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                                                       Calendar No. 443
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-229
_______________________________________________________________________


 
       MOUNT ST. HELENS NATIONAL VOLCANIC MONUMENT COMPLETION ACT

                                _______
                                

                 June 26, 1998.--Ordered to be printed

_______________________________________________________________________


  Mr. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 638]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 638) to provide for the expeditious 
completion of the acquisition of private mineral interests 
within the Mount St. Helens National Volcanic Monument mandated 
by the 1982 Act that established the Monument, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment and recommends that the bill, as amended, do 
pass.
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mount St. Helens National Volcanic 
Monument Completion Act.''

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds that--
          (1) the Act entitled ``An Act to designate the Mount St. 
        Helens National Volcanic Monument in the State of Washington, 
        and for other purposes'', approved August 26, 1982 (96 Stat. 
        301; 16 U.S.C. 431 note), required the United States to acquire 
        all land and interests in land in the Mount St. Helens National 
        Volcanic Monument;
          (2) the Act directed the Secretary of Agriculture to acquire 
        the surface interests and the mineral and geothermal interests 
        by separate exchanges and expressed the sense of Congress that 
        the exchanges be completed by November 24, 1982, and August 26, 
        1983, respectively; and
          (3) the surface interests exchange was consummated timely, 
        but the exchange of all mineral and geothermal interests has 
        not yet been completed a decade and a half after the Act's 
        enactment.
    (b) Purpose.--The purpose of this Act is to provide for the 
expeditious completion of the previously mandated Federal acquisition 
of private mineral and geothermal interests within the Mount St. Helens 
National Volcanic Monument.

SEC. 3. ACQUISITION OF MINERAL RIGHTS WITHIN THE NATIONAL VOLCANIC 
                    MONUMENT.

