe bill related specificaUy to ixnpacts froxn offshore development. Others ixxvolvedaddrexsxing the effects of coal and other energy facilities in the ~ zone, withparticular reference to the Great Lakes. Additional ~ of the legislation alsoaddxsxsxed the population and competing uxor presxures on the coastal zone and statepxograxnxnatic obligations under the CILIA.

The legislation wsa, in effect, an effort to find a balanced program that addressedboth ~impacts and CZM resource xnanagement obligations. It attempted torecognize that the national interest of the United States would be enhaxxced by abroad snd comprehensive program. for the continued sound management of ournation's ocean and coasted xesources, based on funding from. of fshore energydevelopxnent. It is an idea not likely to go away.

CHAPIKR 1l

The Dispute Over 8 g! Fttttds

SECTION 8 G!; YESTERDAY AND TODAY

1 POX LEGGKTTK~Assfsrant SenhorOf jshoI'e Mfncrals cvuf Inccrnarional LawVS. Department of rhs lrttcrhrWashington, D4.

Section 8 g! of the Outer Continental Shelf Lands Act OCSLA! concerns thedivision of revenues from certain leases on the Outer Continental Shelf OCS!.Disputes over dividing OCS revenues are alnMstt as old as disputes over the ownershipof the OCS. ln 1953, when signing the Submerged Lands Act, president Eisenhowermade clear his view that OCS lands "should be achninistered by the Federal00vernmcnt and income therefrom should go into the Federal Treasury." HisoppN6tion to sharing revenues, and presumably other f~ prevented earlierproposals to give cossttLI states 375 percent of OCS revenues fmm being reneweci inthe debate over the 1953 CCckJi. See ag�KR. Rept. No. 2078, 81st Cong. 2d Sess.!�950! KR 8137!, I believe it fair to say that Congress regarded its quitclaim ofsubtnerged lands to thee states as an appropriate substitute for revenueebaring. Inany even.t, the 1953 OCS ~da Act, in Section 9, quired that all lease revenues bedeposited in the Treasury as miscellaneous receipts." No revenues were to be shared.

Revenue-aheing became an issue again in the mid-1970s as Congress consideredamendments to the 1953 act. For example, in 1974 thc Senate Committee on Irtteriorand Insular Affairs reported favorab!y on thc proposed Energy Supply Act, whichwould have establjshed a Ccststal States Fund" in thc Treitury. The fund was to befunded by 10 percent of OCS revenues, not to exceed %200 million per year. TheSecrebtry was to award grants "to compensate impacted meed. states for the full costof any envirouunental effects and social and eccstomic impacts of offshore oil and gasexpioratiort, development, and productio " S. Rept. Zo. 93-1140, 93rd Co g. 2d S

The views ezprtssod in this paper are thaw of the author and not necessarily theofficial views of the Department of the Interior.

110 US. CartrinetttctL Shelf: Gsse Stttdy

119! �9743 But by 1976, the Congress decided not to use the OCS Lands Act as thevehicle far helping states "deal with the impact of offshore development andproduction." choosing instead to help them through amendments to the Goastal ZoneManagement Act. KR. Rept. Na. 94-I632, 94th Cong 2d Sess. 55-56! �976! Conf-Rept. an S. 521!.

At the same time, the Conference Committee reviewing the propcsed amm~tato the OCS Lands Act eramined a new provision, one applying only to federal tractswithin three miles of a state's submerged lands. That provision wo~ld have requiredthe Secretary to offer a Governor "the opportunity to jointly lease any area which heconcludes, in consultation with the Governor~y contain a field, geoloIjeLIstructure, or trap w'hich may be located within both Federal and State owned lands."Qd. at 17.! If the Secretary and Governor could not agree, the Secretary wouM befree to lease the federal tracts anyway, but would have to deposit lease revenues inan escrow account until the Secretary and the Governor agreed on "the proper rate ofpayments" to the State and Federal Treasuries. Old. at 17-18.!

DIIPU'IX RESOLUTION h PROBLEM

One intenstting point about this new pn~aai was that it provided no rnec2hRZIIlsmfor resolving disputes over how the money should be divideL This point was rtotlost on Secretary of Interior Cecil Andrus in 1977. On May IO of that year he fileda report with the House af Representatives on H3L 1614, a bill substantially the sameas the 1976 bilL The report explained his concern about the joint leasing schcsne; hefeared it wmxid undermine his authority under the act. So he proposed revisedhtnguage eliminating any referent to joint leasing. In its place, the Secretary wouldbe retluired to offer the Governor an agreement for thc "fair and equitable division"of lease revenues from tracts within three tnilea of state-submerged lands. IF the twocould not agree the So~y was to place the lease revenues in a special sax'.tuntil they reached agreement, or until a federal district court determined the fairand equitable" division of the money. With a fcw minor changes. Secretary AndrusMay 10 Ianituage was cna~ by Congress thc following year.THE Kg! PROCXOURE

Ths details of the procedure Congress cna~ to resolve disputes under Section8 g! axe worth ornaidering. The first point to note is that Corymb tied the procedureDepartment procedural steps in plating for a lease sale. ZlM. the

¹ep in the .g! procedure i ~ for the Secretary to send the Governor a mountainex iainedof infortnation %t the time af soliciting raminations for the leasin of Iandl "' Asg L«plained earlier, this soliciting of notrunations is what Interior does in its "call for

ormatioa" for a lease sake, and it occurs at the beiilttning of the lease sale proca~~~ ~ 25623! Ntrxt, after reoeivkng nominations frotn industry and thepublic, the Secretary must tell the Governor whether be intends to consider including

any 8 g! tracts in the lease sale. If so, he must then consult with the Governor to seewhether any of the tracts "may contain one or mote oil and gas pools ar fields"underlying ¹ate and federal aabedL If the Secretary then decides to offer any Kg!tracts contaming a pool or fieLd in common with the state's seabed, he must offer the

lease revenues fairly and equitably between thestate and Federal Government.s The Dalertrnent xaatea this offer at about the tisanethe Department publishes the proposed notice of sale. See 30 CFOUL Section 25&293

Once the Secretary bas made the offer, the Governor has 90 days to accept orreject it. If be accepts it, lease revenues will bc distributed in accordance with theagreement. If he rejtcta it, the Secretary znay stQI leap the 5 g! tracts; but he must

The lÃspate Over 8 g! P'ands Ill

place the revenues "attributable to coxnmon! oil and gas pools" in a separate accountia. the Treasury where the xnoncy can earn intexest.

But the procedure does not necexnaxily cnd with the lease sale. Thc Secxctary andthe Governor can continue their discussions after the Lease sale and, upon agreexnent,ean withdxaw the money from the special account. Or, either official can sue to havea Federal District Court determine the "fair and equitable" division of the money.~

THE $ g! KXPKRlXKCE

The Departxnent's experience with section 8 g! has not been a happy one. Asummary of that experience may interest you. Section 8 g! took effect on Septexnberl8, 1978, while Mr. Andrus was still in office. The first snd principal issue he facedwaa to detertninc what a "fair and equitable" division of revenues should be.

Secretary Andrus, of course, had no trouble resolving what the phrase "fair andequitable" meant. for hc was its author. Hc had explained it to the Home in his May10, 1977, letter.

Under existing law revenues from leasing the Ou,tcxContinental Shelf must be paid into the Federal treasury.However, there are instances in which a part of this revenuemay have been derived fxoxn oil and gas drained fram StatelaxuL We believe any lars of resouxce or revenue by States insuch a situation should bc remcdioL A statutory provisionspecifically covering this situation would enhance theFedexaVState cocedination of development in adjacent axess inaddition to that provided elsewhere in the amendments.Additionally, it would reduce the likelihood of matlylitigation.

%'c favor a provision which gives ~ States fair andequitable compensation for oil and gas which is producedthrough wells in the Federal areas adjacent to thexn, butwhich is derived from State LantL KR. Rept. No 9S-590,95th Cang� 1st Sess. 219-20! �977!.

As Sccxetary Andrus saw it, the purpose of Section 8 g! was to protect thc coastedstates from drainage" that is, from having federal wells m conunon reservoirsproduce oil and gas from both sides of the botxndary line. The xexnedy for thispxoblem was therefore quite simple. It called for the ua, of a legal procedure called"unitization." Simply put, unitizatitwx is a proceduxe for making two or morc leasesinto one Isaac.' As a part of this procedure, the parties agree on a formula fordividing the oil and gaa to bc pxoducoL The formula makes sure that the ~te getsthe credit~ the money-for the oil and gas froxn its lands, even when it is broughtto the surface by a federal ~

So Sec+.taxy Andrus began the prractice of offering the Governors before each salean agxeexncnt to unitiae any coxnmon xcscrvoixs which tnay bc discovered on theFederal tracts to bc Leased. It should be noted that under a unitization agreexoent theFederal Governxnent would never pay the state anything directly. production wouldfirst be divided among the ~ who would then pay royalties to the ~te andFederal GovernxnentL The State of Alaska agreed to this as fair and equitable in thefirst federal. sale in the Beaufort Sca in 1979. Six other states, and Alaska since 1979.have declined to accept this offer. As a result, appxoxixnatcly $59 billion was in the

8 g! axount in the Treasury as of September 1, 1984.

1l2 US. Continental SMf: Case Sturdy tz J~gictioeag gssses

Two states Texas and lou~ filed suits in Federal courts in July L979 tohave Judges deterraine what a fair and equitable division of revenues ahoulcl bs-

Ltes presented an array of thcorres to lusttfy there clauns to8 g3 revenues- A.t the least, they said, they were entitled to compensationdrainage of their ail aad gaL But, ia addition, they claimed a right to compensatitanfor the onshore effects of OCS exploration and eduction. These effects were said toinclude harm to the environment and stress on the infrastructure of localconUnunities. Left unmentioned w'erc the beneficial effects to the atatts of incus~employmcat and taxes.! And, in addition, the states claimed a right to share ingains and to be compensated for thc losses! resulting from the independent IetunnSprograms of the state and Federal Governraenta.

This last point requires some elaboratioa. ~ea leasiag in the &df K h4~Texas, Louisiana, aad the United States historically have relied heavily on bontrsbiddiag." UrMier bonus bidding, each bidder subxnits a sealed bid offering to pay a"bonus" to get the rights to lease a given tract. The Lease goes to the bidder offsrrrrRthe highest bonus- What a bidder will pay as a bonus is influenced by raaay tlunMbut a bidder generally will not pay more than tbe present value of thc lease to hirm-The present value is influenced by the amount of oil and gas he expects to prod~and sell, by expected prices, interest rates, and casts, and by the probability that "might not find any oil or gas on the given tract.

To asia this probability, the bidder gathers information about the geology af tbntract and of the region. Much of this information comes from wcgs dzille< oarnearby leased tracts. If the information from the nearby weHs suggests oilmay be ptesent, the bidder may bid more. If it su.ggcsm little or ao oil or gaa, tlxebidder won.'t bid.

Texas claimed that federal bidders used favorable information from wegs est sireTexas side of the boundary when bidding aa ce~un federal tracts. As a desalt saaciTexas, the tidders paid Interior more than they would have without ijeformaticxn-frotn drilling oa the Texas side of the boundary. Therefore, said Texas, the FederalGoviwuuent receiveci a windfall by letting Texas lease its neighboring tracta fiast-

windfall is caged "bonus enhatsmmeat. Izatisiana, on the otheremphssiaas the opposite pheaonmnon. It cotnplains that in certain areas Interior l¹tseci

g showed that ao oil or gas was pleat. Consequently, no one ~Mbid on the?sntisiana tractL Louisiana wants to be compensated for the Ihcmcy itaught have received if bidders had mhntakenly beheved oil or gas to bc prcsent-ageged loss is called coadunation. At this ~ting, it renNins uachcar %rtMtherthe Lcatisisaa ctsrrt will permit the State to present evidence of condemnation at triaL

X%K DOI OFFER

Became of thc impose of tbe OCS program to this nation's defense aadenmatnic mcuxity, former Secretary Clark made the resoluetrn of the 8 g! issue a mppriority in 1984. His staff briefed him oa the states' legal theoriea, the litigatmmtrisings, the tatrdens of further lawsuits, the rulings of the two district courta, am'other ide tians. After wsighiag these matters. he decided to offer the states thefollowing agrecmnent aa a comprratnisc4

The states would nxeive 16 2/3 pensnt of the bonuae andrentals properly ia the special account.

The states would share in royalties through nnitizationagteeatents generagy.

Thc lXrpute Over 8 g! Funds II3

This offer was made on August 8, 1984 in letters to the Governors cf the fivestates not in litigation. On that day Former Solicitor Frank Richardson asked theJustkco Departxnent to extend an identical offer to Texas and Louisiana. UnderFederal isw the Attorney General hss final authority to settle litigation to which theUnited States is a party.! Later that month the Solicitor met in Denver, Colorado,with representatives of Alaska, Alabama, California, Florida, Louisiana, and Texas�iisissippi did not attend! to answer their questions about the details of the offer.On August 31, he sent them "the fine print:" a detailed, ten-page draft agrcemexLt farresolving the $ g! dispute. Eventually, all five of these States not in litigationrejected the offer.

TMr STATES' COUNTEROFFER

Eight months later, aftex considerable prodding by the Department, Governors ofsix of the States � Gdifornia did not join them-finally made a countezpropasal fordividing the amount in the 8 g! accent. Regrettably, they proposed that the statesreceive 375 percent of bonuses, rents, royalties, and taxes, an amount far higher thanany of those statss could hope to receive in litigation. The Governors' letter wssdated April 15, 1985, which apparently explains why taxes were on thar minds.

On May X4, Secretary Hodel outlined a nMthod of proceeding in futuxe discussionsin his roipcese to the Governors' April 15 letter. The Secretary was unable to ~their counter-proposal, however. 1 am unaware af any response fzoxn any of theGovernorL

THE RESULTING KfTUATION

Although the 8 g! ice hss remained unresolved for mven years, the end is notfax sway, The basic legal issue is currently being considered by the Fifth CircuitCourt of Appeals in New Orleans, the Sscretsxy and the Governors are pmxeedingwtth good faith negotiations, and a Congressional subctsnrnittee is corssidering a

tive solution. All three branches of the Federal Government-or. as one wagput it. all thee rings of the Federal circus-axe involved With all this attention, theproblem must be nearing resolution. Neil. Spring is the mrna of hope, and we stillhave three more days of Spring.

"�! At the time of soliciting nominations for the leasing of lands within threemiles of the seaward boundary of any ~ State, the Secretary shell providethe Governor of such State-

A! an identification and schedule of the areas and regionspropcsed to be offered for lousing,

8! all information concerning the geographical, geological,and ecological clueactexistbe of such xegiorsr,

C! an Nttimate of the oil and gss reserves in the areasproposed for leasing and

�! an identification of any field, geological structure, or traplocated within three znges of the seaward bouncy ofsuch coach State." 43 US@. Sec. 1337 gX1!.

ll4 US. Gmtl~sral Shel J": Case Study tn Jurfsdrcriartcri Issues

"After receipt of nominations for any area of the outer Continental Shelf withinthree miles of the seaward boundary of any ~ State, thc Secretary shallinform thc Governor of such coastal State of any such area which the Secretary Fbelieves should be given further consideration for leasing. The Secretary> irrconsultation with the Governor of the ~ State, shall then determine whc~rany such area may contain one or more oil or gas pools or fields underlying hotlythe outer Continental Shelf and hnds subject to the jurisdiction of sacs. Statewith respect to such area, the Secretary mlects a tract or tracts wMch mrs'contain one or more oil or gas pools or fields underlying both the outerContinental Shelf and lands subject to the jurisdiction of such State, the Secreta~shall offer the Governor of such coaeQ State the opportunity to enter into uxoragrecmcnt concerning the disposition of revenues which may be generated by aFederal lease within such area in order to permit their fair and equitable divisicrstbetween thc State and Federal Government." 43 UAC Sec. 1337 gX2!-

"Within ninety days after the offer by the Secretary pursuant to paragraph b! csfthis subaechon, the Governor shall elect whether to enter into such agreement axeahaD notify thc Secretary af his decision. If the Governor accepts the offer, tlsetcrros of any lease iuued shall be consistent with the provisions of tosssubchapter, with apphcable regulations, and to the rnaxirnurn extent practicawith the applicable laws of thc coasts State. If the Governor declines the offeror if the parties cannot agree to terms concerning the disposition of revenues framsuch leam by the time the Secretary determines to offer the area for Isaac!, tluteSccnstary may nevertheless pmceed with the leasing of the area-"

"Notwithstanding any other provision of this subchapter, the Secretary shnlldeposit in a separate aorsrunt in thc Treasury of the United States all bonuse-sroyalties, and other revenues attributable to oil and gas pools underlying bath theouter Continental Shelf and submerged lands sub@et to the jurlstHction of a-'nY~ State until such time as the Secretary and the Governor of such coastsLIState agree on, or if the Secretary and the Governor of such ~ State can~tagree, as a district court of the United States determines, the fair and eguitaMedisposition of such revenues and any interest which has accrual and the props:rrate of payments to be depositecl in the treasuries of the Federal Government nrsdsuch coast state." 43 US.C. Sec.1337 gX3! and �!.

" 'Unitization' is an agrccmcut between lessees approved by the lessors! to treat<thc arcs above a cortuuon ~rvoir as onc lease, 4r�as a 'unit.' 'Hxc scparate1yowned leuc intcrorts are combined or consolidated for purpalss of jcaiss.texploration to share the oast and liabilities af production and to divide the oil ram'gas they produce under the terms of a 'unit agreement.' By this arrangement ~

't the number of wells drilled. dail in the mast efficient Iocatiaasr,and control the rate of eztracticso, so as to rrraxirnize production and tninimizecosts." Solicitor's Opisaion M-36927, 87 Int. Dcc. 616, 618-19 �980!.

A reservoir is an accuxnulation of oil or gas within porous rack. It is Ii3r.e ~esoda in a soda glarss which can be drained by one or more straws put in the glsarm.

Thc Interior Departntent has not departed f roan Secretary Andrus' intcrpre tati'.of section Kg!. This remains its position in court. There is always a concern tha.tby offering to carnpnmiae a dispute, one will prejudice one's case in court. UztcgezRule 408 of the Federal Rules of Evidence, however, "evidence of �3 furnishi~or offering~ valuable consideration in compromising or attnnpting ea

The Dtspurc Over 8 g! Funds J JS

compronisc a clsixn which was disputed as to either validity or amourrt is notsdxnilablc in court! to prove liability for or invalidity of the claim or itsamount. Evidence of conduct or statements made in mrnpromisc negotiations islikewise not eimisnble."

LOUISIANA'S POSlTION CONCENVIHG SZCTlON 8 G!

MARY KZL,KN LEEPERAs&taxxr Atr onaey GeneralStats of LaaManeBaton kaagc; Lodsikvux

In 1975, the Outer Continental Shelf Lands Act, 43 USC Section 1331 cr scq wasancndcd. Thcec amcndmcnta sought to address the many and varied concerns of xhecoastaL states and were passed in response to the incxcllang Icshltsnce of such states tothe expanding and accelerated federal mineral leasing of thc Outer Continental Shelf.Enacted together with a paclxage of federal legislative acts designed to addron, Wcraiba, ~ zone management and ~ offshore-development ixnpacts, the purposeof the amcndxnents was to enoouragc thc cooperation of the coastal states in offshoremineral leasing, through a variety of meehan.isms for state-federal interaction andcpyartunity for state involvement during the federal leasing prod, «m.

One particuiar concern to ~ states wss the neaxshore leasing af federal Lands.7& was a concern fxom an environxnental and geogxaphkal standpoint, and becausesuch ieasing could directly affect, and be affected by, development of the mineralxcsaumsn underlying the subxnerged lands of the ~ states. In response to this Lastcoaecrn. aactim Kg! see Appendix! f43 USC Section 1337 g!! of xhe amelimentsprovided for a "fair and equitable" distribution of all federal revenues derived framleasxs within three miles of a coae6 ~tc's seaward boundary. 'Hue section has lcd% the present litigatiorL, between lauisiana and thc United States, and Texas and theUnited States, and to disputes with the States of Alake, OLIifornia. Rorida,ltHmlsxippi and. Alabama, over what constitutes a "fair axrd equitable" distribution ofthese revenues. There is now in escrow, in the various disputes, in chic«e of $6biilssr and claixns outstare for additional revenues which have not been placed inCRAW.

The present Litigation in Lauisiana was initiated in 1979. Immediately followingcaactxnent of the amendrncnts, the Dcpartxncxxt of the Interior DOI! had scheduledSale No. 51, which sale included certain tracts Located within thxec miles ofLouisiana's seaward boundary. Louisiana protested thc inclusion of such tracts, onaacount of DOI's failure to follow the provisions of cacti' 8 g!. As a result, thou:tracts were withdrawn from Sale 51.

However, DOL determined that section 8 g! tracts which were to bc included inthe July, 1979, Sale No. 5$, would not bc so withdrawn, despite the fact that theinforxnatian-sharing and ~tative xequirexncnts of section 8 g! had not beenfollow@ Comequently, Lrausiana filed suit in July, 1979 to cnJMn Sale 58.Although Iauiiiana was unsevmeful in obtaiu6ng action, the US. District Court

116 UZ Contincrttal Shelf: Case Study ba Jurisdictional Issues

ordered that all revenues from all tracts leased within three miles of ~uissuplaced in escrow, pending a dcterminatioa of the appropriate fair and equitable shujaaea lx

to be distributed to Louisiana. Since that time, for all subsequent federal lease saItsthe DcpartnMnt of the Interior has placed in escrow certain of the revenues denvuifmm federal leasing within the 8|.g} area

SYNOPSIS OF SRCHON 8 g!

Section 8 gX1! requires that, at thc time of soliciting nominations for the bessieof lands within three xniles of the seaward boundary of a coastal state, the Govern

e

of that state be provided with certain detailed geographical, ecological and geologicaiveraor

information concernmg the area sought to be leased. Section 8 gX2! requires that th<Secretary of Interior, in consultation with the Governor, shall then determine whichotf such tracts xnay contain one or more oil or gas pools and fields underlying both theOuter Continental Shelf and lands subject to the state's jurisdiction, and is to off<the Governor, prior to ~ such tracts. an opportunity to enter an agreemeatconcerning the fair and equitable division of xevcnue which xnay be generated by sfederal lease in such area. Section ggX3! gives thc Governor 90 days to ~ tothat offer but allows the Secretary to proceed with leasing if the parties cannot agreeto the terms, Finally, Sects' 8 gX4! provides for escrow of all such revenues until sUA District Court determines their fair and equitable disposition.

THE NhTNkE OF THE OONTROVKaSV

From the outset, thc G:payment of Interior has contended that section 8 g! is aprovision ooncerned only w'ith "drainage" of oil and gas from the state's submergodlstnds which may occur after production is established fram the adjacent federal leuc.Cotuasquentiy, the only offers" made by the Secretary of the Interior to Louisianahave been to access for such drainage out of royalties accrued Louisiana, as well asthe other ooasbd states, has comustently rejected this position as overly narrow and,from both a legal and technical pmspa~ve, nonrctgxmsive to the plain language cfthe Aznendment.

"Drainage," as a toJmical matter, can only occur after production is establishedfrom a. single reservoir or pool which extends froxn property belonging to one perscato property belonging to another. It occurs as hydrocarbons are produced through swell completed in the ~soir, causing migration within the reservoir of additionalh~xarihons toward the well, which were forxnerly located beneath the adjaacat

a coxnnuon problem in the oil industry and is normally adtlresscd byse defining thc productive limits of the amrvoir and allocatiag

pro rata to those owners who may bc drained by thc well s! iathat YCICPPQlr.

Therefoxe, from a technical standpoint, the federal position that "drainage" is thesole criterion for a distribution of 8 g! revenues ia not reasonable, in that "draixuLge

not add~ thc question of oil or gas f~ which may contain multiplereservoirs many af which axe not subject to "dntinage"! nor does it provide axnechaniam for sharing any fafcral bonus, rental, royalties, or other revenues 'txneruly being a method for anocating to the State what, it already owruL

Fran a legal standpoint as well, the suggestion that drainage is the sole critenoeis not an adequate interI'relation of the statute. In 4nrjsiana alone, the State and theDegstrtmeat af the Interior have cntcrcd into in excess of 100 unitization agreemes+

production along the state's seaward boundary, since the 1950L The federsthat 8 g! add~ only the pxoblem of drainage effectively xeads the Ã~"

out of the Amendments, since thc mechanism to protect the States from drains'

TIgc 1Xspggte Qvsy gg! p'gggggr

ioggg prior to its enactment. The coastal states have taken the posit-o th ~~y axe thc Secretary a offers pursuant to section 8 g!�! inadeqh vc ggniy of fared protection f rom drainage, but they arc not in

~ S tery'a legal obiigatgonsg sgnce there have been no attegnpta to comply with th~ring requirements of section 8 gX1!, nor the eongultative requ~

+ pe!, prior to the subgnission of such "offers." which deficienthe Louisiamg litigation has rcczgnizegL

Th coastal states have continuously asserted that the proper interpretation of the~ fox arriving at a "fair and equitable sharc of revenues derived from the 8 g!~ i t ~ve at a percentage of all such revenues to be distributed to the adjacent

eral revenues derived fxoxn federal lands located onshore are+< ~ggant to the Mineral Leasing Act, on a fifty-fifty basis with the states

lands are loca~ Louisiana ~ that f aim~gs at ]east that same percentage be dlstxxbuted to opsstQ states.tb Mieexgd ~ging Act allocatea 90 percent of the revenues from leasing~ lands to the State!

~glans and the other coastal states have also urged a 50 percent division~ the cgsnpaxative equities involved, inasmuch as the 8 g! belt, in Lcsgisiana' ~ ease,xepggaea~ only about three percent of the adjacent federal Outer Continental Shelflands available for lcasgngi pgpelgnea construction faciiitics aud other

must necessarily bc located within the confines of the ~ agate togegvics the offshore; state mineral leasing offshore may bc adversely affected by~ djaceut federal leasing, the affected ~ wetlands, islands and~ly susceptible to adverse ixnpacta fxoxn mineral development; and federal

activity and revenue income has been significantly enhanced by stateuxgyegation and state exploratiau in the offshoxe areas.

Texas filed a signiiggr suit to Lcagisiana's in 1979. In a ~ txial on the meritsTexas wsa su~ui in being awarded 50 pcxcent of that portion of the 8 g! bonuseswhich waa proven at trial to represent the enhanced value of the federal leases,which xcsulted from the availability to potential bidders an those leases ofiefcrmation derived from exploration and development of adjacent state txactL TheaI papriate distribution of remaining revenues. based upon other state claims, has yctto be xeaoivegL

Tbexe axe a number of subsidiary issues which have been raised in the Loui3ianaaud Texas htigatian, as well as by the other ~ state+ These include a number ofssuga concerning thc sufficiency of the caco~ account; for example, whetherWindfall Profits and other taxes axe "revenues" required to be shared the Judges inbeth ngigs have ruled that the States are entitled to offer evidence on this question!;wbetber those xevenuea dexivcd from those portions of 8 g! ~ lying mewaxd oftbc 8 g! belt age subject to a fair and equitabie distribution to the adjacent state;whether those revenues collected subsequent to pgumggc of the 1978 Amcndmcnts, butdcrivggi from Iaasea in cxistencc prior to that time, axe subject to distribution; whethertbcse xevenuca crglIscted from leases amrmicd by the Federal GovcrgMxgent under axes

leasing represent fair marhet value for these leases, and, if they do not,whether the coastal states are entitled to a fair and equitable shaxe of the marIgetvalue cf those txactgL,

Fgeaiiy. thege has been considerable disagrecmen't bctwecn Louisiana and the+ertxncnt of thc Interior over which of thc 8 g! tracts "xnay contain one or moxc+ or ggN pgOIs or fields underlying both the Outer Continental Shelf and landsmbjgct xo the jurisgbctlon of" Lcagisjsna Section 8 gX2!!. This deterxuinatiou requires

analygas of the gealogicai and geophysical infoxngation by experts for thcplxtiag.

