• Royalty relief for deepwater production in the Central and Western Gulf of Mexico—one of America's best opportunities for adding new large oil and gas reserves. The Department has supported this royalty relief as long as it is revenue-neutral and meets the concerns of the Minerals Management Service. As a result of this proposal, new lease sales between 1996 and 2000 will open the potential for increased production of more than 390 million barrels of crude oil; and

• Reform of the Oil Pollution Act of 1990 (OPA90) to reduce the current $150 million certificate of financial responsibility for all offshore operators, irrespective of size or risk of oil spill.

In addition, DOE has worked closely with the Department of the Interior on proposals to grant royalty relief for stripper wells. The Interior Department will also reform its calculation of payments due on royalties for natural gas to make them more predictable. Additionally, the Department is working with Congress to complete a royalty fairness bill providing a statute of limitations allowing interest on overpayments to be credited to underpayments.

Within the appropriations process, the Department has also supported jointlyfunded partnerships with the petroleum industry to develop new technologies that can lower the costs of extracting and using our domestic resources. Even as overall energy funding levels have declined, natural gas and oil research and development budgets have increased 46 percent between 1993 and 1995, with special emphasis being given to programs that transfer to industry improved technologies that can boost domestic oil and natural gas production.

In short, we believe our energy initiatives have recognized the dominant role that fossil fuels play in our economic health and our global competitiveness. Our energy policies have been structured to reflect a balance of legislative, regulatory, and R&D efforts that can help ensure the full contribution of all of our domestic energy resources.

Question 7. Your testimony indicates that you will be the head of a merged Congressional Affairs/Public Affairs/Freedom of Information Act office. In the past, DOE has been criticized for using taxpayers funds for "public outreach programs that are, in fact, an attempt to influence legislative policy. Such activities are illegal. It is important that the public have access to information from its government; however, it seems to me that the merger of these offices only increases the danger that public funds will be used to perform illegal grass-roots lobbying campaigns.

What do you plan to do to ensure that this does not happen?

Answer. My impression is that the professional staff associated with congressional affairs functions is very sensitive to the fact that there are legal restrictions on grass-roots lobbying activities. So I think it likely that the merger with Public Affairs will, in fact, reduce the risk of error here. In any event, if confirmed, I will see to it that all members of the organization for which I am responsible are aware of, and adhere to, the comprehensive legal advice on this subject that was prepared by the Department of Justice in 1989.

Question 8. You note on your resume that your duties in DOE have included coordinating Secretary O'Lear/s international trips. I find that an interesting job responsibility to highlight since both the Congress and the press have been very critical of these trips. In November 1994, the DOE's Inspector General completed an audit of the Secretary's trips to India and Pakistan, which highlighted several deficiencies in the method by which the Department acquired and paid for international air flights including the use of charter air flights and an inability on the part of the Department to recoup these costs from non-Federal passengers. Most recently, a GAO audit of the Secretary's trip to South Africa indicates that the Department has yet to correct these problems. For example, the Department felt it was necessary to charter a private plane for the delegation to travel to South Africa at a cost of over $5,200 more a person than a commercial flight. Moreover, it is my understanding that the Department has had a difficult time getting the 40 non-federal employees on the charter flight to South Africa to pay for their flight.

Why didn't the Secretary's office comply with the IG's recommended changes? Has the Secretary's office implemented any type of system to control the costs of, and monitor the results of, international trips?

Answer. The Department of Energy has implemented all of the Inspector General's recommendations, and in some cases, expanded upon them. The Department's current practice and control systems ensure that all costs associated with an international Presidential mission are minimized as much as possible consistent with mission needs, and that the government does not pay for a mission's commercial private sector costs. The Department's Office of Policy, working with the Secretary's staff, coordinates mission evaluation and follow-up activities to ensure that commitments for policy consultation and trade promotion are fulfilled. The policy office also regularly updates the Secretary and her senior staff on accomplishments, results and recommended next steps.

Question 9. It also concerns me that the Department did an internal reprogramming of approximately $400,000 in order to finance the Secretary's travel for the 1995 fiscal year and that the Department failed to let Congress know about this reprogramming.

Do you think the Department has an obligation to let Congress know about these unobligated funds and this reprogramming?

