Emergy and Mineral Issues in the FY2006 Budget Reconciliation Bill
CRS Report for Congress
Energy and Mineral Issues in the FY2006
Budget Reconciliation Bill
Marc Humphries
Analyst in Energy Policy
Resources, Science, and Industry Division
Summary
Several resource issues that are designed to generate revenue for the federal
Treasury have been proposed for the FY2006 budget reconciliation bill. The most
controversial of these provisions recommended by the House Resources Committee and
Senate Energy and Natural Resources Committee would open part of the Arctic National
Wildlife Refuge (ANWR) for oil and gas development. The House panel also approved
a provision that would allow coastal states to “opt out” of the current offshore oil and
gas development moratoria, increase fees for hardrock mining and patents, dispose of
certain federal lands, and begin an oil shale and tar sands leasing program.
The House Rules Committee, however, approved a closed rule (H.Res. 542) for the
budget reconciliation package, including an amendment that would remove from the
bill, the ANWR and OCS provisions described above. On November 18, 2005, the
House approved its version of the budget bill, H.R. 4241, passed as S. 1932 (without
the ANWR and OCS provisions), by a vote of 217-215.
The Congressional Budget Office estimates offsetting receipts from resource
development on federal lands in the House-approved bill to be $286 million and in the
Senate version to be $2.66 billion between 2006-2010. This report will be updated.
Several resource provisions designed to generate revenue for the federal Treasury
have been proposed for the FY2006 budget reconciliation bill. According to the
Congressional Budget Office (CBO), potential offsetting receipts from resource
development on federal lands under the House-approved bill (H.R. 4241, passed as S.
This amount of reduced spending is much lower than the $3.7 billion approved by the
House Resources Committee because the ANWR and OCS provisions were removed
from the final House version.
The House Rules Committee approved a closed rule (H.Res. 542) for the budget
reconciliation package, including an amendment that would remove from the bill the
ANWR and OCS provisions discussed below. On November 18, 2005, the House
Congressional Research Service ˜ The Library of Congress
approved its version of the Budget Reconciliation bill (H.R. 4241) by a vote of 217-215.
ANWR and OCS provisions were not included in the final bill.
Subtitles in the House-passed reconciliation package recommended by the Resources
Committee would involve the following: increasing fees and other miscellaneous
amendments for hardrock mining on federal lands (Subtitle A), sales of public land to
mining claimants in Idaho and Nevada (Subtitle B), oil shale development (Subtitle C),
and the sale of federal land (Subtitle D).
The two provisions removed from the bill would have opened up the Arctic National
Wildlife Refuge (ANWR) for oil and gas development and offered coastal states the
option of offshore oil and gas development in areas now under a leasing and development
moratoria.
The Senate Energy and Natural Resources Committee, however, supported opening
a part of ANWR as its only recommendation to the budget reconciliation bill. Arctic
Coastal Plain Domestic Energy Reconciliation provisions in the Senate package would
allow for oil and gas leasing within the coastal plain of the Arctic National Wildlife
Refuge. CBO estimates that the Senate panel version would reduce spending by $2.66
billion. The Senate Budget Committee reported its reconciliation bill (S. 1932) on
October 27.
Below is a listing and brief description of each subtitle of the Resources Committee
recommendations that are contained in the House-passed bill, followed by a discussion
of the two provision removed (ANWR and OCS) from the Resources Committee
recommendation.
Mining Fees. Subtitle A of the House-passed bill would change the fee structure
for minerals located and developed under the General Mining Law of 1872. The General
Mining Law of 1872 is one of the major statutes that affects the federal government’s land
management policy. The law grants free access to individuals and corporations to
prospect for minerals in public domain lands, and allows them, upon making a discovery,
to stake (or “locate”) a claim on that deposit. A claim gives the holder the right to
develop the minerals and may be “patented” to convey full title to the claimant. Less than
A continuing issue is whether this law should be reformed, and if so, how to balance
mineral development with competing land uses.
The right to enter the public domain and freely prospect for and develop minerals is
the feature of the claim-patent system that draws the most vigorous support from the
mining industry. Critics consider the claim-patent system a giveaway of publicly owned
resources because of the small amounts paid to maintain a claim and to obtain a patent.
Congress has imposed a moratorium on mining claim patents since FY1995.
The one-time location fee, now at $32 per claim, would increase to $100 per claim
under the Resources bill. Required mineral development work (i.e. work required prior
to a patent application) would increase from $500 per claim to $7,500 per claim and a
new schedule of maintenance fees would be established. The patent application
processing fee would increase from $250 for the first claim or site to $2,500 for the first
claim or site. The charge of $50 for each additional claim would remain unchanged.
Patent fees, which allow for the transfer of title, would rise from $2.50 or $5 per acre to
$1,000 per acre or fair market value, whichever is higher. Mineral examinations would
not be required under certain circumstances and the Mining and Minerals Policy Act of
1970 (30 U.S.C. 21a) would be amended to “facilitate the productive second use of lands
used for mining and energy production.”
