Finally, the committee should also consider the impact of the development of the claims on the agriculturist. At the time at which development occurs, the holder of the oil shale claims or lease should reimburse the surface lessee for the replacement value of all fences, corrals, and roads disturbed or displaced by development. Language reflecting this principle should be added to the bill.

In summary, we do support an economically viable and valid oil shale industry in the State. We believe that oil shale is a strategic national fuel and, in the short term, has valid industrial by-product uses, and our focus in previous litigation and in our comments on this bill is to focus on process and to make sure that those surface rights remain in the public trust.

With that, I will turn the microphone back to Peggy.

[Prepared statement of Mr. Cattany, with attachments, follows:]

Mr. Chairman, thank you. I appreciate the invitation by your staff to
participate in this hearing. I am testifying today on behalf of Governor
Roy Romer of Colorado. I request that this statement and accompanying
support documents be included in the record. They include 1987 testimony
on behalf of Colorado before the Senate Subcommittee on Mineral Resource
Development and Production (Attachment I) and our analysis of the impacts
of the patents issued in 1986 (Attachment II).

Colorado welcomes the opportunity to comment on both the process and the
substance of the settlement of oil shale claims in Northwest Colorado.
The settlement of these claims is important not only to the companies and
individuals wishing to invest in Northwest Colorado, but also to the
local governments who derive revenues from these projects and to the
public who use these lands for recreation and agriculture. While the
state does not have direct jurisdiction over this issue, our objective
over the past two and a half years has been to assure that a wide range
of interests are considered in both the management and the disposition of
our natural resources.

In general, Colorado supports the basic provisions of H.R. 643. However,
there are four major areas of the bill which we believe need further
clarification or expansion. They are:

1)

2)

3)

Additional conditions on the transfer of surface rights for
claims exempted by this bill;

Evaluation of the remaining patent applications filed prior to
January 24, 1989 and possible patent under certain conditions;

A redefinition of the validity criteria for the claims subject
to patent, which will reflect the standards in existing law and
the issues raised in previous litigation of the oil shale
claims; and

4)

An adjustment in the value of the assessment work necessary to maintain oil shale claims to reflect the value of the resource under claim and in the processing fees for transfer of patents which reflects the cost of the government services required to complete the transaction.

Our comments in these areas are based on the principles of our litigaton of the 1986 agreement between the U.S. Department of the Interior (DOI) and the claimants, consistency with state and local land management practices and responsibilities, fairness in resolving the contradictory directives of Congress and DOI, acknowledgement of the principles raised in litigation of this issue since 1960, and appropriateness of the fees charged for the permanent or temporary transfer of rights to a public asset.

Our comments today are also based on the belief that in many cases the surface right may ultimately be the valuabel resource, not necessarily the oil shale right. Previous patents or leases account for the majority of the high quality oil shale. Therefore, it is our intent to have the states play an active role in the management of the surface.

To put into context my specific comments on H.R. 643, let me summarize the actions of the state since 1986.

BACKGROUND

In 1986 525 oil shale claims were patented in the states of Colorado, Utah and Wyoming covering 82,000 acres of land. Colorado, which had various surface management responsibilities on those lands, was not a participant in the patent process, or in the related agreements between DOI and the claimants. These special agreements, affecting land use and the surface and mineral rights that were transferred, were a compromise between the claimants and the federal government. They mooted appeal of Judge Finesilver's 1985 decision. The settlement transferred oil shale, sand and gravel rights, but reserved to the United States oil, gas and coal ownership, as well as some surface control for a limited time (20 years). The settlement, however, did not explicitly address the validity of the claims even though allegations had been made in prior litigation that as much as 202 of the 525 claims may have been invalid.

LITIGATION

Colorado had concerns about the terms of the special agreements because they did not protect Colorado's interest, especially in the management of the surface. Specifically, when the federal government entered into private negotiations with the claimants without public participation, it violated its trust responsibilities to the state. As a result, the state filed a motion to intervene in Tosco v Hodel and Ertl v Hodel in the Tenth Circuit Court of Appeals. The motion was denied based on a lack of jurisdiction which was mooted by the settlement agreement. Colorado then filed a complaint in the Washington D.C. Federal District Court challenging the validity of the oil shale agreement executed by the United States. This case was transferred to the Federal District Court in Colorado and was heard by Judge Finesilver. The case was dismissed without prejudice for failure to join all indispenable parties (oil shale claimants). No ruling was made on the merits of the case.

