We have to then make another decision down the line and that is a pretty far way away. Until that time, we have no knowledge of the real resources that are out there. I see your point on the fact they are putting up a lot of money, but I think they are practical businessmen and will take into account the State's concern and approach.

Senator TUNNEY. The oil companies may well feel they have the Department of Interior's support, whether the State or local government gives its approval or not, because you would be perfectly willing to consider as an alternative, floating rigs which would allow them to process the oil and transport it to refineries or separating plants as the case may be.

I am just trying to point out as a practical matter and I think that we have to look at the thing pragmatically, you cannot expect to take hundreds of millions of dollars or even billions from the oil companies in your bonus bid leasing schedule and then say, "Well, oil companies, we are not really telling you we have a plan now for you to develop those leases or even that we will agree to the development of it. We are just giving you a hunting license so you can see if there is oil and maybe in the future you can develop it."

That is malarkey and you know it and I know it. I was involved in the Santa Barbara blowout. I know the bonus bids and I know the pressures the oil companies put on and I felt sympathetic with one aspect of their position.

They had paid money to the Federal Government and they say, "Why can't we develop what we have already leased." It was a pretty good argument. Then, the question came, what about the Federal Government paying back to them their bonus bid and putting the whole area into a preserve? As it turned out the amount of money to be paid out was billions of dollars, and it was impossible to imagine the Congress of the United States would vote the money through the appropriations process and the point is, we didn't do it. So the drilling went ahead and development went ahead.

The same is true in southern California, if you go ahead with leasing and get billions of dollars from the oil companies for a hunting license. There will be tremendous impetus to go ahead with the development program.

You know that and I know it.

Mr. LINDGREN. Senator, as to development of leases, if a decision is made to issue leases. Let me first go back to something you mentioned-getting the leasing out by May and whether we are on that schedule.

Our activities are not designed to get leases out. Our activities are designed to allow sound and intelligent decisions to be made one way or the other. The timing is summer at the earliest. Certainly, if that decision is to issue leases, we do expect that on some of these leasesand the some depend entirely on where discoveries are made—that production of those leases would follow.

Then, you have, I think, something that is a completely different question, the question of what kind of support processing facilities are put in southern California and where. It depends on the location of the leases that may be issued. We have tracts ranging from the most controversial ones of southern California, offshore Santa Monica Bay, to those on the other side of San Clemente Island. Certainly, I am not

saying, and we are not saying, that once we issue the leases, well, i is still anybody's guess as to whether the leases will be developed o whether we will allow the leases to be developed.

Assuming there is discovery and again, we don't know where they will be on the Mafla sale there have been no discoveries.

Mr. MALLORY. On a $220 million tract, they drilled a dry hol recently.

Mr. LINDGREN. Following the leases, then there is exploration. The company has to get a permit for exploration and then have to submit development plans. The development plans and the methods of development have to be approved.

Again there is a point of control to assure the development occurs in an environmentally sound, acceptable way, and in a safe manner. I am not going so far as to say a lease is not a lease.

Mr. MALLORY. His point is what I am trying to say, Senator.

Senator TUNNEY. I think we understand each other, that once you go ahead and accept substantial amounts of money from oil companies on a bonus bid or lease, you are going to find an environmentally sound way to let them develop it.

Mr. LINDGREN. I think more, if we make the decision to proceed, that we will have formed the judgment that they can be developed in an environmentally sound way. Before that decision is made, that question will be examined very carefully; but if that decision is made, in that direction, that will be one of the components of that decision. Senator TUNNEY. Isn't it true the oil companies would much rather drill in the Gulf of Alaska?

Mr. MALLORY. There was a ranking, Senator. I don't recall it offhand. The Gulf of Alaska, much like the North Sea, has serious climatic problems and a limited working period that warmer climates don't.

Senator TUNNEY. You mean environmental hazards?

Mr. MALLORY. There are environmental hazards, be it the Atlantic or the Gulf of Mexico even.

Senator TUNNEY. One of the things I have never been able to understand is why the Department doesn't do its own exploration. Are you going to do your own exploration? Is there a new policy being formed to do your own exploration?

Mr. MALLORY. We are examining the possibility of doing our own exploration. I have not looked closely recently at the legal authorities. I am not sure we have the authority from Congress to do it ourselves. I can tell you we have considered this as one direction we could go. Mr. LINDGREN. We operate under the Outer Continental Shelf Land Act of 1953 and the basic policy set forth by Congress in that act is that exploration and development should be done by the private sector of the United States, not by the U.S. Government itself.

That is a basic congressional policy we are operating under at this time.

Senator TUNNEY. So, you say you don't have the legal authority to do your own exploration?

Mr. LINDGREN. To do our own exploration, to contract for exploratory work to be done for us would require additional authority from Congress; that is, it would require additional appropriations. From what I understand in this field-and it is getting to be a technical

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Senator TUNNEY. Will you require subsea comp’à s Mr. MALLORY. If I might address myself to that post Sva Secretary recently spoke to that and urged that the tachogi subsea completions be developed as rapidly as possible by the try. It is an area we have substantial interest in.

If it can be done in an environmentally safe mannen me.) the only way that you will be able to drill in the doper wale max of 300 meters and do it safely.

So, we are encouraging them to do it and hopefully, we w technology for that developed to a point where we think it won mentally safe to go forward with it.

Senator TUNNEY. Why wouldn't you wait until that technolger s developed before you go ahead with the leasing programs, place like southern California?

Mr. LINDGREN. Senator, I think much depends on where, in fos what leases you are talking about. As I understand it current, sud surface production technology, the type that is being developed How and that is being tried now in the Gulf of Mexico, would not elig inate all platforms.