    Section 3 of the Act entitled ``An Act to designate the Mount St. 
Helens National Volcanic Monument in the State of Washington, and for 
other purposes'', approved August 26, 1982 (96 Stat. 302; 16 U.S.C. 431 
note), is amended--
          (1) in subsection (a), by striking ``and except that the 
        Secretary may acquire mineral and geothermal interests only by 
        exchange. It is the sense of the Congress that in the case of 
        mineral and geothermal interests such exchanges should be 
        completed within one year after the date of enactment of this 
        Act''; and
          (2) by adding at the end the following:
    (g) Expeditious Completion of Mineral and Geothermal Interests.
          ``(1) Definition of holder.--In this subsection, the term 
        `holder' means a company, or its successor, referred to in 
        subsection (c).
          ``(2) In general.--Within the period described in paragraph 
        (7), the Secretary of the Interior shall acquire by exchange 
        the mineral and geothermal interests in the Monument of each 
        holder.
          ``(3) Monetary credits.--
                  ``(A) Issuance.--In exchange for the mineral and 
                geothermal interests acquired by the Secretary of the 
                Interior from a holder under paragraph (2), the 
                Secretary of the Interior shall issue to the holder 
                monetary credits that may be exercised by the holder 
                for payment of--
                          ``(i) not more than 50 percent of the bonus 
                        or other payments made by successful bidders in 
                        any sales of mineral, oil, gas, or geothermal 
                        leases under the Mineral Leasing Act (30 U.S.C. 
                        181 et seq.), the Outer Continental Shelf Lands 
                        Act (43 U.S.C. 1331 et seq.), or the Geothermal 
                        Steam Act of 1970 (30 U.S.C. 1001 et seq.); or
                          ``(ii) not more than 50 percent of any 
                        royalty, rental, or advance royalty payment 
                        made to the United States to maintain any 
                        mineral, oil, or gas, or geothermal lease 
                        issued under the Acts listed in clause (i).
                  ``(B) Value of Credits.--The credits issued under 
                subparagraph (A) shall equal the fair market value of 
                all mineral and geothermal interests conveyed in the 
                exchange as determined under paragraph (4)
                  ``(C) Acceptance of credits.--The Secretary of the 
                Interior shall accept credits issued under subparagraph 
                (A) in the same manner as cash for the payments 
                described in subparagraph (A). The use and exercise of 
                the credits shall be subject to the laws (including 
                regulations) governing such payments, to the extent the 
                laws are consistent with the subsection.
                  ``(D) Treatment of credits for distribution to 
                states.--All amounts in the form of credits accepted by 
                the Secretary of the Interior under subparagraph (C) 
                for the payments described in subparagraph (A) shall be 
                considered to be money received for the purpose of 
                section 35 of the Mineral Leasing Act (30 U.S.C. 191) 
                and section 20 of the Geothermal Steam Act of 1970 (30 
                U.S.C. 1019).
          ``(4) Valuation of interests.--
                  ``(A) In general.--Not later than 120 days after the 
                date of enactment of this subsection, the mineral and 
                geothermal interests to be conveyed by each holder in 
                the exchanges required by paragraph (2) shall be valued 
                by one of the following methods, as selected by the 
                Secretary of the Interior.
                          (i) Use of appraisal report.--The 1982 value 
                        established by the report of the third party 
                        appraisal completed on September 11, 1991, 
                        shall be adjusted toreflect changes in the 
consumer price index for all urban consumers published by the 
Department of Labor as of the date on which the exchange is to be 
consummated pursuant to paragraph (7), or such other value as shall be 
mutually agreed to by the Secretary of the Interior and the holders not 
later than 30 days after the date of enactment of this subsection.
                          ``(ii) New appraisal.--
                                  ``(I) Selection of appraiser.--Not 
                                later than 30 days after the date of 
                                enactment of this subsection, the 
                                Secretary of the Interior and the 
                                holders shall mutually agree on the 
                                selection of a qualified appraiser to 
                                conduct an appraisal of the mineral and 
                                geothermal interests.
                                  ``(II) No agreement on appraiser.--If 
                                no appraiser is mutually agreed to 
                                under subclause (I), not later than 60 
                                days after the date of enactment of 
                                this subsection--
                                          ``(aa) the Secretary of the 
                                        Interior and the holders shall 
                                        each designate a qualified 
                                        appraiser; and
                                          ``(bb) the two designated 
                                        appraisers shall select a third 
                                        qualified appraiser to perform 
                                        the appraisal with the advice 
                                        and assistance of the 
                                        designated appraisers and in 
                                        accordance with the 
                                        instructions that were mutually 
                                        agreed on for the September 11, 
                                        1991, third part appraisal.
                                  ``(III) Date of valuation.--The value 
                                of the mineral and geothermal interests 
                                to be conveyed by each holder shall be 
                                calculated as of August 26, 1982, 
                                adjusted to reflect changes in the 
                                consumer price index for all urban 
                                consumers published by the Department 
                                of Labor as of the date on which the 
                                exchange is to be consummated pursuant 
                                to paragraph (7).
                                  ``(IV) Costs.--The Secretary of the 
                                Interior shall bear the costs of the 
                                process established by this clause.
                  ``(B) Timely appraisal report.--The appraisal report 
                resulting from subparagraph (A) shall be presented to 
                the Secretary of the Interior timely to permit the 
                Secretary of the Interior to determine the value of the 
                mineral and geothermal interests to be conveyed by each 
                holder. Not later than the date that is 180 days after 
                the date of enactment of this subsection, the Secretary 
                of the Interior shall notify each holder of the 
                determination.
                  ``(C) Failure of process.--If the Secretary of the 
                Interior fails to make a determination under 
                subparagraph (B) by the date that is 180 days after the 
                date of enactment of this subsection or if any holder 
                does not agree with the value determined by the 
                Secretary of the Interior under subparagraph (B), one 
                or more of the holders may petition the United States 
                Court of Federal Claims for a determination of the 
                value of the mineral and geothermal interest to be 
                conveyed by the holders in accordance with this 
                subsection. Subject to the right of appeal, a 
                determination by the Court shall be binding for 
                purposes of this subsection on all parties.
          ``(5) Exchange account.--
                  ``(A) In general.--Notwithstanding any other 
                provision of law, not later than 30 days after the 
                completion of each exchange with a holder required by 
                this subsection, the Secretary of the Interior shall 
                establish, with the Minerals Management Service of the 
                Department of the Interior, an exchange account for the 
                holder for monetary credits described in paragraph (3).
                  ``(B) Initial balance.--The initial balance of 
                credits in each holder's account shall be equal to the 
                value as determined under paragraph (4) of the mineral 
                and geothermal interest conveyed by the holder in the 
                exchange.
                  ``(C) use of credits.--The balance of credits in a 
                holder's account shall be available to the holder or 
                its assigns for the purposes of paragraph (3). The 
                Secretary of the Interior shall adjust the balance of 
                credits in the account to reflect payments made 
                pursuant to paragraph (3).
                  ``(D) Transfer of credits.--
                          ``(i) In general.--A holder may transfer or 
                        sell any credits in the holder's account to 
                        another person.
                          ``(ii) Use of transferred credits.--Credits 
                        transferred under clause (i) may be used in 
                        accordance with this subsection only by a 
                        person that is qualified to bid on, or that 
                        holds, a mineral, oil, or gas lease under the 
                        Mineral Leasing Act (30 U.S.C. 181 et seq.), 
                        the Outer Continental Shelf Lands Act (43 
                        U.S.C. 1331 et seq.), or the Geothermal Steam 
                        Act of 1970 (30 U.S.C. 1001 et seq.).
                          ``(iii) Notifications.--A holder shall notify 
                        the Secretary of the Interior of any transfer 
                        or sale under this subparagraph promptly after 
                        the transfer or sale.
                  ``(E) Time limit on use of credits.--On the date that 
                is 5 years after an account is created under 
                subparagraph (A), the Secretary of the Interior shall 
                terminate the account and any remaining credits in the 
                account shall become unusable.
          ``(6) Title to interests.--On the date of the establishment 
        of an exchange account for a holder under paragraph (5)(A), 
        title to any miner and geothermal interest that are held by the 
        holder and are to be acquired by the Secretary of the Interior 
        under paragraph (2) shall transfer to the United States.
          ``(7) Completion of exchanges.--The Secretary of the Interior 
        shall complete the exchanges under paragraph (2) not later than 
        180 days after the date of enactment of this subsection or as 
        soon as practicable after completion of the process described 
        in paragraph (4)(C).''.

                         Purpose of the Measure

    The purpose of S. 638 is to provide for the expeditious 
completion of the previously mandated Federal acquisition of 
private mineral and geothermal interests within the boundaries 
of Mount St. Helens National Volcanic Monument.

                          Background and Need

    Public Law 97-243 established the 113,000-acre Mount St. 
Helens National Volcanic Monument in 1982. Section 3 of that 
Act directed the Secretary of Agriculture to acquire all lands 
and interests in lands within the boundaries of the Monument, 
except that mineral and geothermal interests were the only 
authorized to be acquired by exchange. The bill also included a 
sense of the Congress provision that mineral and geothermal 
exchanges should be completed within one year after the date of 
enactment. All inholdings within the monument are owned by 
Weyerhaeuser and Burlington Northern (now known as Burlington 
Resources Oil and Gas Company). To date, the Forest Service has 
acquired all of the surface estate within the Monument 
boundaries. In addition, approximately 27,000 acres of 
subsurface estate was acquired from the companies in 1991.
    S. 638 addresses the approximately 10,750 acres of 
subsurface estate within the Monument remaining to be acquired. 
Although Weyerhaeuser and Burlington Resources Oil and Gas 
Company [the companies] have supported exchanging their 
subsurface interests and the Forest Service is directed under 
the Monument's enabling legislation to acquire them, and 
despite extensive negotiations over the past 14 years, the 
parties have not been able to agree on the value of the 
remaining interests.
    In order to resolve all acquisition issues, S. 638 amends 
the Monument's enabling Act to eliminate the requirement that 
subsurface interests be acquired only by exchange. In lieu of 
exchanging mineral and geothermal interests, it requires the 
Secretary of the Interior to issue monetary credits to the 
companies when the subsurface interests are acquired. The 
companies would be allowed to use the credits for up to 50 
percent of bonus bids or other payments made for mineral, 
geothermal, or off-shore oil and gas leases, and up to 50 
percent of royalty payments. The companies would be authorized 
to transfer their credits to other qualified lessees, and all 
credits must be used within 5 years after the account is 
created.

