636 



second, and that the balance must be spent on impact related projects. 

 Any funds not used for impact lelated activities must be returned to 

 the Federal Government. It should be noted th;it since the automatic 

 grants must be spent on impact related projects and the surplus re- 

 turned to the Federal Treasury, the automatic "Tants are not re\-enue 

 sharing. States become eligible to receive automatic grants when the 

 volume of oil or its natural gas equivalent produced on or landed from 

 Outer Continental Shelf lands exceeds 100,000 barrels per day. In the 

 event that oil or natural gas is produced on the Outer Continental 

 Shelf lands adjacent to one State and landed ^n another State, each 

 State shall receive automatic grants at a rate half as great as if the 

 same State landed and produced the oil or natural gas from adjacent 

 Outer Continental Shelf lands. 



The level of automatic grants shall be 20 cents per barrel for the 

 first year. 15 cents per barrel ff)r the second year, 10 cents per barrel 

 for the third year, and 8 cents per barrel for the fourth and all succeed- 

 ing years in which oil or natural gas is produced or landed. The de- 

 creasing amounts of the grant reflect the fact that the impacts of Outer 

 Continental Shelf oil and natural gas production upon State and 

 local gover.nments are more severe in the early yeai'S of the project. 

 Funding is limited to $50 million annually for each of the fiscal years 

 through September 30, 1978. Following that date payments are limited 

 to the first million barrels of oil or its natural gas equilavent per day 

 per State for each of the 10 succeeding years. 



Realistically, some Outer Continental Shelf oil or natural gas proj- 

 ects are going to fail. 'N^Tien a State or municipality issues bonds guar- 

 anteed by the Secretary of Commerce with the intent of retiring the 

 bonds from anticipated revenues in the form of automatic grants and 

 such revenues are not fortlicoming because of the failure of an Outer 

 Continental Shelf project, it is only equitable that the Federal Gov- 

 ernment bear the risk of such a failure. State and local governments 

 cannot and should not pay the high cost of constructing impact-related 

 l^rojects when they receive no revenues. The Secretary must, under the 

 tenns of the guarantee, pay the bondholder upon a default by the State 

 or municipality. ^Yhen the defau.lt results fT-om the failure of an Outer 

 Continental Shelf project and the accompanying lack of expected 

 automatic grants, the Secretary's right of reimbursement shall not ex- 

 ceed the amount of automatic grants accrued or due the defaulting 

 State. Funds accrued in automatic grants subsequent to the default 

 shall be applied by the Secretary toward reimbursing the Federal 

 Government for the defaulted bonds which it assumed . 



The provisions of S. 586 are administratively workable and easy to 

 manage. A Coastal Impact Revenue Board consisting of two mem- 

 bers design.ated by the Secretary of Commerce, one member designated 

 by the Secretary of the Interior, and two members appointed by the 

 President, chosen from a list of not less than six candidates submitted 

 to the President by the Xational Governor's Conference, shall advise 

 the Secretary of Commerce regarding the awarding of grants and 

 loans. 



Mr. President. I urge my colleagues in the Senate to give favorable 

 consideration to this bill, which is of such great importance to our 

 coastal States. This bill not only provides for grants and loans to 



