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"grandfather" 50,000 acres of valuable oil shale rights for patenting at $2.50 an acre. H.R. 2392 as passed by the House carries out this agenda of the claimants, except that it sets some dollar figures they will fight to reduce. My rough calculation is that this would mean a gift to the claimants of between $100-250 million, which would be the probable immediate speculative market value of the oil shale rights. Moreover, even if this acreage were not grandfathered, in the course of the legislative process, it would be a simple matter for the claimants to keep securing legislative extensions or reductions of maintenance requirements until they get the "whole works" by patents. Something is wrong in our country.
These bills do not address the fundamental public policy issues relating to these 69-year-old oil shale mining claims which I believe the Congress should consider if it is interested in protecting the public interest in these valuable resources. In listing the following issues it is my intent that legitimate rights of claimants to oil shale mining claims should be protected on a par with the interests of the general American public. But, I do not believe the rights of the public have been adequately represented through the years by the U.S. Departments of Interior and Justice in the oil shale cases. Furthermore, most of the issues which I list below have not been considered at all by the Oil Shale Legislation Committee because there has been no one on the Committee who was interested in raising them.
Major Outstanding Public Policy Issues Relating to Pre-1920 Oil Shale Claims and Pending Bills Relating to Them.
1. Approximately 430,000 acres of rich oil shale lands, containing several hundred billion barrels of shale oil, have been "sold" for $2.50 an acre. How does this huge disposal from the public domain square with the requirements and purpose of the U.S. mining laws? Why is there no viable commercial oil shale industry in the United States? Was not the real purpose and intent of the mining laws that for the land to be patented the miners should develop and put minerals in the marketplace? Is the mining law failing to accomplish its intended purpose where oil shale is concerned? Why should patents be granted on oil shale claims which have no real prospect of development?
2. Some 300 billion barrels of potentially recoverable oil are probably contained in the acreage the Federal government has patented through 1987. This is on the order of ten times the oil and gas in identifiable U.S. oil and gas fields. Privately held oil shale is probably enough for a century or two of mining, given the fact that no viable shale oil industry is in sight. Why should the U.S. government be allowing any more of the oil shale to be patented or otherwise put in private control? What would be the public purpose of such steps?
3. The pending oil shale mining claims are at least 69 years old. Many of them have passed through various and often different hands. In some instances present owners or their agents might have bought the "rights" to an abandoned claim from one co-locator for possibly only pennies an acre and "forfeited out" the other co-tenants out of the 8 for a 160-acre claim. Under such circumstances how can present "claimowners" establish that the claims have been continuously in force ever since they were first located? Does DOI have any stipulated procedures for determining factually whether each claim has been maintained continuously since its location? Does DOI consider that when oil in the Texas and Oklahoma fields in the 1930's sold for less than $1 a barrel oil shale claims were essentially worthless as economic ventures and hence their owners suffered oss of discovery" because the minable oil shale mineral was no longer valuable under the laws which then prevailed?
4. A cursory review of maps on oil shale mining claims that have been patented to date, and those that are actively being sought for patent, show that they tend to be located in contiguous blocks, covering large areas. How can it be that claims so uniformly met the requirements of the mining laws for validity? Or, did the government neglect to review the validity of the claims in disregard of numerous appropriate criteria which Interior lawyers in the past have identified as being pertinent, so
the land went to patent? Were these the results of the "automatic" patenting of claims Interior briefs in 1968 described?
5. Of the 430,000 acres, more or less, that have heretofore patented, what active development to produce commercially marketable shale oil from them has occurred and is under way? What proportion of those lands has simply been "stockpiled" by oil companies against the future time, well into the next century, when liquid and gas hydrocarbo run out? What proportion of the patented acreage of oil shale is owned by oil companies? What public purpose has been served by divesting these energy-rich lands from public ownership, particularly under circumstances of mismanagement and maladministration in disregard of applicable law? (See 1968 Interior Briefs.)
6. The oil shale mining claims were located under the Oil Placer Act of 1897 which stipulated a more rigorous standard for validity then was generally applicable to other minerals. However, through the years the criteria for patenting oil shale mining claims have been relaxed substantially from those generally applicable to other minerals. How and why did this happen? Was there a valid public purpose for relaxing the criteria for oil shale mining claims? If such a purpose has been specified, how has it served the public interest? Or, have oil shale disposals been a scandal-waitingto-be-discovered which dwarfs Teapot Dome?