                          Legislative History

    S. 638 was introduced by Senators Gorton and Murray on 
April 23, 1997 and was referred to the Committee on Energy and 
Natural Resources. The Subcommittee on National Parts, Historic 
Preservation, and Recreation held a hearing on October 29, 
1997.
    At its business meeting on May 13, 1998, the Committee on 
Energy and Natural Resources ordered S. 638, as amended, 
favorably reported.

            Committee Recommendation and Tabulation of Votes

    The Committee on Energy and Natural Resources, in open 
business session on May 13, 1998, by a unanimous vote of a 
quorum present, recommends that the Senate pass S. 638, if 
amended as described herein. The rollcall vote on reporting the 
measure was 20 yeas, 0 nays, as follows:
        Yeas                          Nays
Mr. Murkowski
Mr. Domenici
Mr. Nickles\1\
Mr. Craig
Mr. Campbell
Mr. Thomas
Mr. Kyl
Mr. Grams\1\
Mr. Smith
Mr. Gorton
Mr. Burns\1\
Mr. Bumpers
Mr. Ford
Mr. Bingaman
Mr. Akaka
Mr. Dorgan\1\
Mr. Graham\1\
Mr. Wyden
Ms. Landrieu

    \1\ Indicates voted by proxy.

                          Committee Amendment

    During the consideration of S. 638, the Committee adopted 
anamendment in the nature of a substitute, which made a number 
of clarifying and technical amendments to the bill as introduced.
    The amendment also added a new subsection 3(d) which allows 
the Secretary of the Interior to consider payments received in 
the form of credits as money for the purpose of section 35 of 
the Mineral Leasing Act (30 U.S.C. 191) and section 20 of the 
Geothermal Steam Act of 1970 (30 U.S.C. 1019). The amendment 
further directs the Secretary of the Interior, within 180 days 
from the date of the enactment of this Act, to complete a 
timely appraisal report and to notify the subsurface holders of 
the appraised values.
    The amendment also directs the Secretary of the Interior to 
establish, within the Minerals Management Service, an exchange 
account and an accounting system for the holder for monetary 
credits for a period of five years, at which time the account 
will be terminated.
    Finally, the amendment provides that upon the establishment 
of an exchange account for a holder of subsurface rights, title 
to any mineral and or geothermal interest shall be transferred 
to the United States.
    The amendment is described in detail in the section-by-
section analysis, below.