JJ'8 US. Contia~aJ Shelf: Case Study fm Jurfsdktfonal Issues

THE STATUS OF THE CONTROVERSY

The 8 g! controversy has been tried in the Texas litigation, in September, 1982.An opia&on was rendered in that matter in 1984, State of Texas v. Secretary of tJrcIntcrkr, ct aL, 580 FMpp. 1197 ED�Texas, 1984!. That rnatter is presently onappeal to the United States Court of Appeals, Fifth Circuit, Docket No 84-2422

The Louisiana suit is presently aet for trial in October, 1985. However, a numberof the legal issues raised by both parties were disposed of by the District Court byOrder dated July 3, 1984, in ruling on crtmn Motions for Surnrnary Judgment. Stateof ~JarM, cX rcJ, WQlfam J. Gustc, Jr. v, James G. Watt, ct aL, US. DistrictCourt, Eastern District of Louiahsna, CA. No. 79-2965-l�!. Interlocutory appealshave been taken by both sideL The appeal by the Department of the Interior haa beengranted by the Fifth Circuit, and consolidated with the Texas apped State ofLaetsiarur v. Secretary af Interior, ct aL, Docket No. 85-3140, US.CApp�Fifth Cizc.

ba addition, an offer has been made by the Secretary of the interior to Alaska,Florida, California, h4heimippi and Alabama, to share 16 2/3 percent of the presentlyorczowed revenues with those States. A counter proposal, in which 4~isura andTexas joined was made to interior, to accept 379 percent of the revenues whkh the~ states cabmlate should have been placed in escrow. At present, however, therehas been no final agreement reached with any coarerl state on this matter.

Section 8 g! of the Outer ContinentalShelf Lande Act Amendznenta of 1978, 43 USC 1337 g!

Leasisrg of lands srithin three miles of seaward. borszrLkariesaf coastal States

gXl! At the time of soliciting nominations for the leasing of lands within threemiles of the nrawazd boundaries of any coastal State, the Secretary shall provide theGovernor of such Sta.te-

A! an identification and schedule of the areas and zegiorMspn~d to be offered for leasing;

B! all information concerning the geographicaL, geologicaL, aa4eeloy'cal characteristics of such regions;

C! an estimate of the oil and gas rema~ in the azeas leopxedfor leasing and

D! an identification of any field, geological structure, or traplocated within three miles of the ra+ward boundary af suchcoastal State.

�! After receipt of nominations for any area of the Outer Corrtinentai Shelfwithin three miles of the seaward boundary of any ~ State, the Secretary shaDinform the Governor of such ~ State of any such area which the Secretarybelieves should be given further consideration for leasing. The Secretary, ia.

Thc DLtyetc Over 8 g! Pxxzx& ll9

~tation with the Governor of the ~ State, shall then, determine whetherany such area may contain one or more oil or ges pools or fields underlying bath theouter Continental Shelf and lands subject to the jurisdiction of such State. If, withzoxpect to such szea, the Secxetary ILlects e tract or tracts which may contain one orznore oil oz gas pools or fields underlying both the outer Continental Shelf and landssubject to the jurisdiction of such State, the Secretary shall offer the Governor ofsuch ~ State the opportunity to entez into an agreement concerning thediegmtion of revenues which znay be generated by a Federal lease within such areain order to permit their fair and equitable division between the State and Federal&oveznznenL

�! WithizL ninety days after the offer by the Secxetary pursuant to paragraph �!of this subsection, the Governor shall elect whether to enter into such agreement andshall notify the Seczetazy of his decision. If the Governor accepts the offer, the terznsof any lease iamed shall be consistent with the provisions of this subchapter, withapplicable regulations, and, to the znaximum extent practicable, with the applicablelxaws af the coasts State. If the Governor declines the offer, or if the partice cannotagzee to tczzns zxzncerning the diapo6tion of revenues from such lease by the time theSecxetary determines to offer the area for leaxe!, the Secretary may neverthelessproceed with the leasing of the area.

�! Notwithstanding any other provision of this subchapter, the Secretary shalldeposit in a operate account in the Treasury of the United States all bonuses,royalties, and other xevenues attributable to oil and gas pools underlying both theouter ContinentxLI Shelf and submerged lands subject to the jurisdiction of any ~State until such time as the Secretary and the Governor of such coasted State agee on,oz if the Secretary and the Governor of such coast Staxs cannot agree, ae a DistrictCourt of the United States determines, the fair and equitable dispontion of suchrevenues and any interest which has accrued and the pzepez rate of payments to bedeposited in the treasuries of the Federal Government and such oaastal State.

PART FOUR

The UEL Ol& 0$ d Gas IJIRSlag PIOgIRUL.

The Building Blocks for the

Proposed Five-Veer Plan

ln the inUuediate aftermath of the 1973 Arab oil embargo, a principal policyxesptuxse of the UW government was to propose significantly incxeaeung the pace ofleasing oa the Outer Continental Shelf OCS! to speed the recovery of domestic oiland gas reamxceL Sales were to be held more fxequentiy and were to take place ixlareas othex than the Gulf of Mexico and southern California for the first time.

The OCS leasing prccess had been a relatively rejaxed one, with sales heldwhenever it seemed appxopriate. Thus, the proposal for significantly increased leasingraised concerns about the potential impacts of offahoxe oil operations and the abilityuf the DeIstrtment of Interior DOE! to anticipate and mitigate any adverse effects.

A. prcemcted debate about xeforms to the OCS leasiag proces culzninated in thel978 OCS Lands Act Amendments. A Itsy provision of these amendments was axeciuirement that the Department of the Interior prepare a five-year leasing scheduleand adhere to it in conducting saleL Congress also required that a detailed analysis oFthe ctarta and benefits of the options for scheduling sales be conducted. in thepre!aration of the five-year OCS leasing progetm

The Depertment of Interior prepared the first five-year plan in 1980. A yearLater Qus plan waa revised under the new Secretary of the Interior, James Watt. TheI-'iepax~nt is now preparing its third five-year plan to cover the period %987-1991.

Fzom ita beginning, the five-year planning process has been one of the mostextensive, complex, and controversial portions of the OCS leasing procure. Indeed, the

122 Thc US. OCS Oll and Gas LeMag Program

five-year OCS leaiing program is probably onc of the mtnt complex planniag effortsin the Federal Government.

its extent and complexity derive from the scope of the problems which DOIconfronts in dcvclopiag thc 1caiing schedule snd frotn the requirements CotrgreNimposed on thc process for developing the plan. The five-year program must identify'which areas of the nearly 1-billion-acre Outcr Continental Shelf are to be offered furlease, in what ardcr, how soon, with what returns to thc public, and with whatpotential asta. To do this, DOE must consider eight statutory requirements for itsanalysis and must publish and receive comments on three drafts over two ~before a final plan is put into effect.

The plans have been surrounded by controversy, as indicated by the fact tba<each of the two previous plans have been litigated by various parties. Although DMhas Largely prevailed in these lawsuits, each plan is prepared with an cyc ta thccourts as weil as to the resources of the OCS.

The papers from this panel consider the major components of the analysis w'huchDOI must perform: the question of how much oil and gas is potentially avaBaMe ~be recovered. thc social costs of recovering thee resources, the effects on the rnnzinnenvironment and the compilation of this information into a form readily acconibje tothe Saaetary, the final decision maker,

with any effort of this scope, DQJ has been refining and. improving itsanalytical techniques and conceptual approaches to the five-year planning FtecnsL'Ibe methods used by Dol in this edition of the five-year plan are signif~improvements in many ways over the earlier versions. Better data are ~cotnbinsd with more sophisticated views of the lean; sale planning probicrrt toproduce a clearer and better reasoned analysis for thc Secretary.

The present five-year planning pmoee is still in its early stages. Two full drafts~ nd three decision steps rema' before a final plan is ready for implementation.too early, therefore, to bc sure what effect them improvements wiH have on thedecislotis orioaa- or thc controversy, concerning thc five-year QC$ leasing progearn.

chum+ s. ooLGAN1Xrsetor, P'agcy

Narc State Planning Off~Acgurte, hf edna

CHAFTER 12

Asseesm t f E4

MARSHAL JL, ROSE

GhftfBranch o f Kcoxuxsdc SxudhsOffshore Resource Evaluation DfvtskmMlncrals Nanagemsnr ServkeW'ashkagton, D4.

INHtoOUCTION

Section 18 a! of the Outer Continental Shelf Lands Act �~9 required. theSecretary of the Interior to pxepare a five-year leasing pros �.~ consisting of aschedule of lease sales which considers, among other things, economic values of thenonrenewable resources of the OCS. This paper discuaam the concepts, methods�andresults af that economic analysis.

Energy, including oil and gaa, has played a significant role in the growth of theUS. ecoauxuy from ita infancy to the present. Prior to thc intcrneuotual events of the1970a, which ~ructed the worM's energy pictuxe, the growth of the UKeconomy and its uac of energy grew in tendexn. When the steep price incxeaaca inpetroleum occurnK in the 1970s as a result of OPEC'a policiea, the UA economytmdevvent a structural change in ita energy uae which resulted in more efficient andeffective heating and uansyartation xnethodL Further, the hcavy dependence onixnporta fmn OPEC at that time has since changed to a more divexsified suppl.y ofimported oil and gaa. %Ms situation haa led to ixnprovements in energy security andto a moxa stable commie envinmment.

'lb' near-term outlook over the mrt ten years sees our total energy rx:msuxnptIonincreasing by 21 percent from 1984 to 1995; our domestic production of oil and gas,on the other hand, is projocted to decxetua: to 36 pexcent of our total energycxmauxnption compaxed to 49 penent today. The shortfall is pxogctcC to be mct byixxctesling ixrtporta; the DepsLrtnumt of Eneqpr haa forecast that the quantity ofimported oil will double froxn 1984 to 1995 and will grow from currently supplying9 pensstt of total energy coxuxuxnption to 1$ percent by 1995.

In the face of declining dhsneatic proven hydmearhm reserves and in~dependence oa foreign sources of oU, the hydrocxcrbon potential on the OCS representsa significant domestic energy souxa In 1984. offahoxe oil aud gas pxoductionrepresented 12 percent af total dorcestic oil production and 25 percent of totaldcanestic natural gas pxoduction. 'Hm axnount of unl~ umiisnvered economically

123

124 Thc U5. OCS OQ as@ ~ ~sxi~g Px-o~~

recoverable oti and gas resources on the QCS that is ex~~ to be worth searching'on barrehx of oil ecluivalent BBOE!; the pre~rr<

value of these resources is estUnated to be in excess of $95 billion in 19$6 pzicest-The OCS csi and gss resources axe heterogeneous in their location, their size, ~

their pxobabtlxtxes of being econoxnlc. An asm~srnent o f economically reoclvcraMcxetun~ is dynaxnic over time based upon the influence. of factors other than ~physical sire and location of the resouxce. Changing econoxnic conditions which ars-'reflected m price changes, cost changes, and technological development influence axemagnitude of our resource base in terms of its exploration and developxnent poxexrtrraproduction of the resource oxdinarily involves a time lag of five to fifteen yeax3 <rtrrx'the time it is leased, indicating the need to address projections of oil and getsrtquinments in the futuxe in formulating a leasing program today

paueem A r.auXNO SmZDmx � THE XCONOMIC PERSPB~P~

ln developing an OCS leasing program, the most important consideration ~ ~choice of a leasing schedule, ie the order end frequency of sales to be hedifferent planning areaL Accordingly, one objective of the economic analyrdsprovide insights into how the lease schedule should be designed, dra~xelevant economic maLsuxes in each planning axes.

If the Secretary were obliged to explore and develop OCSecorsmucally optixnal manner, he would tend to focus interest first on the geoiogi~pnxrpo~ expected to be mcsxt valuable on a per barrel basis, ix those prtx<ecCa ~t-are least costly to find and produce, and/or those that are most likely to constr-ncomnMrcial accumulations of hydrocarbons. This observation provides the ~~conceptual IixLk between the economic analysis of planning axeas and the design ~the five-year leasing pxogram. Another reason for conducting the economic ILnal~is to ensure that leasing occurs in specific locations only when the benefits to ~eNation exceed the environmental costs.

The initial step in developing economic values for each of the 25 planning rtxe~on the OGS wss to estimate u.ndiscovered economically developable resources Tra~1!. These estimates xeflect the state of geological and geophysical knowledge sLxrclexpectations of relevant futuxe economic conditions. They are based on. a mid-1'986starting point for the next five-year program. The estimates were generated using a.sophisticated sixnulation computer model called PRE%0, an acmnym for probeaM1-

»t th t Table 1 ~

resou.rce estimates-conditional and risked. 'Ibe conditional resource estimates indiaatcthe potential anKunt of oil and gas that would be produced in a particular locatxanassuxning that the area contains hydrocarbonL The conditional resource estixaatess sireused to asses the environmental consequences of leasing in specific areas. However,in conducting the econoxnie analysis for the five-year schedule, mexuxures represerxzxxxgthe risked resource estimates were used since they incorporate the appropriatelikelihood of hydrocarbon cecurrence.

Although these average values are the statisticaGy "best" measures to use iran ~eanalysis, it is important to recognize their inherent uncertainty and variability.risked resource size srnociated with each planning area xepresents the average ressu3.tsthat would emerge if the exploration and development aenario were repeated. Q,OOOtimes in an area. Of course, in practice, only one secluence of exploratioxrdevelopment activities wiH occur in each planning area. Hence, the actual reatxltscould differ sabstantially from the expected result

To obtain the risked levels af econornicaQy developable oil and gas resou~x, splanning area's mean conditional resource l.evels are muluplted by the chance thaz ~<or more geologicsl conditioxN exist, such that the planning area is consider~

Asscssssenr c f &sorrrccs 125

Table 1

Undisoovered Economically Developable Resources Unleased As Of '7/86

PLanningRank' Area'

1.00 5.41%29 1757

185 2123

229 1787

185 2123 1.00 5.32

1390.78

0.72

OM

081

Ih5

0.83

3.16

2.81

120027

025

I 330

0.70

1.10

OA3

0.160.16

Ohi

1.653.08

12.64

2.81423

L10X33

0.640.16

0.87

OW

OMOA8

0.99

020

030

092

288035

031

OW

0.10

IAO

2.12

1AI

15.10

7A�

OkS 036 0310.79oW

1.86

6.09

326

OkO

022

020

OA5

0.41

O.LS

025

0.17

0.04

OA2

0.77

0.18

1.12

134

Oh5

032

OAI

0.14

0.130.04

0.04

0.01

i igi1 ig ili gi1 igi

0.05

OA�

082

001

negligiblenegligiblenegligible

neg

neg

neg

neg

020

0.08

0.12OM

0.02

OA�

OX�

ble

bic

ble

ble

5.121.16

2.92

1.81

LA2

020

ligilrgrligiligi

0.10

0.10

0.05

0,03

0.01

0.01

negligibleb 1 e

b I e

b 1 eble

023

087

020

0.15

0.17

ODS

0.10

neg

neg

nagneg

$~JJng based an risked BOE.in the Beaufort and Chukchi Sea planning areas, 200-foot water depth istxsrsMiensi to be the limit of current technology. Sued on current east/pricerelationships and foreseeable technological advances, it is assumed that theconditional mean gas resources estimated to exist in the Alaskan OCS Beaufort Seaand Chukchi Sea P!anndng Areas are unecorMMnic.

contain a cornrnennal accumulation of hydrocarbons. This hkelihood is defined bythe tertn "marginal pmbability, its value for each planning area is shave in columnfive af Table i. The resulting estimates of risked eotmomically developable oil and

1 Central Gulfof Mexico

2 Western Gulfof Mexico

3 Southern

California4 Navarin Basin5 South Atlantic6 Mid-Atlantic7 Beaufort Sea8 Eastern Gulf

of Mezim9 Chuischi Sea

10 North Atlantic11 Central

California

12 Northern

California

13 St. George Basin14 Washington-Oreg'15 North Aleutian

Basin

16 0uif of Alaska17 Norton Basin1819 Hope Basin20 ShunLagin2I Cook iniet22 Aleutian Basin23 Sower Basin24 St, Matthew-Hall25 Aleutian Arc

Cndl Cndl Risked RiskedMean Mean Mean Mean RiskedOil Gas Mphc Oil Gas BOE

BBO! TFCO! BBO! YCFG! BBOE!

gas resources are provided irx columns six and seven. A single measure, called barrelsof oil O},uivalent ROE!, is obtained by converting the risked gas to the litu esluivalentof oil and then sixnply adding it to the risked oil figure. One barrel of oil contairxxxthe heating content of about 5.62 thousand feet of gaa The units in Table R arebillsons of barrels of oil and trillions of cubic feet of gas. Hence to obtairx risltecoeqebralent barrels of oil, we divide the gas amount in wlumn 7 by 5.62 and add it tothe oil amount in column 6.

ln many of the planning areas studied, hundreds of geologic pmxpects ~xdentified having anne likelihood of containing hydrocarbon resources in axruNxxxtsgreater than that size neomary to encourage developxnent, given that the fields hawebeen discovereL However, prior to exploration, many of these developable f iems ha~negative risked private values net of exploration costa. Thus, in considering tlxepotential for oil and gas discovery, it is appropriate to recognize that discovery resultsfrom investmenta in lease acquisition and. exploratory drilling. Under a given ~ cdeconomic conditions and geologic risk, some prospects are not worth aoq~drilling even though they would be profitable m develop if such investrxmn" hx&aiready been made and the deposits found.

Lease acquisition and exploration investments are based upon both the size axxd ~probability of the eetsxcsnic payoffs that can result. The Minerals Managexnexx<Service 54MS! has estimated the risked economically developable oB and gas resouscesland their net econoxnic value for the identified prtsxpects that are wortlx invxsrtnmxxtsin Lease acciuisititmx and exploration, ie they are leasable even in the preserxce of ~perceived Level of risk for the planning area. Table 2 shows the estimates of riskcI>resources and expected net economic value from the set of prospects in each ~ arcnw'orth leasing and. exploring.

The economic aeaunptions for these base case calculations include a FOB port ~export oil price of $2L65 in. July 1984 rounded to $29 in the discumioa!. a 1 pencerxtreal oil and gas annual price increase, an 8 percent discount rate, and a 5 ~~<inflation rate lhe net eomcsnic values as of July 1986 have been calcuLatedTable 2 for a representative 10 percent sample of 2,400 potential geologic fields-four lowest ranked planning areas in Table 1 Aleutian Basin, Bower Baxxin St-Matthew-Hall, and Aleutian Arc! are deleted from Table 2 and subseciuent taMcsxbecause their memxoe magnitudes are estimated to be negligible.

The aggregate magnitude and value of leasable resou.rces do not, however. ~viea complete picture of the rescaxrce and economic potential of an OCS planning ~A substantiai total net economic value may result from a moderate axnoxxnt afhigh-valued resources or a very substantial amount of lower valued resourcoL Table3 shows how the resource potential is distributed by net economic value in each arca- The actual distribution of developable resources by net economic value is rncxrowidely dispersed than that shown in Table 3 because the sample si2e xxsed i'evaluating fields within a planning area tends to truncate the lower snd u.pper txailsof the original distributions of fieM sizeL This, in turn, expLains the abeam ofresources in the lower net economic va1ue categories of Table 3!

The ~tivity of the distribution of leasable resources by net economic vxL3.ue taalternative starting oil price aemmptions has also been approximatecL ~ chaxq~from the base case- occur gmmarily in the lowest net economic value categories of ~distribution af leamble nmercea.

Table 4 evaiuates the effects af alternative price assumptions on the amount cddeveJopable resources that is on leasabie prospects for each of the 20 plea:ning arem~This table shows that some areas, such ss Gulf of Alaska and St. George Basixx, ha.~much better leasing possibilities when the investment climate is more favorable ~specified in the tsxse case. The sensitivity analysis on prices is extended to zLemeasures of net axsmrnic value as shown in Table 5.

