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Document 88 of 118.

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MARCH 2, 1999, TUESDAY

SECTION: IN THE NEWS

LENGTH: 4108 words

HEADLINE: PREPARED STATEMENT OF
CHAIRMAN FRANK MURKOWSKI
DEPARTMENT OF THE INTERIOR
BEFORE THE SENATE ENERGY AND NATURAL RESOURCES COMMITTEE
SUBJECT - FY 2000 BUDGET HEARING

BODY:

At today's hearing, we will discuss with Secretary Babbitt the Department of the Interior's Fiscal Year (FY) 2000 budget request. I'd like to welcome Secretary Babbitt.
The Department of the Interior has requested nearly $8.7 billion for its FY 2000 operations. This is an increase of $832 million over the amount enacted in FY 1999. During today's hearing I would like to question you on the priorities which are reflected in the expenditure of this money. Let me mention a few areas of specific concern.
As Secretary, you have complex responsibilities: to protect this nation's natural resources and to wisely use these natural resources. Unfortunately, the Department's FY 2000 budget only reflects your preservation objectives and not your obligation to support the multiple use of our public lands.
Minerals Management Service
Nowhere is this misdirection clearer than in the budget for the Minerals Management Service (MMS). MMS is the Department's Golden Goose. In the coming fiscal year, you predict that onshore and offshore oil and gas development and production will produce over $4 billion for the Federal Treasury. While this is a significant amount, it is a decrease of almost $1.6 billion from FY 1999 figures. In fact, the decrease is likely to be even greater, because this $4 billion figure is calculated using OMB's estimate of oil prices being $14.12 per barrel, something today's oilfield workers can only dream about.
Last year, there was a 33% drop in oil prices, and there has been a 60% drop in prices over the last two years. While you can't control the price of oil and gas, you can control other factors. Unfortunately, as I discussed with Secretary Richardson last week, the President's FY 2000 budget does not respond to today's domestic energy production hemorrhage. The domestic oil and gas industry is in serious trouble with exploration and development budgets way down.
A few relevant facts are in order. First, real prices for energy now rival those of the deflationary days of the Great Depression. Second, U.S. oil production in the lower 48 states is at its lowest level in over 50 years, plummeting 6% last year. In Alaska, production dropped 15% -- by 180,000 barrels a day -- last year. Fully 12% of the jobs in America's oil fields disappeared last year -- 42,000 good jobs are gone. At the height of the "energy crisis" in the 70's, we imported 36% of our oil -- now it's 56% and climbing daily.
These are the grim facts facing our domestic industry. While some of your priorities in the MMS budget make sense -- such as updating computer programs to collect royalties and moving resources to expedite permitting for increased activities in the Gulf of Mexico - I have serious problems with your general focus.
Unfortunately, it appears to me that you're more intent on squeezing more and more out of the domestic oil and gas industry than you are in its long term health. Oil and gas producing states are dropping taxes, adding incentives and working with their oil and gas producers to encourage them through these bleakest of days. Your budget, on the other hand, calls for jacking up royalties on a reeling industry by changing the way oil is valued. The $66 million you propose to increase royalties paid by the industry come at a time of historically-low energy prices. This is in direct contrast to the actions of the states where Governors and legislators are foregoing present revenue to preserve future economic viability and revenue possibilities.
The contrast couldn't be more stark: The states are bending over backwards to help their workers keep their jobs in the oil and gas industry, and the Federal government is trying to squeeze the life out of an industry important to our economic future and our national security. It is critical that the Federal government help this vital industry; not tax it to death.
Lands Legacy Initiative
Last month with great fanfare, President Clinton announced the Lands Legacy Initiative. The Administration is claiming this proposal fully funds the Land and Water Conservation Fund (LWCF), which is authorized at $900 million for Federal land acquisition and the state-side matching grant program. However, many of the programs the President seeks to fund from the LWCF are not authorized uses of LWCF monies, such as the Forest Legacy program. Moreover, many of these programs are not even contained in the DOI appropriations bill, such as NOAA's marine sanctuary program. In large part, the proposal seeks to raid the LWCF to replace or supplement other federal programs that should seek their own funding.
Within the Lands Legacy request, only $413 million for Federal land acquisition by DOI and the Forest Service is clearly authorized by the LWCF Act. This request is only marginally greater than historic funding levels for Federal land purchases.
For six years this Administration has resisted bipartisan calls to fund the State-side portion of the LWCF to fund vitally needed state and local park and recreation programs. Despite the Administration's rhetoric that is not what this budget request does. Instead of supporting the federal-state partnership established under the LWCF, the Administration seeks to subvert the process and bend the States to a federal will.
First, the grants can only be used for land acquisition or open space preservation. The LWCF Act allows states and local communities to use LWCF grants for rehabilitation. The President's proposal changes the state-side program from a "recreation" program to an "open space" program.
Second, instead of allocating the money to the States pursuant to law and allowing the States to decide how to expend the grants, the proposal would make States compete against one another for funding. That is, DOI would determine what land the States should purchase and only those States that accede to DOI's dictates will receive funding. This fundamentally undercuts the policy in the present LWCF formula. The proposal also seeks $50 million for state open-space planning grants. It is unclear exactly what this program will do.
The White House has claimed that these changes to the LWCF Act are minor tweaks. I disagree. I believe the Administration's Lands Legacy Initiative makes fundamental changes to the terms of the LWCF Act. Changes which are subject to the purview of the authorizing Committee -- this Committee.
PILT Today we will hear you talk about a number of significant increases in various Department of the Interior programs. Unfortunately, one program for which no increase is requested is Payments in Lieu of Taxes or PILT. The Bureau of Land Management (BLM) request for PILT is equal to last year's enacted level of $125 million-- $130 million below the authorized level.

