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Mr. HUGHES. This is the statement and comments of the differences between the two bills?

Mr. ASPINALL. That is right.

Mr. HUGHES. I think the basic draft was an Interior one. We may have participated in it. I do not remember, Mr. Chairman. I would be glad to

Mr. ASPINALL. Well, I know that you folks worked pretty closely together, but it means quite a bit to me as to who had the primary, as well as the ultimate responsibility for the preparation of that memorandum. You did not participate, did you, in the order of withdrawal to which this committee has taken such an exception?

Mr. HUGHES. No, sir; I did not.

Mr. ASPINALL. You did not do that?


Mr. ASPINALL. In other words, here is where this committee, at least, some of the members of this committee-I will have to be perfectly honest with you-lost some confidence in our good friends down in the Interior. Now, if you largely prepared this memorandum from which you have made your presentation, that is all right. If you okayed it before coming up here, why, that is all right. If the Department of Interior prepared it and you have just gone along with it this morning, that is something different.

Mr. HUGHES. No, the bill and the consequent report were primarily the responsibility of the Department of Interior. We worked with them on it. This was a matter of involving several departments of the Government, ourselves, Interior, and Justice, in particular, and we worked with the agencies as we have in other matters. As far as I can recall I was not directly involved in the drafting of the letter, or the Bureau of the Budget's review of that letter. But, as far as I can recall, our participation in this was the standard participation. The primary responsibility was with the Interior Department; our action was a standard legislative review and coordination action, to the best of my recollection. I am sure you will want to talk with the Interior Department about it.

Mr. ASPINALL. We will talk with the Interior, all right. I do not take any exception to the President using his constitutional right to veto a bill passed by Congress. I may take exception to the wording of his message, but I do not take exception to the President using his constitutional prerogative. On the other hand, every once in a while we have somebody appear before committees in Congress and state we either pass this bill or the Executive is going to veto it. Now, if our legislation does not follow the principles and objectives laid down by this memorandum, are you in any position to say that the President will again frown upon our legislation?

Mr. HUGHES. The final say, obviously, Mr. Chairman, is the President's. We would hope

Mr. ASPINALL. I understand, but his right arm is the Bureau of the Budget.

Mr. HUGHES. We would hope that working with this committee and the Senate committee, we could develop a legislative proposal which would permit the development of these resources by private industry in a fashion that is mutually agreeable and protective of public interests.

Mr. ASPINALL. I do not think anybody could take exception to that statement. I hope that we can. Of course, you answered my second question, so I am not going to have to worry about that one. That has to do with the development of this great natural resource by private industry.

Now, then, on the other question that I have, Mr. Director, why does geothermal steam value present any basic differences when it comes to the drafting of the base provisions than other natural resources such as oil and gas, except, of course, in the amounts of royalty and some of those protective provisions that may be peculiar to this natural resource value alone. In other words, one of these provisions here in the memorandum has to do with the requiring of new lease provisions and the right to renegotiate rates and royalties. Now what is there about geothermal steam that is different from other natural resource values such as oil or coal or oil shale?

Of course, as to oil shale, that is a touchy subject today, but what about the rest of them?

Mr. HUGHES. Well, it is a different resource. It apparently is more limited in the geographic spread, at least, as far as we know it.

Mr. ASPINALL. But, the Department of the Interior withdrew 85 million acres plus. I do not know of many other resources more widespread than that.

Mr. HUGHES. I would like to pass with respect to withdrawal, Mr. Chairman.

Mr. ASPINALL. You do not have to answer that. You stated a while ago you did not have anything to do with that. Go ahead.

Mr. HUGHES. Were you speaking to renegotiation provisions, Mr. Chairman? I was not clear on your question.

Mr. ASPINALL. Many of our leases, except oil and gas have renegotiation provisions, do they not?

Mr. HUGHES. It seemed to us, as I just mentioned very briefly, that there should be a specific statutory renegotiation requirement. Our concern here stems from the fact that the legislative history seemed to us adverse to the Secretary utilizing the renegotiation opportunity which would be afforded him by general regulatory authority. We were afraid that he would be handicapped in a protection of the public interest in the light of that history.