Disposal of Public Lands. Under Subtitle B in the House-passed version, public
lands in Nevada and Idaho would be conveyed to claimants under the General Mining
Law of 1872. About 7,000 acres in Nevada would be transferred to the claimant for $500
per acre. In Idaho, about 520 acres would be transferred at $1,000 per acre.
Under subtitle D, several parcels of land would be made available for immediate sale
at fair market value. Certain lands are conveyed to the District of Columbia, and there is
a transfer of property from the District to the United States for administration by the
Secretary of the Interior.
Oil Shale. Oil shale and tar sands amendments in Subtitle C of the House-approved
bill would require the Secretary of the Interior to conduct lease sales, offering at least 35%
of federal lands considered geologically suitable within the states of Colorado, Utah, and
Wyoming. Royalty rates for the first 10 years would be set at 1%-3% of the gross value
of production. Beyond 10 years, the rates would range from 6%-9% of production value.
The Secretary could reduce the rates under certain circumstances. States would receive
50% of the revenues generated from oil shale and tar sand leases within that state. Of this
50%, local governments would receive a one-third share. In the first ten years of
production, state and local governments would share an additional 80%of the receipts
deposited with the federal Treasury. The royalty rates proposed for oil shale leasing would
be much lower than the 12.5% for oil and gas leasing on public land. There are currently
no oil shale leases in the United States.
Arctic Coastal Plain Domestic Energy. The ANWR coastal plain, east of
present sites of oil production, is the virtually undisturbed home to a wide variety of
plants and animals; several species there are protected by international treaties or
agreements. This “1002 Area” is the calving grounds of a large caribou herd. It is also
believed to be a promising U.S. oil prospect. Seismic studies and drilling outside the
restricted area have led to estimates of a good chance of finding significant quantities of
economically recoverable oil. However, because of the wide range of estimates and
probabilities associated with finding oil, there is a good deal of uncertainty. In addition
to oil estimates, there are a number of controversial environmental issues being debated.
For a broader and detailed discussion on issues related to ANWR, see the CRS reports
below.
(For more details on ANWR, see CRS Report RS22304, ANWR and FY2006 Budget
Reconciliation Legislation, by Bill Heniff Jr. and M. Lynne Corn; CRS Report RS21030,
ANWR Development: Economic Impacts by Bernard A. Gelb; and CRS Issue Brief
IB10136, Arctic National Wildlife Refuge: Controversies for the 109th Congress, by M.
Lynne Corn, Bernard Gelb and Pamela Baldwin).
OCS Leasing and Revenues. The Outer Continental Shelf (OCS) moratoria,
which prohibit leasing on most federal offshore lands, have been an important issue in the
debate over energy security and the potential availability of additional domestic oil and
gas resources. Congress has approved the moratoria for each of fiscal years 1982-2006
in the annual Interior Appropriations bill. The offshore leasing moratoria began with the
FY1982 Interior Appropriations Act (P.L. 97-100), which prohibited new leases offshore
of California. The imposition of other moratoria came about after many coastal states and
environmental groups contended that leasing tracts in environmentally sensitive areas
might lead to activities that could cause economic or irreversible environmental damage.
Eventually the moratoria were expanded to include New England, the Georges Bank, the
mid-Atlantic, the Pacific Northwest, much of Alaska, and a portion of the Eastern Gulf
of Mexico. Because of environmental and economic concerns, Congress for the past two
decades has supported annual moratoria on leasing and drilling in the OCS. This proposal
would affect states along the Atlantic and Pacific coasts, the Gulf of Mexico, and Alaska.
The House Resources Committee’s budget reconciliation package would have
imposed a statutory leasing prohibition through June 30, 2012, on the OCS areas currently
under moratoria and revoke the 1998 Clinton leasing prohibition that covers the same
period. States could opt out of the leasing ban and receive 40%, over time, of OCS
revenues. After June 30, 2012, states could petition for five-year moratorium extensions
for OCS areas within 125 miles of their coastlines. States with offshore energy
development have been seeking to receive a direct share of the federal revenues generated
by those activities. Currently, the affected states receive some revenue from offshore oil
and gas leases in federal waters. This is in contrast to states with onshore leases on federal
lands, which receive a 50% direct share of the oil and gas leasing revenues.
The possibility of oil and gas production in offshore areas covered by the moratoria
has sparked sharp debate in Congress. A proposal to require the Department of the
Interior to conduct a comprehensive inventory of OCS oil and natural gas resources drew
heated opposition, although it was ultimately included in the Energy Policy Act of 2005
(P.L. 109-58, Section 357). Opponents of the OCS inventory saw it as a first step toward
lifting the OCS leasing moratoria. The House Resources budget reconciliation package
would have also repealed the inventory requirement. (For more details on OCS issues see
CRS Issue Brief IB10149, Outer Continental Shelf: Debate Over Oil and Gas Leasing
and Revenue Sharing, by Marc Humphries).