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105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     105-766
_______________________________________________________________________


 
       USE OF SAND, GRAVEL, AND SHELLS OF OUTER CONTINENTAL SHELF

_______________________________________________________________________


October 2, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Young of Alaska, from the Committee on Resources, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3972]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Resources, to whom was referred the bill 
(H.R. 3972) to amend the Outer Continental Shelf Lands Act to 
prohibit the Secretary of the Interior from charging State and 
local government agencies for certain uses of the sand, gravel, 
and shell resources of the outer Continental Shelf, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                          Purpose of the Bill

    The purpose of H.R. 3972 is to amend the Outer Continental 
Shelf Lands Act to prohibit the Secretary of the Interior from 
charging State and local government agencies for certain uses 
of the sand, gravel and shell resources of the Outer 
Continental Shelf.

                  Background and Need for Legislation

    Public Law 103-426 amended the Outer Continental Shelf 
Lands Act regarding the disposition of sand, gravel, and shell 
resources from the outer continental shelf (OCS). This 
amendment was prompted by the need for such materials for beach 
replenishment projects to fight coastal erosion as closer in 
sources of sand (within State waters or onshore) become 
exhausted or lacking proper physical characteristics. The Padre 
Island National Seashore off the Texas Gulf of Mexico coast was 
an example of such immediate need. Because the federal 
government (National Park Service) manages this barrier island, 
the Secretary of the Interior made the OCS sand available for 
disposition without charge to the agency. However, Public Law 
103-426 did not specifically provide for ``fee-less'' resources 
for state and local government projects of a like nature.
    The OCSLA mandates the Secretary receive fair value in 
return for the rights to federal resources on the OCS. A 
negotiation process which the Department of the Interior's 
Minerals Management Service implemented post-Public Law 103-426 
provides that the fees for OCS sand resources for public 
projects will be reduced--but not eliminated altogether--to 
reflect the fraction of federal interest in a beach 
replenishment or other public project. Disposition of sand, 
gravel and shell resources to non-governmental entities remains 
subject to full payment of fair market value.
    Beach erosion on the Atlantic coast remains significant, 
particularly after nor'easter storms such as the two which 
pounded the Delmarva and Virginia/North Carolina coastline 
during the past winter. Congressman Owen Pickett introduced 
H.R. 3972 after the City of Virginia Beach went through the 
negotiated fee process for OCS sand needed to replenish the 
beach in the Sandbridge, Virginia, area. Because the need for 
the replenishment was immediate, the City agreed to pay 
approximately $200,000 to the Minerals Management Service for 
the OCS sand in order to begin dredging last May. The total 
cost of the nourishment project is approximately $8 million, so 
the OCS sand fee is less than 2 percent of project costs. The 
far larger question for state and local governments is the 
availability of funds for U.S. Army Corps of Engineers-
authorized projects for dredging work and placement of the sand 
on the beach, but such authorization and funding falls outside 
of Resources Committee jurisdiction.
    H.R. 3972 simply amends Public Law 103-426 to the OCSLA to 
put state and local government agencies in the same category as 
federal agencies, i.e., able to receive these resources without 
cost for public projects. By way of comparison, disposition of 
sand and gravel resources from onshore public lands is made 
under the Material Sales Act of 1947 [30 U.S.C. 601 et seq.] 
which states: ``any Federal, State or Territorial agency, unit 
or subdivision including municipalities, or any association or 
corporation not organized for profit, to take and removewithout 
charge, materials and resources subject to this subchapter, for uses 
other than for commercial or industrial purposes or resale.'' [Act of 
July 31, 1947, c. 406, section 1, 61 Stat. 681].
    Furthermore, because of the dynamics of geologic processes 
(erosion and sedimentation) operating on our shorelines, the 
Committee views beach nourishment projects which use sand 
resources derived from shoals on the OCS more as a ``rental'' 
of these mineral materials than a ``sale.'' In other words, 
sand, gravel and shell resources disposed under the OCSLA will 
no doubt be returned to the OCS sometime in the future by 
ongoing beach erosional processes. Nevertheless, the Committee 
supports the relatively short-term ``loan'' of this sand 
resource without charge to governmental entities for beach 
nourishment (or other public projects) which have demonstrated 
positive cost-benefit analyses, in the same manner as the 103rd 
Congress supported such disposition and use by the federal 
government.

                            Committee Action

    H.R. 3972 was introduced on May 22, 1998, by Congressman 
Owen Pickett (D-VA). The bill was subsequently cosponsored by 
Congressmen Charles Schumer (D-NY), Michael Castle (R-DE), 
Brian Bilbray (R-CA), and Michael Pappas (R-NJ) and 
Congresswomen Tillie Fowler (R-FL) and Carrie Meek (D-FL). The 
bill was referred to the Committee on Resources, and within the 
Committee to the Subcommittee on Energy and Mineral Resources. 
On July 21, 1998, the Subcommittee held a hearing on H.R. 3972, 
where Mr. Pickett testified on behalf of his legislation. Ms. 
Meyera Oberndorf, Mayor of the City of Virginia Beach, 
Virginia, testified as to the need for prospective relief to 
state and local governments for beach nourishment-type 
projects, and related the history of negotiations with the 
Minerals Management Service over the Sandbridge beach 
replenishment project. Ms. Carol Hartgen, Chief of the 
International Activities and Marine Minerals Division of the 
Minerals Management Service, testified on behalf of the 
Administration. She described the negotiated-fee process by 
which the Minerals Management Service currently calculates the 
fee to be charged for non-federal government agencies today. 
The Administration objects to H.R. 3972 and believes state and 
local governments receive fair treatment under current rules. 
Ms. Hartgen further testified the Secretary of the Interior 
believes that should H.R. 3972 become law, so-called cost 
recovery principles would deem it necessary to charge a fee to 
state and local governments seeking OCS sand, gravel or shell 
resources commensurate with federal administrative costs 
associated with data collection and analysis attributable to 
the non-federal portion of any particular beach nourishment 
project.
    On August 5, 1998, the Committee on Resources met to 
consider H.R. 3972. The Subcommittee on Energy and Mineral 
Resources was discharged from further consideration of the bill 
by unanimous consent. No amendments were offered and the bill 
was ordered favorably reported to the House of Representatives 
by voice vote.