Tht US. OCS OQ and Gas W~g py0~~

ao

eg wc

ao

RR~

!j

g

aoMaoaochM~W VICE

I

8

fIg

$4~

~=' 4l8 ~5,o

fg a

8!r ICC

!a a$ !Ip QC

~gt et gc aeoee e egaogg~aoWCa~ ~

~~~ mWw~ nnmaow mao%~ A ao t A IA Q & w 00 w Q ~ w O Ch W A ~~g ~c c- w 8 Cm w w 4 w ~ ~

Asscssmcnt o f Resaacrccs 529

Table 4

Sensitivity of LeasableRcsou.rce Amounts to thc Starting Oil Price

Millions of Equivalent Barrels!

Planning Area Starting Price: $24 Starting Price: $29 Starting Price: $34

5,416»4,846

5/125+125,153

1,471»794»

615418

651

1,090559

593

150

407

902

557

556150

391

Starting Oil Price $29Annual Oil Price Change 1 percentKliamunt Rate 8 percentR~urccs Expressed in Minions of Equivalent Barrels Mh63OE!

Estnnatcs of leasable resources in these planning axeas exceed economicallydevelopable rcemrccs Qn the base case! beaLuse the price change lowers theminimum economically developable field size and. tends to increae ultimaterecovery from a given field.

Central Gulfof Mexico

Western Gulfof Mexico

Southern

California

Navaria. BasinSouth AGmticMid-AthnticBeaufort SeaEastern Gulf

of MexicoChukchi SeaNorth AtlanticCentral CaliforniaNorthern CaliforniaSt. George BasinWaahuqrtoai3zegonNo. Aleutian BasinGulf of AlatltaNorton BasinKo~Hope BasinShuntay'nGxk Inlet

454

343

49

359

347

173

56

0 0 0 0 0 0 0

454

396

103

400

409

173

561918

14

0 0 0 0

556

487

128471»

417

359

56253314 0 0 0 0

>lre V4. OCS Ce md Cas L arjng Zrog ~

Table 5

Sensitivity of Net Economic Value Estimates forLeasable Resources to the Starting Price of Oil

Base Starting Price Less $5 Base Starting Price P>ua ~

Net Economic Net EconomicValue per Net Economic Value Per Net Eoonorajr-

Banel Value M! Harxel Value Std

$52,102$5.74 $27,816 $9.62

47+3010,910

3,120341223832,122

443

539

197X57

2.161.14

23,8584,865

874

1,429

325446

8.91

7.42

3.935.71

5.70

326

Starting Oil prlceL' $29pries Chrtnge: 1 percent

Discount Ratty 8 percent~~ ~Pressed in MGlbxo of Equivalent Barrels QAMBOE!

WRhT TQ OPFKR hND MKhP

An important consideratioa ia deciding mhen to offer the potential reraouroes tr ngiven planning artra for lease, or hmv to order the offering of all plan~g areas aathe cost of delaying the sale and hence, presumably, exploration aad developraent! ~leasable prospects la cava where the net eeommic value per barrel can be increaaadin present worth frraa future rather than currant offerings, such planning ~ahould be timed for sale later jf at alQ in the mhedule.

Centml Gulf ofMexico

Western Gulf ofMexico

Southern CaliforaiaNavarjnSouth AtlanticMid-AtlanticBeaufort SeaPastern Gulf of

MexicoChultchi SeaNorth AtlanticCent?al CaliforniaNorthern CaUforniaSt George Basin~aahjnjitoaDrcymNorth AleutianGulf of ~Norton BaainKodjrdcHope BaaingShumsgiaCock inlet

3A7

0.97149

5333.78

1204.79NWNWNm

NWNM

NA.NW

1575333

82

1,9121/12

208

2680

00

00

0

0

7.35

3.01

5297.32

8.08

4A89.47264281

326NM

NA

NWNA.

4,08'71,466

677

3,446~91W8

5306683

46

0 0 0 0

Assessmcnx o j Resources 192

Measures of the cost of delay for curren.tly July 1986! leasable prospects in eachPlanning area for the base caw are presented in Table 6. These average annualmeasures were developed under both 1 and 2 percent real oil price inweave scenariosover a multi-year delay intervaL The largest delay costs, equal to about 4 percent ofnet ecoeotnic value per year of delay in the 1 percent pxicc growth scenario, areincurvA Fuz the highest valued planning areas including the Gulf of Mezzo andPacific RegiozsL 'Ihc relative size of delay costs would be higher if no price increasewas ezpcctetL

Table 6

Simple Avexage Annual Change in Nct Economic ValuePer Barrel For Leasable Resources Fzozn a Delay in Lcasiag

Planning Axes

Starting Oil Pnoe $29sazunt Rate: 8 pexcent

Resources Expressed in Millions of Equivalent BarzeJs MJ fBOE!

75 and 15-year delay intemraLa for 2 percent and 1 percentannual zeal ail price growth amunptians, xespectively.

Negative change xncans cost xn delay.

Central Gulf of MexicoWestern Gulf of MezicoStsuthern Calif orniaNa.varin BainSouth Atlantic

Mid-Atlantic

Beaufort Sea

Eastern Gulf of MexicoChukchi ScaNorth AtlanticCentral CaliforniaNorthern CaliforniaStlksorge BasinWashington oregonNorthern Aleutian BarinGMlf of AlaskaNorton Basin

Ka4ak

Hope BasinShutnaginCaak Inlet

Annual Resource Price Increase Per Barrel

1 Percent 2 PercentS/bbl Sfbbl.

O30 -3.92 -0.36 -3,84-027 -3.91 O35 -3.90-026 -3 84 O28 -3.74-0.09 -342 -0.13 -2.97O.15 -3 73 O.18 -321

O.14 -3AiO O.03 -129OX� -331 O.IO -2.76O20 -3 77 -022-0.07 -392 -OD9 -2.71-0.12 -348 O.16 -3.05O26 -441 O27 -3 79O22 -3.75 OZ3 -3.93O.10 -334 O.10 -234O27 -3 79 O32 -359-0.03 -227 O.04 -149-OA� -2,18 -093 -120O94 -229 -0.04 -128NA. NA NA. NA.NW NA. NA. NA.NA. NA NA. NA.NA. NA. NA. NA.

Z'hs Ug. OCS OQ orad Gas Leasfrtg Progr~

The delay costs reflect changes in the sixc « the developable resource that occuras prices increase as weU as ~~ ~ p«barrel value due to these higher pfioas.jpicMs that may bectmne lm e at higher prices through time at a given annual

g~vth assumption are no mcluded in the calculations.! Observe in Table 6that aQ entries are negatively valued- This means essentially that within each of therelevant plknning ~ a ~y in l~g, which results in postponement of the startof exploration actavl~ wall UL~ a reductron ln the net economic value per barrelof oil that would bc produced if hydrocarbons were discovered on a ry~ leasablefichus

The net economic value of a barrel of oil and gas in the g percent growth case ishigher than in the 1 percent cern- Moreover, thc set of Ieasabie prtnpects may differsomewhat for each price ns'nario Thus, for a given planning arcs, the delay cost3 perbarrel as presented in Table 6 are not directly comparable between price scenarnw A-more appropriate comparison is between the annual percentage change in values peroriginal rishi barreL ss shown in columns 3 and 5 of the table, since this comperlNrtnczmaljzes the effects on absolute values duc to the different priceanaurnptinnL Qf ~ fof a given price change assujnption, thc dollar Ineaaalxes ofdelay costa do suggest the proper ordering of leasing and invtartrnent among areas

Table 7 shows that the central and western Gulf of Mexico areas have by far thegreatest meuroe potential in the highest value category, nearly 5 billion barrels each.Thee two arses also have the greatest total net economic value and the greatest totalloasable resourceL In «ddition, both areas have substantial resource potcn.tial at lowernct economic values.

Baaed on these indicators of the resource and economic potential of the central andwestern Gulf of MImico, it w'onld be reasonable to schedule sales in these areas foreach year in the five-year gcegnun. This would centinue the frequency cd' Ieeiagunder thc current prognun. The amount of leasing and thc value of leans soM insuch annual sales would be cxpcctcd to decrease unless prices increased suddenly errsignificant new prclpects were identified; however, annual leasing in these two areasis warTanted until the unleased inventory is sufficiently depleted to fall more nearlyin line with that of other OC5 areas.

Quads the central and ivestern Gulf of Mexico the eastern Gulf of Mexico andthe three CaUfornia planning areas have by far the greatest amount of high-valuedleasable rcmureea. The southern California area has thc ~ portion of thishigh-valued resource in the top net economic value categories and almost as roaringleasable resources aa the eastern Gulf of Mexico and the central and northernCalifornia planning areas combined. Moreover, the southern California area has agreater potential gain in leasable reacaazcea frtln higher aU priceL The estimated cosrtof delaying investments in the leasable resources at the base case amumptian. of 1percent! is about the same for each of the four areas, and somewhat less than in thecentral and western Gulf of Mexico areas. Thus, while thc relatively high comtnnicvalue of the resource potential in these areas maJkes it reasonable to schedule morethan one lease sale in each area during the five-year program. priority for earlier salesshould be given to the asathern California area-

The Navarin Basin and ~th Atlantic planrting areas have about the sameestimated leasable resources with total net economic values of about 528 arad $X>biUion, respectively. The Sou.th Atlantic, however. hss more resource poten~top economic value categories and about twice the cost of delaying inverrtrncnts as ~Navarln llasin. The Navarin Iamn area would gain more leasabl e rew%~es f ~higher price+ 'Ihe estimates show that both areas may warrant sales

Asscxxmmt of Resources 133

Table 7

Condensed Distribution of Risked Developable Resxu~ Millions of Equivalent Barrels!

Net Economic Value per BarrelDevelopable Category for lmsaMe Rearurces

but not~ble Below $3.00 $3.00 to $6.00 $6.00 to $10.0Planning Area

126 4,720

4.690661

0

0

0

0

463

261

80

375

72 0

159

168

479

218

78

407

Starting Oil Price $29Annual Oil Price Change: 1 percentDsnsunt Rate: 8 percentResources Expressed in Millions of Equivalent Barrels Ml4%6!

1986-1991 leasing pxogram, perhaps morc than one sale if exploration yields positivertlults. Consi tion af industry intexest and nonoxmomic factors must also beweighed ia addition to the nct economic value basis for mheduling.

The next group of pnsspective areas in Table 7 are tbe Beaufort and Chukchi Seas.Thee areas are simllrLr in both estimated leasable resources and nct econuxuic value,but the Beaufort Sca shows a greater gain in leasable reaoum» from higher base prices see TaMc 8!.

Since the aetiruatcd nct economic value for each of these areas is in the $1 biUionrange, it iu realsnable to offer both of them at least once in the 1986-1991 f~pmn.

Central Gulf

of Mezz 564Western Gulf

of Mexico 12Southern California 296Navarin Bain 217

South Atlantic 128Mid-Atlantic 506Beatxfoxt Sca 199Eastern Gulf

of Mexico 105Chukchi Sca 138North Atlantic 378Central California 56Northern California 37St. George Bain 238Washington<!roon 96North Aleutian Basin 84

Golf of Alasi~ 78Norton Basin 34Kodak 30Hope Bssira 11Shutnagin 8Coat inlet 4

52

39654

0

0173

0

19

18

14

0

0

0

0

0

31273

225010 0 0 0 0 0 0 0

2020

18127

184

46

G 0 0 G 0 0 0

D4 Th Ug OGS Oil ~ Ger ~+g ProgramTable 8

Change ln Base Case Leasable Resources Resulting Fawn Ag5 Par Barrel Change ln The Starting Oil price

bulbous Of Etluivalent Barrels!

Base Starting priceLess $5

Base Starting pritnPlus $5

Plarumg Area

Starting Oil Price $29Annual Gil Price Change: 1 percentDiscount Ram 8 percentResottretn Rrpxessed in h6llicuta of Equivalent BarrelsO~iBOS

Because the Beaufort Sea estimates ahoy higher resource grovrth potea~ ~~ omewhat earlier sale in the Beaufort Sea tnay be preferable.

The last four areas that currently have resources that appear to tnake ~actluisitiona are mid-Atlantic. St. Gscege Bean, North Atlantic and W~Oregon. The catunatsd net axmmtic value of leasable resources isof $04 Mioa for thsas axttaL 'Hg;y have relatively little resource pohigh-valued prt~ but the mid-Atjantic and St. Georgesubstanttaliy frotn a higher aU/gaa price leveL Delay cost» are moderate ~

ton<traym, which reflect the relatives.y high per barrel value of tthat area. These findings zmhc it. cnorth offering the areas at ~,during 'the 198&1991 period to alice firma the ~artunity to invest in g ~data and exidering the unleassd. prospects that axe letwable.

Central Gulf of MezicoWestern Gulf of ldericoSouthern CabforniaNavarin BasinSouth AtlanticMid-AtlanticBeauforC ScaEastern Gulf of MtmieoChukchi SsaNorth AtlanticCentral CaliforniaNorthern CaliforniaSMsorge Basin%aahinjltonEhegce.Northern Aleutian BainGulf of AlaskaNorton Basin

Hope BasinShunw ginCook inlet

0-159'

-188-2

-37

0-16

0-53-52

-41

420

0-19

-18-14

0

0

0

0

5700

381235

22

268244

10291

2571

8186

0 6

15 0 0 0 0 0

Assessment o f Reawrces 19!

~ areas with reeource potential, the Minerals Mallligc5lcnt Sefvketh~ with come leasable reeource potential North Aleutian

of ~~ and Norton Basin! and four with none Kodiak, lope Baan,Q gjnagU4

C k inlet! Further, none of the lest four show any reeOurce /sin

Ertsnb ~1 higher oil price lepeL The other areae ere Inarglnal TO be

' ii areee availab>e if new information ehauld make thetn

scoreet4 bl they might be wheduled for etandard or tentative ealc+

VSE PROPOSZO PROO~Oa March 21 19B5 Scg;retary

period- The economitbs tICtoN considered by the ~reta~Ouif gf Mexico, for cgkggplg,

e n ml and weetern Gulf

T~ ealce are propoeed in 15 othexploration ealge

Lg tercet in th areas to helpcbedule provjdaa for anrtual ~ f

earn 0 lf of Meaico in ~,eseociated wtth not offe~ th b~

by etetee, federal eon~~Pl Final Pxup

P~ ' few appropriabefore Congnga,

NOTE

The PRESTO methodology te deetgned to acconunodate an analyete of hydrocarboarteource potential for an area on both a horison-by-horixon and a praepect-by-prospect baeie.

~g~ A G]gGAI.UNAS~fsxspr~~ p f gggggrcc SC01lomlcs

~y pf gJggfs IskQtdg ~ gjbygs Ishwuf

~opU~ON ~ IACKGROUND

L8 aX3! of the Outex Continental Shelf Lands Act {OCSI~! provi~ thatg and location of individual OCS Lease sales be selected

Of balancing the potential for environmental daxnage, for the discoveryg ail and gas, and for advexse impact on the coastal zone. Hence, an. analysis~bis eaviionmental damages and. adverse ccestal zone effects froxn propctsecl OLSail +g gas leasing is essential in the developxnent of the proposed five-year OCS oilggj gas leasing p~plLDL

ptptr briefly summarizes an economic analysis af the potential sociaLcl 4gvalqjng, producing and transporting the oil and gas resources of each QQj

ted to be leasable as of July' 31, 1986, the current starting date st tht pteposad five-year schedule. Readers interested in a detailed damon of thetMtbtdeiogy, data, assumptions and results are referred to the study docuxnent �>Dqertmeat ef interior, Draft proposed Five Year OCS Oil and Gas Leasing Schedule,Appcahc 6, March, 1955!.

The advantage of developing cost estimates in eoonotxuc texxns is that coxxxparisons4 axial casts can be made acxtsst OCS planning areas using a ccsnxnon unit ofmesatenssit - dollaxs. Also, the estimation of social ccats in dollar texxns aLLovvs onee rank OCS areas by their net social value {developxnent benefits minus social costs!.lt ia recognized, however, that a number of potential societal costs of QCSkvelopment axe not economic in natuxe eg�effects on subsistence coxnxnunityiiftatyka af rapid OCS development! or cannot curxently be quan.tified in economicanaa {ag, passible effects of an oil spill on endangered speues!, Therefore, in theusiyss af sociaL costs attention was focused on thae categories of costs fox whichsasaLtble quantifiable information could be obtainexL issues which canxiot be~ in quantitative terms are addretsed qualitatively in other documentstttlsitd itt contstctitsx with the Five-Year Pxcgram.

Gives the intent of the analysis, the ecoxMtnic study of social costs was carriedIa aa aa aggregated, plantung-area basis for each QCS areL The sacid eeet analysis

238 The US. 0CS OC and Gas Leastag Program

thus does not addrcm specific, intra-area resource management issues' such isaemuninsd in Environmental Impact Statements preceding s lease sale in

To pxovide a common basis for comparison among OCS phsnning areas socxxsl tsestimates fox each area are based on the assumption that all of the leasable aU aad gsss~sxrces for each sxea are leased on the same date, July 31, 1986. The diffezers<flows of sxssts over tixne for each OCS area are converted into their present dist~~valuss, using a discount rate of 8 percent.

Qgagtifjcation of economic damages from environmental incidents is a dif<icsxlssndertsJciag see, ag Grigslunas et al�1985; U5. Departxnent of Commerce >9<3~.

level of the analysis, aad severe lixnitations in the state of the art for quantif~eomoxnic damages make it ixnpassible to develop precise estimates of social costs or copresent confidence intervals for estimates of these costs. Pxe-ss& estimxsteshydrocarbon xesossrcea, their location aad composition oil or naturals gas!,conditkcss uader which any spills will occur aad the damages which will result mrs

Hence. in ccsLsidering the results which foHow, attention ahmMfocused more on the relative ranking of planning areas than on the precise nuxaerb~result+

As a result of the snaay difficulties inherent in the messuxemeat of social ccsstss-when judgment wss xoquixed concerning a cost estimate or aa assumption to be msacLa ~~tive, high~ abroach was adopted, provided a reasonable hig~~

te waa available. Specific examples of this conservative approach irsclMe=

Oil «pills predicted by the oil spill trajectory xnodel to reachshore xnay not actuary strilte land because of preventioasasasures ag booxns ox at-sea recovery!;Spills hing shore may not impose tourism and recreation.losses, depessSag upon the season ia which spills occur andthe speed and thoroughness af cleanup operations;

Existing mitigating or regulatory meImuxes, such as pxecludingthe alteration of wetiands by shoreside pipelincs or recluiringa redncticss in potential air pollution emimions, can reduce orelixxxinate many potential social cxssts although orssta ofcoxnpliaace axe not considered here because they are productioxscosts w'hich axe part of the net economic benefits calculatioas~aad

Beneficial aspects of OCS oQ and gas development are ignored.For example, platforms ia some OCS areas serve as artificialreefs, Ixnpxovtng the quality of recreational fishing. Also,offshore opexatoxs have provided emergency assistaacc tofisherxsssn. Finally, additional OCS natural gas production tosome extent reduces the amount of imported oil and theassociated oil spilhr, and by substitutiag for coal and otherenergy pxeducts, OCS natural gas production reduces airpollution pnAiexns or air pollution control costs! in eneqproceamning axesa None of these beneficial effects, however,axe c si In this analysis because they are beyond tbescope of the present effort.

Notwithstanding the ua of aaumptioas which provide a high estixnate txf smeialcosts, informol judynent snd simplifyiag assumptions ac+warily play izapcs~t

roles in this analysis. Every effort has been made to daaxmcnt data sources and tcstate explicitly the methodolqpr and asslxmptions employed to give the reader theoplaMunity to judge the reasonableness of the results. Also, sensitivity analysis isuSed tq examine hOw costs respOnd to variations in the estimatea Of uxut Crntaemployed in the analymL

THE OONCKPT OF COSTS USED IN THE ANALYSIS

Iatrtshectkm

The term "ccats" means different thinga to different peOple. To reduce Chepotential fOr COnfusioc, it is impOrtant tO define the COncept and categOries Of costswhich have been conxadered in L~IIenung the potential socull costs of the Draf tPn~sed Five- Year Poogxam.

Social costs measure the environmental and related casts to the Nation as a wholeresulting from the proposed oil and gas development in each OCS pixumingspecific ccsss considered in the analysis of social cost enccsxxpaxs market andnon-market asxts and include such oil spill and non-spill caste as cleanup and contxolcltta, Ccmmexcial fiaheriea, tOurism and recreatiOn costa, ecOlogical ccats. WetlandLosses and several other costL

Excluded from sociaL costs axe transfers, mxmdary or "muLtiplier" ! effects andpurely private costa. Transfers are merely financial roNstributioos. For example, oilspill~used lOssss in a community's tOurism induStry sales tax receipts Xnay be Offsetby increases in other communities' tax revenues. Because losses by one group tend tobe counterbalanced by gains to othexs, no net social cost is involvecL Sixnilarly, oilspill damage compensation payments redistribute the burden of a spill but do nocchange its social cost; thus, compensation payments are not included as a cost for to doso wouM count costs twice. Secondary effects usually are omitted from theestixnation of social costs unlem it is unxtxtsonable to xusxume Ml employment andxnoMe resources, such as in inflated commercial fishing communities. Finally, purelyprivate losses occur when, for example, a loss in profits by the tourist industry in oneLocation is balanced by an increase in profits at substitute siteL Because the Lesxes inone location usually are offset by gains at substitute sites, no social cost arises.

ln all cOSC-benefit studies, the standard Of COxnpariaXn far assesxirxg a pcliCy iswhat would have happened in the absence of the policy, Fos this analysis, theWith-va-withOut COmpariSCXn is OCS oil and gas develnpcrumt VL the alternatiVe ofimported Oil. Hence, the social ccets of the Draft propcsed Five-Year Pxclpam aremeasured net of the costs avoided because OCS oil development reduces the demandfor foreign oil and thexeby avoids damages from spills by foreign Canltexs.

The naticnal fOcus adopted far sxINsing SOCiaL Ctssts is Omristent With theevaluation of the benefits of OCS developunent at the na~ leveL. Actualmeasurement of the social costs of prodUccion in an QCS LTyL, however, reqlllxes Chatconsideration be given to the consecluences of that production for other OCS areas.For example, oil produced in the Navaxin Baem on the Alakan OCS is expected to beshipped neth to xefineries by tanlters, potentially resulting in oil spills off all wesCcoast OCS areas, thereby causing social costs in thee axesL The social oosts concerned,however, are attributed to OCS oil production in the Navarin Basin since they wouldnot have occurred in the absence of the Navaxin Basin production. On the other handcil pxoduction in an OCS area reduces social cost3 in other axeas by bschng out

pOrted Oil and fOreign tantCr spiliS from these Other axeaa FOr example, oil

240 Thc US. OGS OQ and Gax Leasing Program

produced in the central Gulf of Mexico replaces aa equivalent amount of imported. oOdortiaed for refineries in the central Gulf of Mexico as well as other OCS aretsL Thcreduction in imported oil means less oil will be spilled from foreign tankers in aBareas cxatcerxaerL Just as costa imposed on other areas are attributable to the producingOCS area, so too, the crwra avoided when imported oil and the associated oil spillageare reduced also must be aligned to the producmg area if social costs are to bexneasured corxectly from the viewpoint of the Nation as a whale.

bt addition to aa analysis of social costs to the entire Nation, the, GMLA dictatesthat the distribution of the sachs costs of OCS oil and gas developnxent also beooasidexecL To emphaiize the important difference between the social cata to theNation as a whole aad the costs estixnated to be realized by residents of the producingOCS area, a second category of costs ls estunated. These costs axe referred to asregional ctsxtL However, this paper focuses on the analysis of social costa carried outas part of the development of the Draf t proposed Five-Year program DPP!. Reatiersinterested ia the definition and estimation of potential regional costs sheuM refer toAppendix 0 of the DPP,

OVKRVIE% DF MR'.THODOMOY AND ANALYTICAL APPROACH

Lncrrdxscrlexa

To estixnate the present diaccatnted value of the costs of OCS oil and gasdevelopaxent for each plaxuxiag axes. the analysis proceeds through several steps

are illustrated in the accompanying simplified flaw chart Fig. 1!, anddescribed in general terxns below. The two basi~ types of costs considered axe oil-spiUcrate aad non~ costa. An overview of the approaches used to estimate each txfthese categoriea of costs followL

A xnajor focus of the analysis is on the costs of oil spills. Particular atteatioagiven to the posi,Mity of Large oil spills � those over lQ6 barreh. Spills of thisfrom QCS production axe rare; no spills greater than 1,000 barxels have taken placeaiace 1981, and atxly three such spills have occurred from 1979 through 1984.Nonetheless, Large spiLLs happen periodically, with potentially serious daxnagea.especially if they strike sensitive resources or reach shore within a few days, beforenatural weatheriag, of the oil can reduce its harmful effects.

Small spilis those less than LAN barrels! also axe considered in the analysis ofsocial ate%. Although numerous. the total amount of oil historicaILy discharged iatothe marlins eavirtslxneat by axnaLL spills is relatively sraali compared to the axncaU1tattributable to large spilla. To illustrate, 934 araaLL spills between 1 aad l~ barre1sconstitLsted over 99 perecat of all production platform aad pipeline incidents teamedin the Gulf of Mexiao from 1974 to 1983. However, these spills accounted for only'about 23 percent of the volume of oil spilled during the period. 'Axe average amountdisdutrled in these small spilis over the period cited was 9A barrels per spilL

For each OCS area, estimated ail spill ccsrnx are determined by eereral factorL Theprincipal factors include the scale of annual oil production; the estixnated nuxxxber rate! of large and small oil spllhr per unit of annual production.- the estimatedaverage aire of spilia; the chaace that spills which do occur will strike Iaad; and the

etOCkd COStS 241

S IMPLIFIE 0FLOW DIAGRAM FOR ANALYSIS OF SOCIAL

AND REGIONAL COSTS FOR EACH O.C,S, AREA

Glf snd fc ~ tvfet GS ~Resovrcss Vnl ~ seed

ea of yrSIISS

De vs lop I Trans partSrenai los

OS Spill Rate and Styeby Score ~

lanPiOben»ny or SpillRaechins Snore orRernetnma at SvaLtnrt Coat to E acn

Spill a Ron-Spitl Goal

SOCIAL COSTSEet. Annoat Production,Split S Ron-Spilt Goat

REQIOleAL COSTS

P,V. 01 SOClel Coat ~10 fiction s ~ Vfhote

Lees: PAL 01 SOO'et Goatsavoided sy Reavcinq imports

Ser sit ivn yAnn I y ale Y

Yss

Ho

~Reatflfat P.tf. PlP.V. of

Figttrct 1. abixnpUfkcd FloW Dbqpam far Analysis ef SOcia1 an@ RegianalCosts for Each OCS Area.

marine resources and economic characteristitn and tbc cavixtxmncutal productivity andmnsitivity of each OCR area.

Pstimatea af the remaiIning leasable resources ae Of July 31, H86, and thedevclopTncntftxaosportation scenario time to initial, peak, and final production; xuodeof oil transport! provide the poirLt of departure for estimating each axes's oil spillcosta. Given this informatitm, obtained fram Interior Department amxcese annual oilpxeductiafu was estimated fer each OCsi area. The eetimated XCmtxxass and thedevalapment/transpOrtatiau IKCnarim Vary Widely frtnn OCS axes to area;coasetiuantly the eStimated time pattCrn of Oil production differs canaiderably amoxLgOC5 aresL For esample, the time from a leace Sale to initial prcductioxL ranged from

142 Thc US. OCS Ofl arrrt Gas LeaAng Program

ss Little as three years in a mature OCS area Like the central Gulf of Mexico tothirnsen years for OCS areas in the Arctic.

Using the estimated annual oil pmduction for each area, the number and size crfLarge and mnaLI spills are established Table I!. The number of large spijls ~terthan or erluai to 1@30 barrels! per billion barrels of oil for each source pxoducticstPlatforms pipeiines snd tankers! is adopted from 4mfear and Amstutz �983!.

ted "tJJpical" spill size for large platform and pipeline spills also is adoptedfrom Lanfear and Amstutz �983!. For vessels the large spill size is estimated frtrrxxthe worMwide tanker sinll data file for the period 1974-1984 maintained by tluteinterior Department. Information for small spill sizes is based on the recoxd of srunlispills in the Gulf of Mexico for 1974-1983.

Given the estimated total spillage for each area, the next step is to estimate theamount of ~ oil expected to come ashore. This number is significant becaurse,generaILy. the costs per barrel are considerably higher for spilled oil which comesashore than for oR which remains at sea. The former requires ccstly onshcse retraloperations snd impose a variety of additional costs uot amociated with spillsstay at sea

The estimated probability that a given spill will strike Land is an average cxfmany hundreds of oil spill trajectory runs made for each planning axes in ~piousstudies by the OCS oil spill modeling group in the Interior Deprrxtrneut.probability figure used in this analysis can be regaxthxi as a weighted averagereflecting the overaU chance that a given spiIL will come ashore within thirty de~Ebr example, the cham+ that s spill which occurs will strike laud within thirty daysranges from 10 percent in the North Atlantic to 85 percent in the Gulf of ALrrsdca~ estimated amount of spilLage to come ashore in each area plays a key role in the«naiyis of costs Table 1!.

Once GCS oil production and the axnount of oil spillage by year have beenestimated, estimates of annual social crxrts for each area are developecL Basically. totalcosts are estimated by multiplying estimated unit costs per barrel spilled tUnes theannual estimated spillage in each area. Constant marginal and average cosrts areshoed, fox all aiE spill costs, over the range of spills considered. All coefficients areexpressed iu constrrnt 1986 dollsrL

Since non~ costs depend upon the scale of total OCS activity, the apprcsxchused to estimate these oosts differs considerably from the approach followed toestimate aH syill ccats. For example, coxnmercial fishing losses from gear asnfHeusresulting from OCS ail and gas debris or bottom obeeuction or axes preemption caursecIby the emplacesnent of OCS hydrocarbon facilities on fishing grounds can beginduring OCS exp4Ãatron and development~ten years before production begms PoTthese cosxs, losses are saumed to begin one year after a Lease sale, reach a msxtixxtttxncoinciding with an axes's peak production and decline thereafter as field activitydiminishes and, eventually, facilitiss axe abandoned. Actual data fox these costs sLxeobtaineti fram studies of commercial fishing axes preemption losses and reccrltexperience with claims for damages to the Fishermen's Contingency Fund estaMshcdby the OSCLA and operated by the Nathnsl Marine Fiaheries Service.

Possible wetland a~le losses were based on best estimates by InteriorDepartment experts. These estimates are axes-specific and include consideration af anaxes's oil and gas rcsourocs, existing pipeline facilities and the extent of wetlaradspotentially exposed to alteration because of OCS piprJiaee. Air tluality ccxncrmm f orNunc areas arim from both oil snd natural gas production; hence, possible air quality

d y$ Al14 l

~=9

5 f

Ig

cgmeommgwv!mga

l-CVg!R~~ AFl488p QRQ«

~ ~t ggw g Inq&t WOggcvwnww

Ch 4 $ . e 0 Q 0 0 g 0 e oO e g w Q Q w e pa

% Vl Vl O IA Vl A W W A w m W ~ W 4j g g g g g ~ g Q Q Q 0 Q 0 0 v4 e~

8

3<~3~p~ 3 '!;-g~j !~f8048k86xkAA!xPkea324~

f44 The US. OCS OQ and Gas Leastng Program

losers were related to total oil and gas production using the results of a prior anaiyaurof possible air quality damages in southern California.

D&fEMPhKNT OF UNIT OIL SPILL AND NON-SPILL EST

l¹knQrrcfk¹a

The costxr examined include thae which could be incurred as a result of �! oilspills in the marine environment, �! physical conflicts among competing xnarirreresource usrs. and �! adverse ~ ixnpacta. The thixd category includes 4!

of wetlands, b! possible deterioration in air rluality, and c! subsistexxceSpace Iixnitationa xnan it impossible to explain in detail in this paper tIxe

xnethodology, asaxmptions and data used to generate each of the thirteen individrxalcateysrim of costs used ia the study of social coats. Insteai of presenting an extenm~4rL~rrt of each cast, an overview is given of the development of unit oil spill axxd

ln addition, for each of the taro categories of costs, one rnaj>t' cart isreviewed in %xme detail in order to provide an example of the appxoacIx usecL toestlxxLate important cart items. Again, those interested in the particulars ofanalysis can oonadt the original study document.

For oil ayill-related oaexr, the unit cart coefficients developed in this startsxneasnre the costs reasonably expected to be incurxed, by axea, per barrel of oil spioe~LThese coefficients are adapted from available case studies of oil spill costs, xnodified