7. The Departments of Interior and Justice, to the best of my knowledge, failed to disclose explicitly to the Supreme Court of the United States in the Andrus case that the Department of Interior had extensive evidence in its briefs that the Department's ruling in Freeman v. Summers in 1927 was erroneous with respect to the geologic structure of oil shale and was not in conformity with the economic rule that was stated in Castle v. Womble (1894). Despite this knowledge, the Department of Interior and Justice failed to Petition the Supreme Court for Rehearing on Andrus, even though professional staff urgently recommended such a Petition. How can the U.S. government be justified in continuing to use criteria for patenting pending claims which the Departments of Interior and Justice know are erroneous and stem from ex parte proceedings and political manipulations in 1927 in the Freeman v. Summers case? Should not the government take corrective action, by both the Secretary of Interior and the Congress, to stop patenting on the basis of Freeman v. Summers inasmuch as the Department earlier carefully documented that this key ruling was full of errors? I hereby by reference include herein the excerpts from the DOI 1968 Brief I submitted for S. Hrg. 100-527, October 16, 1987, at pp. 194-242.)
8. The Departments of Interior and Justice failed to appeal the Tosco v. Hodel (1985) decision despite cogent staff work that showed that this decision was wrong on practically all its points. How did it come about that a "settlement" was reached by Reagan administration officials in 1968 which divested 82,000 acres of rich oil shale lands which contained a potential 42 billion barrels of recoverable oil? Who, if any one, protected the public interest in that divestiture? Did the Secretary of Interior properly discharge his trust responsibilities to the American people?
9. As described above, the Department of Interior repeatedly has fired, removed, or sidetracked career personnel for doing valid work to stop the oil shale land "giveaways." How can proper administration of valuable natural resources prevail in that Department if the political appointees of the Department repeatedly destroy the careers of professional staff who endeavor to do their best to have the Department administer the lands according to the laws which the Congress passed? I urge the Congress to investigate the Department's treatment of its employees who tried to uphold the laws relating to oil shale in the 1930's, 1960's, and 1980's.
10. The oil shale reserves in Colorado are one of the largest reserves in the world of potential recoverable oil, costly though it may be. These oil resources total somewhere between 1 to 2 trillion barrels. They are a national heritage. The resources in the 250,000 acres which the Department of Interior would dispose for $2.50 an acre could well be in the order of 100 billion barrels. Such huge
resources affect all Americans, not just the few who live on the western slope of Colorado. Is it proper and fitting that three members of the Congress from Colorado and some State and local officials in Colorado should be negotiating with claimants over a relatively narrow set of issues relating to the disposal of the 250,000 acres when the outcome is of concern to all the people in the United States? Should not oil shale policy be set in a national forum rather than in meetings in Colorado to which the general public was not invited.
11. The U.S. budget has huge deficits and the budget of the State of Colorado is likewise strapped for money. The need for public resources is virtually perpetual. On what basis can the staff members of Congressmen from Colorado and the Governor of the State of Colorado or his agents be carrying on negotiations in a forum at which hardly a voice is raised over the possible divestiture of huge Federal energy resources? If such public policy negotiations are to be carried on, should they not be done with wide advance public notice in an objective and wide open public forum which enables people from other States, including citizens from Colorado, to have an effective voice - and be done on the basis of data which present the full implications of proposed divestitures to the American people?
12. In natural resource literature the Secretary of Interior is often described as the trustee for the U.S. public domain. Likewise, I view the Governor of the State of Colorado as the trustee for Colorado people of the potential large income which oil shale land in Colorado might someday yield to the State Treasury if the shale were continued in Federal ownership. Given the history of oil shale in Colorado, particularly the 1986 divestiture of 82,000 acres, have these officials been properly discharging their public trusteeship responsibilities? What should be done to ascertain whether they did, and to make sure that they do so in the future?
13. As the figures cited above show, the "claim owners" of pending oil shale claims would acquire potential oil shale resource wealth of more than $1 million for every $1 that they pay the Federal government for the claims. The people who succeed in securing patents based on claims that are more than 69 years old will become instant millionaires and their service to the public interest is of a very doubtful and uncertain nature. How much personal enrichment in this field is the U.S. government willing to tolerate at the expense of the taxpaying public?
14. Why has the Department of Interior neglected a large array of well-grounded charges that it could have levied against pending claims in contests to ascertain their true validity under the U.S. mining Law? In my statement to your Subcommittee, which the Senate finally published in its October 16, 1987 S. Hrg. 100-527 at pp. 265-266, I listed more than 15 such criteria, beyond the discovery and maintenance of claims criteria, which the Department of Interior has used or should use. The criteria include:
Loss of discovery due to changing economic circumstances, as when the price of oil in the 1930's was less than $1 a barrel and oil shale claims became worthless for practical mining purposes for at least a decade.
Improper or fraudulent location of claims (e.g., in deep snow, without stakes.)
Location for non-mining purposes, e.g., for speculation, grazing, etc.
Failure to do $500 of improvements on each claim.