Answer. The $400,000 internal reprogramming was necessary to ensure the security of the Secretary and the Department's senior management during international travel. The matter was handled as an internal reprogramming only after reviewing the reprogramming guidelines specified by congressional committees involved in the appropriation that was implicated, and determining that it met all the criteria to qualify as an internal reprogramming. Of these funds, $159,000 came from the budget for close-out of the New Production Reactor, canceled in fiscal year 1993 by the previous Administration. An additional $241,000 became available through savings in the Materials Support Program from contracts initially issued in fiscal year 1993 and prior years. The programs that released the funds affirmed that "these funds are available [for transfer] without a detrimental impact to ongoing FY 1995 activities." The Department occasionally notifies congressional committees of matters that could qualify as internal reprogramming due to specific interest in the matter. Because the need to provide adequate security to a Cabinet Officer of the United States is widely acknowledged, and no programs were adversely affected, the Department did not anticipate any congressional interest in this matter and therefore followed the established guidelines Tor an internal reprogramming.

LITHIUM ASSET SALES

In August 1995, DOE, through Martin Marietta Energy Systems (Martin Marietta), its contractor at Oak Ridge, Tennessee, awarded contracts for the sale of approximately 70% of the government stockpile of surplus lithium hydroxide. Twothirds of the surplus lithium hydroxide which was sold is processed material contaminated with mercury. The Committee has been advised that the total stockpile of lithium hydroxide represents a five-year, world-wide supply and will have significant effects on the domestic lithium market.

The Committee has some concerns about the process by which the lithium hydroxide sales contracts were awarded and the efforts taken by DOE and/or Martin Marietta to ensure that the winning bidders) had the financial and technical capability to handle the lithium hydroxide, especially the mercury-contaminated material, ft is the Committee's understanding that the award of these sale contracts was to occur through a competitive bidding process resulting in a negotiated best-and-final offer. It also is the Committee's understanding that the DOE and/or Martin Marietta was to ensure that the winning bidders) had a demonstrated ability to handle the mercury contaminated lithium hydroxide in a matter consistent with local, state, and federal environmental regulations as assumed in the 1993 environmental assessment DOE performed on the then-contemplated sale. See Environmental Assessment for the Sale of Excess Lithium Hydroxide stored at the Oak Ridge K-25 site and the Portsmouth Gaseous Diffusion Plant (Feb. 1993).

Question 1. Provide the Committee with the relevant provisions of the Management and Operation contract between DOE and Martin Marietta which detail the conditions under which the sale of the lithium hydroxide was to occur?

Answer. My understanding is that the authority for Martin Marietta (now Lockheed Martin) to conduct the sale is covered in the contract under provision 1.6Property. This clause refers to DEAR 970.5204-21.

Suestion 2. Was the sale of lithium hydroxide conducted pursuant to either the eral Acquisition Regulation or the Federal Property Management Regulations? If not, please describe the guidance applicable to this sale?

Answer. My understanding is that the lithium was disposed of under the provisions of the Atomic Energy Act of 1954, section 61, the Defense Authorization Act, the Federal Property Management Regulations and the DOE Property Management Regulations.

Question 3. Describe the efforts taken by DOE and/or Martin Marietta to evaluate the financial qualifications of potential bidders?

Answer. My understanding is that a Dunn and Bradstreet review was performed of all bidders—FMC, TOXCO, and Cyprus Foote. Both FMC and Cyprus Foote (the two largest Lithium manufacturers) are very sound. Little data was available from TOXCO. All of the bidders' business plans, cash flows, and current work was reviewed. TOXCO had a major contract with DOD to recycle lithium batteries.

Question 4. Describe the efforts taken by DOE and/or Martin Marietta to evaluate the ability of potential bidders to transport, store, handle, and process the lithium hydroxide in a manner consistent with local, state, and federal environmental regulations. Did this determination include site visits? If so, please provide the committee with specifics of these visits.

Answer. My understanding is that no site visits were conducted. Reviews were made of the processing plans and ultimate disposition of the material. FMC and Cyprus Foote were to remove the traces of mercury. TOXCO planned to utilize the mercury in their final product. DOE has copies of all the bidder.s required environmental permits. Transportation of the material is not a special issue as any shipper can transport.