                      Section-by-Section Analysis

    Section 1 of H.R. 3972 amends section 8(k)(2)(B) of the 
Outer Continental Shelf Lands Act by striking the phrase ``an 
agency of the Federal Government'' and substituting ``a 
Federal, State or local government agency'' to have all levels 
of government treated equally regarding payment for OCS sand, 
gravel and shell resources.

            Committee Oversight Findings and Recommendations

    With respect to the requirements of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives, and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee on Resources' oversight findings and 
recommendations are reflected in the body of this report.

                   Constitutional Authority Statement

    Article I, section 8 and Article IV, section 3 of the 
Constitution of the United States grant Congress the authority 
to enact H.R. 3972.

                        Cost of the Legislation

    Clause 7(a) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs which would be incurred in carrying out 
H.R. 3972. However, clause 7(d) of that Rule provides that this 
requirement does not apply when the Committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974.

                     Compliance With House Rule XI

    1. With respect to the requirement of clause 2(l)(3)(B) of 
rule XI of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, H.R. 
3972 does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in tax 
expenditures. According to the Congressional Budget Office, 
enactment of H.R. 3972 would result in a loss of offsetting 
receipts of less than $500,000 annually.
    2. With respect to the requirement of clause 2(l)(3)(D) of 
rule XI of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 3972.
    3. With respect to the requirement of clause 2(l)(3)(C) of 
rule XI of the Rules of the House of Representatives and 
section 403 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 
3972 from the Director of the Congressional Budget Office.

               Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 17, 1998.
Hon. Don Young,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3972, a bill to 
amend the Outer Continental Shelf Lands Act to prohibit the 
Secretary of the Interior from charging state and local 
government agencies for certain uses of the sand, gravel, and 
shell resources of the outer continental shelf.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Kim Cawley 
(for federal costs) and Leo Lex (for the state and local 
impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

H.R. 3972--A bill to amend the Outer Continental Shelf Lands Act to 
        prohibit the Secretary of the Interior from charging state and 
        local government agencies for certain uses of the sand, gravel, 
        and shell resources of the outer continental shelf

    H.R. 3972 would amend the Outer Continental Shelf Lands Act 
to allow state and local government agencies to negotiate 
agreements with the Department of the Interior (DOI) to use 
sand, gravel, and shell resources from the outer continental 
shelf (OCS) for shore and beach restoration programs and other 
federally authorized construction projects without charge. 
Under current law, DOI cannot charge federal agencies for the 
use of these offshore resources, and the bill would extend free 
use of these resources to state and local governments. CBO 
estimates that enacting H.R. 3972 would result in the loss of 
offsetting receipts to the federal government of less than 
$500,000 annually. The bill contains no intergovernmental or 
private-sector mandates as defined in the Unfunded Mandates 
Reform Act.
    Based on information from DOI, CBO estimates that future 
annual receipts from state and local governments using sand, 
gravel, and shell resources from the federally controlled OCS 
would be small, ranging from nothing to a few hundred thousand 
dollars a year. Most projects to replenish beach sand use 
dredged material from nearby state submerged lands rather than 
the OCS; however, there is increasing interest in this 
resource. Proceeds from the sale of this material are recorded 
as offsetting receipts to the Treasury; thus a loss of these 
receipts would increase direct spending. Because the bill would 
affect direct spending, pay-as-you-go procedures would apply, 
but the amounts involved would not be significant. By exempting 
state and local governments from fees that would otherwise be 
charged for sand, gravel, and shell resources, the bill would 
result in some small savings to state and local governments.
    The CBO staff contacts are Kim Cawley (for federal costs) 
and Leo Lex (for the state and local impact). This estimate was 
approved by Paul N. Van de Water, Assistant Director for Budget 
Analysis.

                    Compliance With Public Law 104-4

    H.R. 3972 contains no unfunded mandates.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

           SECTION 8 OF THE OUTER CONTINENTAL SHELF LANDS ACT

  Sec. 8. Leasing of Outer Continental Shelf.--(a) * * *

           *       *       *       *       *       *       *

  (k)(1) * * *
  (2)(A) * * *
  (B) In carrying out a negotiation under this paragraph, the 
Secretary may assess a fee based on an assessment of the value 
of the resources and the public interest served by promoting 
development of the resources. No fee shall be assessed directly 
or indirectly under this subparagraph against [an agency of the 
Federal Government] a Federal, State, or local government 
agency.

           *       *       *       *       *       *       *