On May 22, 1998, Rep. Owen Pickett (D-VA ) introduced legislation, H.R.3972, to amend the Outer Continental Shelf Lands Act (OCSLA). The bill concerns the levying of fees for shell, gravel, and sand resources on the federally owned outer continental shelf (OCS). In 1994, the OCSLA was amended to expedite the procedure for government agencies to obtain these resources from the OCS and allow for the government to avoid cumbersome competitive bidding for the non-energy mineral resources in federal waters. It also exempted the federal government from being taxed on the sand, gravel, or shells. In Pickett's opinion, however, both state and local governments are "taxed" for these resources, even when used for public works, in that they must pay a discounted rate to the federal government for the materials. H.R. 3972 would grant the same exemption to state and local governments that is given to the federal government, allowing them to use OCS sand without paying for it.
The House Resources Subcommittee on Energy and Mineral Resources met on July 21, 1998 to hear testimony on the bill. In his opening statement, the Ranking Member of the subcommittee, Rep. Carlos Romero-Barcelo (D-PR) stated that the minority supports this bill, but the Administration opposes it. This bill is also supported by the subcommittee chair, Rep. Barbara Cubin (R-WY). The bill passed the House on October 15 under suspension of the rules, but did not move in the Senate
In testimony, Rep. Pickett discussed how the 1994 OCSLA amendment, as written, is an example of how the federal government is imposing unfunded mandates on the governments of states and localities. In addition to the present wording of OCSLA, he cited a recent proposal by the Administration for the states to take over all beach restoration programs that are not "nationally significant". Rep. Pickett also likened the pending bill to the 1947 Minerals Materials Sales Act, a law that currently benefits states in the West. Under this law, if a state builds a road, it can use gravel from federal lands, free of charge, with the condition that the state pays to reclaim the land from which the gravel came. Extending an analogy of the 1947 law to the OCS situation, states would be able to use the OCS sand free of charge and then would "pay" to reclaim the OCS land. However, because the OCS sand put on the beach in nourishment projects will ultimately (and often quickly) end up on the outer continental shelf by natural processes (one tropical storm can do the trick), there are no costs associated with the reclamation of the OCS land. Therefore, as would happen under H.R.3972, the state would not have to pay money for the sand since it would be returned to the OCS anyway. Some scientists, such as Dr. Orrin Pilkey, believe that for this very reason, these projects are futile, and beaches should not be nourished.
Meyera Oberndorf, the mayor of Virginia Beach, spoke of the economic impact current law has on her city. Virginia Beach continually works with the U.S. Army Corps of Engineers on restoration projects that protect buildings insured for over a billion dollars. In addition to being the backbone of their tourist industry, she stated that sandy beaches also provide for the public welfare by abating floods. The Minerals Management Service (MMS), the federal agency which enforces the Outer Continental Shelf Lands Act, instituted policy changes in 1997 in accordance with the 1994 amendment to the law. These policy changes resulted in the city being assessed a charge for sand dredged from the federally owned outer continental shelf. Because the funding for the project was in place before the change in policy, the city had not budgeted money for the cost of sand. As a result, the city of Virginia Beach had to spend $198,000 from the project budget towards sand, despite the federal involvement, via the Corps' role as construction manager and a contribution of $2 million to the project. The mayor asked for the passage of H.R.3972 that would grant state and local governments the same privilege as federal agencies in the avoidance of fees for OCS sand. Her written testimony also requested a reimbursement from MMS of $198,000 for sand used in their nourishment project.
Carol Hartgen represented the Department of the Interior as Chief of the Office of International Activities and Marine Minerals in the MMS. She discussed the history behind the current OCSLA. Prior to the 1994 amendment, sand resources in federal waters were subject to competitive bidding. The changes delineated in P.L. 103-426 were designed to ensure government access to mineral resources and prevent the use of sand from being cost-prohibitive. A valuation method was established that allows the Secretary of the Interior to charge a fee that would balance the cost of the resource with the value to the public. For example, the sand used in the Virginia Beach project was discounted 65%. Ms. Hartgen's written testimony cites a statement from Mr. Gerry Studds, the former Chairman of the Committee on Merchant Marine and Fisheries for the 103rd congress, expressing the intent of Congresses in regards to states' fees: "...the minerals are not to be given away."
Current law results in a three-tiered system with private ventures assessed full price for the OCS sand, free use of the sand for the federal government, and state and local governments paying a discounted price (including projects with federal participation and authorization). The Department of the Interior supports the current law as "sound economic and public policy". Ms. Hartgen's testimony also made the following points:
In an interesting aside during the question and answer period, Rep. Romero-Barcelo (D-PR) noted how the delineation of the OCS off of Virginia happens to be different from that of other areas of the United States. Offshore Texas and the gulf coast of Florida have state jurisdiction extending to three marine leagues (approximately 9 nautical miles) as opposed to the federal OCS beginning three nautical miles off the East coast. Coming from Puerto Rico, Rep. Romero-Barcelo stated his understanding of the need for this law. The Subcommittee Chair, Rep. Barbara Cubin (R-WY), joked that the sand should be referred to as a rental because it will eventually end up in federal waters. She also mentioned her appreciation of the need for this legislation. Near the end of discussion on H.R.3972, Rep. Cubin pressed the MMS representative, Carol Hartgen, about the difference between projects on South Padre Island, Texas (free sand) and Virginia Beach, VA (taxed sand). She questioned whether one project served the public good more than the other.
Sources and Related Sites
Mineral Management Service
Rep. Petri's commentary on federally funded beach nourishment
Duke University's Program for the Study of Developed Shorelines
Please send any comments or requests for information to the AGI Government Affairs Program.
Contributed by Joy Roth, AGI Government Affairs Intern
Posted August 7, 1998; Revised December 9, 1998
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