                      Section-by-Section Analysis

    Section 1 designates the bill's short title as the ``Mount 
St. Helens National Volcanic Monument Completion Act''.
    Section 2 provides Congressional findings for, and 
establishes the purpose of the bill. The findings are: (1) the 
1982 enabling Act for the Monument required Federal acquisition 
of all private inholdings within the Monument boundaries; (2) 
Congress intended that the private surface estate and private 
mineral interests to be acquired by separate exchanges to be 
undertaken sequentially three months and a year after enactment 
(by November 24, 1982), for the surface estate and August 26, 
1983, for the mineral interests; and (3) the surface estate 
exchange did occur in a timely manner but all mineral interests 
have not been acquired fourteen years after the designated 
deadline.
    Subsection (b) states that the purpose of the bill is ``to 
provide for the expeditious completion of the previously 
mandated Federal acquisition'' of the Monument's private 
mineral and geothermal interests.
    Section 3 amends the Monument's enabling Act in order to 
complete the acquisition of the private mineral and geothermal 
interests within the Monument.
    Section 3(1) eliminates the requirement in the enabling Act 
that the private mineral and geothermal interests may be 
acquired only by exchange.
    Section 3(2) adds a new subsection (g) to section 3 of the 
Monument's enabling Act which requires and establishes 
procedures for acquisition of the remaining privately owned 
mineral and geothermal interests.
    Paragraphs (1) and (2) of the enabling Act's new section 
3(g) reiterates the enabling Act's previous mandate to acquire, 
by exchange, the private mineral and geothermal interests 
within the Monument held by the companies.
    Paragraph (2) also states that the exchange will be 
conducted by the Secretary of the Interior rather than the 
Secretary of Agriculture as provided in the Monument's enabling 
Act.
    Paragraph (3)(A) establishes how the mineral interests will 
be acquired. In recognition of the difficulty previously 
encountered by the Federal Government and the companies in 
locating sufficient, suitable Federal mineral interests to 
exchange for the private mineral and geothermal interests, 
paragraph (3) substitutes the issuance of monetary credits for 
subsurface mineral and geothermal interests as the exchange 
medium for the Federal side of the exchange. The provision also 
allows the Secretary of the Interior to consider payments 
received in the form of credits as money for the purpose of 
section 35 of the Mineral Leasing Act (30 U.S.C. 191) and 
section 20 of the Geothermal Steam Act of 1970 (30 U.S.C. 
1019).
    Paragraph (3)(A) also specifies how the companies may use 
the Federal monetary credits they receive in exchange for their 
mineral and geothermal interests. Whenever the companies are 
the winning bidders on Federal leases for coal, oil, gas, or 
other minerals under the Mineral Leasing Act of 1920; oil or 
gas under the Outer Continental Shelf Lands Act; or, geothermal 
steam under the Geothermal Steam Act of 1920, they can submit 
the credits in payment of up to 50% of the bonus bids or other 
payments required to acquire the leases. If the Companies own 
any such leases, they may also pay up to 50% of the payments 
necessary to maintain them including royalty, rental, and 
advance royalty payments.
    Paragraph (3)(B) establishes the value of the credits and 
directs that exchanges must be for equal value.
    Paragraph (3)(D) allows the Secretary of the Interior to 
consider payments received in the form of credits as money for 
the purpose of section 35 of the Mineral Leasing Act (30 U.S.C. 
191) and section 20 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1019).
    Paragraph (4) establishes alternative procedures for 
determining the fair market value of the private mineral and 
geothermal interests to be acquired.
    The first procedure is to use the third party appraisal of 
the mineral and geothermal interests conducted for the Federal 
Government and the companies in 1991 and adjust the 1991 values 
to current dollars, or to adopt any other value agreeable to 
both the Secretary of the Interior and the companies. If the 
Secretary and the companies cannot agree to use the 1991 
appraisal or cannot agree on a value by other means the 
alternative procedure would be exercised.
    The alternative procedure would require that both parties 
agree on an appraiser, or each party could appoint their own 
preferred appraiser; the two appointed appraisers would select 
a third appraiser, who would perform the mineral and geothermal 
evaluations. If this alternative is exercised the appraisal 
must be conducted in accordance with the appraisal instructions 
which were mutually agreed upon by both parties for the 1991 
appraisal; and the date of the appraisal would be August 26, 
1982, adjusted for inflation to current dollars. This provision 
also requires the Secretary of the Interior to pay the cost of 
a new appraisal if the third party appraisal alternative is 
exercised.
    Paragraph (4) establishes deadlines for the completion of 
the appraisal and a process for resolving any dispute over 
value arising from the appraisal. The provision requires that 
the first procedure of updating the 1991 appraisal or mutually 
agreeing to a value be completed within 6 months after 
enactment of S. 638. The provision sets an identical 6 month 
deadline for the alternative procedure. If the alternative 
appraisal procedure is not completed by the deadline; or, if 
one or both companies disagree with the value of the mineral 
and geothermal interests established by the Secretary of the 
Interior, the Companies are authorized to petition the United 
States Court of Federal Claims for a determination of the value 
of the mineral and geothermal interest to be conveyed.
    Paragraph (5) provides the procedures for use of the 
monetary credits. The provision requires the Secretary of the 
Interior, through the Minerals management Service, to establish 
an exchange account for each company within 30 days after the 
completion of an exchange, from which the company may draw 
credits. Paragraph (5) also permits the companies to transfer 
or sell their credits to other parties who, if they are 
qualified to hold Federal mineral or geothermal leases, may use 
the credits to make lease acquisition or maintenance payments. 
Finally, the paragraph limits the use of credits within five 
years of the establishment of the exchange accounts. Any unused 
credits are to be terminated at that time.
    Paragraph (6) requires that both the transfer of title for 
a company's mineral or geothermal interests to the Federal 
Government and the establishment of an exchange account are to 
occur on the same date.
    Paragraph (7) requires that the exchange process be 
completed within 6 months after the date of enactment or as 
soon as possible thereafter if the value determination is made 
by the United States Court of Federal Claims.

                   Cost and Budgetary Considerations

    The following estimate of this measure has been provided by 
the Congressional Budget Office:
                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 5, 1998.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 638, the Mount St. 
Helens National Volcanic Monument Completion Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Victoria V. 
Heid.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

S. 638--Mount St. Helens National Volcanic Monument Completion Act

    Summary: S. 638 would specify a process for valuing mineral 
and geothermal interests within the Mount St. Helens National 
Volcanic Monument and require the Secretary of the Interior to 
acquire such interests using monetary credits.
    CBO estimates that enacting S. 638 would result in a net 
increase in direct spending of about $10 million over the 1999-
2003 period. Therefore, pay-as-you-go procedures would apply. 
S. 638 contains no intergovernmental or private-sector mandates 
as defined in the Unfunded Mandates Reform Act (UMRA) and would 
impose no costs on state, local, or tribal governments.
    Description of the bill's major provisions: The Secretary 
of Agriculture manages the Mount St. Helens National Volcanic 
Monument within the boundaries of the Gifford Pinchot National 
Forest. Under current law (Public Law 97-243), the Secretary 
may acquire mineral and geothermal interests within the 
boundary of the monument only by exchange. For several years 
the Forest Service, in cooperation with the Bureau of Land 
Management (in the Department of the Interior), has negotiated 
with the owners of about 10,750 acres of subsurface estate 
within the monument to complete exchanges, but the parties have 
not yet agreed on the value of the subsurface interests.
    S. 638 would modify the methods used by the government to 
value and acquire these interests. It would specify that the 
valuation be based on market conditions as of August 26, 1982 
(the year the monument was established), adjusted for 
inflation. The agencies could base that valuation on either an 
exiting third-party appraisal done in 1991 or a new appraisal. 
If the Secretary of the Interior does not determine the value 
within 180 days of enactment, or if any holder of interests 
disagrees with the value determined by the Secretary, then a 
binding determination would be made by the United States Court 
of Federal Claims.
    Once value is determined, S. 638 would require the 
Secretary of the Interior to pay for the mineral and geothermal 
interests by issuing monetary credits, rather than by exchange 
as under current law. The monetary credits could be used over a 
five-year period to pay bonuses, royalties, or rent for 
mineral, oil and gas, or geothermal leases on federal land, and 
would be transferable. S. 638 provides that credits accepted by 
the Secretary of the Interior for such lease payments be 
considered as money received for the purpose of calculating 
payments to states.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 638 is shown in the following table. The 
costs of this legislation fall within budget functions 300 
(natural resources and environment) and 800 (general 
government).