Question 5. Describe the process for arriving at a "best and final" offer for the sale of the lithium hydroxide, including all negotiations which occurred between DOE and/or Martin Marietta and bidders. Did DOE and/or Martin Marietta negotiate with all bidders?

Answer. My understanding is that negotiations were held only with TOXCO and Cyprus Foote. FMC was requested to answer clarifying questions, but were outside the negotiated range. FMC was generally 1/3 to 1^2 lower than the other two bidders. Negotiations were to maximize the government advantage. Negotiations centered around agreements to split the 90 million pounds: TOXCO to take the Portsmouth material (containing traces of mercury) and Cyprus Foote to take the K-25 material.

Question 6. What role did DOE have in the award of sales contracts? Did DOE review Martin Marietta's decisions to award sales contracts to the winning bidders)?

Answer. My understanding is that DOE was involved and reviewed all aspects of the sale. The approach was a teaming arrangement with DOE providing two people on a five person team.

Question 7. What is the intended processing and ultimate use of lithium hydroxide, including the mercury contaminated lithium hydroxide?

Answer. My understanding is that the material to TOXCO (Portsmouth material with traces of mercury) will be blended with other acidic lithium to create a neutral solution to be blended into construction concrete. The material to Cyprus Foote (mercury free) will go into typical lithium products (grease, oil, etc.)

Question 8. Is there an opportunity for bid protests by unsuccessful bidders for the lithium hydroxide?

Answer. The Department believes there is no basis for a protest. The Department is aware that FMC did file a protest with GAO, but the protest was denied. To meet the fair market concerns of the Departments of Justice and Commerce, 90 million pounds were sold to two firms, but 30% of the inventory is being held for sale to other bidders at the negotiated price for six months. If no firms are interested, the material goes to the two bidders.

Appendix III
Additional Material Submitted for the Record

U.S. Senate, Washington, DC, May 3, 1995. Hon. Frank H. Murkowski,

Chairman, Energy and Natural Resources Committee, Dirksen Senate Building,
Washington.DC.
Dear Frank: I am pleased to have the opportunity to write a letter on behalf of
William Burton of Austin, Texas, who has been nominated by the President to serve
on the U.S. Enrichment Corporation Board of Directors.

Bill is with the law firm of Jones, Day, Reavis & Pogue, with offices in Austin and Dallas. He co-chairs the firm's energy industry practice group in Texas, representing energy and natural resource companies in a wide range of transactional and litigation projects. His past public service includes Deputy Assistant to the President, and Policy and Staff Director for the White House Chief of Staff from 1993-1994.

Bill's impressive credentials and expertise in energy issues recommend him highly for the position for which he has been nominated. I'm sure his nomination will receive appropriate consideration from you and the other members of the Energy Committee. Please do not hesitate to contact me if I can provide additional information.

Sincerely,

Kay Bailey Hutchison.

Rio Grande Conservancy District,

Albuquerque, NM, July 17, 1995. Hon. Frank Murkowski, Chairman, Senate Energy and Natural Resources Committee, Washington, DC.

Dear Chairman Murkowski: We are delighted to hear the nomination of Mr. Eluid Martinez as Commissioner of the U.S. Bureau of Reclamation. President Clinton and Secretary Babbitt made an excellent choice in nominating our former State Engineer, Mr. Eluid Martinez.

Mr. Martinez has broad experience in managing water resources. We have worked with him very closely and are impressed with his management style. Mr. Martinez has provided us with meaningful guidance in managing our water resources. In addition, he is well respected by all water users in the State of New Mexico. His experience and knowledge as former State Engineer and Chief of the Technical Division for the last 23 years will be a great asset to our nation. Mr. Martinez is an honest, hardworking individual. We will all be proud of his performance as Commissioner. We would appreciate your kind consideration and assistance in confirming Mr. Martinez as the next Commissioner of the U.S. Bureau of Reclamation. Sincerely,

Subhas K. Shah,

Chief Engineer.

Washington State Water Resources Association,

Yakima, WA, September 22, 1995. Hon. Frank H. Murkowski, U.S. Senate, Hart Building, Washington, DC.

Dear Senator Frank H. Murkowski: It has come to my attention that the confirmation hearing for Mr. Eluid L. Martinez of New Mexico as Commissioner of the