Given all the increases across the Department's budget, certainly there was room to fully fund PILT.
Rural counties and boroughs are being hit hard. As you know, federal land acquisitions decrease the tax base in these areas many of which also are facing increasing demands for police, rescue and sanitation services. Meanwhile, the Administration has undertaken a concerted effort to eliminate economic development on federal lands -- the economic lifeblood to many of these communities. PILT money does not solve the problems of these rural counties, but it will help.
Last December, I sent you a letter asking you to join with me in a program over the next 12 years to bring PILT payments up to the fully authorized level of $255 million. I proposed $20 million increases in each of the next three fiscal years, with $10 million increases in each of the following nine years. Unfortunately, I still have not received a response to my proposal and the Department's budget request leads me to believe that you do not think such PILT increases are warranted.
Mining Law
I noted that you have requested an increase in the Solicitor's office in part to meet the Congressional deadline to process outstanding mining patents. I'm not a big fan of providing you more lawyers, but in this instance I will support your request if we can finally provide individuals with their too long delayed rights.
I also want to mention the so-called section 3809 regulations. At the request of the western governors Congress appropriated $800,000 to the National Academy of Science to analyze the need for new mining regulations. New regulations will cost a lot of money and will be disruptive to existing state environmental protection programs.I am very unhappy that despite this Administration's claims that it wants decisions made on sound science, you have published the new regulations and decided to close the comment period a full two months before the Academy's report will be complete. You plan to waste $800,000 and thumb your nose at sound science in your commitment to scrap the domestic mining industry.
National Park Service
The National Park Service is proposing a 16.3 percent increase in its budget -- to nearly $2.3 billion -- one-quarter of the total Department of the Interior budget. The budget also proposes an increase in NPS employees.
No matter what the number is, it appears that the NPS gave little consideration to having the private sector perform some of its functions. This Administration has told us that Government is getting smaller. At the Park Service it appears to be getting larger. The Service just went through a very expensive and painful down-sizing of between 1200 and 1400 positions. In defiance of natural law the Department would have us believe that what goes down must go up.
I am pleased to see that the National Park Service is beginning to seriously address the backlog of critical health and safety maintenance needs throughout the system on a priority basis. While I question some of the priorities, I note that the $12 million designated for the removal of the Elwah Dam could be better spent on the North Access Road at Denali National Park or other higher priority needs throughout the System.
Office of Insular Affairs
The proposed budget for the Office of Insular Affairs is, at best, a curious document. The justification singles out American Samoa and the Virgin Islands as jurisdictions with significant fiscal and economic problems and suggests that the Virgin Islands is on the brink of economic collapse. Based on my visits to some of the areas, it would appear that Guam also runs an operating budget dangerously close to revenues and the Marianas has an operating budget that has increased exponentially, and is well in excess of revenues. We are about to open negotiations on future economic assistance with the Federated States of Micronesia and the Republic of the Marshall Islands. The reports from the Asia Development Bank and others are not particularly encouraging about either of those jurisdictions.
My concern is that we do not appear to be addressing fiscal conditions in advance of a crisis, and if this budget is any indication, our response in times of crisis is woefully inadequate. The Department's justification notes that the Virgin Islands had a cumulated operating deficit of $138 million in 1997 and will again be well in excess of $100 million in 1998 with total revenues of less than $500 million. Quoting from the budget justification "With our proposed budget ... we can offer limited technical assistance to improve government operations and to promote economic development." You could do more. In fact you are doing more, but apparently haven't read your own budget.
