together with others opposed to additional Federal 
bureaucracy, argued forcefully for a revenue sharing 
or an automatic formula approach. The Ford Ad- 
ministration opted for a combination of loans and 
bond guarantees. In final form, the CZMA amend- 
ments creating the Coastal Energy Impact Program 
include grants, loans, bond guarantees, and formula 
grants. 
The major restriction on the availability of the 
“formula grants” for public facilities and services is 
that such money can only be used because of the 
“unavailability of adequate financing under any other 
subsection” of the impact assistance program. That 
means that as long as loans and bond guarantees 
are available, grants to the States will be generally 
restricted to planning assistance, and compensation 
for environmental and recreational losses. Propo- 
nents of the automatic or formula grant approach 
had wanted funds under this provision to be avail- 
able for public works projects. It was on this point 
that the Ford Administration balked. 
The Administration made the difference between 
reliance on grants or loans a major question of 
principle. The loan approach was seen by its sup- 
porters in OMB and the Commerce Department as 
a precedent for any inland impact assistance pro- 
grams which might be contemplated and, in fact, as 
a broader precedent for adjustment assistance in 
general. The advocates of the loan-bond guarantee 
approach hoped the success with the coastal impact 
program would lead to the consolidation of other 
assistance programs; specifically mentioned in this 
discussion were aid programs run by the Department 
of Agriculture, Economic Development Administra- 
tion (Commerce), Department of Defense, Depart- 
ment of Health, Education, and Welfare, and Depart- 
ment of Housing and Urban Development. 
At present, however, the carefully worked out 
construction of the energy impact program is being 
revised. In dealing with legislation altering the Outer 
Continental Shelf Lands Act, the Congress is cur- 
rently discussing removing some of the restrictions 
on application of the “formula grant” section as 
well as increasing the money available through this 
vehicle.** Alterations were made by the program 
administrators in revised regulations issued early in 
1978. 
Implementation of the loan provision has been 
delayed by a lack of agreement on the interest rate 
to be applied. The Office of Management and Budget 
recommends the official Treasury rate. The program 
managers contend this will effectively make the loan 
program useless since States and localities can by 
and large obtain better rates on their own without 
difficulty. 
58 H.R. 1614, Outer Continental Shelf Lands Act Amendments 
of 1977, Title IV. 
Proponents of the automatic grant type of as- 
sistance for coastal States base their case in part on 
the fact that western States with minerals on Fed- 
erally owned lands receive 5O percent of the royalty 
income, to help compensate for the needed new 
governmental services required since no State rev- 
enue accrues for the activities on the Federal prop- 
erty. 
A second major question is whether either grants 
or loans for facilities and services are appropriate. 
That is, are the changes in communities brought 
about by the introduction of a heavy industry such 
as the offshore oil industry susceptible to being 
treated with Federal aid? 
There is evidence, as in studies of western mining 
towns, that the most severe impacts from large- 
scale energy development may be psychological. Re- 
searchers have come to label this the “Gillette Syn- 
drome,” named for the town of that name, said to 
consist of drunkeness, depression, delinquency, and 
divorce. Researchers have found that planning as- 
sistance to help communities prepare for change is 
often of limited help because many rural commun- 
ities are hostile to planners and planning. 
The solution for some coastal States faced with 
the offshore industry for the first time has been to 
attempt to funnel any prospective support industry 
into existing urbanized areas. For instance, Massa- 
chusetts has proposed five coastal cities, some with 
chronic unemployment, as potential supply bases 
and has actively courted the off shore industry. A 
study by Princeton University’s Center for Environ- 
mental Studies, released August 22, 1977, proposes 
that New Jersey locate any support industry for 
offshore development in Atlantic City. It further 
suggested that certain facilities, such as tank storage 
farms, be located inland from the coast, near major 
highways. The study also noted that the State needed 
to assume leadership, because local communities 
might, if left to make siting decisions themselves, 
allow environmentally damaging locations for im- 
mediate tax revenue benefits.*? 
An argument put forth in justification of Federal 
aid to coastal States adjacent to offshore oil and gas 
operations is that the proceeds from such activity go 
entirely to the Federal Government, while expenses 
for services and facilities generally are borne by the 
local and State governments. The difficult factor to 
calculate is how much local and State revenue is 
generated by the onshore facilities or by the oil/gas 
production itself in States that tax same, and whether 
this revenue will keep up with expenditures. The 
evidence points to a short-term shortfall. There is 
also the question of whether a State’s tax load is 
“fair;’ in other words, does it do enough to raise 
revenues itself? 
59 New York Times, August 23, 1977. 
IV-18 