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                       1999     2000     2001     2002     2003 
----------------------------------------------------------------------------------------------------------------
                                 DIRECT SPENDING (INCLUDING OFFSETTING RECEIPTS)                                
                                                                                                                
Spending under current law:                                                                                     
    Estimated budget authority.....................................        0      \1\      \1\      \1\      \1\
    Estimated outlays..............................................        0      \1\      \1\      \1\      \1\
Proposed changes:                                                                                               
    Estimated budget authority.....................................       10      \2\      \2\      \2\      \2\
    Estimated outlays..............................................       10      \2\      \2\      \2\      \2\
Spending under S. 638:                                                                                          
    Estimated budget authority.....................................       10      \0\      \0\      \0\      \0\
    Estimated outlays..............................................       10      \0\      \0\      \0\      \0\
----------------------------------------------------------------------------------------------------------------
\1\ Costs less than $500,000.                                                                                   
\2\ Savings less than $500,000.                                                                                 
Note:--Implementing S. 638 also would increase discretionary spending in 1999, but we estimate the cost would be
  insignificant.                                                                                                

    Basis of estimate: CBO estimates that enacting S. 638 would 
result in a net increase in direct spending of about $10 
million over the 1999-2003 period. We estimate that any 
increase in spending subject to appropriation would be 
insignificant.
    Direct spending: Under current law, the Forest Service has 
appraised the subsurface interests based on current market 
conditions (rather than on their value in 1982, when the 
monument was created) and estimates them to have a fair market 
value ranging from about $2 million to about $4 million. CBO 
assumes that, under current law, the federal government would 
likely acquire these interests through an exchange in which the 
private parties would obtain the rights to other federal 
property of equal value. From a budgetary perspective, such an 
exchange would result in a loss of offsetting receipts from 
royalties and rental payments that otherwise would have been 
collected from leasing the federal interests offered in the 
exchange. Such income usually represents only a fraction of the 
market value, and is collected over the life of the project, 
which can span 10 years or more. We estimate that lost income 
to the government under current law would total less than $1 
million over the 1999-2003 period, net of payments to states.
    Under this bill, the federal government would award 
monetary credits, which are equivalent to cash, for the full 
market value of the property. CBO estimates that, by specifying 
that the value for the interests be determined as of 1982 (and 
adjusted for inflation), S. 638 would raise the cost of the 
property to be acquired. Based on a range of estimated 1982 
values from the private interest holders, and adjusted for 
inflation as provided in the bill, CBO estimates that the 
private interest holders would receive monetary credits valued 
at about $10 million.
    The value of monetary credits counts as direct spending in 
the year they are issued and as receipts in the years in which 
they are redeemed. If the credits displace cash payments that 
otherwise would have been received by the government, the use 
of the credits results in a corresponding loss of receipts. For 
the purposes of this estimate, we assume that the credits would 
be issued in fiscal year 1999 and redeemed within five years. 
CBO estimates that such credits would displace an equal amount 
of cash payments that private parties otherwise would have made 
for federal leases. Hence, we estimate that implementing this 
bill would increase direct spending by $10 million in 1999 and 
would have no significant budgetary impact in subsequent years.
    Spending subject to appropriation: S. 638 provides that the 
Secretary of the Interior pay for any new appraisal. Based on 
information from the Forest Service, CBO estimates that 
conducting a reappraisal would cost less than $50,000 in fiscal 
year 1999.
    Pay-as-you-go considerations: Section 252 of the Balanced 
Budget and Emergency Deficit Control Act sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. The net changes in outlays that are subject to pay-
as-you-go procedures are shown in the following table. For the 
purposes of enforcing pay-as-you-go procedures, only the 
effects in the current year, the budget year, and the 
succeeding four years are counted. CBO estimates that enacting 
S. 638 would result in a net increase in direct spending 
totaling about $10 million over the 1999-2008 period.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                      1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................  .....     10  .....  .....  .....  .....  .....  .....  .....  .....  .....
Changes in receipts................                                                                             
(10)Not applicable                                                                                              
----------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector: S. 638 contains no 
intergovernmental or private-sector mandates as defined in UMRA 
and would impose no costs on state, local, or tribal 
governments.
    Estimate prepared by: Victoria V. Heid.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 638. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from 
enactment of S. 638, as ordered reported.

                        Executive Communications

    On April 30, 1998, the Committee on Energy and Natural 
Resources requested legislative reports from the Department of 
the Interior and the Office of Management and Budget setting 
forth Executive agency recommendations on S. 638. These reports 
had not been received at the time the report on S. 638 was 
filed. When these reports become available, the Chairman will 
request that they be printed in the Congressional Record for 
the advice of the Senate. The testimony of the Department of 
the Interior at the Subcommittee hearing follows:

  Testimony of Robert Anderson, Deputy Assistant Director, Minerals, 
       Realty, and Resource Protection, Bureau of Land Management