orrnation from prior OCS lease sale HSs and other sources, The results af sevencase studies were used to develop unit oil spill ccst estimates Table 2!.

These spills rangcsi over time fram the 1979 IXTOC I platform spill in which 5million barrels were spilled to the 1967 supertanker 1URRKY CANYON spiE inwhich 858 thcaurand barrels were lost. All costs wexe converted to catx-gtxrxeacorresponding to thase used in this study and aII values were inflated to 1986 dolla.rs.

'nre nine unit oil spill casts used in the social mats analysis are summarired inTaMe 6. In generrd, the mst-per-barrel coefficients differ by: �! type of ocsrtconsidered ag ail spill oontxol and cleanup costs vs aommercial furhery losses!. '�!by planxxinl area. xeAactinI the different xesorx~ marine uses, and environmentalsensitivity and productivity of each axes, and �! whether or not spilled oil aoxrxesashore of remains at ses.

Aa Bsslapta GNatref erNf l7es¹rrp Casts

'Am costs of interest bere include the erat of manpower. equipment, supplies xxndservices used: �! to stem tbe less of oil from a tanker, pipeline, or offal cN.facility. �! to recover the oil at sea or pxevent it from reaching shore, and �! toremove and ream'er the oil, should the spiH coxrm ~ Control and cleannp casrtatypically xeprwcat the ainele largest market valued cxsrx of a spill, often accountingfor fifty percent or xnoxe of the total ant. Hence, this category of carts merits specxn?attentiorL,

Several factors influence the per barrel cost af contxnliing and cleanixxg u.p aparticular spill Table 2!. %%ether or rLot a spiU strikes shore is a very irxxportnntdeterxninant of the per barrel acta af contn~g and cleaning up a spilL Boca~there is a ma jxr difference in met per barreI between spills which do and which. do

Socket ~~ 145

146 The U5. OCS 0Q and Gas Leasing I'rogram

not hit land, considerable attention is given to the estimated chance that spills in snOCS planning area will or will not strike shore.

The geographic location of an oil spill will also influence control and cleanupcosts in arne cases because of relative cost differences among regions. To allow forpossible higher cteQ, Alaskan OCS cleanup and control arts are ssauned to be 45percent greater than for "lower 48" OCS oil spiUs, based on the F.W. Dodge labor andmaterials constructicsr costs index for Anchorage L A. McMahon, 1983, p. XII!.

Control and cleanup costs also are affected by such considerations as the type ofshoreline struck ag�sandy beach vs. rock.y shore! and by the ease of accessibility afthe resources employed in cleanup operations ro the spill area. However, sufficienthistoric data do not exist to isolate the effect of rhese end possibly other! factors oncontrol and cleanup corbL Moreover, at the level of aggregation necessarily used in

document, it is not feasible to predict precisely the specific sections of areas thatcould be affected by spilla For these reasons the only distinctions made whenestimating cleanup and control costs for possible spills in the different OCS planningareas are: L! whether or not the spill is expected to come ashore, �! whether thepuree of the spiIt ie an OCS preduction platform, pipeline, or a tanker, and �!whether the spill is on the lower 48 OCS or the Alaskan OCS. Using the availablecleanup and control cost data from several oil spills, the per barrel cost of contro~and clesoring up oil spills used in the analysis of costs ranges from $318 for a egincoming ashore from an Alaskan OCS platform to $21 per barrel for an OGS-relatedtanker spill in the lower 48 which remains at sea Table 3!.

Chen4sts oj H~pQ Casts

Four categories of non~ social costs were considered Table 6! As indiontedearlier, estimates af these coats were based on total oil and gae development in eachOCS area, the unit cost results from prior studies, and analyses provided by theinterior Department.

Aa Bxcssyta PasAMe Nethnd Casts

Development of offshore oil and gas requires onshore support and tran~rtfacilities which can lead to wetlan.ds losses. Dredging of pipeline or navigation amuLiecan Mock or channeli2e water flows, thereby altering water circulation pattera«iThis ten result in changes in water tables, tidaL flows, and salinity levels, all ofwhich can be detrimental to wetland habitats. Construction activity can Lead to soilcompaction and subetsiuent lose in water holding capacity of the wetland's soiLthese sails are not reetcsed to preconstruction conditions, long-tenn changes ia. waterquality, gnmndwater levels, and vegetation can result. OCS oil and gas-relatedactivities have been cited ae one of the contributing factors to salinity changes and.lac of v~umds. most notably in Louisiana, although the available results do notindicate the ahare of amhuML alterations attributable to OCS oil and gss operationss vs.oil and gaa operations in stare waters and other activities Olds, f9841

Wetlands are recognized ss important nurseries and food production areas formany spache of finfish, shellfish, and waterfowL Wetlands work as buffers forflood waters and can reduce levels of eroion and subsequent eeiimeatatina. Also.wetlands provide aesthetic benefits through provision of open space and may Playimportant rules in purifying waters by remm~g ezcee nutrients and reoxygeaatiogwater. The cmcmtialiy irreversible nature of damages resulting from wetland laeresand the relatively increasing value of these natural enw~nments compazeti tomanufactured goods! bss been recognised in the economics literature 85c,Shabtnan and llerteleon. 1979!,

Sack@ Costs 147

Table 3

Summary of Per Barrel Oil Spill Control and Cleanup Coats Used inAnalysis of OCS Planning Areas

Gest per BarrelAlaskan OCS

�986!

Cost per BarrelLower 48

�986!

Preluction Platform

Hits shore

Relnains at ma

3219 b1OO c

$318145

PipelineHits shore

Remains at sea 61d313

89

TankerHits shore

Remulins at sea 21 e322

31

Unit cleanu.p and contxol cost3 for the Maskan OCS axe aatumed to be 45percent greater than indicated costs for lower 48 OCS spills, based on F. W.Dodge labor and materials construction cost index for Anchorage 0 A.McMahon, 1984 Dodge Gunite to PuMc W'ops and marvy ConstructkvaCosts, 1983, p. XIO.Average of the ctsrt of the xelevant spiLls in Table 2.Estimate based on average per barrel well contxol costs for two productionspills reported in Table 2 $79! plus the per barrel at~ control andcleanup costs for the ARGO MERCHANT $21!.Average of platform and tanker costs.

4 ARGO MERC1-GAG' spiU.

While it is easy to enumexate benefits provided, quantification of econoxnicdaxnsles from wetland losses, particularly pxeservation value, is extremely difficultbccauxn the flows of cervices provided by thee reources sxe not directly measurablethxough the marltet. Psst soshes have employed the "life support" measaxe ofGcsselink ct aI. �974!, largely because alternative mcasuxes which capture thediversity of benefits from wetlands were unavailable. The life support approachestimates total primary energy production within the wetland of interest andmlLltlpiies this IGORruxe of energy by a unit value dctelmined by dividing GxoRRNational product by the National Energy Consumption index. However, this lifesupport measure of value has been severely criticized ss having no meaningful

p to st ~ ~~ ~ ~m W~, 1974; Sh b and B m 1978;Sbabxnan and Bertclsm, 1979!. ~ life support methxfalogy of Gossetinlt st aL mayvastly overstate wetland values.

Deslate severe empirical problems, several studmc have sought to estimate theeconomic contribution of wethmds to particular fisheries Batie and Wilson, 1979;Lynne st al�1981!, as weil as the overall cconoxnic returns to commercial fisheries inseveral estuary areas Tihansky and ~ 1976! The value of wetlands for%iMlife tnaxxagemcnt, flood contxol, and amenity benefits have been estimated Guptaand Poster, 1975!. Also, analysis has been used to isolate the effect of the amenity

148 The US. OCS OQ and Gas Leasing Program

qualities of salt ponds on property values Edwards and Anderson, 1984! Fmallestimates are available for the value of a recreation fishing day e.g Norton, Smithand Strand, 1983!

Attempts to estimate the possible economic damages from wetlands changesresulting from the expansion of OCS oil and gas operations in a planning area raustre4te the anticipated increase in exploration. development, productiontransportation to �! investment in pipelines and onshore support facilities, �! acresof wetlands destroyed, and �! economic changeL Analysis of this issue iscompUcated because the investment in pipelines and other facilities needed to support

depends on the rate of utilization of existing facilities and. ona host of highly area-specific siting issues which can be substantially influenced byapplicable state and federal rules and permitting requirements

Given these considerations, the wetlands acreage losses forestimated using the best judgment of experts within Department of the lnternrares with negligible or zero estitnated resources, zero acreage lassies are auanned-other areas acreage loses were allocated over time, assuming constantdamaged per year, starting from the lease date and culminating at the year Of peakproduction M addition. camion is assumed to cause wetland losses to spread each yearat S percent until peak production is reached.

The value per acre of wetlands is constructed by summing the estimated value ofbenefits for each region using the economic information described above-

The aesthetic and flood control benefits are taken from Gupta snd Faster �975!.ply a capitalized value per acre of 311+43 in 1986 dollars! at an I

percent rate of interest.WildMe values per acre of wetland are estimated using area specific information

on the range of per acre prices or ssscsesti values made by the U~ Fish and Wildlifein acquiring wetlands acreage in each area. These per acre value ranges are

given in Table * This study employee the rnid-point of the range of values for eachregMm outside of Alaska as an estimate of wildlife values. Within Alaska. wherethese figures are unavailable ml wildlife habitat is abundant, the lowest non-zerofigure of $50 per acre is used.

The value of wetlands as nurseries for recreational and cornmercuil fuiheries ~calculated as followL Availability of wetlands is assumed to be a limiting factor forall fiaheriss. The proportion of fisheries lanes is asnimed to be equalproportion of wetlands dastroyeL Fisheriee losses are then calculated by multiplyingthe total value of the fishery by the proportion of total available wetland which isdestroyed by onshore development. For example, the proportion of wetlands lost inthe western Gulf of Mexhm is calculated by dividing wetland acreage leases �30acres. including ezoaha3 by total estuarine wetlands in the region �.715 millionacres! to calculate the proportion of wetlands which are destroyed. ~ total valueof a aommeraal fishery s catch is then multiplied by this figure to determine the lcsasin comrnercM fisherieL Far tacreaUonal fisherics, the total number of recrea~fishing days is obtained for each area U8. Dept. of Commerce, National MarineFisheries Service, 1984, p. %!. This is multiplied by an estimate of the rxisrguM,lvalue of a recreational fishing trip for striped bass from Norton, Smith atad Strand.�963!. Norton sr oL give values ranging to a maximum of $12S3 for recreatirmslfishing days in various areas on the Atlantic coast. For this section, the highssitmarginal value per day is used. Adjusted to 1986 diAJars, this value is $15.03 perday fished. ln the western Gulf, the annual vat.ue of an acre of wetlands forrecreational fishing is $15A�fday fished times 7372 million days fished divided by'total acres of wetlands �.715 molioa! equals $6441. At an 8 percent interest rate.this implies a capitalised value af $807. per acre. The value per acre for commercialfisheries i ~ total val.ue of catch in 1986 doQars @23.7 million! divided by 1.715

goctd Costs 149

Table 4

Wildlife Valuation Dollars Fer Acre

UX Fish and Wildlife Service Wildlife ValueRange per acre

The U. S. Fish and Wildlife Service did not provide ranges of values forAlaaltan planning area+ The range 50-50 and wildlife value per acre 50were Resumed

million total acrcagc equals $130. At an 8 peroent interest rate, this implies acapitalized value of $1630. Hence, the value of an acre of wetlands in the wertcrnGulf as a nursery ground for comtncrcial and recreational fishing is $2438.

The total capitalized value of an acre of wetland in the m~ Gulf is the sumof the aesthetic, wildlife, and flood control benefits $11,718! plus the value asnursery grounds for commercial and recreational fisheriea $2438!, which equals$14,l.58 per acre. Determining acreage damaged as described above, the total presentvalue in 1986 dollars! of wetland losses in the western Gulf is $223 miUion.

'Qcse measures are expected to overstate fisheries losses since many ~ suchas tuna and sea scallops, are not highly dependent upon wctlanda 1n addition,wetlands availability may not bc a linuting factor even for those species which dodepend upon wetlands. For example, Batie and Wilson �979! aod Lyme a aL�981! both conclude that thc lass of a amaU amotsnt of wetlands would not likelyhave much of an effect on particular wetlan~pendent fish populations. Fmally,thee figures represent gross value of recreational and oosnnten~ fishing frvm whichotsss of fishing aimed be deducted to calculate net values,

Using the methodology described above, acres of wetlands lost, value per acre- ofwetland and total cotsmnic losses were estimated for each region Table 5!. Asshown in the table, acres lost range from near zero to about 1013 acreL The netpresent value of losses range across regions from near zero to about $5.84 million.

Western Gulf of MexicoCentral Gulf of MexicoSouthern CaliforniaSouth Atlantic

Navarin Basin~

Eastern Gulf of MexicoBeaufort Sea~Chukchi Seas

Central California

Northern CaUforniaSt George Basin~Mid-Atlantic

North Atlantic

Oregon-WashingtonNorth Aleutians

Gulf of Abets*

Norton Basin'

lMtnk~

Hope Basin~Shumagin~

450 � 500

50 - 250

300 - 1000

50 � 100

50 - 50

0- 50

50 � 50

50- 50

300 - 1000

300 � 1000

50- 50

500 � 2000

600 � 1500

300 - 100050 - 50

50 � 50

50- 50

50-50

50 - 50

50 - 50

475

150

650

75

50

25

5050

650

5050

1250

1050650

505050

50

50

150 The US. OCS CC and Gas Leasing Program

Table 5

Estimated Wetland 4ztaea for Each OCS Planning AreaResulting frona the Production of All Leasable

Resources Unleased as of July 31, 1986.

Present ValueAcres Lost Value Per Acre $! Q4iillort

8harasaarp oj V'ah Coat 8sckeeCas

For convenience. the unit crsrt estimates derived in the preceding sections art:aunmmized below in TaMe 6. Thee results, all stated in 1986 dollars, provide thecentral eolx&tnlc building Modts f Qr the estimation of the coats Qf ]clnnnlrplanting areaL

introdtaction Using the approach outlined in the preceding sections, eartimatcmhave been made of the social costs from producing all of the leasable hydracstrbcexaamrcea unleased as of July 3l, 1986 Only the aggregated oil spill and aoa-spiLlcott results for each area are presented here. lt is emphasized that the resul~described here are from the draft Appendix 0 report and are subject to revhiaa as,

Western Gulf of MexicoCentral Gulf of MexicoSouthern CahforniaSeath AtlanticNavarin Bain

Eastern Gulf of MexicoBeaufort SeaChukchi SeaCentral CaliforniaNorthern GLIlforniaSt. George BainMid-Atlantic

North Atlantic

Oregon-WashingtonNorth AleutianGulf of AlaskaNorton BasinY~iak

Hope BaainShurnaipnSt. Matthew-HaQAleutian BasinBowers BainAleutian Are

408

1013

4184

112

216173

122

4141

1123430

180 0 0 0 0 0 0 0 0 0

14157

13767

30490

12550

11480

11850

11295

11294

20167

54563116641414336738

17031116721155111296

11432

11296

11410

223

5.84

057084

OM0.910.96

04?

OA4

1.19047026041

0.16ODOO~

0~

0.00

OX@

0.00OZAOQO

0330

ODO

Soehxf Costs I5 1

Table 6

SumrnarJJ of Unit Cast Estimates Used in Analysisof Casts of Propased OCS Five-Year Leasing Pragxam

Cast per indicated unit $1986!

Oil Spill Castsl. Cleanup and control costs

a. Production platform i! Oil comes ashore ii! Oil remains at sea

b. Pipeline i! Oil comes ashore ii! Oil rexnains at sea

c. Tanker

i! Oil comes ashore ii! OLL renuxins at sea

2. Canxmercial fishing i! Direct LAxases ii! Seacsxdary multiplier!

effects

3. Tourism industry k.recreation lasxes

* Ecological Casts5, Subsistence losses

$219-318 per bbl ashore$100-145 per bbl spilled

$216-313 per bbl ashore$61- 89 per bbl spilled

$222-322 per bbl ashore$21- 31 per bbl spilled

$7-123 per bbl spilled$87-266 per $100 lass incoxnmercxal fxahing inaotneS 40-120 per Pl spilledreadxing shore$406-311 per bbl spilled$26 per bbl spilIed forAhxskan ~$32- 34 per bbl spilled o6. Value of lost oil

7. Other castsa. iagaL-administrative cartsb. Research ctaxts

-$17' per bbl spilled$8 per bbl spilled forspills > 1,000 bMs

-$443 per bM spilledreaching shore for"lower 48"

-$5 per bbl spilledrea9dag shore for Alaska

NanOil Spill Casts1. Coxnnuecial f~

a. Area preemption $18 xnillion per BBOEproduced$1.1 raillson per BHOEproduced.

- SAN2-O63 per bblh

-QXQ-D24 per MCFb

$11!94-54~3 per acrelost

b See teM for a discusxlon of the derivation of the individual unit cost estimates.The indicated range reflects the range of unit casts estimates used for differentOCS plannixxg axesa.These ate 1986 hxse prxces whxch axe asmxxned to incream by 2 percent ux realterms annually.

152 The U8. OCS OQ and Gas LeWng Progrcon

resource estimates change, uew data becoxne available or as analytical refinernenta andadjueumnts are carried out during the review procesL

Social Coat I.esulta for Each OCS Area Table 7 presents a summary of the~ stixnated social oosts for each OCS area as a result of developing, producing andtranspc~ng all of the estimated leasable oil and gas resources unleased as of July 31,1986 Using the western Gulf of Mexico as an example, the results in the ableshould be interpreted as described below.

Table 7

Suxnrnary of the Present Discounted Value of SocIal CostsFor Each ~ Planning Area millions of 1986 dollars!

�! �&3344!�! {2! �WIM2! ~ Tom Net

Grcxsx Cost Avoided Kha~yvat-Oil Spill Non Spill Social From Reduced ed Social

Costs Costs Costa Imports Costa

112L27.8619597.39IX29

25.8113AG

X626.99

11.74

6490.81

257

22.9014A7

2.19

L29

3754

20.08

3A3

955

14445.61

IM127

Social costs avoided to the nation as a w'hole from reduced needs for intyarted czi1.saunung reduced imports and ameiated oU spills! are distributed acrtxxs ~planning areas in the mme propor1botL ss in xeoent years see Table HL~5 1,ApIendix G, Draft prepared Five-Year Oil and Gas Leasing Prograxxt!.

Western Gulf

of Meaioo

Central Gulfof Mexico

Southern CaliforniaSouth AtlanticNavarin Basin

Eastern Gulfof Mexico

Beaufort SeaChukchi SeaCentral California

Northern CaliforniaSt. Oeoxge BasinMid-AtianticNorth Atlantic

Oregon-WashingtonNorth AleutianGulf of Alaska

Norton BasinK odistHope BasbaShumaginSt. Matthew BaxanAleutian Ssaln

Bowers BasinAleutian Axe

3863.903A5

3412511.1905202.9

027

0.14

N39

OA39OAN

OAN0.00

OAN

MN

OANOAN

1361.37

0.97

0.93

147084

0.46

040024

0.02

OD2

OA32

0.00

0.00

0/30

OAN

OANOA30OAN

5.22

528

4A24544.18

203

0.980.89

051

0.160.110.12OA300.00

OA30

OANOANOANOAN

1.302.14

1.79

1.99128

087

026

0.10

0.10

OA360.03

084

OA30

OA30

0.00

OAN

0.00

0.00

OAN

3.92313

Xk3%55279i~

0730.79641

0.10M!8

QD7

OA30

OAX!OA30OA30

OA30OA30

OX30

The value of thc oil spill costs $12.29 miHioa3 plus the Mn~ spill casts p~xnillion! for the western Gulf of Mexico is $1949 xniilion in 1986 dtallaza, Thisfigure represents the total, quantifiable social cc»ts resulting from the production andtransportation of all of thc area's xesourcea, However, the social et' estimate of$19h9 Ntillion does not yct include xeccgnition of the social casts avoided beoaua: oilfrom tbs western Gulf of Mexico will back out imports, thereby reducing foreigntanker spills. Hence, the $1959 minion social astt figttxe at this paint xepresentsgross" social carta

The social costs avoided when western Gulf of Mexico oiI backs out imports is$734 milan Column 4 in Table 7!. These social met savings are distributed atnongthe diffetetat OCS areas based on thc xecent geographical pattern of crude oil imports xet indicated herc!. After thc social costs avoided axe subtxttcted. from gross socialcaata. wc anive at nct social costs of $11.82 million for the western Gulf of Mexico Gxluxost 5!. In suxn:mary, the $11.82 million is estimated cast of developing all ofthe western Gulf of Mexico leasable oil and gas resources unieiased as of July 31,19& tl the Nation as a whole.

Estimated social casts range from $25.8 million for the central Gulf of Mexico toIeas than SL million. for thc north and mid-Atlantic axeas, for Oxelen and Watthingtonand for several Aisakan OCS areaL Generally speaking, there is a dixect asrociationbetween an area'a total social cost and the total lcasablc hydrocarbon xeNturces~ stirnated to be contained in the area.

Total hydrocarbon xesouxces alone, however, do xtot determine total social costs.The ail~ resource crxnposition, thc transportation mode, the estimated chance thatspills which occur will xeach shore, together with the characteristics of an area'smarine and ~ resources and environmental productivity and sensitivity, alsoinfiucxscc total social costa For example, the central Gulf of Mexico has roaatrceswhich are 9 pexcent lower but social costa which axe moxc than douhle, thcctmeagtottdlng estimates for the western Gulf of Mexico. One ixnportant reason forthe large difference in social costw estixnates for the taro areas is ~t the central Gulfaf Mexico is expected to axntain considerably xnoxe oil than the western Guif, hence,estimated apilixtge is greater for the former area. Other rcttnms for the difference inthe estatnated total social costs between the two axeas include the fact that the centralGulf has more valuable commercial fisherics and a higher environmental productivityand aestsitivity ranking and is potentially more susceptible to w~Lnd alteration thanthe western Gttif of Mexico

The net effect of aH of the myriad of factors influencing social costs can beessxoined by a~exing, the social coats pcr unit of proiuction � here measured aa thesocial astts per biUion barrels of oil equivalent BBON This information is presentedfor each OCS axea in Table 8.

Social txxrt per BBOE xange fxom $1X50 milan for the Navazin to fL23 xniHionfor the wtsrtcxxt Gulf of hIexico and is not directly corxeJated with an area's totalleasable xesouxoeL The high social costs pcr BBOR far the Navaxin Resin ia explainedby the trantryortation scenario set out for this QGS area. Oil produced in the axea ishoned 'to be shxpped first by pipeline to a central colloctkolL Iroint axtd. thexLtxansportxrd down the west coast by tanya Hence, oil produced in this area issubject te a double spill risk for pipelines and for ~exs!. This double spiU riskexplains why the estimated number of large spills �.87! ia ao high relative to otherOCS areas, despite thc mcdest axnount of resources estimatoi tran be leasable in this area ec Table 1!.

As noted, the crit per MOB is determined by a number of factora Oneimportant factor ia the estixnated ~ertation mode for oiL Since tankers xtsult inconsiderably more estimated oil spillage �0941 barxcht per 880! than pig~as

154 The US. OCS OQ artcc Gas Leasing Program

Table 8

Total And per BBOE Net Social Costs

Total Net

Social CostsNet CostsPer BBOp

Thee numbers appear to be anomalous and aze being investigated. It isunlikely that a recalculation w'ould affect the relative ranking of thephLnning area's total axial ctsrtL

�1.499 per BBO!. ~ mymg o ~zs ~ ~ p pel. ~ to tn ~~ oa. ~ bexpected to have higher social costs per BBO, other things being the same

With respect to the cotnptssition of social coats, an important conclusion ia that Kcosts exceed non-oil spill costs by a wide margin for most OCS areas. Thou!h

amaO relative to total social costs, potential wetland losses and/or aiz cluality lotuscould occur in several OCS areas, and could be a relatively substantial part of socialant for the central and western Gulf af Mexico and southern CaliforniaIt is important to swan, however, that by regulatozy au.thority the MMS Iimiejnimians from OCS operations or employs offsets! to avoid slgnifionshore ambient aiz quality. Furtbmnore, states through their permitting authon thave considerable control over wetland use. Far these zeasrons, nonwil spillbe overstated.

Social Cart Sesssitivity Analysis A sensitivity analysis was used todetermine the magnitude of area social cost changes, if specificpresumed to be even higher than the conservative costs described in preceding see Table 6!. W'ethrnda, eccdagjcai and commercial fishing industry Inases .<~selected fof the sensitivity analysnr because these cents are potentially qusntltatlvsIXsignificant and inherently dif f jcult to ~tn. The sensitivity analysNonuidered ranged from one aet of results in which each of the individual coats ~

Western Gulf of Mexico

Central Gulf of MexicoSouthern California

South Atlantic

Navarin Basin

Eastcra Gulf of MexicoBeaufort Sea

Chukchi Sea

Central CaliforniaNorthern CaliforniaSt. George BasinMid-AtlanticNorth Atlantic

Oregon-%'ashingtonNorth AleutianGulf of ~Norton BainKodak

Hoye BainShusnagin

11.82

25,81

1340

2.62

6.99

3.92

3.13

2.63

255

2.79

1.66

0.73

0.790.77

0.100.08

0.07

0.00

0.00

223533

11.&8

442

12~

8.647.70

M5743&33942

4.84

7.72

13.6P

539422

5M

0.00

OAN

Sodas Casts J55

~nt greater than the unit cost estimates presented in Table 6 to~ extremeallow which ail pf the three unit casts wexe assumed to be 50 percentpeater t ~ indicated in Table 6. ln general, the sensitivity analysis

~ 30 ~rcent increase in social costs. This is because �! only al ~ ~ is ~umed to increase and �! when individual oil spiQ ccatssubs t -~ ~ s~g~ from backing out imported oil also increase, therebyjoc~ ~ t inc~ in total social

~y a smail change in the rankrng of OCS areas in texxns Of their~tal sp@Q costa.

R+ AND CONCLUDING CX!MhCE2'ITS

costs reviewed in this paper provide a perspective onthat could result from the exploration,

and transportation of ail of the leasable oil and natural gLsas pf Ju I y 3 I 1 986 The gggul 4 deecnbsf are thcee which aPP~ar

~ 1985 ~t propelled Five-Year Program. These results are subJect tctes px txanpmtatlon ~0s or

additional inf oxxnation pr comments receivedsocial costs for each OCS area provide an

bl k fpz the mtimate of net social value development benef'ts~! descrsbed in a later chapter sn tbss volume.

R Wilson Economic Values Attributable to Virginiar production," 14sse~> Khvuaon

pu.blscation No VPI~77~ BState Univexsity, June 1979.

Burrows, P�Rpwley ~ C�and Owne, D. rorrey Canyon.- A Case $tudy in AccidentalPollution," SaocaLsh Jasntal of PoQtkd Bamosay, VpL XXI, No, 3, November1974, pp. 237-258.

Cvrruscrawedth of Psserto Rke a SS. Zoe Calooctrced, US. Court of A~ FirstQrcuit, No. 78-1543, 79-1468, 12 August 1980.

Esi~ S. F and Anderson, G. D. "Land UsL Conflicts in the Coastal Zone: AnApproach for the Analysis of the Opportunity Ccats of protecting CoastalRoL'mrna," Jssrnal of the Nprthcastern Agr4~ssral Baxao&es <~V, VoL13, No. 1 April 1984!: 7M1.

J. G Odosn, E P�pope, R. M Thc Valses cf cise Tea/ JlfarA, PubLLSU~74O3, Center fpr Wetland Resources, Louisiana State University. BatonIouge. M May 1974.

unast, T. A- R. C Anderson; G. M. Brown; L Cougar; N. Meade and P- $oxensenthe Coats af Oil Splllsc Learns fzern the AMOCD CADIZ Incident,"

3f~ Pmaarce Bcestomks in pxess!.

Oil end Gas Leasing Program

and Amstutz, D. E. "A Reexamination of Occurrence Bates foxOil Spills on tbe UA Outer Continental Shelf," f983 CC Sjsl

Cost jcrence

Lynne <- D~ Conroy, P�and F. Prohaska. "Economic Valuation of Marsh Aressa far>~a Production prtsxsaea." Joattvud o f Znvfronn~al Fomxstlcskfanaynnettt, VoL 8, No. 2, June 198l. '175-186.

McMabon L A- l984 Dodge Gukte to Pubic Works and Heavy Constr'~ ~-Annual Edition No 16, p. XE Princeton, N3 McGraw-llill lnr l983

and Sorensen, PZ. ~e Economic Cost of the Santa Barbara Oil S~paper presented at the Santa Barbara Oil Symposium, Santa Barbara, CaHfataia,December 1970.

Norton V~ Smith. T and Strand, L Strlpcrs: The Economic Value of the AtlcstLtge'Coest Ctslpnsv'ckrl atsd Recreational Steed Bass Elshcrfes, Publicatiotx +UM~TS-83-12. College Park, Md University of Maryland, 1983.

Orgnnixation for Bxmomic Cooperation and Development. "Data on oil spiU cleeoauPcosts." Paris, 13 August 1980. Mimeographed.!

Sbabman L end Batie, S. S. "Economic Value of Natural Coartai Wetlands A.Critblue." Cottstol Zone Management J~ VoL 4, No. 3: 231-247-

and Bertebam. M. K. The Use of Development Value Estixnatee forGaastal .etbtnda" Lend Socmcnaks, Vol 55, No, 2 {May 19793: 213-222-

Sotensen. P. E. Summary of Damages to the Commonwealth of Puerto Rico Causedby tbe labia Sucia Oil Spill of March 1&, 1973." Expert ~tnese testixsxanvpresented to tbe Khstrict Court in 1977. Mimeographed.!

y, D- >~ and Meade, N. F. "Economic Contribution of Ccsnnmxcial Fisheyes xsamValuing UX ~arieL" Goarral Zorur Management Jcerrud', Vol 2, No. 4. 1976.

US. Degertment of Cotnmetee. NOAA. Title IV of the Aeter Ccsuktestt& X@eZgLands Act Anaesdresnts of l978 Atttutsl Report. Calendar Yaxr 198M

U8. Department of CoaLmereci NOAA. Title IV of the Oarter CoratlnentaE ~gLends Act Astendtesnts o f l978 Annual Report, Septcmbcr l8,Juawary jl, l982

US. Department of Comcnerce, NOAA. Assesslag the Soctal Cost oj CXl S~-The kNOC9 CAD1Z Cate Stay, Washington, M August. 1983

UK Department of Ccenmeree, NOAA Fisheries of the Untied States 1983.Current Fishery Statmstice Na 8320. Washington, D.C�April 1984.

U5. Department of Jeterkxr. Sutnau of Land MamLgement. lxtoc 7 CC S~Eoceaaedc lmpect Stash, BxeouHvs Stonmary, 2 vole. Springfield. V'aNational Technical Information Service, April 1982.

Soetaf Costs 157

US. Department of Interior. Minerals Management Service. Foal PegkmalEnvlrottmerLtal Impact Statement, Gul f of Mexko, VoL J, Springfield, Va:National Technical Information Service, January 1983.

5hz.inc Prcxiuctivity and Ew~mmental Semitivity

PIFI' DFWFPF

Chh fOf jshore Envb omaental Assessxxtent LMvbkmaRbaerab Nanagexxtextt ScreeWash4gtora, DG.

INTRODU~ON

Section l8 aX2XG! of the Outer Continental Shelf OCS! %ands Act, as axnended,requires that the Secretary of the Interior consider the relative marine productivityand environmental motivity of the various oil-and~bearing p>biographic regionsof the OCS in determining the timing and location of oil axtd gas activities. Analysesaf relative xnaxine productivity and environxnental mnsitivity were conducted in thepmcese of developing the 1982 oil and gas prcgram of Secretary Watt. Those analysesclearly demonstrated the complexity of collecting, interpreting. and analyzingxientific information to satisfy the xequirexnenta of section 18 a!�XG!. In spite ofthe difficulties described in the 1982 analysis, the approach used by the L'lepartsnentaf the Interior DOI! waa upheld aa xeaaonable by the U5. ~ of Appeab for theDistrict of Columbia Circuit on July 5, 1983

Those xnexnbexs af the Minerals Management Service MMS! staff who mereinvolved in the 1985 analyses of relative marine productivity and environmentalmnsitivity used the 1982 analyses as a prototype. We estabHshed a goal of ixnprovingthe analysis by �! ixnproving the data base for xnaking comparisons among the OCSregions. and �! developing an analytical procedure that could be more easilyunderstood than that used in 1982.

In order to improve the data base, MMS contracted the University of MarylandEastern Shoxe UMES! in 1983 to a!Hect, analyze. and archive environmentalinfcrxnation oa all OCS planning arear' The MMS axdxed the UMES to ensure that thefinal data used in the comparative analysis required by section 18 aX2XG! werecomparable in quality among the OCS planning areas. This waa not an easy tank.The VMBS experienced difficulties resulting not only fram the cotnplexity afavailable information but also the abundance af data in arne axess and the absent': afdata in others. As a result of thee difficulties, the UMES was not able to meetseveral deuiiines established by the MMS. To cempensate for this, MMS staff engagedin data marches and analyseL The UMES waa able, thxough considerable effort, toprovide the MMS arith drafts of several sections of data aMnpilatioxt. That