Adverse possession of the land by government, e.g., for grazing leases, oil drilling, hunting,
Oil shale is a non-metallic mineral of widespread occurrence. All the 430,000 acres already patented containing it cannot be simultaneously or proximately developed, so pending claims should be treated according to the restrictive discovery rules formerly applicable to sand and gravel mining claims (marketability at a profit).
Failure to develop claim for mining within a reasonable time.
Abandonment of claim (as among other indicia, acquisition under quit-claim deed for nominal consideration, and use of assessment work procedures under 30 U.S.C. 28 to forfeit out original co-owners). Deception of original locators or misuse of forfeiture procedures to deny them due notice should also be considered. Failure to do assessment work in past years and failure to answer charges in contest complaints in the 1920's and 1930's are good evidence.
Issuance of conflicting patents and/or conflicting claims located for metalliferous minerals in late 1965 through early 1967.
Land in the claim is non-mineral in character. Non-mineral land of 10 acres or more on claim.
Claim not valid and subsisting on February 25, 1920 -- and continuously since then.
Land not chiefly valuable for oil shale.
Fraud in location or application for patent.
Contravenes or denies established or higher public use of land (e.g., for coal classification or withdrawals antedating the claims or other purposes) under guise of a mining claim.
Failure to meet affirmative standards for a productive venture to produce oil commercially in 69 years of claims.
Lack from February 25, 1920, of foreseeable economic prospects for future profitable commercial oil production from shale within a reasonable period, e.g., 20 years.
Claim previously investigated and declared null and void by Interior Department by "old decisions" for failure to do assessment work and other reasons.
The Congress should enact these criteria for determining validity of pending oil shale claims and stipulate that the Department of Interior must use them where applicable, in determining validity. The Congress should also give the Department adequate time for determining validity of pending claims so that required full field investigations can be made and contests can be prepared and conducted.
15. Huge wealth is involved in oil shale claims. Should not claimants be required to submit full documentation in support of claims and be required to do so under oath, subject to the same sort of penalties as we are required to face when we submit even the smallest tax return to the I.R.S.? The burden of proof should be on the claimants.
16. The development of oil shale will require much water and/or cause much air and land pollution. Studies from EPA more than a decade ago indicated that the production of oil from shale might require use of more energy than it produces. The threat of the global "Green House" effect due to excess carbon dioxide in the air raises a major question about the future of oil from oil shale. Should more public lands be turned over to private hands on the face of these environmental uncertainties about the feasibility of oil shale development?
17. The authors Tolchin have alerted America that foreigners have been buying American assets "on the cheap" with devalued dollars. If the Congress continues to allow Interior to "privatize" the public oil shale, we can look forward to having Colorado oil shale bought by the Japanese to provide oil for the factories of Japan while the environment in Colorado is desecrated by pollution from mining and extracting the oil. How do oil shale resources fit into our energy picture for national security purposes? The Congress should proscribe sale of oil shale rights to foreign-owned companies or foreign governments.
Recommendations to the Congress.
To protect the public interest properly and also to do justice to the claimants who still have pending oil shale claims located before February 25, 1920, I suggest the following actions by the Congress:
1. Embargo further patenting of pending oil shale claims including those that were in the pipeline on January 24, 1989.
2. Direct the Secretary of Interior to complete a full investigation of the geologic and economic validity of the criteria established in Freeman v. Summers and in Andrus, to identify the full array of other criteria applicable to proper determination of the validity of claims -- and to take necessary legal and administrative action to bring the criteria for patenting of oil shale claims in line with those that are used for other minerals and in line with geological facts and proper economic criteria. Then the Congress should enact the criteria.
3. Order the new Secretary of Interior to investigate the 1986 settlement and the disposals of the 82,000 acres of oil shale lands for propriety, validity, proper procedure, and adequacy of discharge of the Secretary of Interior's trusteeship responsibilities as public guardian of the U.S. government's public domain lands. Require the Secretary, based on such full investigation, to report to the Congress within one year its findings and proposed corrective actions that are needed to recover any lands that might have been improperly divested from public ownership.
4. Direct the Secretary of Interior to make a study and report to the Congress what it would require for the government to "buy out" all pending oil shale claims by reimbursing claimants for their prior development and other actual costs.
5. Congress should take action to authorize a full oversight investigation of Interior Department management and disposals of oil shale lands since 1920, including particularly the disposals in 1986-1987. This review should be done with the assistance of the General Accounting Office and should cover the scope which I carefully outlined for the Senate Subcommittee on Mineral Resources Development and Production in their Hearing record of October 16, 1987 (S. Hrg. 100-527 at pp. 191-192). I include those points in this Statement by reference. Such a review would clearly be in the public interest. The people of the U.S. deserve to know factually how their oil shale lands were mismanaged; on what basis disposals were made and who got them in the end; and whether such disposals were in accordance with the law and serve the public interest.
The roots of the oil shale land mismanagement go back to the Teapot Dome era in the 1920's.