    Mister Chairman and members of the Committee, I appreciate 
the opportunity to appear here today to discuss S. 638, a bill 
to provide for acquisition of private mineral rights held by 
Burlington Northern Incorporated and the Weyerhaeuser Company 
(the companies) within the Mount St. Helens National Volcanic 
Monument.
    In 1982, the Congress passed and the President signed into 
law Public Law 97-243, an Act to designate the Mount St. Helens 
National Volcanic Monument. This Act, among other things, 
directed the Secretary of Agriculture to acquire all of the 
privately held lands within the newly created monument, 
including the mineral estate. The Forest Service informs me 
that significant progress has been made toward meeting that 
objective. With regard to Weyerhaeuser and Burlington Northern, 
the entire surface estate and over seventy percent of the 
mineral estate previously held by the companies has been 
acquired through exchange. This leaves approximately 10,750 
acres of the mineral estate held by these companies at issue. 
The BLM and U.S. Forest Service have had discussions with the 
Weyerhaeuser Company and Burlington Northern Incorporated, but 
have been unable to come to a mutually satisfactory agreement 
to acquire these rights. The primary issue is the valuation of 
this mineral estate acreage. S. 638 is intended to resolve this 
impasse between the Federal Government and the companies. 
However, S. 638 will not resolve valuation issues with regard 
to the five other private inholdings covering five hundred 
ninety five acres within the monument.
    While the Administration would like to see the issues 
resolved, we oppose S. 638 for several reasons. The bill:
          Fails to recognize the complexity of assigning values 
        to mineral resources, particularly geothermal 
        resources;
          Establishes a credit system for Federal payment and 
        involves the Departments of the Interior and Treasury 
        in implementation of the acquisition of resources 
        beneath lands administered by the U.S. Forest Service, 
        and
          Sets an unrealistic time frame for completion of a 
        project which has been a source of disagreement for 
        eleven years.
    I would like to briefly discuss each of these concerns.


                               valuation


    This bill requires the Government to bear the full costs of 
a reappraisal, stipulates that any reappraisal be completed 
based on the same methodology which has already been rejected 
by both the BLM and the Forest Service, and specifies that the 
date of valuation for the mineral estate is 1982. This 1982 
value would then be adjusted to reflect changes in the consumer 
price index. We feel this is inconsistent with Department of 
Justice instructions for federal appraisals.
    Weyerhaeuser and Burlington Resources have stated their 
belief that the value of their remaining mineral estate 
consists primary of geothermal resources. The companies' latest 
estimate of value establishes a range between $6,420,000 and 
$10,746,000. This value is based primarily on a third party 
appraisal, paid for by the Forest Service and the companies, 
completed in September of 1991. That appraisal failed to meet 
Federal Appraisal Standards and could not be utilized as a 
basis of settlement. Neither the BLM nor the Forest Service, 
which administers the Monument, have accepted this appraisal 
because of the very speculative nature of the information used 
to arrive at a final value. In particular, this appraisal was 
based on a Discounted Cash Flow methodology, which assumed 
economic geothermal resources exist at the site. This appraisal 
did not correctly address the scientific probability of a 
viable geothermal resource based on a favorable geologic 
environment, nor did it reflect prices paid for similar 
interests in the market place.
    Appraisals based on speculation cannot be defended. In 
fact, Department of Justice instructions prohibit the use of 
speculative data for assigning value in Federal appraisals. 
Significant technical and scientific information exists to show 
that the area in question within the Mount St. Helens National 
Volcanic Monument lacks several geologic features normally 
associated with a viable source of geothermal energy. In 
particular, U.S. Geological Survey investigations of geothermal 
resource potential conducted before and subsequent to the 1980 
eruption of the mountain conclude that no convincing evidence 
is available of a high temperature geothermal reservoir beneath 
Mt. St. Helens. The Administration believes that these facts 
establish a level of speculation that prohibits the use of a 
discounted cash flow methodology in assigning a value to the 
mineral estate. Such an appraisal would not be in accordance 
with the Uniform Appraisal Standards for Federal Land 
Acquisition and the Uniform Standards of Professional Appraisal 
Practice.
    This is not to say that the mineral estate is without 
value. Our preferred approach is to determine this value with 
an appraisal based on comparable sales of similar properties. 
To this end, the Forest Service, assisted by data supplied by 
both the BLM and the companies, is completing an appraisal of 
the property interest based upon potential comparable sales and 
other technical data to arrive at a current estimate of value 
for the mineral estate at issue. This reappraisal is scheduled 
for completion in mid to late November. Unfortunately, until 
this reappraisal is complete, I am unable to comment on any 
specific value, or range of values, that may be assigned to 
these holdings. We have, however, been informed that the entire 
10,750 acres are speculative in character and are not known to 
contain any minerals defined with current development 
potential. Currently, the final decision on valuation is under 
the authority of the Secretary of Agriculture. We have 
conferred with the Forest Service and have agreed to discuss 
the details and conclusions of the reappraisal with both 
Committee staff and the companies once it is complete.
    Our other concerns with the appraisal language involve the 
cost recovery and requirements for future appraisals. S. 638 
states that the Secretary of The Interior shall bear the costs 
of any reappraisal required to establish a settlement value. 
This is inequitable and inconsistent with Federal guidelines 
for cost recovery. One-half of the costs of the rejected 
September, 1991 appraisal were paid by the government. The 
Forest Service is currently absorbing the cost of completing a 
reappraisal that will meet Federal standards. If this bill is 
enacted, and another, third party appraisal is required, the 
costs should be borne equally by the Secretary of The Interior 
and the companies.
    The instructions for any new third party appraisal should 
be mutually agreed upon by the Secretary of The Interior acting 
through the Bureau of Land Management, the Secretary of 
Agriculture, acting through the Forest Service, and the 
companies. Such instructions should not be linked to the 
instructions which resulted in the September 1991 appraisal. As 
already noted, the methodology and assumptions used to complete 
the 1991 appraisal led to its rejection by the Forest Service. 
We acknowledge that the Discounted Cash Flow appraisal 
technique is an accepted appraisal standard given the proper 
circumstances. These circumstances do not exist at Mt. St. 
Helens. To base a new appraisal on the same discounted cash 
flow methodology would be faulty due to the speculative nature 
of the interests. To reiterate, in our opinion, another 
appraisal beyond those which have already occurred, and the 
reappraisal currently being done, is not in the public 
interest.
    The final issue regarding valuation is the date of any 
agreed upon settlement value. Offices of both the Department of 
Interior's Regional Solicitor and the Department of 
Agriculture's General Counsel have stated that any valuation 
date should be current, that is, based on the date that title 
is acquired by the Federal Government. S. 638 sets a 1982 
appraisal date and makes the government liable for the costs of 
inflation. We believe the costs of inflation constitute a form 
of damages to the companies which are unwarranted.