It has two utilities. One, it would decrease substantially the num ber of visible platforms if it is utilized in waters of a depth that won' allow platforms; and, two, it is necessary in deeper water. The impact statement we are preparing will address the issue of subsurface production systems.

It will describe the problems associated with them, the state of technology, and so forth. I can give you two possible decisions. Let's focus on Santa Monica for a moment.

Two options we have are not to lease there until such time as the technology is available, or to issue leases, but put in them a term and condition, a requirement, for subsurface production systems.

These are, and will be, examined in the environmental impact statement and that is certainly an issue that will have to be closely examined during the decisionmaking process, after the study process is completed.

Senator TUNNEY. Do you favor having bonus money put into a trust fund so if the oil companies are not all allowed to go ahead and develop a lease, it can be returned to them?

Mr. MALLORY. Senator, I have not fully considered the question. The issue generally comes up in sharing the bonus moneys with the coastal States rather than the trust fund for the Santa Barbara context.

Being from Louisiana and admitted to the California bar, I have my own personal feelings on the sharing of revenues but I have no opinion on putting funds in trusts. I do know the appropriations process utilizes the bonus moneys heavily and we are also looking at the royalty approach.

Senator TUNNEY. That is the problem, though. You have men like Roy Ash suggesting that the reason we need to have a lot of leasing is because we need the money and therefore, we will just go ahead with a policy of leasing which is not going to take into consideration the overall social or environmental ramifications of that leasing and the eventual development.

I can't help but personally, as an observation, feel that it would be much better for this country's long-term quality of life of its people, if instead of President Nixon saying he was anxious to see 10 million acres of offshore lands leased, he had indicated that he was anxious to see a 25-percent conservation of energy utilized.

Twenty-five percent would save us approximately 4 million barrels a day which would be vastly more than anything you could get off the coast of California and it would be more than what you get off the coast of California and the North Slope development.

But on the other hand, I suppose that is an approach that is not as exciting as the thought of going offshore and reaping a harvest of billions of dollars worth of leases?

Mr. MALLORY. Senator, your thoughts are very profound and I think very worthwhile. I will only say that you reach the conclusion thatI had the honor of attending President Ford's conference on inflation yesterday and the only consensus that was reached there was that to fight inflation, one of the most effective means is to conserve our energy

resources.

This would be the most important anti-inflation measure available. It certainly is a theme that is arising locally throughout the rest of the country.

We had strong conservation going when the embargo hit and perhaps we will have another one, particularly if people like you can keep putting that word out.

Senator TUNNEY. One of the things I am also interested in as it relates now to southern California is why the Department has decided to speed up, expedite the leasing program here as contrasted, we will say, to Florida, Maine perhaps, even parts of Texas and Louisiana. There are some who suggest that the reason you are moving ahead here is that California has not challenged, in court, the U.S. ownership of those lands whereas these other States have.

I am just wondering if you know anything about that?

Mr. LINDGREN. Senator, let me start with the challenge first. California has challenged the ownership of these lands. California lost. In fact, it was a decision of the Supreme Court in the California case that was the basis for the decision of the special master who ruled on the case of the East Coast States. That issue has been decided by the Court. There are open issues over exactly where the 3-mile limit rests. The State officials have approached us with a request that we try to resolve these issues as rapidly as possible and we have agreed to address that issue with them and get that issue negotiated out, if possible.

California has challenged it. As far as the east coast is concremad. that case is still in court. The special master came out with his report and his recommended decision about 3 or 4 weeks agO.

That goes to the Supreme Court. The matter has to be broactad bes fore the Supreme Court. We do not realistically expect a decision by that Court until the end of the October term, which would be June of next year.

Until that time, that litigation does preclude us from rex ng $8 quickly. There are other things in terms of southern California and gas development is not entirely new to offshore waters of sem been California. We know more about southern California in terms of r source potential and in terms of environment,

Our state of knowledge is much superior in California than ↑ S on the Atlantic, than it is on the Gulf of Alaska, and that is one of the reasons.

As far as the Gulf of Mexico is concerned, we have the sales scheduled for next year, as was mentioned. As far as we can determine the major prospects are totally leased in the Gulf of Mexico and to move elsewhere is necessary to get us into prospects that have grat potential.

That is why we are examining so seriously southern Califors &

Senator TUNNEY. Of course, there is no State that has the recrestion potential that California does for its coastal areas and the way. ber of people living in the concentrated area where there is that re reational potential as does California, which is another factor.

That is one of the reasons we passed the Coastal Zone Management Act of 1972, because we wanted to balance the conflicting need for development, recognizing there would be offshore oil development, with the environmental needs of the people living onshore,

Mr. LINDGREN. We would agree completely with the tremendous recreation desirability of the southern California coast and its fature potential, and that is one of the critical subjects we are examining in an environmental impact statement. It is an important consideration that must be weighed in the decisionmaking process.

Senator TUNNEY. The California Coastal Commission had an opportunity to testify through spokesmen yesterday and I was just wondering what the Department of Interior's view is regarding the consultation that they had both prior to the decision to announce the beginning of the various steps that had to be taken toward the leasing of the lands offshore, and subsequent to the announcement that you were initiating the process to lease 1.6 million acres,

Mr. LINDGREN. Senator, I am not aware of what the representative of the coastal zone commission testified to. My own feeling on the state of consultation is that what we have had so far has been helpful. I think it has improved our understanding of the issues that are involved and of the viewpoint of the people in the agencies within California, and I think it has improved also the understanding by the State agencies, including the coastal zone commission, of some of the national considerations that are involved in this decision.

I would not say that I am by any means yet satisfied with the state of consultation and cooperation. I think there is room for improvement. We believe that is very vital.