259

260 The US, OCS M and Gas Leasing Program

ormation wes used in the Draft Propose Program which was released in Mare~1985 and provided an outline for data analyses by thc MMS staff. Thc UMES stud3'

ed to provide information on one-balf of the equation to deterrnirteenvironmental sensitivity, the distribution and abundance of environmental resostrcaLThe ~ half of the equation, the ef facts of oil on these resources, was surnnxazmedby the MMS staff. The surnnutries prepared by the MMS staff appeared in the DraftProposed program as Appendix I-X. The information provided in these summarios ssthc same as that in the 198' publication of thc National Academ.y of Sciences OQ >tIss Sta: Impacts, Fates and Effects.

The second goal of our effort was to improve the analytical procedure irtmanner which increased its comprehensibility. Although we were interested

the technical quality of the analysis, we believed that it was equally. ifnot tnore, important so have a procedure that could be discussed and understood bymost reviewers. As wc developed the analysis, this aspect berne increasing>3'

portant to ua Since the publication of thc 1982 analysis, thc DOI has receivedadvice and suyeeticem on improving its analysis of environmental sensitivi&-Concepta for improving the analysis were discussed with the OCS Advisory BoardPolicy Committee October 1984! and Scientific Committee April 198S! TIxeanalysis in the Draft Proposed Program incorporates much of the advice aod guidancereceived. Sotne of the advice and suggestions werc more appropriate to ~environmental analyses of the Five-Year Program which follow the present analysss-Many of these suggestions wiQ bc considered during the preparationenvirottxnental impact statement H$! on the proposed program and in sutsnqnentsalevsIecif ic KSa.

In the present analysis of rekative marine productivity, we chose to follow thelead of tbe 1982 analysis and to address this topic through its strictest ecologicaldefinition: that is, the production of plant material through phottstynthemtL lnaddition, we chose to focus ou the primary production of marine phytop~tonbecause of the significance of their productivity through their numbers axLddistributionL

Measurements of phytoplaakton productivity have been made in almost all af theplanning areas of the OCK The methods for measuring phytoplankton productivityare rehatively suuu9axd and results are normally exprestcd in terros of the arntmat ofcarbon fixed during photosynthesis pcr unit area of ocean surface during a fixed:period of time. In the present analysis we selected one year as our fixed period oftime- As a result, our data are ex~ as yama of carbon fixed pcr tsiuare meterper year gC/mrfyr!. By selecting the period of one year for reporting pchmLryproductivity, we theoretically incorpsrate short persode of extremely Iow ar 16ghproductivity and place them in the appropriate perspective in terms ofcontribution to the annual cycle. This may sound relatively straightfarunaxd. lmt asboth MMS and the UMES concluded, it is far fmn simpic. This is espe~y truewhere primary prociuetivity is highly variable by season and rncasutetneata areavailable for only one seasons.

As L nsatlt of the vRKk of the ULKS and arne additional literature researchthc MMS staff. the mal>inc phytoplankton productivity data used in 1982 ~modified «s shown in Table l. This table is being revised for the Prop~i Pa>Mam.Productivity data reviewed and analyxed by thc UMES I' or many of the Maaltstnplanning areas are being added. Referettces are being changed to the primLry aossrce.The table will be footnoted to indicate that the UMES report compiled and analyzethese data

Meric Producrlvky aruf Ense rsusenral Serasfrlvtty 16 I

Table 1

Marine Phytoplankton productivity by Planning Area.Expressed as Gratns of Carbon Fixed pcr Stiuarc Meter per Year

Range of ValuesUsed in the 1982

Analysis More Recent Results gC/zn'/yr!' gC/ma/yr! Reference

VmS Qn ~!t~ 0 ~!

0 ~!UMES 0l.~ 0 ~!bMES in Presa!UMES in Prc !FWS �981!FWS �981!MMS �938b!

230470260-370

20-360

10-110

1&22027c

18&360150-300

150-300

3%360

20C~O

100-200

50-200

50-100

50-100

50-100

20C~6200-400

2l30-4%

North AtLanticMd-Athntic

South Atlantic

Eastern Gulf of MexicoCentral Gulf of Mezioo

Western &df of Mexico

Southern CaliforniaCentral California

Northern California

Washington oregonGulf of MmQta

Cook inlet

Kodiak

Shurnagin.Aleutian Arc

North Aleutian BasinSt. George BasinBowers Basin

Aleuuan Basin

St. Matthew-Hall

Navarln Basin

Norton Basin

Hope BasinQmirchi Sea

Beaufort Sea

2Q!-400

20C4KO

29~30

293-400

NOAA/OCKAP �984b!NOAA/~Z.AP �9$4a!400-7300

400-7300

2C6-430

50-20050-100

<50c50

<50

18-28 NOAA/&WEAP �97$!2-14 NOAA/OCSEM �978!

Data from Smith and Kaiber �974!e Reported Annual Mean

One of the aust controversial results of our first analysis was the lowering ofthe primary productivitics reported for thc St. George and North Aleutian Basins ofAlaska. The 1982 analysis placed thee two basins in a class by tbeuasclvea as aresult of thc data provided by Smith and Kalber �974! showing a productivity rateof 7300 gCfrna/yr. Based upon mare recent information, we understand that suchrates may occur along thc sea-ice edge for very limited periods of time. However,they arc not tepee;ntative of the annual average primary pmduction in these basins.Based upon more current information, we lowered the average annual productiviticsfor these two areas, but kept them in the high productivity group. Based c.pon ocr

our ranlting of the pbtnning areas by relative marine phytoplankton productivity TaMe 2!.

162 The VS. OCS OQ and Gas Reason,g Program

Table 2

ReLative Phytoplankton Productivity of the OCS planning AreasExposed as Gratns of Carbon per Square Meter per Year

High Productivity Moderate Productivity Low Productivity�00 to 500 gC/mr/yr! �0 to 200 gC/mr/yr! Less than 50 gC/'I'/~!

Hope BasinChukchi SeaBeaufort Sea

OTHKII hQMVUREI QF MARINE PRODUCTP~

The MMS has received mvcral comments from reviewers of the Draft PrCyc~dprogram objecting to thc ua, of the literal definition of the term "productivity." ~MMS has also been advised by some members of the OCS Advisory Board ScientificCornrnittee that the literal definition is appropriate. Critics of the Literal defini~%'ould illts to imclude other biological components into this analymc fiab. hasdcmarine mammals, or benthie communitiea. Thee coraponents are censnmcrs, srotproducers. As such, they are qualitative, at best, measures of productivity.

In order to prepare an analyis of relative productivity among phag axensusing these nreassrres, MMS mould need equivalent data from most of the areas.some instarees, such as fish, birds, and marine mammals, presently availrableinformation appr this condition. In others, such as benthic communitlcs, ~have mattered inforrrLation in different units of measurement and of diff~quality, Even arith some of onr best data, assumptions are incorporated into theanalysis of marine productivity. Many of our critics appear to have overloolrcd %batpoint. We shall discuss this point further.

KNl~ONMZNTAI. SKHSHIVXTV

ThC KSKCpt Of CnvlrOKUnsntal ensitivity is even more cOmplcx than tbe cnracmptof amrinc prod~vity. 'He 1982 analysis clearly demonstrated this temyiexity.The 19&2 analysis of rcLativc cnvirtrnnrcntal sensitivity ~ based, in Iarme yaxt anan evaluation of the sensitivity of various coastal and marine habitat» and biotsa tospic crude oiL Lhniting the analysis to spilled crude oil provided. the fallma~gadvantages:

1. Different OCS phLnning areas mere evaluated against aoccnmon factor. in this case, crude oi4

North AtlanticMid-AtLantic

North Aleutian Basin

St. George BsrL'nSouthern California

Central California

Northern California

Washington arsd OregonGulf of AlaskaCook InletKcdiak

Shuma.ginSt. Matthev-Eall

South Athntic

Navarin Basin

Eastern Gulf of Mexico

Central Gulf of Mexico

Western Gulf of Mexico

Norton Basjn

Bowers Basin

Aleutian Basin

Aleutian Arc

Marine Productivity and Envfronnsentaf SesAdvixy 163

? Effects fram "overlapping" factors wexe avoided; and

3 Oil spiUs, although rare, cause the most visible, and easilymeasurable effects of OCS activities.

The present analysis of environxnental sensitivity also concentrates on the effectsof spilled oiL Some other factors were evaluated but were not used in the finalaoalysiL They include operational discharge noise; habitat alteration; and airer?UI8lons

%e defined enviroxUmeatal sensitivity in the following terxnL.

1. The severity of dlnage resulting from contact of spilled oilwith various coastal and marine habitat' and biota this wasdesignated as the persistence of oil in the 1982 analysts!; and

2. The time reciuixed for the habitat or population to recoverfrom the effects of contact with spilled oiL

llxe following assumptions were also included in the present analysis of xelativeenvixcIRmeILtal sexuntivl~

1. Spilled oil has not weathered significantly when it ccxntaetsthe habitat or population. ln some lixnited instances, whereweathexed oil may have significant effect. the weathered oilwas incorporated into the analysis; and

2. AQ of the biological populations in a planning area arecontacted by spilled oiL Migratory species, which may inhabitthe planning axea for only a short period of time, are aamxxxedto be present and contacted by spilled oiL

Two variables weze used to asass zelative envimnxnental sensitivity:

Nsxrikcsdan of the Resource - linear or anal extent of thehabitat or abundance of biota. This information was providedby the UMES and from MMS ElSs and other sources; and

Scnstt5vfty Coef f~ � based upon the definition above.'Ada information wss provided in Appexafix 1-2 of the DraftFxoposed Pxogxaxo.

ln the present axLalysis, relative envircsrmental sensitivity was calcu&ted forthree eoxnponents of each planning area: coastal habitats; marine habitat@, and xnazinebiota.

For each subcomponent the distribution of the resouxce and its ansitivity toapilhd aQ had to be aasssxecL An example of the method used to xnalce the caudationis provided in Table 3 These aaemrnents are as xelative as available informationwcNM. permit.

A condition of the analysis was that initially we would not provide greaterixxxpsxtance to one calnpanent over the othexs by the design af the ealculatioa. As aresult of this condition, the rmLxixnum possible scrubs for each of the thxee componentswere ecluaL ln this case that nuxnber was 22$ points per ccMnponent. 'Hxie nuxnberwas cierived fxoxn the theoretical xnxL'ximum score for biota bum of the products ofthe xelative abundaxKee times the sensitivity coefficients!. The ~ and marinehabits were analyzed using a unit" concept suggested by Dr. Don Breech of the

The US. OCS OQ caad Gas Lcczslng Program

Table 3

Relative Marine Productivity/EnvirorUncntal Sensitivity AnalysisOil Spills

Overall Total Score: 290

SensitivityCocf f icicnt

�! �!

Distribution

of Resource

�! �!

Miles

200

300

100

600

33 High 225 742.50 Mw 45 22517 Moderate 135 228'

100 119.7

Marhe HabitatsSubmerged VegetationSubmarine CanyonsCoral ReefsHami Bceorna

Shelf Break Zan@Mud/Sand Bottom

TOTAL

5.3 Moderate 13S0 Low 45082 High 2252k Low 4537 Low 4S

882 Low 45100

Biotaphytoplanktonfuvenile Fish/ShellfishAdult Fish/ShellfishMud/Sand Benthos

Coastal Birda

Marine Birds

Marine Turtles

Marine Mammals

&tralee

1&VhL

Linear or areal extent of habitar abundance of biotaPcmcntage of total amytal marine habitat in the planning area: abundance ofbiota in plajuung area in relatzrn to abundance in all other OCS planing axecLs.Rated as high 5, moderate 3, low-1, and none or neghgible4.Adjective describing mnaitivity in terms of the ecvcrity of impact from api1?edoil and reaavcry time ae Mgh, moderate or low.Numerical value amociatcd with the adjective under �! as high 225,nuxhra~l 35 or low~ for coastal and marine habitata, and high 5,moderate 3 or low~1 for bicsta. Thua, the mazimum paaaiblc total mere for eachecological cocnpooent ie 22$.Product of �! and �!.

�}�!

�!

�!

�!

Acresl200000

None

5000

&XC60

8500002030i39X

22&55000

HighHighModerate

LowModerate

HighNone

KighModerate

Low

HighModerate

Low

HighHighLow

HighHigh

1

5 3 1 5 5 15 5

7.1

02

0.0

1.1

1.6

39.649.7

525

91

I5

250

2515

120

Marbac Producttvfty and Znvb onmcnxal SnLrixfAty 165

OCi Advisory Board Scientific Committee. This concept involves calculating theImsitivity of an average unit of these habitats for each planning area. In effect, thisclimiuatcs the effect of total size and permits the comparison of planning areaspuxely ou sensitivity. Several reviewers of the Draft proposed Program objected tothsr concept.

As stated previously, the analysis of the environmental sensitivity of marinebiota xerluired arne assessment of the relative abundance of the various biotic groupsaaefg the OCS planning areas. The results of that assessment are generallyconaxvative. The estimated populations axe probably higher than the actualpopulations, but the relative xrrnjcings are probably accurate. Thc sensitivitycoefficients may also be conservative, but we believe that their relative values aregenemlly accurate.

The results of our calculations are displayed in Table 4. The results indicate thatthe nine most sensitive planning axeas are in Masks. The most sensitive plsnoixrgarea in the Lower 48 is the central Gulf of Mexico. The principaL deumnfurants ofeavixucmxentsL sensitivity werc the ~ habitata and marine biota We haddifficulties discriminating among the planning areas on the basis of ruarinc hsbitats.This results from a general LacJt of information about the extent of various marine

Table 4

Relative hhrine Productivity and KavironmcntalSensitivity of the OCS Planning Areas

St. Matthew-Hall

Norton Basin

i~

ShumaL~Gulf of AlaskaSt. George BasinAleutian AxcNorth Aleutian Basin

Cook InletCentral Gulf of Mexiqo

North Atlantic

Central California

Northern California

Hope BasinSouthern California

Chukchi SeaSouth Atlantic

Eastern Gulf nf Mexico

Waabington43xegonWestern Gulf of Mexico

h6d-Atlantic

Beaufort SeaNavaxin BasinAleutian BasinSmokers Basin

345

307

303

295

283278273264

255253

245

244

234

231

222

212

206204

203196

1 a5183131107

97

166 The US. OCS GC and Gas gasbag Programma

habitata and the large extent of habitats such ae mud!sand bottoms! which are nothighly sensitive.

It is important to remember that the results of this analysis are not equivalent topte4c4arU of the amsoqucnces of OCS oil and gas activities. 'Axis analysis does notincorporate the concepts of riaIt, vulnerability, or mitigation. In addition, it does notaccount for specific ecological interactione between habitats and biota or betweenvarious biotic groups These factors enter the planning process through theprogranematic and sale-specific environmental impact statements. The prograxnrnaticHS initiates these analyses in the phased OCS leasing and lease-management process.

CHAPTER 15

The Iategration of Data for Policy

ROBERT SAM UELSProgram AnalystPregrazft DtVelOpnsnt aztd PkrnzdngMkasreLs ManageIIMzts ServiceDePart~ O j ZIIS Inter@».WssIdagzors, D4.

This preaentatiOn will describe in su.mmILry farm the anal.yeis and decisionoptions developed for the Secretarial issue Document SID! for the Draft PropasedFive-Year OLtter Continental Shelf OCS! Oil and Gas ~g Peqmun �985!. Beforereviewing this mast recent effort, it is worthw'hile to present some of the backgrotindwhich exerted a formative influence on it.

BACKGROUND

The legal mandate for preparing the new Five-Year OCS Oil and Gas LeasingProgram is found in section 18 of the OCS Lands Act. Prior to the passage af the1978 Amendments to the Act which added section 18, the issuance of a leasingpzugram Ives a diaczetiOnary act Of the Secretary Qf the l11te1103 hezcafter5 theSeczctary!. Whiie Federal OCS lease sales date fzum the year after the passage of theoriginal OCS Lands Act of 1953, the Secretary had issued leasing pzcgzama sincentid-1970.

18 ftemalizcd the process of developing OCS leasing progrttznL Inparticular, it specified both a thought pmcee and a political process with thzee basicaspect+ consultation; analysis; and decisionmaking. Section 23 of the OCS LandsAct-also added by the 197$ Amcndznents-provides a fourth aspect the pracess forlitigation concerning a leasing pmlpam, beginning in the UX Court of A.ppcals forthe District of Columbia

'Khc first five-year program prepared pursuant to section 18 received finalsppzoval in 1980. A suit brought by a number of coastal States and other par&s ledtn a 1981 opinion by the U5. Court of Appeals for the District of Columbia' whichvalidated znuch of the method followed by the Department, but called for a nuznberaf changes which it permitted to be implctncntcd in the preparation of the. nextfive-year pmgram. The 198l opinion was distinguished by uphoMizlg theEk~meaA a@coach of quantifying the quantifiable and providing qualitativedescriptions of nonquantifiablc clementa The analytic basis for the 1982 pzograzn

z67

TM US. OCS Og ++g Gus Ltagfng Progrcun

rcd with the benefit Of the guidance proVided by the cauxt s 198$ Op~Th t ~it bccaxne manifest with the Issllaacc of the court's ].983 o

1982 program in terms of thc requirements af section 18 ~d ~Na~ EOVirCsxmcntai POlicy Act &EPA!.Th nature af the deciaian to be made by the Secretary dace much to sh > ~~ Of deVelaping a ncW program. The farm and standard fOr the decision u, b~ ~ mandated by section 18 a!y Which prOVidea that the Secretary est b~five-year OCS Oil and Gas Leasing Program whi~h

Of a SChedule Of propascd lease sales inas precisely ss pQHBblc, the size, tuning, and location Of ~aCtivity Which he detCrmincs Will best meet nat- ~ ~needa fOr the fiVe-year periad foIIOWing its appQ!~ OrreappxovaL

Sec6On 18 aX2! requires the Secretary to Conaider a wide ra ge Of f~affeCt Or arC affected by OCS Oil and gas activities,conaidcratians, the Secretary is to

~lect thC tLming and location af leasing, tO the maximCXtent practicable, SO as to Obtain a proper balance bctWCcn thpotential for CnVironmental damage, the potential faI thed~tvcry of ail and gas, SIld. thc potential for adverse imon the ~ sasm tlS4XZ!].

It is important to note that the Federal OCS oil and gas leasing progrsnceeatially only affers OCS OR and gas leases for purchase by private firms. In Ilease sales, qualified bidders axe given the OppOrtunity tO bid On the clearly defined'and limited rights tO CXplore, develop, and produce Oil and gas which are Set fart' inthe lease, the applicable stipulations, and the large body of applicablc huts,regulations, and operating arden

The initiatian Of the current cffOrt to dcVelap a neW prolpam was timed ai ar tepXOvide far an OVerlap bctvaea the current spam and the neW One to can: thetranaition. This timing alsO reflected the rcaqinitian that the prOcess Of develOping snew schsdule takes about two years.

The Sastatatian Of camncnts is One af the fixat stepa in the development of S osvpxogram Cormtenta werc requested by means Of letters ta all ~ StarC Gaveioonand the heads af affected federal agenciea as Well aa a F'aferal Rcgkscr natice>uly 11, 1984. OVer 160 comments were XecciVCIL Tlgrse conun~ts cantributsd >bath the analysis and thc forxnulation of decisian options for the ncw pxog~~

The Draft PXOposcd Program selected. by the SCCIIgary~msisting of a schedule Lpxopased sales aIMl proprsssi poligjea-was submitted tO GOVernara for reVMW aoinotice On it waa pu~ in thC pcrfcruf Wgbrcr on March 22, 1985. Ccsnntennw'ere due an May 20. 1985. Over 300 orsnxnents were reccivesL

A proposed program Will be issued around the beginning Of 1986, based On 'a3nsaderation of updated analysis and comments. In particular, the Secre

in Writing ta Conrrnents by the GoVCrxn~ Of affected S

Thc frLtegratfee Of Data fOr PC4Cy 169

the Attorney GCUCral, Congxcm, CaaebQ State0overnofL

gILd Lndtvtdukls

bc issued in late 1986 or carly 1987, based on 8A f ~ updated analysis gnd Iemments on the proposed ProI~LmstgPtxSLSL ~ Utdicate why any ~LC reccsxlmendatton Of thC Attcrney

~ government wgs not an~tCSL The PrtlpSI54 FLILal PIOgramgese ~ the president at least 60 days prior to final approval bythe Secretary

f th ~igatfOIL ProCess

by ScctLOn 18 8crves two ttgstc fLUlcttottsd LSLOn making egpeCTS Of ~ton 1L First, Lt plQvldes

FOr ezample, ThC mdustry interest Tabl 1! provtdes a very useful check On MMS CSTUttgtcs

g~m ~~ TSM 2!.on ~+~ prOVides 8 formal mechsIUIL for plrtLcLQETIIL by

goVCrnments; f edCral agencies Otherfishing, tourisnL, and rccreaticuL

ps; and indivtdualtLea ~ ~~tion Of af f CCted partiea are Insxufold.

, ~t of our democratic foxm of government gndiHugrates its chatacteriatic features.

On the OUC hand, public cOIILments can cOntribute data ~ ~~interpretation that are ILOt always avgilgblC tO Or idcxLtified by ggv~~~t ~~public continents Can also pxovide noVel recxtmxncndations Of pol'cy Ob~qecific ntesns Of rcCOnciling gnd implementing them. On the Oth z h d OCS-are tO 8 large extcn t both Tee hruCal 8 nd Capable Of arougingsituxtion in WhiCh the latter clemCnt can Obscure the fOrmer.

A further benefit Of thC public participatiOU prooeduxta pxcacribed by section 18 isthat the parties involVed are given a Specifxc channel for ezpresaing their vieWLWhile sstisfactiOn with the pK~Xes La, of course, greater WhCn the party in questian is~ul in getting its ways failure to succeed is sometimes equated with notbeing 1istetled ~there ts at least sontc potential fOr rccL3hcGlilg thC variOLLS psftiCS tothe resLLlts of a prucesn in which they had a Say. It is dear frOm the legislatiVehistory Of the OCS Lande ACt Amendments Of 1978 that incnauatd participgtiau ULdeism-tttgking was intended to reduce litigatian OVCr OCS leaaixtg, It ia hgxd. tOtasrn the success Of Qmt intCntiun, since We CannOt knOw what lawsuits WOuld haVCbees brought had the Amendments not been enacted. Nonethelena, it is dear thatthere have been numerCSLS suits against sales in the pregrams issued by the Secretaries>hose five-year pfegrama WCre ierued in accOrdancc With sectmm 18 � and, in addition,

ging thae five-year prttgvaxns themselveL

- Natfonal BILergy Needs

Section 18 a! provides that the So~ULry establishLtasittg prcgram Which

~ consist Of a ~cdule Of proIxSad lease sales indica88 preciacly as pCSsablc, the size, TUXuxtg. and location Of leasingactiVity Which he deterxxums Will best meet natiOnal

needs for the five-year period foUowing its approvalreapprovaL

tn cxatnining the way in which OCS oil and gas production can help rnocnatiOnal energy needs, the SID revie~ed the following tOpicsc the rOle Of OCS Lal agas ln the United States economy; the current and projected United SLates demand for

general and oil and gss in particular; the current and projected U~ sttpp>Yand g% the pTMgect for continued dependence on cil imports; the dolnestic astri

foreign policy implications of such continued dependence; and the role of OCS i~in reducing that dependence.

To sumjnatjgg the Qnited States in 1 984 consumed 73.73 quadril11on Bxi~Thertnal +nits of energy. QQ snd gas constituted about two-thl.rds of ~t ~~The Nation's production of oil snd natural gas liquids peaked in 1970»4 ~~~ ~

Table 1

lnduatry Interest in OCS Planning Areas Summer 198 Not sU companies ranked all areas.!

&droll Ranking Range of Companiea 14mkinga

Rank order of tnsan average! ranks of companiea ranking the OCSplanning area on the basis of interest in exploration and developrment.

b Reflects higheat and lowest ranking by companies ranlcing theparticular OCS plantLing area on the bash of interest in exploration anddevelopment.

110 The US. OCS 0tl and Gas Learning Program

1 Central Gulf of Mexico

2 Western Gulf of Mexico3 Beaufort Sea

te! S th euro~4 tia! Central 8t Northern6 Eastern Gulf of Mexico

7 Navarin Basin

8 North Aleutian Basin

9 St. George Basin10 Chukchi Seall North Atlantic

12 Norton Basin'13 Washington-Oregon14 Mid-Atlantic

15 Hope Basin16 Cook. inlet

17 Shurnagin18 South Atlantic19 Gulf of Alaska20 St. Matthew-HaQ21 Ihaiiah.22 Bowers Basin23 tie! Aleutian Arc23 tie! Aleutian Basin

1 to 51 to 71 to 71 to 11

3 to 14

3 to 122 to 113 to- 14

3 to 152 to 13

7 to 22

8 to 185 to 219to 23

10 to 19

9 to 20

12 to 2210 to 24

12 to 21

14 to 23

13 to ?A16 to ?A

12 to 241S to 23

production peaked in 1973. nte United States is heavily dependent on oil imports Table 3!. Furthermore, the Department of Energy projects continued US. dependenceon oil ixnports for the foreseeable future.'

Leanng and exploratton of OCS oil and gas resources can make a substantialcontribution to limiting UK dependenoe on oil imports, The hydrocarbons ~u~from the ~ in 1984 represented about 12 percent af domestic production of oil andabout 25 percent of domestic natural gas production- The h98S risked estimate of the

Table 2

Risked Oil and Gas Resouxce EsthmteaaUnleased Undiscovered Resources Pxojtcted to be in

Leasable Pxcstpects "Leamble Resources" ! aa of July 1956 $29 per barrel 1984 ~g price!

Estimated Risked Oil and GasResources Millions of barrels

of oil equivalent BOE!!Planning Axes

Neghgtble estnnated to be less than 08 tntllaan BOE!,

Risked oil and gas xemuxtx estixnates axe obtained bymultiplying the conditional mean xtstouxce estimate by themaqpnal probability af the presence of hydztxmxbaaa.GLieulations exclude Beaufort Sea and Chukchi Sea naturalgas. See Marshall Rose's presentation, above in this volume.

Western Gulf of MexicoCentral Gulf of MezicoSouthern CahforniaSouth AtlanticNavaxin BasinEastern Gulf of MmicoNorthern California

Beaufort Sea

Central CaliforniaChukchi SeaSt. George BasinMid-AtlanticNorth Atlantic

Washington&regretNorth Aleutian BasinGulf of Alaska

Noxton Basin

Kodudt

Hope BasinKhumaginCook inlet

Aleutian Basin

Bowers BasinSt, Matthew-HaQAleutian Arc

The lruegratfon of Data for Fancy 771

$3124,846lg90

593559454

409

4P

45

396173

103

56191814

172 The US. ~ ga ~ Gus M~8 Program

Table 3

Imports of petroleum and Selected petroleum products in 19+

Nct quantity: 2Q hall8%. barrels

Value: $592 billion

-$1233 billion

+ From table 6, Imports of Petroleuxn and Selected petroleum productsinto thc U5. Qastcans Axea and the U8. Virgin Islands from ForeignCountricc, in "Stumauixy of US. Export and Import MerchandiseTrade, December 1984", UX Department of Commerce, Bureau ofthe Census, February 1, 1985 FK5KM-84-12!, pp- 16-17.

From Table 1, UX Exports, General Ixnports, and Merchandise TradeBalances $41�p. 3.

unlcssed undiscovered "leasable" oil and gas resources on the OCS ss of rnid-1986 vtMalma' 15 hanion barrels of oil equivalent.

- Nattonal Sccurky Ceuccr;M $Mcvcnt to OCS Least'

dependence rxf the United States on oil imports for a substantialpart of our consumption cxeatcs a number of national security concerxia First, thtpotenQLL fcr a alipply disruptinn iinpoaea political lixnits on the flexibility of 6Ufoxeignlnational ecurity policy, including our ability to respond to foreign atcuritythxeata.

Second our dependence on foreign nations for ni essential a commodity aa oiltea thc pratcntial fcr the United States e> be dravra mtO diingercua pOlitiCal ~

military situations involving those natiaxuLdcpcnx}ence on oal jxnports cntails dependxmce on extended ~pp y

tanltcr routes! which present a target for attack and thus add to our defenadded dcfeom buxden involves both the deterrence of attaclrs as weil a

defense in thc cvcnt of an attnclr-Fourth, many other nations, including our aolen, are faced w' h the

Thc restraints on them indirectly but effectively pose f~Our OWn national security flcxihality. Th~ jlriy linpxoverncRt in Outhem in meeting their energy needa in turn iinprOVes Our abiTity tO p ~ ~foxeign policy/national mauity goalL The 1983 Naxioxxal EneP'underlines this last point by noting thaL"

The overxsding ahern of our alliesdependency on ixnportcd oil has lcd t0 growingnatuxal gaa from the Soviet Union. avulnerability and concern to our a%ective energy ~~ yand to fundamental United States natwxnal

The Integration oj Data for Pogcy 173

F~~ g there mere a worM oil shortfall, all of our suppliers, including~p~ supp lie rs might reduce oil shipxnenta to us in order to honor all of their

t~ts equitably. Thus, our oil ixnport vulnerab6ity is not limited to ourc �~ ~o~t of OPEC ~~

w capone systexns in the Nation's current arsenal «nd underdevelopment for future uxor are ~P e ~ hQ~ hy~~ f~ h F

1 9 83 the armed forces used over 1 77 million barrels of oil, which was the~ulvalcat of over 58 percent of OCS oil production in that year. The xnost secure

supply for such fuel are, clearly, domestic scaxrccL This consideration isxas:tion 12 b! of the original OCS Lands Act:

ln time of war, or when thc Pre>ident shall so prescribe, theUnited States shall have the right of first refusal to purchaseat thc market price all or any portion of any xnineral including oil and gasj produced from the outer ContinentalShe1f.

~yes of Secttan 18 a/2! Factors

The factors which section 18 aX2! requires the Secretary to coxmider and thebalancing which section 18 a!�! requires the Secretary io perform are the legal basesfor the technical analyeoa which appear in the SID. Section 18 aX2! spccif its thai thcfollowing factors be considered by the Secretary in the cour' of reaching a decisionon the I~g proi~oxL

A! existing information concerning the geqpaphical, geological,and ecological characteristics of such regions;

B! an equitable sharing of developmental benefits and cnviron-xnental risks among the various regions;

C! the lOcation of Such regiOna With reepeet iO, and the xelativeneeds of, regional and national energy xnarhets;

D! thc location of such regions with respect to other uses of thesca and seabed, including fisheye, navigation, existing orpxopeacd seduces, potential aitea of deepwater porta, and otheranticipated mm of the resources and spare of the OCS;

E! thc interest of potential oil and gas producers in thedevelopment of oil and gas rcscaxrces as indicated byexploration or axnination;

F! laws, goals, and policies of affected States which have beenspecifically identified by the Governoxs of such States asrelevant mattexs for the Secretary's ~ration;

G! the xelative environmental sensitivity and xnarine pro-ductivity of different areas of the OCS; and

H! relevant en~mnentaI and proactive information fordifferent areas of thc OCS.

A comparative snaiymis by planning area with xespect to the factors lmted abovepresented in thc SID. That analysis compares the inf

18 aX2! in quantitatiVe terms Where that ie ~Me and in qualitative termotherwim.

174 The US, OG$0fl ancf Gas Leasing I'rograrn

%he quantitative balancing of risked benefits and costs is tucnmarized bp' tlacirdifference, termed net social value" in the SlD see Table 4!. Me analysis of socsalacta ls explaijed in Tom Grigalunas' presentation, above in this volume. Thcanalysis of marine productivity and environmental sensitivity, reflected in the socaalcost analysis as ~ as presented on its own, is explained in Piet DeWitt's piece, slsoabove in this volume.

Table 4

Ranking of Planning Areas by Estimated Net Social Value

Entitled Net Estimated Social

Economic Value Casts of

of Leasable Leasable

Resources Resources

S 1986 Millions! S 1986 Millions!

Estintated

Net Social

Value S 1986 Me- ~i. 1 -m 2!

42612

13

3

4 3 3 7 3 3 12

Negligible estimated tc be les than 0$ million $1986!.

~ R~mee for these, areas are estimated to be negligibl~ Sce Table 2!. thus zaaproduction is expected, and social costs are estimated to be negligible.

Central Gulf of MexiceWestern Gulf of MexicoScattharn California