                             credit account


    S. 638 would establish a credit account once a settlement 
value is reached. This credit settlement would be contrary to 
the original Act of 1982, which provides only for exchange for 
acquisition of mineral and geothermal interests. The proposed 
compensation mechanism could present serious constitutional 
difficulties under the Just Compensation Clause. The proposed 
mechanism calls for the U.S. to acquire mineral interests and 
provide, in exchange, consideration potentially worth less than 
fair market value. Moreover, it is not clear if the use of 
credits in future mineral leasing would result in the Federal 
Government having sufficient funds to pay the States their 
share from receipts. At a minimum, the issuance of credit will 
result in a net loss of revenue to the Federal Treasury. 
However, if a credit account must be established, we would 
recommend this account be managed by the Mineral Management 
Service (MMS) and not the Department of the Treasury. The MMS 
currently is the recipient of Federal payments and distributes 
receipts to the States. BLM works closely with MMS and can 
track and exchange required information easily. To duplicate 
this process at the Treasury Department would result in lost 
time and increased administrative costs. In addition, the loss 
of revenue in the form of credits is not offset in the 
legislation. As such, S. 638 would increase the deficit and 
contribute to a sequester of mandatory programs under the pay-
as-you-go requirements of the Budget Enforcement Act.


                         unrealistic timeframe


    Finally, S. 638 requires that if determination of a new 
value is required via a new third party appraisal process, all 
work must be completed within 120 days or the companies may 
proceed directly to U.S. Court of Federal Claims. In the event 
a new third party appraisal is required, the work cannot 
reasonably be expected to be completed within this time 
constraint. We acknowledge that completion of this exchange is 
long overdue. However, in order to assure we can meet required 
Federal appraisal guidelines and protect the public interest, a 
time frame of at least six months is required.


                               conclusion


    The Administration supports the expeditious acquisition of 
the privately held mineral rights. However, the value of the 
mineral estate must be based on available factual data such as 
comparable sales and scientific findings. A current reappraisal 
by the Federal agencies, scheduled for completion in just a few 
weeks, will assist in the establishment of a value which can 
both fairly compensate the companies for their investment and 
protect the public interest. The Forest Service and the BLM are 
working cooperatively and view this reappraisal as a key to the 
potential resolution of this issue. Determination of such a 
value could allow this transaction to be completed under 
existing authorities of the Forest Service, negating the need 
for this legislation.
    This concludes my statement. I will be happy to answer any 
questions the members may have.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the changes in existing law made 
by the bill S. 638, as ordered reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman);

(Public Law 97-243 as amended--August 26, 1982)

           *       *       *       *       *       *       *


    Sec. 3. (a) The Secretary shall acquire all lands and 
interests in lands within the boundaries of the Monument by 
donation, exchange in accordance with this Act or other 
provisions of law, or purchase with donated or appropriated 
funds, except as provided in subsection (c) [``and except that 
the Secretary may acquire mineral and geothermal interests only 
by exchange. It is the sense of the Congress that in the case 
of mineral and geothermal interests such exchanges should be 
completed within one year after the date of enactment of this 
Act'']. Any lands owned by the State of Washington or any 
political subdivision thereof may be acquired only by exchange. 
Those mining claims in the Green River-Polar Star area shall 
not be acquired without the consent of the owner.