When the excise tax on distilled spirits was increased from $10.50 to $13.50, the legislation provided for the increase attributable to production in Puerto Rico and the Virgin Islands would be deposited in the Treasury-y rather than being covered over to the local governments. The Administration has decided to seek a repeal of that provision to provide an additional $34 million to Puerto Rico. Of that amount, about $6 million will go to the Puerto Rico Conservation Trust Fund. A by-product of that decision, however, is that the Virgin Islands will also receive the additional $3 per proof gallon, or about $12 to $15 million.
There is no suggestion that the additional $12 million should be dedicated to deficit reduction in the Virgin Islands nor that it is contingent on any restructuring of the Virgin Islands fiscal operation. Had the Department been as concerned about obtaining better fiscal operations in the Virgin Islands as it was in obtaining funding for the Conservation Trust, it might have proposed something more substantive than "limited technical assistance".
The Virgin Islands is facing a significant annual payment for FEMA assistance from Hurricanes Hugo and Marilyn. Those debts could be reconsidered under existing authority and in large part cancelled. The Virgin Islands is facing a considerable construction cost associated with waste water facilities and prisons as a result of federal requirements. There apparently has been no consideration given by this Administration to using a portion of the uncommitted $27.7 million of the Marianas funding that is available for construction. The Administration chose to take money from the Marianas to give to Guam, which does not yet have a plan for the use, and ignored the Virgin Islands.
There is no prohibition that I am aware of that would prevent the Administration from seeking new authority for additional construction in the Virgin Islands outside the $27.7 million for the Marianas. In the past, we have funded hospitals and other essential facilities in the Virgin Islands and elsewhere, and could do so again - if, and I want to emphasize if- there is a plan to deal with the structural fiscal conditions in the islands as well as the condition of essential facilities.
My frustration comes from what I perceive is a reluctance or unwillingness on the part of the Administration to deal honestly with a long term commitment to the islands. We structured a funding agreement with the Marianas that required the Marianas to come up with a 50% match for construction funding. A match is a remarkable requirement. Now the Administration proposes to go back on the commitment - for some unknown reason - and take money from the Marianas to give to Guam, and do it on Appropriations. In the interim, there is no proposal to deal with Samoa and barely a hint in the justifications of any concern with the Virgin Islands.
Since Samoa was also mentioned, I think we should look at the priorities there. The justification suggests that Samoa has a $30 million accumulated deficit, but the Department plans to hold the operating grants to last year's level with no increase for inflation or cost-of living and no suggestion on how Samoa should raise additional revenues. I would note that the Department has finally established an economic commission for Samoa, four years after this Committee proposed it. Establishing a commission, however, does not solve the carry-over deficit. I would note that the Samoa deficit would be eliminated with just three years of the additional rum fund deposits to the Virgin Islands or six years of the increased Compact Impact Assistance to Guam.
The Department also wants $1 million for "coral reef studies". That is curious, since it seems to be more important than dealing with the fiscal situation in the territories, but not important enough to be included in the President's "Lands Legacy" program. When the Administration unveiled its raid on the Land and Water Conservation Fund, it included $10.3 million to NOAA for coral reef protection and a coral nursery. I don't object to research into the protection of coral, but perhaps if some of the NOAA funding went to the Office of Insular Affairs, the Office could devote its budget to the territories.