Central CaliforniaEastern Gulf of MeximSouth Atlantic

Smhern CaUforniaNavarln

Beaufort SeaChukchi SeaMid-Atlantic

St. George BasinWashingbm43eeganNorth Atlantic

North Aleutian BasinNorton BasinGulf of Alaska

Kodiak

Hope BaanShumaginCook inletSt. Matthew-HallAleutian BasinBo~rs Basin

Aleutian Arc

$3782035,965

7/5625732,4582,4552,4251+35

895

788

590491399359

2421

$37,19435.953

7,4432+702,4542,4522/221528

$92

785589489399

35824

24

21

The Inregrarfon of Data far P~ 175

pfaxutt>g f or an UIKcrtakL p'tttul'c Wfth lilted In f oration

A theme of the SID for the Draft proposed Frogs hkech l985! is the need toxecngnire the inhexent and unavoidable hmits of the planning process for OCS leasingand of the technical analyses in the SID. The decision-maker snd the public need tobe informed of limits on the analysis of two kind+ limits on the available data; andIixnits which cotne from assumptions made in order to facilitate the retluixed analysisbut which bring its results further from actuality.

The first LUnlt derives fxoxn the nature of the activity for which planningundertaken. The offering of OCS leases for bids does not in itself cause bids to besubmitted or leases to be issued on blocks which are bid upon. ln fact, it is verydifficult to predict the patterns of bidding and leasing which will occur at a given,leam sale. For oil and gas ezploxation, firms have alternatives to US. OCS oil and gas].easing which include the onshore lease market in the US. and abroad as mell as thestate and international offshore leam markets. Additionally, the issuance af leasesdoes not necessarily lead to ezploratory drilling-nor does drilling nectsssarily lead todiscovery and production.

The precision with which future OCS oil and gas activities can be planned isfurthex limited by the kinds of considerations an which the five-year pxograxn is tobe based pursuant to section 18 as interpreted by the court. Notwithstanding thetechnical ezpertise of the section 18 analysea, they are subject to several kinds ofIjgnitation: the incoxnpieteness which so often charterizes even, the best available data;the unavoidable uncertainty af predictions of future events; and the exercise ofjudgment not reducible to technitiue.

The court addressed this ilate in CaQforrda v. Wart QLl in the fooowing termg;

It is important to understand what is being evalua~~factual basis and the methodology used by the Secretary invarious aspects of the cart benefit snalyLfall within whatthe court in Watt I described as the "frontiers nf scientific

knowledge," 'Ibe facts used by the Secretary in performingthe analysis axe largely predictive in natu xe, and thexnethodology utilized was necesseily navel beoaum this typeof analysis has not been performed extensively in the pastThus, aa the court in Watt I observed. a. great deference isafforded to the Secretary in these areaL %Mre ammingmethodology or research in a new area of xegulataon isdeficient, the agency necemuily en~ broad discxtetion toattempt to formulate a solution to the best of its ability anthe basis of available information Therefox», although weare obligated to review the f~ findings of the Secretaryin order to determine that they axe supported by substantialevidence in the record, we realize that them finds must besomewhat speculative. Further, we axe required to sustain themethodology and assumptions made by the Secretary if theyare reasonable.a

- limits af the Tecbdcal Analyses

Geological and Geophysical Data Geological and geophysical data aretypically the beginning paint for amosdng the corsasiuencas of OCS oil and gasleasing. A great amount of such data have been accuxnuiated and interpreted by the

I76 Th US ~ Og atua Gas LeaStng Prpgram

MMS and other parties. Nonetheless, the available data have been rated by ~~ 7 Is

from ~llcnt in mature areas to very poor in a number pf f~~

Section lpga! pf the OCS Lands Act Amendments clearlym~pl te nature of geplogic knowledge in mandating that " the eztent of ~ ~~tuzai gas ~uxces of the Outer Continental Shelf [be! atNRased stpracticable time." Drilling many wells is often necessary to determine wh~ <and gas sze present in an area. Since the OCS Lands Act for the most ptzt nright to dzill tp the accluisition Gf a ~ the OCS IcaaUlg prpgzam has to be ~

psxt, as a program that factlitates the acquxsttpn of better geolpgicai d + bpotential producers for usc by them and by the Government. The leasing ~thus has a major influence on pcs in resource assessment

Economic Projections of Benefits The projection of the economic ~» <OCS leasing also reflects tbe unavoidable limits on precisionplanning. The chief limits hexe are the uncertainties attendant pn the pmd~futuze Oil primae and the seieCtsxn of a discount xate used in computingvalue pf the ~ulcca within the various planning azeas m that they can b,compaxed pn the basis of a omnmon standard}.

Esthaates of Social Casts Like the analysis of economic benefits the ~pf spcial cesta aISO bears the tSIZden Of predicting prices and Selection Of a diSm t

The analysis of social costs hss the additional burden of quantifying tertsiapotential Quits Qf oil and gas devclppnlent npt valued by the market sp that tinoverall oet social value pcf, cciQ5lxhxc benefits minus social cost3! can be computed [ctOil and gss deve10psnent ln Csch p lUlnlng area. Net social value hss tp be inin light pf the feet that estimates af soCial casts which are nOt Valued in the maxjtetcannOt be coosidemd entirely camparable tp estimates Of net eCOnOmiC Value.

Analysis of Relative Marine Prod.uctivity and. Extvtroxoncntal SensitivityThe analysis of the relative marine productivity and cnvixonmental sensitivity afOCS phLnning areas called for by mction 18 has limits comparable to those of thanalysis of social casts. %be cahuhtion of nuxnerical and productivity and sensitivitymeasures is subject to two kinds pf limitatione the abstract nature pf the messuxtsas cpntzssted tO the factors Which they repxesent and the unaVOidable need farpxofesional judgment not reducible to technique in the determinatipn of thesensitivity coefficients. In addition, the availabiTity of marine productivity sntisensitivity data m limited by thc data base available as the xcsult of pastinvestigations and by thc costliness pf acquiring new information. 'Hie efforts cf theMIDIS tp acquixe mOrt data thxough its envixpnmentai studies pIOImxkl aIe describtd icthe SID.

- Providing Perspecttve ca the Lkntte pg the TiehntcaL Analyses

< of techniques were emphsyed in the SID to enable the de~n-ms'the data and analysis presented and to appIeclate

limitationa

Evaluation of the Adequacy of the Data In order to provide a way <evaluating thc results gf the vtLIMua technical analyst, an indiCatipn is glvCn +adequacy pf the data on which they axe based. For example, the adcciuacy ~ +1',soho~ and geophysical data which are the basis of much of the analysisranges fznm Excellent" for some azeas to "Very popz in others.

The Inregrudon of Dure for poficy

providing Ranges of Data Given the uncertaintiesraxxges of data are an informative supplemexxt to the point cstimag centraL tendency in the technical analyses. The ranges can present th highlow values deterxxxined by the sensitivity analyses, or valuts at probability Ieveh of 5~xcent and 95 percent.

Overestixnation of Costs A cautious approach in formulating~ xllyses is take+ err11lg on the sxdc of uxxdexstatuxg etxxnomxc benefits to the Nationand overstating social costs to the Nation, while still aitning atof both

Supplexnenting Government Analyses with Public Coxnmcnts pursuant toconsultation with and comments by parties outside thc

Government are used to provide additional informatioxL The consideration of outsidean ixnportant element in the decision-making p~ as discussed above.

Providixxg Perspective an thc Estimates of Costs and Benefits Q makingns between planning areas based on the cost-benefit analysis, the relative

ranking of the values calculated for OCS areas is mended much more importancethan the absolute values themselvea Further, OCS areas with estimates within thesame general range of value are not considered to differ for purposss of programformulation. Thuxx, for example, pianning areas werc formed into the following net

value groups whee members were treated alike for the scheduling of sales. allthings being equaL

centxal Gulf of Mezico, western Gulf of Maxice,High

Interns>Matc southern California, eastern Gulf of Mczico, NavarinBasin, central Califoxnia, northern California, SouthAtlantic, Beaufort Sea, Chukchi Sea, mid-Atlantic, St.George Basin, WaahingtonCXn~x, North Atlantic,Norton Basin, north Aleutian Basin, Gulf of Alaska.

Kodiak, Hope Basin, Shumaluxx, Cook Inlet, St.Matthew-HaLL, Aleutian Basin, Bowers Basin, AleutianArc.

HighMghting the Rale of Jndgxnent in Knterpretixxg the TcchnicalAnalyses and Fornxxxhxting the Leasing Program 'Axe fact that thc tcchnicalanalyses performed pursuant to section 18 have inhexent and unavoidable Limits has

ptstant implications both for the decision.-making proces Leadlxxg to the new~»s-year program and for the strxumxre of that pxqpam ln terms of the

-making pnmary, the limits of the quantitative analyses xnake clear theIxxudence of the court's opinion in Calif ornkx v. Watt 9!. The court found that theSecretary's decision on the leasing program is to bc based on a consideration ofquantitative analyses rather than determined by the results of those analyses in a

Analyzing the Sensitivity of the Analyses to Kc> A ~ tireasonable chazxges xn technxcal assuQ1ptxons could produce significant chxmresults of anal~ sensitivity analyses are provided. Thtse analyses ~w th Qfg different assumptions oa the results of the tecIUxical analystxL F

of net economic value includes a sensitivity test which shows the ~tivity~ Iessabie resource estimates to oil prices.

178 1'he U5. OCS Ofl >md Gas Leaslag Program

mcclanicstic way. Thus, there remains for the Secretary substantial scope for theesercise of ~gment based on non-quantifiable considerations and lixnitations on thequantitative analyses. These considerations and linutations are highlighted in the SKand its appends»a

Llsdsfosa OJShas arut DsctAast,arsakkag

The formulation of the decision options-like the ultimate decision itself � has tobe based upon a consideration of the technical analyses but cannot be determined bychem. For decssion option decisions � require an element of judgtnent whichcannot he supplied by the technical analyses alone.

Decision options reflect the alternative means of pursuing and reconciling theva6ous objectives of the program. Thus, the formulation of decision options toquiresreflection on the objectives of the program prescribed in the OCS Lands Act and thecomments submitted by the public as well as the technical analysestcchnical analysns are only useful for any decision-maker insofar as they reElect Therange of purple of the prcgram specified by section 18: to formulate an ~

I pn~ "geo as to] best meet national energy needs;" and to the masintmncttent practicable, to obtain a proper balance between the ptstential farenvuonrnental damage, the potential for the discovery of oil and gas, cuad thepotentLal for adverse impact on the coastal zone." The point here is that the techt&Manalyses cannot be entirely "valale-free" because even the categories of anal~once ~ are relevant to the variety of p~pmn goals, Of course, the analylaa needto reKKILih objacttve Lh the ense of resisting preconceived nylons of Qtc Olltlxsnc

OFHONS FOR THE DRAFT PROPOSED PROGRAM

Pgsstsclag Ane BNsuflry Opcfcsas

The July 1984 J cderal Regfstcr notice announcing the development of the newprogracn had depicted the OCS as divided among 24 planning areas. The SID pmpcno9chcuages in several of those areas, including the reconfiguration of the planning areasoffshore California from two to three and an option to create two separate planingareas in the South Atlantic. The drawing of planning area boundaries invoklvea anumber of considexationa geohqpaLI and geophysical data; leasing, espioratiocs.developcnent, acsd production hist~r, environmental data; coordination with coastalgovernmental entitias; mapping considerationcc jurisdictional claims to the OCS aacithe Exclusive 8xmmuc Zone; and administrative factors.

Pme oj i~kg Optloar

- Optfon L The Base Schafuls

Annual sales for both high net ax,ial value NSV! areas the central and secs~Gulf of Melicoj ~ proleeed because the high NSV indicates the pre»artcc of veryhigh ~e» potential in those areaL That indication is confirmed both by the higb.ooat of delay of leasing for these areas and by industry interest. In addition, thext. ~about l00 drainalle and development blocks per year in each of these two cncLtama

'Ihe scheduling af triennial sales in Intermediate NSV areas reflect»suggeedons cnade by nucnenma commenters," including a number of states, far ~than 2 yscus between salsa All Intermediate group areas have been ee~tod to bc:capable of attracting bids leadling to production with a poaitive NSV. AQ of thecac

TJxe Ixcrcgratforc of Data for PoMcy 179

areas are included in Option 1-except the Gulf of Alaska, based on lack of industrytercet in that ares lt is intezesting to note that the Gulf of Alaska planning area

wss estixnated to have a NSV appmxirnately equal to that for the North AleutianBasin aud Norton Basin, which aze included in Option 1. However, industryrespondents to the July 1984 Federal Register notice xeciuesting oacaxnents on thedevelopment of the new pxoipatn rated North Aleutian Basin eighth and Norton Basintwelfth in both cases higher than their elative rank by NSV!, whereas the Gulf ofAlaska was rated nineteenth lower than its relative rank by NSV!. Thus, industryinterest was judged to confirm the inclusion of North Aleutian Basin and NortonBasin in the base schedule, whereas it was judged to support the exclusion of the Gulfof Alaska froxn the base schedule.

A single sale in Shuxnagin wss included in Option 1 as a carry-over fzoxn1982 pxc~ confirmed by responses to a reciuest for industry interest in that sale.Shumagin is the only low NSV area to be includeci in Option 1. ln additioe, MMShas rated geological and geophysical data in Shumagin as Very Poor-which raisesboth the question of the reliability of the rtsouzce estlxnate and the need for increaseddata for that area, such as would coxne froxn exphratoxy drilling.

� Optkm 2: Bkxaxcfal Saks

Option 2 amended Option 1 by xnaking sales biennial in up to six higher-value,higher-interest axeas. The six azess were southern California, central California,northern CaMornia, eastern Gulf of Mexico Navarin Basin, and Beaufort Sea. Theaxeas proposed for biennial sales were those with xelatively high NSV and high costof delay, with two exceptions based on industry interest: exclusion of the SouthAtlantic azea, which was estixnated to have a NSV af about SXS billion $19&63, butwas ranked 18th by industry in xespcem to the July 1984 notice; and inclusion ofBeaufort Sea, with a NSV estimated at about $0.9 billion $1986!, but ranked 3xti byindustry.

SlsxdMLfty Optgcsts

Tle lixnitations on the technical analyses and on the projection of futureconditions also suggest the kind of leasing program appropriate to meet the obyetivesspecified by Congress and the National Energr Policy Plan. The many uncertaintieswhich affect planning for OCS leasing nmke clear the value of flexibility in the OCSleasing program. indeed, the in' in formulating a new pzcqmun is not whether toprovide for flexibility, but how. For example, the five-year schedule responds easilyin the dixection cxf less bidciing interest by industry or the deferral or cancellation ofsaleL The five-year pxogram is characteristically rigid, however, with respect toresponding to circumstances which call for the additicxn of sales.

The developxnent of the new progxaxn poses the challenge of providing a stablefzsxnewoxk for planning OCS lease sales while providing flexibility to respond tochanging circuxnstanco> which could make QCS areas much more prcsnising, TheDraft Proposed Pxcgnun SID provided two flexibility options:

- 0pxferx 3: Fronrfcr Zxpforaxfon Safes

Option 3 proposed up to five sales in Alaska frontier axeatc Gulf of Aixeska; Cookinlet; Hope Basin; Ko~ and Shumagin. 'Ihaec five axeas all are estimated by MMSto have developable" resources zeeouxees which wtxuld be economic to develop, iffound!, although only the Gulf of Aixutiza is estimated to have leasable" resources teeuxces which would be economic to bid and explore for!.

180 The US. OCS Otl and Gas Lc@Ang Program

In these areas, the geological and geophysical data are incomplete. MMS hss ratedthe «hquSCy af data in these areas as follows: "GOOd" in Kadiak and COok Inlet."Pair to Good" in thc Ou.lf of Alaska; "Fair" in Hope Basin; and "Very Paw" m-Shumagin.

This option jecagnized that new geological and geophysical data or an oil priocirszeam could result in These areas being viewed more favorably by potentialproduoera, ln addition, the consideration of eriuitable sharing of developmerrtalbenefits and envinmmental risks among regions has been interpreted by the court tosupport the scheduling of frontier sales.

- OprforL 4. Sspy4cmsnral Safes

This option proposed an annual sale to offer selected blocks in areas other thanThe oentral ami vrestern Gulf of Mexico: drainage and development blocks; andblacks on which bids were rejected in the preceding year. This option pre~reintroducing the concept af drainage sales on a basis compatible ~threrluirernents of action 1L Twelve drainage salas were held in thc Gulf of Mexicobetween 1959 and 1978. The annual limited reoffering of blocks which received bi~Iswhich were rejected in sales held in the prior year in these areas was designed todiminish the delay cost amxiated with offering blocks in which industry intererrt hnsbeen dernctastrated.

Thlee basic presale approaches have been used for OCS general lease salen x3"tract salem'" �! thc initial areawide approach; snd �! the modified aron~appr'osch. Historically, these different approaches represent Chstiaguiahablccombinations af pohcy and procedures under different Secretaries of the Interi~.

iona of the effects of' different presale preerssas on sale size aumat beperformed with great pIecisi<m because the pressl e priest" is an abstraction whoseconcrete implementation can lead to very different results in different planning nrnan-The results of the presala process is likely to differ both between planning areas- and.between salas in the same planning area because they depend on the followvariable factors: {1! MMS and industry estimates of the amount and distribution cd'undisosvered aR and gas reaxarces in an area; �! environmental and multiple-~oxlsideratiaeg and �! the results of consultations with numerous parties, includirLgcoastaL State Governors, under mction 19 of the OCS Lands Act. All three f~ axesubject to different perceptions by the various parties who participate in the aff~Bumcleasing prmm. The third factor, depending as it does on a consultation prcsxss, dacenot lend itself to reliable getslictionL

For example, the implications for sale size of multiple-use considerations such aathe LOCatian af Dapretzaent Of DCfenae DQD! use areas are subject tO axemltatiCrCL. Inaddition, different local attitudes toward oil and gas hsasing and other uses af c~ocean can lead to very different outcomes of consultations between the Departrrrent cdthe interior and other parties such ss cauld State Governors under mctiorL 19 of 'teaQCS ~ Act. Bath the Gulf of Mexico and pacific regions contain sigraitacnn.tdeposits of oorruncrciaHy recoverable hydrocarbons under ncarahare waters. ~edifference betvteen the large sire of Gulf of Mexico areawide sales |.ranging up tamore than 8,000 blocks! and the small siss of, for example, Sale 80 offshore arith~California �57 tracts!, held under areawide" procedures, clearly illustrate <Neeffects of factors whose implications for the size of a lcae sale are not clear.lygrredictable.

TIu; yntegratgon of Data for Pafic3r 181tt

l+Lglng actrvlty can

~ for under section a e18 ! af th OCS Lands Act, it rs also rrnpartant ta keep rnem. In the rnid-Atlanticth wide gap between offering tracts and leasing them. kn the mi � t tic

Sale 76, aver 22 million acres were offered, but under 1 percent oC that area was]eagL ItL the eastern Gulf of Mexico Sale 79, over 50 million acres were offered, bu.t}es than 2 percent

t of that area was leased. Even in the OCS sale which leased thehlgtst number of tracts Sale 72, central Gulf of Merica!, the 623 tracts leasedrepesented just over 8 percent of the acreage offered.

Air KcrhC Viue Opcfaras

Sectton 18 aX4! requUes tha,t the program provide for the receipt of fair mazlrctvalue, The SlD proposed conlkderation of varying the tninirnum bid by plan . g~ rca, given the differences among planning areas,

O&CLUSIONS

The conclusion af the decision-making pxess-the Secretary's choices for theDraft Pfoponx! Program � will be described rn the first paper of the final

that discmeiog, there are three conclusions which we can draw about thede'All3prneat af a five-year ~ leasing progrmn under ~on 18 F~ thlrlaruung for an uncertain future with limited information need ta be ro~izcd both5p the analyst and by the decl%on-tnaker. Second, quantlfkcatron needs ta be seenboth as a tool af aaalyma and as a limit on it. Third, the indispcnsiblc role afjudgment needs to be acknowledged � in interpreting the analysis and forrrLulating4xiam opdam as well as in reaching declsicms.

~forrtls v. Wats, 668 F~ 1290 [hereafter, CcdLfornta v. Watt Q!J decidcrlOctober 6, 1981.

CaNfornIa v. Hatt, 712 F2d 584 [hereafter, Cagfomga v. Watt Q!], d~$, 1953.

parchment of Energy, ~at EIrergy review 1984, April 1985 Table

UA ~~t of Energy Encqpr Information Administration, ~~ Error~ACE 1984 January 1985!, p. 223.

GaN jornfa v. $Vatt 09 at 600.

This presentation is a revised version of the anc delivered at the Ccaferenae an shortstairs- Xhanlts are due to the many people at the ~extent af the Intcnoraetributsd to the develaprnent of the Draft Prcycsred PIlograrn and %'hose work. is~ in tbe Sectetariak Issue Elocuxnent and relied upon here.

184 The OCS Leasing PoNcy and the Polky Processlength. It has a 96-page summary and 16 appendices. Some of those appendices arethe building blocks we ha.ve discussed. The scope, assumptions required, and~owiedge implied in. reaching conclusions are indeed impressive. Whether thedocument is thorough or cumbersome depends upon your viewpoint.Fortunately, this panel is well equipped to discus matters of interpretatitmrelated to the pacer and the results. As you know, the Secretary of the !nteriorraakm the ultimate decMnons on tbis plan. There are, however, only a relatively fewerperts for this complex, political, scientific, technical, and economic dement. Benxin mind as we move to the first presentation that between the panel of yesterd yafternoon and that of this morning you wiQ have met many of them.

R. H. 33URROUGHSAssistant Pro fcssor

Graduate Progrcvn fn Marine Af fak.sUnkvcrsfty of Rhode Lskarad

E'lngstos�RhocEc Ichxnd

The Oepsrt t f Interiors ~ De ada~

on the Five-Year Program

PAUL R. STAGCMcfBraech of Program Deva~ ~ P~MfncraLs Managemeaz serviceDepartment o f IygerforWgshtagtm, DQ.

IÃTRODUCFLON

Yesterday we talked about the building blocks theOptions that were bCfOre Secretary Hodcl fOr the fivewe weal turn t d c S ret ~'s prcl a~ d . M ~ m ~ 1985 1 ~~dlike to emphaszze, Lf lt is not clear by nowDraft Proposed Program Q!pp!, ~ Dpp is the f~We have to develop two znoze, and hc will make decisions en both of them. So weare reaUy in the early, formative stages of the pzteae. It is an open pzotxsa, nothingis locket in concrete. Ihe Secretary is appzoa~g the five-year program withflezibility and an eye towards zeaching a consensuL Wc are trying to buildflezibility into the structure of the prqmun as welL

Secretary Hodel decided that we should move from 24 to 26 plaaxmg areas byadding the Straits of Florida, which was formerly part of the South Atlantic region,and by dividing California into three instead of the fozznez two planning areas.Figures 1 and 2 show the layout of the planning areaL

SCIKDULING LEASE %~

Qmugerd Sefes

The leasing schedule itself was based to a large degree on the rank order ofphLnning areas by what we call net social value. As indicated eazlier. we divided thelisting of planning azeas by their net social va1ue into three groups high, medium.and low. Tbesc cab~ries wcze used as a fundamental basis for the Secretary'sdecision ln essence, the Secretary chose to provide for 33 standard sales in the next

185

1S6 The OCS LeaAng PoLky and the PoHcy Process

The Prcllmbuvy Decbton on the Ffve-l'ear Program JS7

18S Th OCS ~g Pygmy and the PoUcy Process

~~am ]9S7 through 1992 The preliminary decisipn is to ha>e ~~the western and central Gulf of Mexico because they were high pn

and to have triccLnial or leaa frerluent sales in all the other areas which mrah MImagement Service MMS! estimates have developable resources {Tabie I!

Table I

OCS Qil and Gas Resources Estimates as of July 1986

Mdbons of barrels

of oil equivalent BOE!

Negijphle estimated to be less than 05 minion BOE!.

The Secretary scheduled no lease sales in the four areas. Aleutian Basin Bow~Saint Matthew-Hall, and Aleutian. Arc, which appear at thc bottom pf <e ~t

social value list aec the last column ln Table 2!. Thee areas have no esumadevelopable xwpurcea, the lowest estimates of nct social value, and low mdustry

Industry ranked three out of the four as the three lowest and the other >the fifth lowest pf all planning areas {Table 3!. ~ areas ~ sp IIttle pn'~that they are not %'orth scheduling at this time as far as the Secretary is

Aisp notice pn the schedule Figure 3! that there are no sales scheduled for ~~t KFIM Tht~h~b ~pp~~t 6 th ~nls~yhad npt yet bee co pleted fo the Straits pf Florida who the DPP was isa'

Western Gulf of M xicoGsntral Gulf pf MexicoSouthern CamorniaSouth AtlanticNavarin BasinEastern Gulf of Mcx~Ncethern CaliforniaBeaufort SeaCentral CaliforniaChukchi ScaSt. George BasinMid-AtlanticNorth Atlantic

WaahingtnnC~eaNorth Aleutian BasinGulf of Alaska

Norton Basin

IMiak

Hope BasinShumaginCoat Inlet

Aleutian Basin

Bowers BasinSt. Matthew'-Hall

Aleutian Arc

5.3124,S461,090

593

559

454

409

407400

396

173

ISO

103

56

1918

14

Thc PrNnsiruvy Dcc4km oIs the Five-Yeor Program !89Table 2

g of OCS Pblnning Areas by Ben~fits and Costsin Millions of 1986 Dollars

Nct BenefitsCosts coL 1 - coL 2!planning Areas

Negligible estimated to be less than 05 jniUion 8 1986!.

~ Rest.rces for these areas are estimated to be negligible See Table 1!,thus no production is expected, and social crwts are estimated to benegligible.

derision on whether to prcycee a sale in the Straits of Florida wiQ be made at theupsrrming Proposed Program stage.

Eleven of the 33 sales are carried-over from the current, ongoing five-yearpngpam which was approved in 1982. Thee were carried over partly because ofsome overlap between the two programs and partly became smne sales were delayedfor various reasons. The 33 sales contrast with 40 standard sales in the currentprogram.

Central Gulf of MexicoWestern Gulf of MexicoSouthern CaliforniaCentral CaliforniaEastern Gulf of MexicoSouth AtlanticNorthern CaliforniaNavarin BasinBeaufort ScaChukchi SeaMid-AtlanticSt. George BasinWashingtonianNorth AtlanticNorth Aleutian BasinNorton BasinGulf of AlaskaKodiak

Hope BasinShuma ginCook InletSt. Matthew-HallAleutian BasinBowers BasinAleutian Azc

$3722035,965

7,4562/732,4582,4552,4251535

895

788

590

491

399

359

2424

21

Q612

133 4 3 3 7 3 3 12 1

$37,19435,9537,443267O2,4542,4522,4221828

892

785

589

489

399358

2421

J90 Thc OCS ~8 Policy and rhe Facy Process

Table 3

Industry Interest in OCS Planning Areasas of July 1984.

Ovexall Ranking

1 Central Gulf of Mexico2 Western Gulf of Mexico3 Beaufort Sea4 tie! Southern California4 tie! Central k Northern California6 Eastern Gulf of Mexico7 Navarin Basin

8 North Aleutian Basin9 St. George Basin

10 Chukchi Sea11 North Atlantic

l2 Norton Basin13 Washington-Oregon14 Mid-Atlantic

1S Hope Basin16 Cook Inlet

17 Shumagin15 South Atlantic19 Gulf of Alaska20 St. Matthew-Hall

21 Kodiak

22 Botvera Basin

23 tie! Aleutian Axe23 tie! Aleutian Basin

In addition to these starward sales, the Secretary chase three flexibility provLaiaxsLI wouM like to paum bere and discuss what we mean by flexibility and why i4 isneeded.

u~th 0 t C ti ~ST DCS!t d ~~ccafiv~y~~~ isapproved. salsa cannot be added to it, but they can be deleted fxoxn it. This pcsaas nninteresting dilexnma. If you project the Nation'a future needs and future world ~~for ail and gas and you make a judgment that a certain nuxnbcr af sake isapproi'siatc, you may have a problem if yota are wrong. If you underestimatecannot add any salsa. However, if you ovcsestixnatc, you can aixnply csLncni max'.The potential problsxn Is that you do not know when the decision is aunts whetter itwill be an overestimate or undcxestixnate. Hence, to avoid the paesibiiity af xnsalcingan underestimate there is a need to build flexibility into the p~vatn.

1' first flexibUity prmrision, the designation of five frontier exploration ea1ea,xe4tas to planning areas which axc near tbs bosn of thc net social value ~ jvstabove these in which tbe Secretary scheduled no saiea Four of these axe Km~Hope Basin, Shumagin, and Cook Inlet. These four planning areas are estixna~ tohave only negligible developabla xeaxxrces.

ThC PrCfkefnary Der."Often. CCC the F!VC-Yeltr PrograllC 191

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l92 2 ~ ~ Leuslng policy ural tire Policy process

Th Gulf of Alrudta was also put in the category of frontier exploration ~ustry interest was low as was tts net socral value ranking,

porsuble that there will not be sufficient interest to hold all or some of the five ~these five planning areaL We have designed a special extra step very early in

presale process to cap ou92 to industry and the public asking if there isgoing ahead with the sale-

The mcond flexibility provision is the designation of five supplemental ssiper year. The purpose of a supplemental sale is to take care of a very lirn,.number of ~ situations that could arise-the offering of rejected bid tracts ~ddrainage and development tracts outside the central and western Gulf of QexicLbtds on tracts are rejected as not meeting MMS acceptance criteria, thrs provewould allow them to be reoffered the following year. If a discovery is made, there nan economic advantage to the Nation to offer the surrounding tracts which are cailtddrainage or development tracts The Federal. Treasury can reap benefits from th tnew information if MMS promptly offet3 for lease adjacent tracts.company could drain the adjaoent tracts and/or the extent of the discovery could notbe delineated in a timely manner.

Unfortunately, the provision for supplemental sales hasca+ceixed by some observers as a wholesale offering of tracts, In fact we ~talking about a very limited number of tracts. Baeod on psst data, MMS DirecBenenberg has estimated that in the range of 10 to 20 tracts would be insuPPlemental sale. That is about the best ostimate we have We cannot tell what thenumber of tracts in a supplemental sale will be until the future unfoldL

The third flexibility provtiion is the potential for acceleration of lease sales iacertain planning areas with high net social value and/or high industry interesLThere has been tnuch debate within the Department and in the form of commentsfrom the public as to whether sales should matinue to be held on a biennial basis ssin the current five-year prograxn or whether a triennial basis is more appropriate.The acceleration provision is an attempt to create the best of both worlds. Triennialor less frequent sales would be heM in areas outside the western and central Gulf ofMexico. Then, ~ conditions mtrrant in one or more of the high valued/highinterest areas, the sale or sales would be moved forward in time. Of course, a keyqtusrtion is, What are them "conditions"?

