The federal government leased the mineral rights on a huge chunk of Fort Chaffee, Ark., to a Texas oil company for $1 an acre without competitive bidding two months ago, though another firm was willing to pay far more.
At a hearing Wednesday, Sen. Dale Bumpers (D-Ark.) and other members of the Senate Energy Committee criticized policies of the Interior Department's Bureau of Land Management, which approved the no-bid lease, and asked for a moratorium on the practice.
The Fort Chaffee deal cost the American taxpayers millions of dollars, Bumpers said, because nearby land had brought bids as high as $200 an acre.
Guy R. Martin, an assistant secretary of the interior, defended the action on the Chaffee lease, saying BLM is required by current law to accept the first application, without bids, on land that is not part of what is defined as a "known geological structure (KGS)."
The 33,000 acres in Texas Oil and Gas Co.'s application at Fort Chaffee were labeled "not KGS" even though surrounding land was filled with producing gas wells and an Arkansas company had a $151-an-acre bid for land a mile away rejected as too low in 1976.
Martin acknowledged that the recent Chaffee decision "vividly underscores inadequacies" in present law.He then lobbied for enactment of a bill that would broaden the definition of areas open to competitive bids.
Martin said in a phone interview yesterday, "The larger issue by far at the hearing was that the whole system needs to be reformed. And the administration intends to push this bill. Congress in the past has been unwilling to go along. It may be that particularly bad example will be a springboard for that reform."
Wildcatters and other sections of the oil industry have long supported the noncompetiitive leasing law, while public interest groups in the West have opposed it. Martin said there is "massive evidence" that speculators buy the $1-an-acre land and then sell it at far higher prices.
Bumpers and Sens. Henry Jackson (D-Wash.) and Henry Bellmon (R-Okla.) said in a letter Thursday to Interior Secretary Cecil Andrus that they believed the country "may be losing hundreds of millions of dollars" by noncompetitive leasing to the first applicant.
Bumpers said in a phone interview yesterday that he felt the Chaffee incident "is just the tip of the iceberg." He said he wrote another letter to Andrus yesterday, asking him to rescind the Chaffee lease.
He debunked Martin's claim that new laws were needed to prevent further noncompetitive leasing of potentially lucrative gas lands. "The secretary is clothed in law already with the discretion not to lease. And the people who thought up that bizarre definition of "known geological structure" could change it," he said.
Bumpers said he also was considering asking the General Accounting Office, Congress' investigating arm, to study how many $1-an-acre leases were sold for great profits shortly after noncompetitive applications were granted.
At the Wednesday hearing, Bumpers had noted that there were more than 10,000 noncompetitive leases covering 11.8 million acres of public lands awarded in 1977. Only 334 leases were awarded on the competitive bids that same year, he said.
According to testimony at the Senate Energy subcommittee on energy resources and material production, the Texas firm submitted its application on the Fort Chaffee land to the Bureau of Land Management in May 1977. This was after 1976 amendments to the federal Coal Leasing Act removed a prohibition on leasing military lands.
It was not until last March 1, however, that BLM issued instructions to process such applications on a "first-come first served" basis. In June a representative of Texas Oil and Gas hand-carried the application to a U.S. Geological Survey official in Tulsa, who certified the land was "not KGS" and certified it for the noncompetitive lease.
Sheffield Nelson, head of the Arkansas Louisiana Gas Co., complained in his testimony that his firm had expressed interest in the Chaffee land for years and had not been informed it was available for noncompetitive leasing.
Martin said yesterday that the Chaffee lease was "very poorly administered," but was not illegal.