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Show and royalties are paid once a lease has been issued and is producing.26 Not only does the administrator have broad discretion to refuse to issue prospecting permits or leases, but he also has broad discretion to prescribe operating terms and conditions. Existing law appears fully adequate to authorize supervision over leasable mineral operations as they may affect other land uses and environmental conditions. While representatives of the oil industry have stated that the leasing system has been generally satisfactory from their point of view, producers of other minerals have stated dissatisfaction with the manner in which broad administrative discretion has been exercised. We recognize that desirable changes in the leasing system can be accomplished by administrative action. However, we have concluded that the system can be improved, and that modifications should be accomplished by statutory action. As noted above, the Department of the Interior has complete discretion to issue or not to issue a prospecting permit or mineral lease on lands otherwise open to leasing. Administrative discretion to establish operating terms and conditions is almost equally sweeping. Since authority to prescribe operating terms and conditions is manifestly adequate to resolve conflicts with other land uses and provide 26 For a comprehensive discussion of the competitive and noncompetitive leasing systems for Federal lands see Rocky Mountain Mineral Law Foundation, Federal Competitive and Noncompetitive Oil and Gas Leasing Systems. PLLRC Study Report, 1970, Chapters IV and V. government. Many wholesome procedural changes are recommended in this report. But these essential features of the early system are preserved: 1. Hard mineral explorers may go on the public lands and search for minerals except where particular lands are withdrawn or their use restricted. 2. Mineral developers may obtain fee title to the minerals and, if they desire, may purchase so much of the surface as may be needed for a mining operation. In the past these developers have paid no direct charge to the United States for the removal of locatable minerals. The Commission has recommended that royalty payments be made. A sound, workable mineral leasing system has been part of the law since 1920. It represented an arduous congressional effort extending over a generation and there is general agreement that the system has worked reasonably well. Leasing and permit systems are the law of many states which own public lands. This approach to the exploration and development of all minerals on the public lands of the United States should be adopted, except where minerals are sold outright. As we understand it, those who oppose the idea have three basic objections: 1) under the present leasing system the Secretary of the Interior has uncontrolled discretion over what land will be made available for mineral development; 132 needed environmental restrictions, we recommend that Congress prescribe the guidelines under which prospecting permits and leases may be refused on public lands open to mineral exploration. For example, it might well be provided that the administrator would have the discretion to refuse an application if the areas sought had not yet been classified in accordance with our Planning or Environment recommendations. This type of limitation on administrative discretion would be consistent with our view that Federal mineral policy for public lands should include a continuing invitation to explore and develop minerals on those lands open to mineral activities. Competitive Exploration Rights Recommendation 49: Competitive sale of exploration permits or leases should be held whenever competitive interest can reasonably be expected. We noted above that when certain mineral conditions are known to exist, the existing leasing system requires competitive sale of exploration and development rights. We have concluded that these competitive sale requirements are too narrow in scope, particularly in the case of oil and gas. It appears to the Commission that competitive leasing would be appropriate (1) in the general area of producing wells, (2) for land covered by relinquished or forfeited leases or permits, or (3) where past activity and 2) under the present leasing system the leasehold interest does not provide sufficient security interest for the raising of investment capital since developers are subject to ex post facto regulation; 3) under the present leasing system small developers are handicapped in the competitive bidding situations as the cash bonus offer is the only bidding tool available and small developers may suffer from a lack of capital. We recognize the legitimacy of these objections and would propose these modifications to the present leasing system: 1) that the Congress list values the Secretary of the Interior will consider when deciding to lease available land and give a right of judicial review for abuse of discretion; 2) that leases be protected from ex post facto regulation of the mineral operation and that the life of the lease be equal with the productive life of the mineral deposit; 3) that in competitive bidding situations the Secretary of the Interior be authorized to consider the royalty offered as well as the cash bonus offered when awarding a lease. These proposals may not convince vigorous advocates of the location-patent system of the merits of our position. However, to those who maintain that a leasing system for hardrock minerals is inherently incapable of providing sufficient incentive for the mineral development of our public lands, we suggest that quick reference be made to mineral development of Indian lands, where just such a system has worked well, and to the state leasing systems. |