There is also a request for an additional $500,000 for brown tree snakes for a total of $2.6 million. According to the justification, a portion will be used for barriers and the remainder for research. Instead of building a wall around Guam, or maybe just around the Fish and Wildlife Service property, you might try extermination. (In any event, if the Fish and Wildlife Service had asked for the $2.6 million and spent it on elimination of the snake instead of increasing its land-holdings, the Office of Insular Affairs would have enough money to eliminate the Samoa deficit in ten years.)
I was also bemused by the additional funding to hire a person to work with the State Department on renegotiation of Compact Impact Assistance. Presumably you have had sufficient personnel for the past fifteen years to administer the direct and discretionary financial assistance to the freely associated states as well as for monitoring of the federal programs that have been made available. The budget justification does not indicate why those personnel are unable to work with the State Department.
I have several concerns with other portions of the Office's budget, but at this time I will only focus on the additional funding to Guam for Compact Impact Assistance. Congress, with the Administration's support, provided Guam with $4.58 million from FY 1996 through FY 2001, when the current Compact of Free Association funding is set to expire. We all understood that the Administration would consider the effect of Micronesian immigration on Guam, Hawaii, and the Marianas during the negotiations on the Compact funding and would propose future assistance based on the outcome of the negotiations, the future relationship, and anticipated effects on Hawaii, Guam, and the Marianas. I applaud the President for going to Guam, but that is not a justification for undoing the carefully restructured entitlement for the Marianas or for proposing what is, in effect, a permanent annual grant to Guam of $10 million. There are, I would remind the Department, effects of Micronesian immigration in both the Marianas and Hawaii which have not been addressed.I am also concerned about tapping into the Marianas entitlement to fund this increase. While the Marianas has not yet matched available funds, that is not an excuse for withholding and in effect canceling future payments. We restructured the $27.7 million to provide scheduled payments to the Marianas, subject to a 50% local match, for capital construction in accordance with the agreement between the Department and the Marianas. In addition, we fulfilled several outstanding commitments with the initial years of the restructured agreement. Our understanding, which the Department fully supported, was to turn the entitlement into a permanent source of funding to meet the capital infrastructure needs of all the territories. Rather than developing a long-term plan to deal with infrastructure needs in the islands, the Department proposes to turn the entitlement into a slush fired.
Given the situation in Samoa and the Virgin Islands, an honest proposal would have been to seek separate authorization for Compact Impact Assistance to Guam so that the entitlement could be used for critical facility needs in other islands. I simply do not understand how you can propose an overall $832 million increase for the Department for your favorite constituencies, yet must steal $5 million from the Marianas to fund a Presidential promise to Guam.
Bureau of Reclamation
The Bureau of Reclamation is requesting $856.6 million, a 10% increase over the enacted level for 1999. Unfortunately, there seems to be an ever declining amount for activities within the Bureau's authorized mission and a studied reluctance to complete authorized projects. The Bureau is placing greater emphasis on "promoting the conservation, reclamation and reuse of existing water supplies; protecting and restoring fish and wildlife resources;" an example of the so-called Greening of the West.
With the money for CALFED and the Central Valley project, the largest portion of the Bureau's budget is for fish and wildlife restoration purposes -- almost 30% of the Bureau's budget request. All of this money for fish and wildlife causes me to wonder what the difference is between the Bureau of Reclamation and the Fish and Wildlife Service.
Alaska Issues