The basis of our legal intervention was twofold. First, it is our belief that a special agreement of this type that goes beyond the normal federal patent process is subject to the provisions of the Federal Land Policy and Management Act of 1976. This law requires public participation, a 60-day gubernatorial review period before any agreement is finalized, and congressional authorization of land transfers of over 2,500 acres. In this particular case, various public groups are affected by the decision: local governments, hunters, ranchers, farmers, recreationists and other potential developers -- none of whom were consulted in this process. Second, it is also our belief that a land transfer of this magnitude is subject to the provisions of the National Environmental Policy Act, which requires either an environmental impact statement or a refinement of the existing statements and management plans currently in place to apply specifically to the 82,000 acres. Finally, the agreements did not provide for oversight provisions in the implementation of the settlement including a review in 20 years before the final surface transfer is made.

No decision on the specific merits of Colorado's case has been made, and we continue to advocate our legitimate interest in the settlement of the issue.

STATE SETTLEMENT

To assure that Colorado's surface management interests were recognized, the Romer Administration began negotiations with the principal claimants in February, 1987 to prepare voluntary surface management agreements that would guide the surface use of the patented lands until such time as oil shale development commenced. These agreements are restrictive covenants that go with the land and are recorded as documents affecting title. They will serve as a matter of record describing the unique biological, ecological and wildlife features of the tracts which will be useful at the time environmental impact statements are prepared prior to the development of the resource. These agreements will be superceded by state mined land reclamation laws when development begins. To date, Colorado has reached agreement with Shell 011, Ertl Trust, Union Oil and Tosco Corporation. A final agreement is pending with Exxon and Weber 011.

These surface management agreements address public access for hunting and fishing and consultation with the state for timbering, grazing, spraying, burning and other land management activities. The agreements identify areas and species of geological, ecological and biological significance that are unique and should be either designated as Colorado Natural Areas or identified for protection at a later date. The agreements also address compliance with state and local land use laws and consultation with the state on road closures, location of transmission and power lines, and other surface disturbances. These surface management agreements are the primary component of Colorado's settlement on the oil shale litigation,

Surface management is critical because of the ecological, biological and wildlife features of these lands. Several of the 1986 patent lands contain wildlife habitat and migration routes, riparian areas, elk calving and nursing areas, sagegrouse habitat and blue grouse winter

habitat in addition to several rare plant species. The lands affected by H.R. 643 are valuable but not critical wildlife habitat. There may be 3 to 4 plant species in the area which are proposed for listing by the U.S. Fish and Wildlife Service as threatenend or endangered. There are also 2 to 3 plant species rare to the state that may also exist in the area. Therefore, privatization of the surface rights makes it more difficult to maintain the level of protection that exists under public ownership. In addition, denial of public access will hinder game management through harvesting and may reduce state and local revenues from recreation.

COMMENTS ON H.R. 643

Future federal management and disposition of oil shale claims should be guided by the comments outlined at the beginning of this testimony. With these in mind, I would like to comment on the provisions of H.R. 643.

Claims Applicable for Patent

The state understands the need on the part of the industry to have assurances that the patent process will move forward before the investment is made to prepare patent applications. Similarly, we recognize the position of the conservationists that it has been clear for the past two years that a patent process would be developed legislatively. Anticipating this pending action, the Deputy Assistant Secretary of DOI directed claimants to file applications in early 1988 while allowing the BLM self-imposed moratorium on processing applications to continue until October 1, 1988. DOI announced it would proceed with rulemaking to process the applications in December. Finally, we are also aware of the difficulties and delays in processing the applications within BLM. There are 1575 claims representing about 250,000 acres of land in Colorado and Utah that are subject to patent.

H.R. 643 currently allows only those applications for which all requirements have been satisfied to be patented. This would affect about 12,000 acres of surface and oil shale rights, but deny the option of patents to those claimants whose applications may have been filed in 1988 but which were not reviewed, amended and approved by January 24, 1989. Under certain conditions, the state is willing to support a more liberal provision while still limiting the total lands subject to transfer.

We propose that no claims be subject to patent except those for which a "complete" application had been filed with the Secretary of the Interior prior to January 24, 1989. The term "complete" in this case would mean that all required forms and supporting documents had been filled out and filed by the applicant by January 24, 1989. The application is still subject to technical review, amendment and final approval by the Department.

There are four conditions on this more liberal interpretation for obtaining oil shale patents: 1)Mandatory surface management agreements (as described above) with the state for any surface rights transferred under claims exempted from the current provisions of H.R. 643; 2) relinquishment of surface rights for those claims whose complete application is still pending final review and approval; 3) public review and possible congressional oversight of the validity criteria currently used by BLM; and 4) adjustment of the value of assessment work to maintain claims, and of processing fees to issue patents.