The public has been asked in the March 1985 FcCeral Regbter notice annoutLciagthe DPP for their views on such conditions. We need and will consider the public'sviews because, quite frankly, we have not predetermined precisely what thonconditions wiH be. We do have some ideas. For example, substantially higherlong-term oil price expectations might result from a serious oil su.pply disruption; ornew geologic data could come from a major new discovery. Once we havedetermined draft criteria, we vrill publish them in the proposed Przgram along witha description of how this scteleration provision would operate. The scceleratronprovision is necessary because of the constraint which I already mentioned-Deptrttnent of the Interior DO9 cannot. add, but only delete, sales once the five-ym'schedule is approved. Under any of those three flexibility provisions there is no octaddition of salsa to the schedule.

LK!~ ~ SIZK

That ends our discunnou of the scheduling of lease salea, Anc~er decirsrs' +eSecretary hss before ham rs the "stre" of lease salea The court valldainte~uo of th OCS ~ ~ term as the ~e ~s of ~~g fmwhale plartning area to the tracts severally offered for lease. In some casts there < '

change, and in other esses there may not be. It depends on the perticuisr

The PrcQmkaary L~an on r~ y'i~i ~ Pr ~~ !93

g area. ThC Secretary s choice Of a presale pxuccss is One Which focusea pnp ~g ~ga By e't h m~~g n~mblyd ~~~ tob 1kcly tol~ to exploration and/or developxnent of oQ and gas ~xccL Ttus Qd~cnc is notstrictly a geologic one. lt ia a way of nnnimixing conflicts early in thc ptcsale~ by deletion of lower potentiaUhigh conflict areas.consists of Similar ~P' f~ P ning area tO planning area, the decisiOna ared termincd on a case-by~ and a sale-by~ basis. Thc focus will~lution Of oonflicts in consultation With affected federal agencies, state and ]Oeal

vcrnments, the public, and potential bidderL

FAIR. MARK%1' VALUE

le lla nOW turn tochosen to cOntinue In the Dpp th b-dFebruary and March of 19S4axca-Wide leasingprocedures help

AcL ln add t og dpollclcs lf rt Is f oundCxlng

um bids in different planning areas.

SUBAREA DKLRTIONS

I Would ilk.e CO wrap up withSecretary has Called fOr the uae Of SpCcial cOnditiOns Or spaM cOnsidexationa fOr partaof planning areas. Wc have been getting nominations and suggestions for a largenumber Of subarea delctions fram a diversity Of "cOmmentera." People aXC Suggestingthat we nOt Offer fOr lCasC ma jar chunka Of the OCS. RecnnlmendatiOns COme from avariety Of scuxues: GOVernoxs, lOcal gOVernments, and OthexL lf them is One generaltheme of these requests, it ia-"I do not want leasing off my shores."

If the Secretary mere co take everyone's suggestions. the program would bc cutback severely and could be clued down in some arcaa He has many difficultdecisanna to make. He is weighing thc suggesticns carefully. HC said he is nOt gOingto CIOse the doOr On thC isrue. He has made a cnmmitment to look carefully at thesaaIC and study it. The candidatea fOr subarea deletion Inust be weighed With aagaaiChratiOn of the Views af the publiC, the geOlOgical patential Of these areas, andthe CnVirlmmental riakL

We expect the Proposed Pxogram to be issued in late 1985 or early 1956 and thePloposed Final Pxt.'gram in very late 1986 or very carly 1987. That is the current~ stimate of timing.

Qpepital State Perspective

RICHARD F. DRAYChdr martCoastal States OrganlzatfoaNasMngton, DC.

NTRODUCIMN

The Department of the Interior DOO employs a detailed methodology indeveloping the Five-Year OCS Leasing Program. After an initial review of the draftproposed program, and thinMng back over my state's 5Iassachusctta! experiences withpropped lease sales 52 and 82, I have some observations on the analysis used todevelop the pn grmn and some suggestions for improvement+

OBSERVATIONS

Thc usefulness of the progrILrn analyal rs dependent on the avaxlabibty of goodinformation regarding the economics of thc market, industry interest, theenvironznental sensitivity and marine productivity of the waters and eabed of theOuter Continental Shelf OCS!, and the estimates of oil and gas in the variousgeologic prospectL Of these four, the market is perhaps thc most difficult to factorinto the analysis since price and demand are so unpredictable. Industry interest isalso unpredictable, since it is ao dependent on thc resources estimates, the costs ofproduction and transIertation, and the projocrcd marker price for oil and gas once thefield is in production.However, we can and should obtain and better utilize information on theenviromnental sensitivity and marine productivity of the various OCS regicea. Theproblem with the analysis in the draft proposed proIpam is not the methodology ~to determine sensitivity and productivity, but thc lack of necessary information tomake the analysis usefuL The habitat types and biological resources chosen for theanalysis are good, as they are comnze to or comparable among the regions. The lackof information, however, in the program analysis on thc extent of carne habitat typesand the abundanas of some of the resources makes the analysis useless, since thesensitivity of the region autngt be established. From my pe~vc, the DOI has anexcellent envircmmental studies program in the North Atlantic. The researchconducted has contributed to thc data base needed for the sensitivity/productivityanalyaiL In addition, the National Marine Fishcrics Service NMFS! has extensive

195

>h ~g ~< pomcy ~ rhg Policy Process

~tion on the abundance of thc region's biological resources Unfortunatelycf fcctivcly used by DQI in thc seQsltivity/productivity

and for some other OCS regions it is not even available.

SUGGESTIONS FOR IMPROVBAENT

To improve its analysis, the DOI should establishrelays with agencies such as NMI'S and should focus the Environment $~;Program on closUlg the cxisttng rnformatton gapLshould not consider leasing OCS regions that lack the nec,~~ einformatice for the five-year program analysis.

Thc rcsourcc estimates used by DOI in developing the five-year proplanning for individual lease sales are the subyct of much controversydeveloped by the United States Geological Survey on specific oiladapted by the Minerals Management Service �4MS! to generate thc probable smoltof oil and gas to bc found m an entire planning areL The oil iud~~ ~�

tcs are too low' for NLLlly OCS IegioIls, The states and others also quesuty and their usefulness in decision-making, since the estimates seem to b

correlated wtth the otl and gas Potcntjal of an entire Planning area ~ thearc changed so dramatically from time to time

I believe that, if the DOI were to narrow the focus of its offshore Ieasiagprogram to those ports~ of the OCS that are actuaUY prospective, the Secretary cfthe Interior would find the states and other concerned parties more willing toaccommodate leasing in those discrete areas. All parties involved in the Ieasiogprocos need tuore reliable information on the resource potential and possibledevelopment «~arios for particular sale areas, in order to assess their interests in andconcerns about a lease sale. I think we need to consider new ways of leasing ~rareas which ara more certain pmssIas~ for oil and gaL Initial drilling should belimited to thae wali' ne~ to determine tf ootnrncrcially significant quantities ofpetroleum hydroctzbans are present.

I suggest that the DQI crsmidcr establishing a process for limited on~ructuredrilling as a way of evaluating prospects prior to a lease sale. The oil industrywould cooperatively Chill thee exploratory wells as they presently do on ContinentalOffshore Stratigraphic Test OOSl'! wells in frontier areas. Interior's process wouldinclude tract emunatiaos by industry for on-structure COST locations, an MMSevaluation of these tsotninations, and the establishment of a drining area of lest thanl00 blockL The Minerals Management Service w'ould auction these drilling rights,after conducting an appropriate environmental analysis, All thc well data acdinformation wouM bc nuade avaoablc to the public once the last well was drilled-The Minerals Management Service would evaluate these data and other geologicinformation and decide whether a lease sale is merited. The maximum sire of thesale area would be limited to a discrete area closely as.s.eiated with the COST w@arcs. If MMS decided to go forantrd with a lees; sale, they would prepare acenvironmental impact statement and the leasing procural wottld be conducted as it is atpresent.

My idea is a general one and many af the specifics would have to be determined.There would need to 'bc incentives established for industry to ~pate agree~atamong the affected partica regarding the size of the ~ well area, and a!peermuton the regulations that would govern the dnlling proipam. I think . this prograrawould improve the anal@is used tn develop the five-year progntm. If the results ofthe on-structure COCLE' well props werc positive, there wouldmformatron avaljamc for un: in preparing environmental impact statcmen~ and fordeveloping more realistic tralNgertation and production scenaritN. H' the resui+

Amtal Stats Perspective 197

< w~ an area to be a poor hydrocarbon prospect, countless hours and dollars wouMl'tn sure we wouM all lite to avoid a repeat of Sale 52.

ghiPIZR 1S

The OB Industry Position

ROBERT E. HUNTZxphratkn CoordinatorTexaco USMHausxon, Texas

It goes w xthou't saying that mdustry supportsPxogram Ls a plajUaing and budgetingInterior DOl! has done a v'cryachieve thc difficult balance between the many intexesta involved in developing theDraft Proposed. Progxaxn DPP!.

Thc Nation dess~m a new schedule, one which wlII afford continuedopportunities to evaluate the resouxccs of all areas. Such timely evaluation can beatbc achieved by continued reliance on a vigorous axes-wide offering system and abalanced and predictable five-year leasing schedule. Companies xea~ that thenational interest requires an effective and efficient mechanism which will permit theremaining pctrolcum xescaarcca of the Outer Continental Shelf OCS! to bs identifiedand developed in a timely manner while sunultanomaly preserving and protectingthc valuable marine and other resources of our ocean and coastal xreeL Thatcontinues to bc thc position of the petxoleuxn industry.

AREA WIDE LEASING

Industry continues to endone the axes-wide offering system snd the manner inwhich the area-wide concept is cxnployed by the existing five-year leasing program,The important aspects of area-wide leasing from an industry standpoint axe

Ability of a coxnpany to make a tract selection anywhere inan area. %Ma docs not mean to select the entire area; andThe willinIpMss of DOI to include all noxr6natcd acreage inthe sale-excluding only acreage on which a mrious negativenoxninatian has been received.

Having said that, Iet me go on to point out that axes-wide leasing is achieving theve of the Outer Continental Shelf Lands Act Amendments CCSL,&D to

«pedite exploration of the OGS in order to achieve national econoxnic and energy

l99

200 The OCS Leasing Pogcy cvuf the Polky Process

policy goals, stature national tncurity. reduce dependence on foreign murces, andmaintain a favorable balance in world trade. Area-wide leasing fosters innovativeapproaches to petroleum exploration. It allows companies to gcneratc explorationideas and then bring them to life through nominations on areas perhaps ignored byothers Over the long term, this technique will result in the locationdevelopment of far more hydrocarbon reserves than the tract selection system

%hen incorporated in a five-year leasing schedule, the area-wide ~pstem alsoensures that companies are able co follow promising leads throughout entire subaress,since that acrcagc can be ncsninatcd at the next area sale. Frcquen.t sa3es andstreareLined procedures permit rapid foUow-up of promising exploration areas. Thelarger ths number of opportunities, the greater the chance for significant net

VeriCs arum the mast Cfficient use Of capital aVailable for eXplOratiOn aetiVitiesThe disappointing results of recent exploration work in frontier areas emphaam»

the need tO oOntinue using the arCa-Wide Offering COneept. We estimate that lusthep even with current levels of domestic production wc must find the equivalent ofL8 miUicst barrels of oil and morc than 50 billion cubic feet of natural gas each andevery day. I am convinced that industry stands a much better chance of meeting, orapproaching this objactive if it is allowed to pick its own plays and acreage in apltU111ing area, aa noted above. rather than being restricted to local areas selected. bythe Department of the Interior.

To maintain balance, ensure equal sharing of the rewards and benefits of OCS Mand gas expioratitm. development and production, and encourage the thoughevaluation of all OCS plannhag areas, we believe that a sale schedule should providefor the foUowing.

annual sales in both the western and central Gulf of Mexim

planning areas;

I imnial salas in those planeung areas identified by oil and gascompanies as having higher interest'higher value; and.

triettnial sales in those areas receiving lower interestflowcrvalue ratiay from responding oil and gas companies.

2!

The program should also retain adequate procedural flexibility ao that it can beto reflect mid-course changes in area prospectiveness, due to the infusion of

new exploratory csmegss or tecburiques, the result of future drilling activity, orchanges in ecnnosnie canditiana.

PilR-%~ PLANNQ413 PROCEL%

The Defnrtnent of the Interior's current proposed Outer Coatinental She%FiVe-Year Pregram intraduce» an additinnal procedural step at the beginning Of theplanning process caHed "request for interest, scheduled four months prior to the cailfor information for OCS frontier saleL Industry ia not totaLly convinced. of the meedfor a new "retluort for interest" milestcme. The Minerals Management Service shoat'receiVe infOrmatiOn at the cail fOr information mBestane Sufficient to make Chedecisson to proceed with the scheduled sale. The new mileage is an additiaaalformai step not heren/ore a part of the Five-Year Leasing Program. It may prmre tabe jurat another oplertunity for litigation and delay.

Thc Ofl Lndastry Poslrtort

These "frontier sales" should be included as standaxd sales in the Draft pxrrpoa<Pxogram, rather than being included as "tentative" salaL If the Secretary determin~that these areas should be oa the lease sale schedule {ss hc apparentlydetexrnUied!, thea the presurnptiosi should be that the sales wfQ go forward unleabased ou information received during annual program review' or ~tie planningthere is adequate reason to defer or cancel the sale. That is the way the pnxgrxushould worlr � to reduce, riot increase, uncertainty.

Industry has consistently urged that the Five-Year Leasing Pxogram stree earlyaomnQtation, cooxdination and environmental jLsnssxnents in order to minimize thewithdrawal of acreage from propcled lease sales, after completioa of the FinalEnvironmental Impact Statement FHS!. Unfortunately, events of the psst severalyears show that very large withdrawals axe made by Congress or by the DepartxnexLtof the Interior after publication of the Final Environmental Irapect 5tatexnent.

These large withdrawals nullify the clear aclvantages of the area-wide offeringapproach, especially when the acreage withdrawn represents excellent prarlssta fornew discoveries. Industry urges that the Minerals Management Service continue thepresale consultation efforts under Section 19 of the OCSLKA but that decisirxos onwhich acreage will be included in, or excluded frrxrn a sale be concluded by the tijnthe Final Environmental Impact Staterneat is published.

That gives a general mnm of where indiusory is coming from as to the OuterCantineutal Shelf Five-Year Leasing Progratn. But there axe two other issuesintimately aeeocmted with the Outer Continental Shdf schedule aad which ait;controversial as welL These arL fair xnarket value and resteex estimates.

FhIR hLU9 ET VALUE

Thc argument ovex fair raarket value of Outcr Continental Shelf ~ xageson-and nothing that wiH be said today is likely to change that. The value acceptedby the Department of the Interior for a tract at a. lease sale is, by definition, fairmarket value. That is, the value involves a wiHing buyer. a milling saner, and nocoercion. Fair xnarket value is in no way conceived ta be real value, future value, orrnaximura value. For example, look at the Outcr Continental Shelf leasing history.As af the ead af 1983:

Tracts Offered - 61,043Tracts Leased 7@17Billion Bonus $51

Each af these tracts was purchased at fair market value � xegaxdlrss of theindividual bonus accepterL Not all of them tracts cvex produced a haxel af ail or arruUicai cubic feet MCF! of natural gas, but at the end of 1983 there was an all-timehigh of producing lessee offahc~ grand total rxf 1386 leases. For the sake ofaxguraent, let's say axi addltÃnal 50 leases have produced lxl the pa|st but are no longerproductive. 'Hut wiU give us a total of approximately I>36 leases that are or wereproductive. That's 1336 af 7317 tracts leased or abou.t one fifth �94 percent, to beesact!.

There is now a total of 3.772 tracts still held by industry. So ~5 tracts havebeen surrendered to the Department of the Interior. The value of aQ 3500 of thesetracts combined is sero, today. But not necrsssarily forever � as we wiU note later-What about the 1386 producing leases? Gertaialy mne rxf them will xaake a

p~ ~ r~ policy process

hindezne pxo it orf't for the Les+e La t I wo uld anticipate that the ma~rity wiL15ome, although productive, will never show a profit.

Thexe is an important point to be made here. Industry overaLL ttotal offshore investment can come only froxn the Profit realized froppog~ 'ter np~ Outcr Continental Shelf leaseL The Iavestxnent Uicludes ~1 ~as lease bonus, the additional expenditures for all seisxnic, gravity mme>archealogical and other surveys, the cost of aH exploratory development md O ~hole drilling, Lease rentals and royalties, coraputexs aad computer pm~

sUiel at all levels, transportation, offshore md onshore fattioverhead, taxes and services, etc, All these costs must be recovered fxogenerated by the relatively few profitable leases.

On the federal ide, the, bonus is only thc beginnlilg of the incoxne stream f~moffshore. One Departxnent of the Interior official in 1982 testified that onlypercent of Outer Continental Shelf revenue to the Departxneat of the interior ~!from bonuses, the other 7S percent fxom royalties and taxes. All Leases xeclu-,~ yearlyrenal paymeata as long as the lease is held or until it is incapable of productioninterixn between dia:aemX and production is covered by miaimuxn rents, w~eproducing lasses are geaerating xoyalty. These and other iathe federal lessor a total of about twenty billion dollars of additionaL revenueannual incoxne from these nurses is growing each year.

At the end of 1983, the Department of the Interior had received 54 percent �Sbilliae3 of the $1268 billion attributed to oil and gas produced offshorebefoxe the income taxes lxidustry xnust a.lso pay on the oil aad gas produced

Yet mother souxce of revenue is the ~e of leases once held aad surrendered,occasioned by new ideas or better, moxe advanced technology. So, charges that thegovernment is not ckeuuing fair inarket value offshore axe specious on many couatL

This is another area of current controversy, particularly in light of recentMinerals Management Service reductions of earlier fozeasxts. What's thc fum about?No one believed the earlier figures anyhow.

l~tainly there have been a number of disappointments offshore in thc last fewyears or so The outlook for some axeas has changed for the worse. But let's notpanic. Neither the North Sea, nor Hibernia, offshore Canada, were discovered withthe first few wells drilled in the areas. 'Hm same is true ia the greatest producingprovince in the UXA Most of the prolific discoveries on south Louisiana salt domeswere made only after repeated wildcats-sometimes dozens.

But let's look at anotlier offshore basin leased and drilled before all this huffingand puffing about xeserve estimatea One of the most disappoinbng offshore areas foxthe oil industry was the &Of af Alaska. That area was leased in 1976 and at thetime was probably number one on every oil company's list of promising offshoreareas Two years later a mriee of uxumxead'ul wildcats were drilled. The basin nowis rated number 19. But it still is on the list, and I will bet that no sexious offshoreoperator has written the Gulf of Malta off completely.

A new gecdagic concept may surface. or a new or impmved geologic techniquexnay show industxy where it made its axistakes in the 1970s. When and ifhappens � and it is constantly happening in other ~then the Gulf of Almight again be ccmsidered as one cf our offshore's nMsxt promising basins and +ssecond time industry may be right. My message is that mc should remexnber thatxemrve estimates axe nothing more than guesses based on mhat we thixik we knowand what we think we see today.

T'hc OQ industry P~ 203

~e should assuxne only one thing about regional xcserve estimateL Regardless of~ho ~es them and xegardlee of the system used, they wiU all uitixnately be

wrong. Let s not overreact.Two particularly interesting reports on the OCS proem were presented

y+g~xday; namely social cost and social value. Bc41 are very interesting studies butnot on the same statxstrcal baNs One shOWa slgxLLf icant 03cg8, the Other eVen mOre~~;cant social value from the five-year program. But what I kept thin.bag aboutduring these presentations was ~ billion doliarL That's the federal xevenue or,~~ accurately, the revenue to the American people from the Outer GxntinentalSh if pro~urn through 1983- And the revenue wiU grow year by year in the future.

end of Section Four, we heard Jim Curlin define a successfule>tal Impact Statement EIS! as one that couM pass the scrutiny of theLet me propose that a successful five-year program is one that expedites

d velopment of Chc Outer Continental Shelf-that carries out sales on schedule. Don'Cf prce industry CO COntinuaUy ad just its very eX pensive eXplOratiOn and leasing~~ and budgets. That is not efficient.

F~y, there are Cwo boatlets published by the National Ocean Industry~~~iatiou available for your reading. one ou Axea-%'ide Lesang; and a second onA ~ca~a Five year Offshore Lasring Plan. These wiU give you more information~ rationale on industry's positions

Enw~vnmental Pe~~tivas Q11 QQS L~Qqt poppy

SAKQi C1h&ISSenor torneyNorgral Resources Defense G;srncQ, Inc.New York, New York

I would like to start by saying a few words about the procesa used to develop ournation's offshore oil and gas leasing policy. l then will devote the majn portion ofmy remarks to envircsunental perspectives on 5¹~r Hodel'¹ Draft Prop~Five-Year Outer Continental Shelf OCS! laving Progratrw

A very thorough pnsm now exists for develoIsreat of an OCS leasing pohcy.As a result of the statutory criteria in Section 18 of the OCS Lands Act AaeeWentsand court decisions interpreting that sation, the Elepadtment of the Interior DOGmust be very explicit about the assumptions it makes and must provide a detailedanalysis buttresssng its ml¹~an of a leasing program. There are also severalopportunities for public review and comment. We think thm asp¹m of the processare excellent.

Notwithstanding these points, there are major problems with the proach. Theprincipal problem is the excessive flexibility and discretion that the Secretary hss inutilizing the analysis that emerges from the pnx¹a For example, the DOI canconduct a very detailed quantitative and qualitative analysis of the benefits and costswhich form the basis of a schedule of lease saleL However, the Secretary may mlecta single factor such as industry interest and use ir. to completely rev~ the schedule.WhUe anne level of discretion is dearly necessary, the broad discretion afforded theSecretary under the statute allows him to continuaHy elevate industry interest overenvironmental concernL

A. ssccmd concern about the proem is that there is no action-forcing rnechanlNn toget the Sacv~r to set aside oertain areas for environmental reasons. For othernatural resource programs, including the management of forest service lands orBureau of Land Management lands, the federal agency ss part of its five-yesr orten-year planning pre~ sets aside certain areas to be predicted. The Department afthe Interior under the OCS Lands Act hss no mandate ro do this and hss not done it..e think this is a serlolN problem.The third point I wouM make about the problems with the proach concerns thelack of a requirtnnent that stare r¹xsnmendatious be given serious weight. Section 19of the OCS Linda Act requires serious weighing of state comments at the lease, saleand subsequent stageL %his provision, however, does not apply to the fiv~year OCS

206 The OCS Waking PoQcy and the POGCy PrOCckk

lease sale planning stage nor docs any similar requirement.drawback.

SPECIFIC CSHCKRNS W1TH THE DRAFT PROPOSED ~YEARPROGRAM

I would now like to turn to specific concerns about Secretary ~is DProposed Five-Year Oil and Gaa Leasing Pxagraxn which was issued in March of ]98!The Natural Resources Dcfeme Councxl subxnitted comments on behalf of a n~berenvironmental groups in response to that program in May.

Scope end Poce of Laxstng

new Draft Five Year OCS Leasing Progrant 1 9&6 1 99 I ! has been Portrayedas slowing the pace of offshore oil and gas leasing. The facts indicate othe

Whxle the number of lease sales m each plannmg area outside the can~western Gulf of Mczloo has been reduced to onc every three years at least tw neplanning areas axe pzc@osad for leasing. These are the entire Washington and ~coast and Hops Basin in Alaska The Draft Program proposea xxtorc lease sales ththe Five-Year Pxegxmn adopted by Secretary Watt: 43 sales vs. 41 salesaddition of two new planning axeas also means that the acreage propcsed for 1eaangcxcccCh the 1 billion acres covcxed under the current prograxn.

j~ Pskresee BSCtaeCes

%he recently zebSxsed Vl'A study entitled Oll and Gos Tean k far thArctic and Deepwater �9&5! includes Minerals Management Service revised resourceestimates fox the OCS. 'fhae revised cstunatcs show a 55 percent drop for oil and 44percent drop for gas since 1981.

If thc estimates aze as low as Minerals Management Service MMS! currentlybelieve¹, one ixnportant question is whether the OCS can play a maj>r role in securingour nation's energy future. In our view, theM: lower estimates suggest there is Iem ofa driving need to lease areas of high enw~nxnental motivity or marine productivitythat also are low in hydrotarbon potential. The environmental risk is simply notworth the small amount af oil or gas to bc found.

Beaeede Aacd+s

Becaue of the importance af the economic analysis underlying the DOI's DraftProgram, we asked two ccxsMxmists to review the analysis, Dr. Jea:ph StigiitzProfemr of Economics at Priaceton University and Dr. Michael Kavanaugh Bothcconoxzusta concluded that a proper casnoxnic analysis supports a more controlled rateof OCS leasing than proposed in the Draft Progatxn. lb.ey rejected the area-wideI~ apprcech on the grounds that it leads to inefficient resource development an<prevents attainxmnxt of fair market value by the Federal Government

Both econonusts recommended that OCS planning areas be defined more narrowlyin light of the significant differences in the value of oil and gas resources withinplajtning areas. Such a narrowing of the planning axeas would permit a moreaccurate assessment of the oosts and benefits of proceeding with leasing in

SnVfranmeILXSl perxpeCXiVCI ~ g g ~g Patky 207

A ma JOT COnCCTIL WC have about the Draft pm~fe~g hug a~~a Ocsfor1 Stat' M g~~ent

l ~nor C ~~ ~t u D~~npa ~~t ~~"~~"."�~ "~leasing approach Waa being Carried Over intp th pdificd area-wide

ln Our View, the Inpdjf led" area-Wide ]~ ap ~ hh, ~frpm thc Original area-wide appIxgLch. Fpr exaznple thig ~ f~ ' guishable

sales Schedul~ Csch Of which lxLVQlveg masnVC lease pffc~gzmid-Atlantic, 20 mxllMn acres; sale 89, m the St George lh .SCrcs; Sale 94, eastern Gulf of MCXicp, ~ milliarea-Wide leasing we fall tQ see

We Wollld eke the Department tp CXplain the cpntinuizlg need fprarea-Wide apprpaCh in light Of the

LUldcr the cuITNlt Five-Year prpgzazn Many pf thesl ]Cases are ~ ~Will the offering Of extensiVC aczeagC under the ~t Fi~Y p

ten-yMT

~y~tlnxap~lnvenmnr g of purlin n's~~g ~~pxm~ thcSpeculative acquisition Of leasCS at bargain prices by pil

H'ep$41ry Prm4ske

Another ms/Of lsauC Wc have raised lg the Draft Prppcatd pxpg~es ~~pTQVlsLQn Wh1ch WOLLld allQw the Secretary pf the hlteripz tp adVance Sales in SCVCIalaxcag based On C~,ed cconpznlC Qr geplpgtc cpnditlpng. We ppptne this prQVjaipn andbelieve it should bc deleted fram the prpgranL

First, we question Whether thia pzoviiipn ia Cpnsistcnt With the atatutpryIcquizeznent regaxding Ieviceme tO thc FlVC-Year pzoipatn. Section 18 e! Of the OCSLands Act Amendments prCLVidcs that the Secretary:

mny TCVise and zcappzQVC a pzpipam, at any time, and SuchreViaiOn and IeappXOVal, eXCept in the caw Of a ICVigipn WhichiS nOt aignirlcant, shall be in the same manner as Originallydeveloped.

We believe the DOI may not use the flexibility provision to make significant changesin the progzaxn withput fallOwing the statute'e dizectivL

The pztgram lists eight planning axcas far Which the flcXibiiity prOViaion mightbe utilized The azeag listed include sxeas along the GLlifornia coast, the Flazids Gulfand fpur axeas in Adatks Which centain some af the World'a IichCst fisheries.Advancement of sales in these areas wouM affect planning by oooo ccanmLLnities,thc States and the public and reduce the time aVailable for gathering valuableenvinmmental informatiNL Advancezncnt Of lCagC sales in these areas wpLLM in purView cOnatitute a siiplificant ICVisipn Of the pxpgnLZn. K the sale datca in eightaignifiCant plazlning areae Can be advanced at the Semor'a broad disczetiuLL. dpesn'tthis auiauaky undexcut the value pf the program aa a phlnning dpcalmcnt7

A key i've af enViranmental concern is the deletipn af auaitive axeaa. Wce that the Dol abpuld be able to delete certain areas at the prcgmm stage m that

the battle over inclusion of these areas docs npt have tp bc fought again and again for

29S The OCS LeaAng PoNcy and the PAky Process

each lease sale. Ae statute provides a mechanism by which the prop<am xnay bcrevised to add such areas at a later date if it is necessary.

Under the current leasing program, there has been an accumulation ofinformation from leasing and erploration in most frontier areas of the OCS. Based onthis information, the Department should be able to asses areas of low' energypotential and low industry interest within planning areas. Where these areascoincide with areas of high environmental sensitivity or marine productivity, thcDepartment should consider deleting these portions of planning areas from theFive- Year Prqpam

tu conclusion, thc process utilized to develop thc OCS leasing program fails toassure that environmental and cowed state concerns axe adequately addtcsaccL TheDraft proposed prr~ developed by Secretary Hodel has limited value as a plannijtgtool and fruls to affect a proper balance between rapid resource exploitation andcnvtranxneetal protection

poMcy end r7u. PAky Process

~~o~- and anaj.ysis gives way to legalistic pleading,~t,-~ coxpensus" on the conduct of offshore leasing now ttu

p t Gmtinentai Shelf Lands Act in 1953? More '

Few opponents of the OCS leasing pxogram are uxu tithed enough to publiclyy ~ uncompromisingly opposed to offshore oil and gas developxn~ t

Not a sing]e coastal state, or a major national eavironmenM organization has xnadens propcsed by some would, for practical purposes, hav<

eff~ Industry pleads sixnpfy for "certxunty" and "predictability" in the leasingprocl~ curry political action to push overly ambitious offshc~