I am extremely alarmed about this Administration's appetite for gobbling up private land in Alaska and sprinkling it with restrictive policies. Quite simply, this is leaving a bad taste in the mouths of Alaskans.
Recently, with the Park Service's ban on snowmachines in Denali National Park, you have ignored the management prescriptions in ANILCA and closed off Alaskans' access with absolutely no scientific justification.
You have sought to eliminate centuries-old family fishing operations in Glacier Bay National Park, again with absolutely no scientific justification.You have continually prevented Alaska's youth from having educational opportunities similar to those in the rest of the country by denying the University of Alaska the remainder of its federal land grant.
And Mr. Secretary, no issue is more disturbing to me than this Administration's opposition to grant a 20 ft wide, 7 mile long right- of-way across Federal lands in order for some of my constituents to have safe access to medical care in times of emergency in King Cove.
Let's just hope that no one or suffers permanent injury or death because of this myopic and inhumane policy.
This Administration also must be held accountable for your fulfillment of your trust responsibilities for expenditure of the Exxon Valdez Trust funds. There is a conflict between your desire to appease environmentalists and your responsibility to enhance the welfare of Alaska Natives through development and preservation of their lands.
Nowhere is this more apparent than in the aggressive attempts to use the Exxon-Valdez fund to acquire Native-owned lands and put them under the control of your Department. More than $416 million of the $680 million Exxon Valdez settlement has been committed to buy up to 650,000 acres of Alaska land--more than the state of Rhode Island. In one instance you paid more than $30 million for one Alaska corporation. Less than one year later the corporation was forced to pay the entire mount out in shareholder dividends -- only $6,000 to each.
This is nothing more than a squandering of the Native heritage in Alaska.
In the meantime you have done little for the economic recovery of these communities which were hard hit by the Exxon Valdez spill or the long-term scientific understanding of the fisheries.
As you know, we are faced with the unprecedented expansion of Federal management of our fisheries resources in Alaska as a result of the rural subsistence requirement in ANILCA. We could have the unenviable distinction of being the only state in the nation to not have authority over our fish and game.
I am sure you are familiar with my counsel to the Alaska Legislature that Congress will not repeal Title VIII of ANILCA, nor can we remove the rural priority for subsistence hunting and fishing. I hope within those boundaries you will continue to work with us this year to resolve the issue.
Finally, let me express my concern about the cuts in the Alaska conveyance program. The BLM' proposes to cut $2.4 million and 4 positions in the Alaska conveyance program. I think history shows us that this is a bad idea.Total (ANCSA) entitlement for Native Alaskans equals 45.6 million acres. BLM has patented 15.5 million acres, and has made an interim conveyance of 21.6 million acres. An additional 8.5 million acres are needed to complete ANSCA entitlements. Alaska Natives are entitled to 15,921 allotments. To date, 11,352 allotments have been issued and 4,569 remain to be processed and issued.
Finally, the State of Alaska is entitled to 104.4 million acres under its Statehood Act. The Department has patented 41.6 million acres to the State and made an interim conveyance of 48.6 million acres -- 14.2 million acres remain to be turned over to the State.
Despite budget increases, BLM proposes to cut the funding necessary to keep the promises which were made to Alaska's Native people in 1971 and to the State of Alaska in 1959. I question whether this makes sense and remind you that it was the Department's failure to survey and convey land in a timely manner that has led us to the University of Alaska being without its Federal land grant. Especially, in light of the ongoing controversy, over the University of Alaska lands -- a direct result of other cuts in the Alaska conveyance budget.
I look forward to hearing your testimony today Mr. Secretary and working with you on these important issues.
END

LOAD-DATE: March 3, 1999

Document 88 of 118.


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