Mr. ASPINALL. Let me ask you a question. I want to be sure that I understand what is prompting you to say this. Are you afraid, or is the Bureau that you represent, afraid that there is a possibility that too much profit will be made by the developer, keeping in mind that if he makes too much, why practically all of it comes back to the Federal Treasury anyhow by taxation? What is it that prompts you? Are you afraid that some other developer may be denied his right to a part of the resource. Just what is it that prompts you to make that statement?

Mr. HUGHES. Our concern was probably basically a somewhat similar one. It was just this: That geothermal steam and its accessibility, the terms under which it can be exploited, the circumstances of its development as a resource, are largely unknown, at least to us, and we think to those who are more expert than we are in this general field. We feel in these circumstances that it would be desirable to provide specifically for renegotiation to permit experience to educate us and to enable the Federal Government and the developer to take advantage


of the experience and modify the terms of leases. Obviously they could be modified in any direction.

Mr. ASPINALL. Well, let me ask the question this way: I want to get practical, because most of us who have had anything to do with this know that there is a value in steam itself for the purpose of driving turbines. We also know that there will be some mineral values that can be captured. Now, if some developer having a lease should, by some means or other of his own research, find the mineral values and should develop the process or the invention by which those mineral values can be captured, is this what causes you fear about not being able to take advantage of what a private enterpriser has done on his own accord?

Mr. HUGHES. No, we certainly think the enterpriser should be able to take advantage of his initiative and his resourcefulness and his invention, if you will. We felt also that the Federal Government because of the large number of unknowns ought to be able to benefit also as its education progressed. It should be able to be advantaged also by the utilization of resources from its holdings.

Mr. ASPINALL. I think that is all.

Mr. BARING. The gentleman from Pennsylvania.

Mr. SAYLOR. Just let me tell you that I was the last person to go along with the members of this committee last year on eliminating the provision for competitive leasing. I did it after I had very carefully examined all of the statements that had been made by the Department of Interior, all the statements of all the witnesses before this committee, because it indicated to me that certain individuals or companies have had the courage to proceed on their own, knowing that there was absolutely no authority whatsoever in the Federal Government to lease geothermal steam.

Now, since you tell me that you are so interested in seeing to it that this is done by private industry, why do you take the position that those who have conscientiously expended money in the development of the industry to its present state, should be deprived of all of their rights and forced to go in and compete with people who are now taking advantage of their developments, having spent absolutely nothing? This is the heart of what is involved in the first argument, which is in the President's veto message. It says that anybody who spent any money in the good old American way is just out of luck. You gambled and it is down the drain, and this becomes public good.

We have never done this before. In the offshore oil lands we allowed in that area those people who made developments to take advantage of those developments. The Bureau of the Budget recommended in those cases that we go along with them. The only place the Bureau of the Budget insisted upon competitive leasing is in new areas beyond those places where exploratory work has never been done before. Now, I want to know from you in the Bureau of the Budget, because you are the people I am sure who are the principal reasons for the President turning down this bill last year.

Now, I want to know why this about-face in the Bureau of the Budget in the case of geothermal steam?

Mr. HUGHES. Well, Mr. Saylor, we, I guess, looked at the situation somewhat differently. With respect to the Mineral Leasing Act provision that you referred to, it is my understanding that the context

of that is somewhat different in that it deals with minerals already locatable. My friends from the Interior Department and the Justice can deal more effectively than I can with the Mineral Leasing Act and its intricacies.

But, in this situation, this geothermal steam situation, what we are trying to create here is as nearly as we can the typical competitive situation in which certain individuals have elected to gamble on the development of a resource, many of them on private land which they own, but some, using other means of entry, have expended sums on exploration, on experimentation on the Federal lands. As we see it, and in the typical competitive situation, these individuals have benefited perhaps from the experimentation which they have conducted and exploration they have conducted.

They have know-how, they have the one fundamental resource necessary to develop these areas. They have, therefore, it seems to us, a substantial "leg up" on any competitor who might enter from outside this particular industry and endeavor to compete with them. It seems to us this is the standard American situation in which rights may be preserved if they are invention rights, preserved by patent or otherwise but in which the industry itself is open to general competition from all those who may be interested in it. The individual who is in on the ground floor and who has exploited his opportunities through private ownership, to explore and experiment and develop, is clearly ahead, it seems to us, of his competitors. But it also seems to us that his edge should end at this point.