~~~ that invite lawsuits, public outrage, and ultimately congressionalRhetoric for environmental protection has becoxne inextrica

>~ven with the less-noble coastal states' quest for "reven~ring." Notice~ were even joined in the progxam for this conference.s ~ve for protecting the environment is unequivocal, but so Is

t ~t to national security and a strong, competitive economy. Little in the~t deb,te over OCS oil and g development ~~ thee ~ We haveg~~y reduced the national debate over the future of our offshore energy

~~ to scrapping over the revenues froxn federal oil arid gss leases and to arguingh ~r a f~~ bureaucnt or a state bureaucrat should regulate the industry. Ia it

the xluestions, to update the debate in light of the nation's future,~ to ~~~g that the position of the United States is changing in a wcr]dundergcsng major ecomxnic and political transitions?

OUR NATIONAI. ENKIGY POLICY AND THE QCS CQNPggiITTIPN

If we are to advance the debate over federal offshore leasing, we must extabliahnew foundation far diN~ the important issues that is based on a broader conceptof national need." Develxrpment of offshore petroleum resources must be debated axa mar component of an integrated national energy supply system, not piecemeal asif OCS resources are the exclusive playtoys of "ocean groupies" or industryfundamentallsoL" There are mveral asIecta to the changing dimensions of offshoreoil and gss exploration and developxnent that should be considered in reformulatingthis debate

TPe Vaftef ~ Pecrelaaa $R fora Is N~ Preoartaas 77aaa CxxrrsatCoadftlcas ladlcate

Energy analysts generally agree that US. petroleum ccamunption will graduallyincrease through the end of the century, while domestic production will rexnainsteady or slightly decrexse. %his trend suggests that imports of petroleum pxxductawill Iilxely increase, adding even more to the $5? billion paid to foreign supphers in1983. Lower gasoline prie have stixnulated consumption, and if use-trends exntinneupward. petroleum impoxts could contribute even more to the trade deficit by theyear 2000.

The Depxatmmt of Energy DOE! projects that the US. can contmue to prcduceabout 8 xnillion barrels per day thxough the year ~it currently pxoducxs S.9mU.Uon-but to do this perpeeudly, we must discover and produce 2.9 &lion bsrxeiaof petroleum each year. Currently, only 46 billion bax.xcls of oil are estimadiscovered and recoverable in all of the OCS after over 30 years of exploration

�A biUxon barraas have already been pumped' lh tixnes morc tband t wad m~ b d- v~ ~ y~ f~ h~ on m ~ d k~g e~ Ofcourse, not all of the petmleum to be discovered is expected to conm fxgxn the fxdexa

The Lost axxrrM ail

OffshOrc, bu't thC prcspo ta fOT gtant dxscOVeriesprudhoe Bay field-are low outside Alaska,

Current excel% WOTld Oil pTOduction hss driven Crude oil ~~ tO I~ ~ $18per barreL LGW' oil prices and a buyers market, particularly With ~ M~ tOVervalued dOllar, have led the public and the gOvernment intO ~e~ ~p'fhe Supply bubble Wiii nOt huXt foreVer, and When it burstaCO+sequellces GUlp bC scvCTC. Inflation dullxlg the past feur years Was not ~hi~as much by skillful economic strategiea, as by greedy petxoleum prOd~

g hard curTCncy Ul a WOTMWldc recession by inereoing Oil prOductk thC bdepressing world energy priceL

Federal policy continuea tO XespORd only tO CriseLample supplies, and budget considerations, the Federal Governm t h ~N im

on energy cOnserva~ dismantled its fOrwsrd-IOOking synthetiCresearch, and is phasing down oil purcheN for the Strategic Petxoleuxn Reserve.Three actitms pxomisC tO mcxoL'e pxlsasxxe fOr accelerated exploratiOn in the QQS andonshore in the futuxe as a cuatuon" in the event of an oil supply disru

The Zerrefexaa I>tdXOXXTy 4 ka The BnOaee Of A<a gCCsuXxsle $P~taexs

Mergers, leVCraged buyouts, and hOStile cOTporate takeOVexs have pls,guei the Oncestable petroleum industry in the last few yeaxL While tbe cause for mergers andtakeovcxs varies axnong transactions, much of the impetus hss been attributed xo theIessimjstic OutIOOk fOr Succcnx and the high cOst Of exploratiOR to diamm andproduce new oiL In a nutshell, it is cheaper and moxa certain to purchase existingreserves than tO take the financial risk of uxuuaccesxful explOTation. WhQe suchCOrpOrate strategies may make btuaxunn eence, they dO nat add a single new additionaldXOp of oil tO the Ratianal xrmrve base.

Firxns threatened with takeovers defend themselves with a number af corporatemaneuvers: stock buy backs, increase debt to make them less attractive, write downssxets, dil~te stocks, etc. A company which successfuHy takes over another oftenmortgages its financial futuxc in order to affoxd the buyout. 'He net result in eithercan is generally the Same � lcm money tO invest in explOration and plant expansiOtxs,and distxsctiXXn Of COrpOXate managexnent from CXplOratiOR and deveIOpment gOalLMerger-takeover trends, ahoy they get out of hand, could amiausly jsopaxdixe futuxeexploration.

Another industry trend that beaxs watching is the erosion of US. refiningcapacity with increases in ixnpOxts Of finished petroleum products. Oil-pxnducingceuntriea axe expanding refinery capacity to take adVantage Of the Valut~5ed byexporting products instead of crude oiL United States production capacity isshrinking as refineries close because an imported barxel of finished petroleumproducts can currently be purchased for about the same price as a barrel of unrefinedcrude oiL This trend parallels those of other US. basic industries that have collapsed:steel, fermaHOys, OOpper. Once the capacity to preen raw materials dixxtineXheesignificantly, options for meeting doroestic demands axe reduced and market strengthshifts to the exporter.

Nxxanc44 Um~xxfxsdss Teeet To CAR I~sstry ~-T~

World oil prices peaked at about $35 per barrel in 1981. They have sincedeclined to abOut $18 per barrel aa a reeult Of OVCrpxnduetiOn. Price instability xnakesOM~te maxUgers cautinus about the future. While the petroleum industry isaccuatOmed to gaging buain~ risks from xsnumptions abOut future energy prices.OPECs pricing and production poIMes add another dimexuxion of uxxcextsinty. For

T~ ~ L ~< Pohcy ~ the PAky Process

ezamp c,ARCO s ~t restructuring, which rcsultcd in liquidation of its caste

facilities, was based on the assumption that oil prices xnay dip <ref itung an$18 ~ barrel in the near future! which has tuxlce occurred.f retslting is a black art but pet role utn econonusts expect that prices

~~~ to dip between 1985 and 1989 but after 1992 prices might rise significanto ~"~5 +r barrel by thc end of thc century. It ls this anticipated rise

1 5 years hence that the of f shore industry must bet its venture ca pi tai on tebly expensive projects m the Arctic.

ted that after taxes and a 10 percent profit the minimum price thatfrom offshore GLUfornia is Q7 per barrel, Gulf of Mexico Q7~ ~

sx Bay g~qufoxt Sea! Q8 pcr barrel. Norton Basin Bering Sea! g8~per barrel, and Savarin Basin Bering Sea! S3050 per barn'.L Today's oil price uf g8>z barrel is not profitable in the mature Gulf of Mexico and California regions n,

n Bay and Norton Basin, and in the Navarin Basin. In the paxlancd ~k r pl ye~ th ~~ is ~tu g on thc ~a"

prospects for tax simplification introduce further uzlcertalntics for investtnentTax txcatxnent of exploration costa, equlpmcnt and resource dcpreciatioe

investment credits, and windfall profits can have a significant effect on thprofitability of invnstmcnts in the frontier deepwater and Arctic regjonL

Sxpec~ns pn Oyj'dere OC ~ G Zeta ross a~ ~ awsred

Reality has caught up with myth. The Axab ail embargo in 1973 pmvidedoffshore industry an opportunity to ixnpress upon governxncnt decision makers theimportant role that offshaxe petmleum resources could play in gaining "energy

The industry did such a good j!b of convincing the Congresn and tbeexecutive branch af this, that the assumption that ' pools of oil and gas lie iathe OCS far the taking becatne a major unspoken cornerstone in US. energy policyIn the cffart to matc a am for going slow on offshore development. environmentalinterests played a similar game by speculating that the development of than Isxgevoluxnes of ail would have the potential for destroying the environment saddisrupting life in the coastal states.

Petroleum gecdqpsts snd engines axe by definition optijxusttL IIowever, thealchemy they rely an for predicting the possible existence of ecxxuomically recoverablepetroleuxn xaluxxss is based as much on intuition as on science. There remains onlyaoe way to determine whether petmleum exists at any single location and that is tadriH Ixonicaily, the offshore drilhng program in the fmntier regina-those outsidethe proven areas of the Gulf of Mexico and southern California-has discovered littleoiL The ind~ outlook haa sauxed in the Atlantic region, the Gulf of Aloha' sadlow'er Gmk Inlet have all but ben abandoned, and disappointments in the BeaufortSea and upper Bering Sea have given the industry reason for paul.

It now appears that the petroleum ramatxees af the OCS will not contribute ssbstantially to the nation's futuxe energy supply as was once thought. In 1983,

production from thc OCS contributed about 1G.7 percent af total 5otnestic oilproduction. The question xexnains, whether the contribu.tion from the OCS will everrise much above this figuxe7

In Maxch 1985, the h6nerals Management Service massessed offshcte oil and gpotential based an exploration completed since 1981, additional geologic infthat has been coIIected, and changes in ecoxamic xecoverability. As a result OCR txiipotential was reduced 55 percent and ssatuxal gas 44 percent. Mast of thc fed~were in the Atlantic and Alaskan frontiers, which were ance ccslidexed thc besxprospects for very large disc~hggjeL

The Last Hurrah' 213

Qy the end of the next five-year oil and gas leasing prc<paxn in 1991, we wiIIg ely know whether the US. can rely on the OC5 for relief f'xoxn increasing>~leum ixnports, or whether national attention must be focused elsewhere to~vide our futuxe energy needs. Failure to discover very large amounts of oil during

give-year period would not suggest that significant quantities of oil and gas willnot be djscovered later.

However, for future national energy plaming, the discovexiea between now and1991 must be tremendously large to offset the pxesuxnption that QCS oil cannot be~ted on to change the national energy picture very much in the future. It would

y ~ delay phuming for the contingenr,y that economically zeeverable OCSpgroleuxn may not be sufficient to offset demand growth. For this reason, Ioxns may~e that the industry should be given latitude in the frontier regions to leuc antiplo~ those tracts with the most promise, because it nay be the offshoxe industry's

~ hurrah. For this xenon, we must msuxe that the right questions are asked, andthat they are properly addressed in the public forum, because the petroleumindustry's last hurrah may well mark the beginning Of the nation's last hurrah.

The Continental Shelf:

BA�puree.; Boundaries and Management

Registrants

John Bouvier

Boz 276, Shore RoadRemanburg, NY 11960

2J5

Alexander, DirectorCenter for Ocean Management StudiesUniversity of Rhode IslandKingston, Rl 02881

Scott AllenLaw of the Sea institute2515 Dole StreetHonolulu, Hl 96822

Sumi ArimaUS. General Amounting OfficeRoom 039, NBOC el11420 Rockville FeeRockville, MD 20852

John ArmstrongThe University of Michigan175 Building 1-AAnn Arbor, MI 48109

John F. Bash

University of Rhode IslandPQ. Boz 145Saunderstown, RI 02874

Martin H. Belak.yAssociate Professor & DirectorUniversity of FloridaCenter for Governmental

ResponsibilityCollege of Law, 230 Bruton~Gaineaville, FL 32611

ard, Deputy DirectorOffice of Ocean & Coastal Resounds

ManagementNOAA3300 Whitehaven Avenue, N.W.Washington, D.C 20235

Brenda J- BoleynCape Cod Ccastal Zone Management

Advisory CommitteeScience DepartmentCape Cod Cotnmunity CollegeWest Barnstahle, MA 02668

John R. Botzum, Jr.Nautilus Press Inc.

1201 National Press BuildingWashington, DZ 20045

Robert Bowen

En>~smmntal Science Pn~University of Maaech~ttsHarbor GunpusBoston, MA 02125

Richard BurroughsCIeography and Marine AffairsUniversity of Rhode hdandKingston, Rl 02881

Bdward C~mn, Policy AdvisorUS, Coast Guard2100 - 2nd Street, S.W.Washington, DZ. 20593

Priscilla A. CapraNautilus Press, Inc.1201 National Press Building

eon, DC. 20045

Staf f AttorneyNatural Resources Deform Council122 Bast 42nd StreetNew York, NY 10017

226

Phillip A. ClarkNational Ocean Industries Association1050 � 17th Street, N,W. 4700Washington, D& 20036

Thomas A. Clingan, Jr.University of Miajru School of LairP.O. Box 8087Coral Gables, FL 33124

Charles S. Colgan, Senior EconomistState of Maine Planning Office184 State StreetAugusta, ME 04333

James W. Curlin, Senior AssociateOffice af Technology AetessmentCongress af the United StatesWashington, D& 20510

Penny A. Dalton student!Sea Grant FellowSenate Committee on Commerce,

Science, and Transportation508 DirlrsenWashington. DC, 20510

Richard F. DelaneyAssistant SecretaryCtestal Zone Managemenr,100 Cambridge StreetPksrton, MA 02202

Piet DeWitt, CbiefOf fshore Environmental AsserstmentMinerals Management Servs»Department of the InteriorWashington, DC. 20240

Carol J. Dryfoos, CoordinatorCenter for Ocean Management StudiesUniversity of Rhode islandKingston, Rl 02881

Frank GableAlien 8t Demurjiar Engineers Bostrm24 Rockland StreetNatick, MA 01760

Diane K. GarnerNautilus ~ Inc.1201 National Prese BuildingWashington, DC. 20045

Martin GlassnerSouthern Connecticut State

UniversityNew Haven, CI' 06515

James W. GoodOregon State University ExtensionCollege of OceanographyCorvallis, OR 97331

EQen GordonOffice of Ocean 8'c CorLstal Resources

ManagementNOAA3300 Whitehaven Street, N.W.Washington, D.C 20235

Walter J. Gray, DirectorDivision of Marine ReeurcesUniversity of Rhode islandNarragansett, RI 02S82

Richard J. GreenwaldGeneral CounselOcean Mining AssociatesBox 2Gloucester Point, VA 23062

Thomas A. GrigalunasResource EoonomicsUniversity of Rhode islandKingston, RI 02881

Lyme Carter HansonExecutive DirectorCenter for Ocean Mansgeznent StudiesUniversity of Rhode IslandKingston, RI 028S1

Milton HeathUnivcrmty of North Carolina at

Chapel HillInstitute of Government 059AKnapp BuildingChapel Hill, NC 27514

Hollis D, HedbergProfessor EmeritusPrinceton UniversityDepartment of Geology11$ Library PlacePrinceton, NJ 08540

217

John J. HeffcznanBethlehem Stccl CorporationMarine Construction GroupBoz 439R02

Soopersevea, PA 18036

CarToli Hill

Richill Marine Corporation3875 Telegraph Avenue A254Ventura, CA 93003

Alezander F. Holsez

Office of Stxategic 4, InternationalMinerals

Minerals Managerncnt ServiceDeparunent of the InteriorMS 642, 12203 Smudge Valley DriveReston. VA 22092

John HoulahanOffice of Ocean & Ccestal Resouxcea

ManagementNOAA

3300 Whitehaven Street, N.W.Washington, D.C 20?35

Brian J. Hoyle, DirectorOffice of Ocean Law 4 PolicyDepartment of State, Rcsxtn 5805AWashington, DZ. 20520

Robert F Hunt

Ezploration CooxdinatozTezaco, U~PQ. Boz 4304800 Fournace Place

Zlellairc, TX 77401

Lawrence Jazett

US. Merchant Marine AcademyDepartment of Marine TranspcetationKings Point, NY 10024-1699

Lawxence Juda

Geography and Marine AffaireUniversity of Rhode IslandKingston, RI 02881

Carolita KsllaurDeputy Assteiata Director for

Of fshore LeasingMinerals Management ServiceUS. Department of the Interior,

Roo-rxt 41018th 4 ~ Streets, N.W.Washington, D.C. 20240

Don Kaah. ProfessorUniversity of OklahomaScience 4 Public Policy Pn~trn610 Elxn StreetNorxnan, OK 73069

Judy A. KellyOffioe of Ocean k Coastal Resources

ManagementNOAA3300 Whitehaven Street, N.W.Washington, DC. 20235

John L KcrmondNational Assn. of State Universities

4 Land Grant CollegesOne Dupont Cixcle, N.W.Washington, D.C. 20036

Lauristcst L KingTczas A k M Sea Grant PmgrarnCollege Staticrn, TX 77843

Susan D. KingCceaco Inc.

P.O. Boz 2197Houston, 'Ix 77252

Thoxnss Kitsos, ~lative AnalystMerchant Marine k: Fisheries Crnt,1339 Lrrttgvrorth Home Office

Building%'sshington, DX. 20515

John A. KnausaGraduate School of OceanographyUniversity of Rhode hlandNarrageupctt. RI 02882

Mazy milan LccpezAsmxtant Attorney GeneralState Qf Locxlslana

Baton Rouge, LA 70804

218

L Poe Leggette, Asshrtant SolicitorOffshore Minerals k, Intn'1 LawDepartment of the InteriorMinerals Management Service18th 8t M Streets, N.W�Rm. 6313Washington, D.C 20240

R�Gary Magnum>n, Din&torCclstal States Organiattion444 North Capitol Stxeet, N.W.

Suite 312%'sshington, D.C 20001

Charles E. McClennenColgate UniversityHamilton, NY 13346

Myxes McDougalSterling Profelror EmeritusYale Law SchoolNew Haven, CT 06520

Alasdair P. McIntyxcDirector of Fisheries ResearchAbexdeen Marine LaboratoryP.O. Box 101, Victoria RoadTorry, AberdeenScotland AB9 8DB

Charles MohanMinerals MrLnagemcnt ScrviccDepartment af the Interior19th k E" StreetsWashington, DW 20006

Donna MoffittN& Office of Marine Affairs417 North Blount StreetRaleigh, NC 27601

Scott W. NixonGraduate School of Oceanography.University of Rhode IslandNaxragansett, Rl 02882

J. D. Nyhart50 Manorial DriveCambridge, MA 02139

Paul Parkerinstitute for Resouxce Management19 Ezchangc PlaceSalt Mm City, UT 84111

Dallas Peck., DirectorUS. Geological Survey201 National CenterReston, VA 22092

Senator Claiborne Pell325 RusseH Senate Office BuildingWashington, D.C. 20510

Richard B, PerryNOAA National Ocean Service13 Duke Street, S.RockviHe, MD 20850

John PeschkeAmerican Petroleum Institute1220 "L" Street, N.W.Washington, D.C. 20005

Robcxt F. Pietrowski, Jr.Brsccwell 4, PattersonSuite 12001825 Eye St:rect, N.W.Washington, D.C. 20006

Rutherford K PlattUnivexsity of MammhusettsAxnherst, MA 01003

Murice O. RinkelState of Florida OCS RepresentativeFlorida Institute of Oceanography830 - 1st Street SouthSt. Petersburg, FL 33701

Stephen RisottoRogers, Golden k, Halpcrn11710 Bowman Green DriveReston, VA 22092

Marshall Rase, ChiefBranch of Economic StudiesMinerals Management ServiceM/S 64312201 Sunrise Valley DriveRestan, VA 22092

Dirk RoscnDeep Ocean Engineering, lnc-1431 Doolittle DriveOakland, CA 94614

2l9

William RaengrenSociology and AnthropojogyUniversity of Rhode bland~gston, K 02881

Peter N. RowcD hutment of GovernmentSmith CollegeWright HalL 214Northatnpton, MA 01063

Robert RowlandUS Geological Survey~ VA 22092

Robert SamuelsDepartment of the LnteriorMinerals Management ServiceOffshore Leasing Division18th 4 ~ Street, N.W. MS 645Washington, D.C 20240

Constance Sathre Student!Sea Grant Mlow

CIA/Panama Canal SubcommitteeWaahington, D.C

Wesley S. SchohMarine 4 Polar Minerals Division

Economics Bureau

Department of StateWashington, D.C 20250

Artnand Silva

Ocean and Civil EngineeringUniversity of Rhode JalandNarragansett, Rl 02882

Maynard SilvaMarine Policy CenterWoods Hole Oceanographic InstituteWoods Hole, MA 02543

Paul R. Stang, ChiefPrcgnLm of Deponent and

PlanxungMinerals Management ServiceM/S 645, Room 252518th k ~ Streets. N.W.Washirqiton, DC. 20240

Wilham L Sullivan, Jr.apartment of State OES/OMS!

Washington, D.C- 20520

Ronald W. Thompson, Jr. student!90 Broad Rock RoadPeace Dale, Rl 02883

Deborah C Trefts student!Sea Orant Ccegzeesional FcQowMerchant Marine 4 Fjsherica

Conunittee575 House Annex liWadungton, D.C, 20515

Frank Welsh12506 Moore Knoll ~

TX 77024

Curtjna MorehLnd-YoongMissjnnppi/Alabama Sca Grant

Ctesortiom

Jackstm State UniversityJackson, MS 39203

Jill M. Zudter

NQAA/OARhtcrnational Activities Staff6010 Executive Boulevard

Rockville, MD 20852