did in the buildings within their services sector. When you run these audits it isn't simply a matter of closing a window. It is a matter of adding insulation, changing a boiler, or changing the configuration of a heating system. I think the thing to note here, Mr. Myers, is that we can do these things sooner or later, but they have a 3.2-year payback. They are very, very cost-effective investments, and if we make them sooner, we begin the savings sooner.

Mr. MYERS. Provide for the record more detail as to what this is going to be spent on.

Mr. O'LEARY. We can provide a table for the record which gives a brief description, the cost, and projected energy savings for each of the forty projects.

[Table follows:]

PROPOSED PROJECTS FOR FISCAL YEAR 1979 SUPPLEMENTAL LINE ITEM "MODIFICATIONS FOR
ENERGY MANAGEMENT, VARIOUS LOCATIONS"

PROPOSED PROJECTS FOR FISCAL YEAR 1979 SUPPLEMENTAL LINE ITEM "MODIFICATIONS FOR
ENERGY MANAGEMENT, VARIOUS LOCATIONS"-Continued

Mr. MYERS. My last observation, on page 6, the $6.4 million is required due to delay in consolidation of your organization.

Would you for the record provide more specifics?

Mr. O'LEARY. I would like to do it right here, if I may.
Mr. MYERS. Briefly, because we have one more witness.

Mr. O'LEARY. We had an environmental impact suit as a result of the attempts to move out the personnel who had been in the Forrestal Building. They said we didn't observe NEPA, so we had to go in and we had about 6 months delay as a result of that.

Mr. MYERS. That was part of the NEPA suit? That was an expensive suit.

Mr. O'LEARY. Part of it was the NEPA suit.

Mr. MYERS. If you had listened to the committee, you might have saved part of that $6.4 million. Some of us told you that was going to happen. It was obvious that was going to happen.

Mr. O'LEARY. I didn't have the benefit of that counsel, Mr. Myers. Mr. MYERS. Well the department didn't heed it.

Mr. O'LEARY. In addition, we experienced problems in obtaining congressional approval of the Forrestal prospectus and procedural delays in implementing construction schedules. We are still in seventeen locations in the Washington metropolitan area and the costs of tying these groups together is considerable. The areas of mail, transportation, communications, supplies, etc., all require additional effort so that the Department can function as a single entity. In addition,

44-119 O-79-38

we are currently paying for more total square footage of space than we are fully utilizing. The consolidation of various organizational elements has resulted in pockets of empty space. For example, certain rooms at the 20 Massachusetts Avenue location have been vacated as personnel are moving to the Forrestal Building. However, we cannot turn back the space until a complete area or floor of the building has been totally vacated.

Also limited building alterations, maintenance and repairs are required at locations other than the Forrestal Building. Walls, doors, telephones, electrical receptacles and partitions require alterations to allow maximum use of space as we consolidate.

Mr. MYERS. Thank you.

NATURAL GAS POLICY ACT

Mrs. BOGGS. Secretary O'Leary, could you please explain for us the manner in which the Natural Gas Policy Act allows the Federal Energy Regulatory Commission to set guidelines and standards for State regulatory bodies that have traditionally had the responsibility for regulating the intrastate natural gas market?

I believe the law allows FERC to set the form and the content of information that the producers must provide to the State regulatory authorities. Is this so?

Mr. O'LEARY. It is, Madam Chairman. If I may, I'd like to give you a little historical perspective.

Up until the passage of the Natural Gas Policy Act, for the period approximately beginning in 1970 until that point in time, we actually had two markets in the United States, that is the intrastate market, which was a fully competitive market, and the interstate market, which was regulated by the Federal Power Commission, and subsequently by the FERC.

Under that sort of a regime, it was possible for the intrastate market to capture all or virtually all of the new gas produced on shore in the United States. Indeed there is statistical proof of that. We had been finding an average of around 10 trillion feet of gas annually from 1970 to 1978, and the long lines, the interstate lines, had been able to capture only about 1 trillion cubic feet of that annually. The remainder was captured by the intrastate market.

One of the things that the Congress sought to do by passage of the Natural Gas Policy Act was to equalize the terms of access to that gas by the interstate and the intrastate market; to get away from the situation there the intrastate market could command all the gas, by paying a penny more than the regulated price in the interstate market. This relates only to new gas development, of course; not gas now under contract in the interstate market.

Thus the Congress determined that there would be a single price for new gas which would apply equally in the interstate and the intrastate market, and they set the price. FERC is in the process of delegating to the States the administration of that provision of the Natural Gas Policy Act. That will say that the states can set the terms and conditions. What they must do is have a regime that permits equal access to any new gas found in the State by both the interstate long lines and the intrastate system.

Mrs. Boggs. Although there is authority for FERC to set the form and content, I am still every concerned about the autonomy of the State regulatory commissions.