           *       *       *       *       *       *       *

    (g) Expeditious Completion of Mineral and Geothermal 
Interests.--
          (1) Definition of holder.--In this subsection, the 
        term `holder' means a company, or its successor, 
        referred to in subsection (c).
          (2) In general.--Within the period described in 
        paragraph (7), the Secretary of the Interior shall 
        acquire by exchange the mineral and geothermal 
        interests in the Monument of each holder.
          (3) Monetary credits.--
                  (A) Issuance.--In exchange for the mineral 
                and geothermal interests acquired by the 
                Secretary of the Interior from a holder under 
                paragraph (2), the Secretary of the Interior 
                shall issue to the holder monetary credits that 
                may be exercised by the holder for payment of--
                          (i) not more than 50 percent of the 
                        bonus or other payments made by 
                        successful bidders in any sales of 
                        mineral, oil, gas, or geothermal leases 
                        under the Mineral Leasing Act (30 
                        U.S.C. 181 et seq.), the Outer 
                        Continental Shelf Lands Act (43 U.S.C. 
                        1331 et seq.), or the Geothermal Steam 
                        Act of 1970 (30 U.S.C. 1001 et seq.); 
                        or
                          (ii) not more than 50 percent of any 
                        royalty, rental, or advance royalty 
                        payment made to the United States to 
                        maintain any mineral, oil or gas, or 
                        geothermal lease issued under the Acts 
                        listed in clause (i).
                  (B) Value of credits.--The credits issued 
                under Subparagraph (A) shall equal the fair 
                market value of all mineral and geothermal 
                interests conveyed in the exchange as 
                determined under paragraph (4).
                  (C) Acceptance of credits.--The Secretary of 
                the Interior shall accept credits issued under 
                subparagraph (A) in the same manner as cash for 
                the payments described in subparagraph (A). The 
                use and exercise of the credits shall be 
                subject to the laws (including regulations) 
                governing such payments, to the extent the laws 
                are consistent with this subsection.
                  (D) Treatment of credits for distribution to 
                states.--All amounts in the form of credits 
                accepted by the Secretary of the Interior under 
                subparagraph (C) for the payments described in 
                subparagraph (A) shall be considered to be 
                money received for the purpose of section 35 of 
                the Mineral Leasing Act (30 U.S.C. 191) and 
                section 20 of the Geothermal Steam Act of 1970 
                (30 U.S.C. 1019).
          (4) Valuation of interests.--
                  (A) In general.--Not later than 120 days 
                after the date of enactment of this sub-
                section, the mineral and geothermal interests 
                to be conveyed by each holder in the exchanges 
                required by paragraph (2) shall be valued by 
                one of the following methods, as selected by 
                the Secretary of the Interior:
                          (i) Use of appraisal report.--The 
                        1982 value established by the report of 
                        the third party appraisal completed on 
                        September 11, 1991, shall be adjusted 
                        to reflect changes in the consumer 
                        price index for all urban consumers 
                        published by the Department of Labor as 
                        of the date on which the exchange is to 
                        be consummated pursuant to paragraph 
                        (7), or such other value as shall be 
                        mutually agreed to by the Secretary of 
                        the Interior and the holders not later 
                        than 30 days after the date of 
                        enactment of this subsection.
                          (ii) New appraisal.--
                                  (I) Selection of appraiser.--
                                Not later than 30 days after 
                                the date of enactment of this 
                                subsection, the Secretary of 
                                the Interior and the holders 
                                shall mutually agree on the 
                                selection of a qualified 
                                appraiser to conduct an 
                                appraisal of the mineral and 
                                geothermal interests.
                                  (II) No agreement on 
                                appraiser.--If no appraiser is 
                                mutually agreed to under 
                                subclause (I), not later than 
                                60 days afterthe date of 
enactment of this subsection--
                                          (aa) the Secretary of 
                                        the Interior and the 
                                        holders shall each 
                                        designate a qualified 
                                        appraiser; and
                                          (bb) the two 
                                        designated appraisers 
                                        shall select a third 
                                        qualified appraiser to 
                                        perform the appraisal 
                                        with the advise and 
                                        assistance of the 
                                        designated appraisers 
                                        and in accordance with 
                                        the instructions that 
                                        were mutually agreed on 
                                        for the September 11, 
                                        1991, third part 
                                        appraisal.
                                  (III) Date of Valuation.--The 
                                value of the mineral and 
                                geothermal interests to be 
                                conveyed by each holder shall 
                                be calculated as of August 26, 
                                1982, adjusted to reflect 
                                changes in the consumer price 
                                index for all urban consumers 
                                published by the Department of 
                                Labor as of the date on which 
                                the exchange is to be 
                                consummated pursuant to 
                                paragraph (7).
                                  (IV) Costs.--The Secretary of 
                                the Interior shall bear the 
                                costs of the process 
                                established by the clause.
                  (B) Timely appraisal report.--The appraisal 
                report resulting from subparagraph (A) shall be 
                presented to the Secretary of the Interior 
                timely to permit the Secretary of the Interior 
                to determine the value of the mineral and 
                geothermal interests to be conveyed by each 
                holder. Not later than the date that is 180 
                days after the date of enactment of this 
                subsection, the Secretary of the Interior shall 
                notify each holder of the determination.
                  (C) Failure of process.--If the Secretary of 
                the Interior fails to make a determination 
                under subparagraph (B) by the date that is 180 
                days after the date of enactment of this 
                subsection or if any holder does not agree with 
                the value determined by the Secretary of the 
                Interior under subparagraph (B), one or more of 
                the holders may petition the United States 
                Court of Federal Claims for determination of 
                the value of the mineral and geothermal 
                interests to be conveyed by the holders in 
                accordance with this subsection. Subject to the 
                right of appeal, a determination by the Court 
                shall be binding for purposes of this 
                subsection on all parties.
          (5) Exchange account.--
                  (A) In general.--Notwithstanding any other 
                provision of law, not later than 30 days after 
                the completion of each exchange with a holder 
                required by this subsection, the Secretary of 
                the Interior shall establish, with the Minerals 
                Management Service of the Department of the 
                Interior, an exchange account for the holder 
                for monetary credits described in paragraph 
                (3).
                  (B) Initial balance.--The initial balance of 
                credits in each holders account shall be equal 
                to the value as determined under paragraph (4) 
                of the mineral and geothermal interests 
                conveyed by the holder in the exchange.
                  (C) Use of credits.--The balance of credits 
                in a holder's account shall be available to the 
                holder or its assigns for the purposes of 
                paragraph (3). The Secretary of the Interior 
                shall adjust the balance of credits in the 
                account to reflect payments made pursuant to 
                paragraph (3).
                  (D) Transfer of credits.--
                          (i) In general.--A holder may 
                        transfer or sell any credits in the 
                        holder's account to another person.
                          (ii) Use of transferred credits.--
                        Credits transferred under clause (i) 
                        may be used in accordance with this 
                        subsection only by a person that is 
                        qualified to bid on, or that holds, a 
                        mineral, oil, or gas lease under the 
                        Mineral Leasing Act (30 U.S.C. 181 et 
                        seq.), the Outer Continental Shelf 
                        Lands Act (43 U.S.C. 1331 et seq.), or 
                        the Geothermal Steam Act of 1970 (30 
                        U.S.C. 1001 et seq.).
                          (iii) Notification.--A holder shall 
                        notify the Secretary of the Interior of 
                        any transfer or sale under this 
                        subparagraph promptly after the 
                        transfer or sale.
                  (E) Time limit on use of credits.--On the 
                sale that is 5 days after an account is created 
                under subparagraph (A), the Secretary of the 
                Interior shall terminate the account and any 
                remaining credits in the account shall become 
                unusable.
          (6) Title to interests.--On the date of the 
        establishment of an exchange account of a holder under 
        paragraph (5)(A), title to any mineral and geothermal 
        interests that are held by the holder and are to be 
        acquired by the Secretary of the Interior under 
        paragraph (2) shall transfer to the United States.
          (7) Completion of exchanges.--The Secretary of the 
        Interior shall complete the exchange under paragraph 
        (2) not later than 180 days after the date of enactment 
        of this subsection or as soon as practicable after 
        completion of the process described in paragraph 
        (4)(C).