Mr. SAYLOR. It seems strange to me that you have recommended this veo on the basis of the grandfather clause, when you have not recommended to this committee as far as I know, or the counterpart in the Senate, that the competitive leases in oil and gas be used in all instances. It is a rather inconsistent position, I believe. Now, if we follow, Mr. Hughes, your recommendations and the administration has been one of those saying that they are trying to get the little men in business, have you not by your recommendations completely eliminated the possibility of any small person or company getting into this field at all? Because it is the big boys that have all the money, and they will be the ones that do the bidding. Might this be one of the reasons that Uncle Sam now takes a look at some of the oil companies with 2712 percent depletion allowance and, "Well, here is a good place, here is a good place to cut the pack of the fat cats and get a big hunk of that back." Might that be some of the reasoning downtown?

Mr. HUGHES. Not to my knowledge, Mr. Saylor. The problems of small versus big business have received a good deal of attention in the Congress and in the administration. The problem of preserving a competitive system in which the capacity for reasonable growth, growth without monopoly consequences, can take place, preserving that kind of a climate, and at the same time, protecting new and small businesses is a difficult one. It seems to me it is a general problem which we have tried to solve in a variety of ways.

But with respect to geothermal steam, specifically, it seems to us that whatever advantage the present experimenters and exploiters have attained through their efforts and through their initiative and through their patents and so on, those advantages would be preserved to them. They have the know-how, they have the flexibility, and the

experience which will enable them to develop these resources as against other competitors, large or small.

Mr. SAYLOR. Well, now, the second reason given in this recommendation which you have preferred to veto, is that it provides for maximum leases of 51,200 acres. You say this is four times as large as the experts say is needed for economic development. Now, what is your basis for the acreage limitation?

Mr. HUGHES. Again, Mr. Saylor, the nature of the resources we are dealing with is not clear to us. The total acreage involved so far as we do know is much less than those, for instance, in oil and gas. The total resource acreage is much less. There is a going commercial enterprise involving something like 3,000 acres at the present time. The best judgment of those knowledgeable in this area was that an acreage of something like 10,000 acres would be a reasonable commercial basis for exploitation. I do not think there is any magic in exactly 10,240 acres, just as I think there probably is no magic in 51,200 acres. Our concern was simply that no more than necessary of this relatively limited resource be locked up in any one ownership or in any one State.

Mr. SAYLOR. Oh, Mr. Hughes, that is an entirely different approach than the language that was used by the President. I can buy that second argument. I can buy your argument that you just gave that no more should be locked up than is absolutely necessary, just as you now say somebody told you 3,000 acres was a good development. Three thousand acres in the center of a big oil field down in Texas, that is plenty of acreage for a good development. But, 3,000 acres in an area where there is only a potential is never going to be enough. The President relied on some experts, and I want to know whether those experts were in the Bureau of the Budget, and if they were, I want to know who they are. Because that is what it says, an area four times greater than our experts, now, I want to know who the experts are. Are you one of those experts?

Mr. HUGHES. No, sir. I am not an expert in geothermal steam. Mr. SAYLOR. All right. Do you have any experts in the Bureau of the Budget that told you 10,000 acres was enough?

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Mr. HUGHES. We are relying, Mr. Saylor, on the advice of those in the Department of Interior who are knowledgeable in these matters. Mr. SAYLOR. All right, sir. Now, you are relying on them, I want to know the names and their occupation in the Bureau of the Budget. I want to find out where these experts are.

Mr. EDMONDSON. In the Department of Interior.

Mr. SAYLOR. In the Department of Interior, yes. But, I want to find out, there are supposed to be experts on this business of geothermal steam, that is what they advised the President on.

Mr. HOSMER. It just says "experts."

Mr. HUGHES. It seems to me, Mr. Saylor, all of the evidence we have is that 10,000 acres will provide a reasonable base for the development of this resource, that there need not be as much as 50,000 acres to permit that.

Mr. SAYLOR. Mr. Hughes, you have not told us who the experts were. Mr. HUGHES. I would prefer, Mr. Saylor, if you would, that you seek the advice of those experts

Mr. SAYLOR. I want to find out from you, because you, I am sure were one of those who told the President or the people in the Bureau

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