Is it possible that price considerations could take precedence over the State efforts to conserve the reservoirs available for the interstate market?

Mr. O'LEARY. I don't think so. I really think that conservation is so imbedded into the activities of the state conservation commissions, and at the Federal level as well, that any threat to that would be immediately taken into the courts by the landowners, if no other person. The landowners of course would be the ones who would be badly hurt if good conservation practices were floated.

No, I really think, Madam Chairman, there is an enormous body of understanding and respect for the state conservation statutes and no intention at all to meddle with them.

STATE REGULATORY INTERFACE

Mrs. BOGGS. What arrangements are you making with state regulatory agencies previously charged with regulation of intrastate gas? Do you intend to duplicate their capabilities? If not, what arrangements will be made to use their capabilities?

Mr. O'LEARY. Under the Natural Gas Policy Act, a Federal or State agency having regulatory jurisdiction with respect to the production of natural gas is authorized to make determinations as to the pricing category for which a given well will be eligible. This means that these determinations will be made by the U.S. Geological Survey in the case of production from the offshore Federal domain and other Federal land. State regulatory bodies will make determinations in all other instances.

The Federal Energy Regulatory Commission reviews these determinations of price eligibility as if it were an appellate court. The Commission will review, on a substantial evidence basis, determinations of the jurisdictional agency. The regulations that have been implemented pursuant to the NGPA reflect the Commission's role in the determination process by prescribing the basic foundation necessary to meet the review responsibilities without directly interposing the Commission into the jurisdictional agency's proceeding.

A key component of the determination process is the minimum filing requirement, which prescribes the basic factual information that must be filed by producers in connection with applications for determinations. These filings permit jurisdictional agencies to perform their determination responsibilities and permit the Commission to make review of the determination. The purpose of the minimum filing requirement is to insure that there is sufficient substantial evidence in the state proceeding to satisfy the statutory criteria for qualification for the maximum lawful prices.

The Commission has the responsibility to review the determinations. The standards against which the Commission may review agency determinations are set forth explicitly in the statute. Specifically, the Commission may reverse decisions only where they are not supported by substantial evidence. Further, the Commission may remand deci

sions to the agency only if there is evidence in the Commission's records which was not before the agency and which is inconsistent with the determinations.

Under the NGPA, the applications must be verified by geological and production records of the type which are generally maintained by state conservation Commissions.

To the extent that on-site inspections are required, the state agencies are geographically well-situated to fulfill this responsibility. To the extent that an applicant is required to make an appearance in connection with an application, generally speaking the burden will be substantially less if the appearance can be made in the state where production is located. Accordingly, the Commission will rely heavily upon the state agencies, but does not intend to duplicate the functions to be performed by those agencies.

Mrs. BOGGS. I notice you are asking $7.9 million to pay for FERC's new responsibilities under the Natural Gas Policy Act in Fiscal Year 1979, which is something you couldn't of course estimate earlier. How much are you asking for in fiscal year 1980?

ADDITIONAL BURDEN OF NGPA

Mr. O'LEARY. The overall request for 1980 for the FERC is $74 million, Madam Chairman. Of this amount, approximately $18 million will be required to fulfill requirements of the NGPA.

Mrs. BOGGS. I can appreciate that you need this additional money to support the additional Federal responsibilities, but aren't additional burdens also being placed on existing regulatory bodies?

Mr. O'LEARY. Indeed.

Mrs. BOGGS. Who is supposed to pay for that additional burden?

Mr. O'LEARY. There is a substantial additional burden on the States as a result of the Act, and it is paid for by the States. It is paid for entirely by the States, Madam Chairman.

Mrs. BOGGS. So the new workload mandated by Federal regulations is going to have to be paid for by the states.

Mr. O'LEARY. Yes, it will have to be paid for by the states.

Mrs. BOGGS. Can you assure me that we will continue to have autonomy of these regulatory bodies that the Federal Energy Regulatory Commission is not going to interfere with the ability of the Louisiana Department of Natural Resources and the Texas Railroad Commission to discharge the responsibilities they have traditionally discharged? Mr. O'LEARY. With regard to conservation, Madam Chairman?

Mrs. BOGGS. With regard to all the responsibilities that they have traditionally discharged.

Mr. O'LEARY. No; there is a change in their traditional responsibilities, to the degree that state regulatory commissions, for example, discharged pricing responsibilities, one way or the other, that is now superseded by Federal law, so I can't make that assurance to you.

IMPLEMENTATION OF THE NATIONAL ENERGY ACT

Mrs. Boggs. Summarize briefly the steps you are taking to implement the National Energy Act legislation.

Mr. O'LEARY. The FERC's regulatory responsibilities have been xpanded greatly under the provisions of the National Energy Act.