Jack Frost and we are participating not only with C-130 aircraft but with other types of aircraft as well. Senator STEVENS. Have these crews been trained in Alaska before? DESCRIPTION OF CREWS General MOORE. Not all of those crews have been in Alaska before. All of the crews are reasonably experienced. None of the crews are the oldest, although there might be one or two. We are trying to spread the wealth so that our line crews get this experience out of the exercise of going to Alaska. Senator CASE. How many men are in your crews? General MOORE. Our five-man crew consists of two pilots, a flight engineer, navigator, and load master. Senator YOUNG. Earlier, General, I said the Department of Defense was appealing or asking the Senate to restore $700 million in O. & M. funds. The Air Force portion of that is $469 million that you are asking Congress to restore in operations and maintenance costs. Senator STEVENS. Do we have a breakdown of how much of that is training fund? Has it been allocated by the House? TRAINING HOURS AS A FRACTION OF 0. & M. COSTS General BLANTON. There were no reductions by the House I would point out. Senator YOUNG. This is all part of operations and maintenance. General BLANTON. Yes; the operation of these aircraft would be a part of that. I must endorse your comment, Mr. Chairman, that is a severe cut and we do hope the Senate will see fit to restore those funds. Senator YOUNG. I hope you will make it easier for us. General BLANTON. We are talking about 1.8 percent of our tactical airlift flying hour program. A small portion of our airlift flying hours. Senator YOUNG. What concerns us is, the military is in competition with private industry. DOD POSITION ON CONFLICT General BLANTON. The policy is we are responsible for lifting cargo to the contractors who are on contract with us, as the Navy commander indicated. That is contractor furnished equipment. The policy is that that equipment will be delivered and furnished to the contractor and as a single airlift body for the Department of Defense we are responsible for carrying that cargo and we are in full compliance with that policy. I would further state that our sense of stewardship to the taxpayer dictates we use that training program on some basis realistically. We believe this training is realistic and the $900.000 out of pocket costs compared to the added cost for commercial lift drives the decision when added to the valuable training toward using our organic lift. INDUSTRY POSITION ON CONFLICT Senator STEVENS. We can go the other way. Prudhoe Bay was 490,000 acres. This is 23 million acres that we are going to be exploring for the next 3 years. If every time we run into some kind of a temporary delay the Navy is going to tell us that contrary to the specific understanding of the Appropriations Committee that this is to be moved by military airlift and it becomes a military necessity to provide drilling rigs and oil mud and fuel for civilian contractors on the North Slope, we will change the designation of Naval Petroleum Reserve No. 4 to Department of Interior. The House committee wants to do that. Our committee held it up. If that occurred it is not military at all. What none of you understand is just because of the designation of this area as a Naval Petroleum Reserve No. 4 which happened in a period of time when there was a slight consciousness of guilt as far as the Teapot Dome scandalthat is when this was created. There was no oil and gas in 1925. This was just a line drawn there to tell the American public we are thinking of preserving oil and gas. Now it has some importance and we are running it through the military. We are running it through the Office of Military Reserves but on the specific understanding Senator Jackson and I had when the money was put in. We put it in and Jack said, "It is my understanding it is all let out on contract." POTENTIAL REOCCURRENCES Senator CASE. Isn't the point really what you are talking about is not just the 45-day operation but the prospect of this recurring over the next extended period. Senator STEVENS. Absolutely. The prospect of us going for training funds and seeing training funds being used for flying, in the years to come, to carry oil and gas rigs to normal oilfield operations is a horrendous prospect. It is a terrible precedent you are setting. As far as the remote sites and the temporary things that might have been of emergency nature to military operations per se, I don't think you would have heard any objections as far as I am concerned. General BLANTON. When we looked at-this I don't choose to challenge or even argue against the point you have made the point we were making is out of the 22,000 tons looked at, we did reduce that to 11,000 tons that had to go by air and we looked at this issue in the context of our stewardship to the taxpayer plus the added benefit of training. Senator STEVENS. I would like to know, you have bulk fuel, 9,399 short tons. How much of that was for the naval petroleum reserve? How much of the general cargo of 304,000 was for Naval Reserve and how much of that drum stock of 891 short tons was for naval petroleum reserve? I assume all of the steel pipe and all the drilling mud was for naval petroleum reserve. General STARR. Roughly two-thirds of the cargo hauled was for the Department of the Navy and one-third of it was to supply the DEW line sites for the Air Force. TRANSPORTATION OF OIL WHEN DISCOVERED Senator CASE. Would you put a question for the purpose of educating your relatively ignorant northeasterner colleagues? If oil is discovered in this drilling operation how will it be brought to civilization? Senator STEVENS. We think we are still part of civilization, but beyond that another pipeline will be built. Probably it will be linked to the existing pipeline. Senator CASE. Would that be a major operation? Senator STEVENS. A pipeline longer than the existing. Senator CASE. So it is not just a matter of drilling it as a matter of transportation. Senator STEVENS. And of having the people who use the oil pay the cost as opposed to those taxpayers who believe in supporting the national defense and Department of Defense paying for the cost as training instead of adding the cost as a basis for the oil and gas when it finally is delivered. DOD ASSUMPTION OF CARGO AS MILITARY General MOORE. It would seem to me the basic mode that was being used is the one that should establish the precedent for the future and we would look on this particular operation as certainly a one-time operation resulting from a financial situation that we in the Department of the Air Force analyzed on this year's budget. For example, last year the Cool Barge operation was in the program. Do you follow me? Senator STEVENS. Yes, I follow you, General Moore, but the problem is that we agreed to this operation in Naval Petroleum Reserve 4 on the basis it would be strictly civilian operation monitored by the Navy. This is the first time-and I am sure Senator Jackson would join me-the first time we learned that the contracts for the development exploration and development of Naval Petroleum Reserve No. 4 obligated the Navy to take the cargo to Naval Petroleum Reserve No. 4 as military cargo which automatically triggers the Department of Defense to treat them as your operation. It is the basic decision that is involved here as to whether or not it is the intent of Congress that this is to be civilian exploration of this area monitored by the Department of Defense and paid for by the Department of Defense through the Office of Naval Petroleum Reserves, at least until we get to the production stage, which is how you handle it in California. ELK HILLS NAVAL RESERVE Am I correct in California you have had some developments on the Naval Reserve there? Commander GILMORE. Yes, sir, we are developing in NPR 1 at Elk Hills. Senator STEVENS. Have you used military transportation to take supplies to Elk Hills? Commander GILMORE. NO. Senator STEVENS. Have you used any to take supplies to Wyoming? Commander GILMORE. We are still in the exploratory stage. We are not in an authorized development program at this time. We have not used Defense resources. As soon as we can get the Huskey Oil contract approved by the Congress and the President that company will be coordinating those activities for us in Alaska. Because of the delays in getting the contract approved we have to get seismic contractors and a drilling contractor, things that Huskey Oil Co. will be doing in the future. FINANCIAL RESPONSIBILITY FOR AIRLIFT Senator STEVENS. Will the Office of Naval Petroleum Reserves repay the Air Force for these 3,100 hours? Commander GILMORE. They will send us a bill which we will pay out of our appropriations. Senator STEVENS. Ultimately it will come out of your appropriations. Commander GILMORE. Yes, sir. Senator STEVENS. Where is the savings, Mr. Perry? Mr. PERRY. The Navy will not be billed for those training hours. That is an Air Force O. & M. cost. Captain STAPP. We will divided the $900,000 out of pocket cost between Air Force and Navy. Senator STEVENS. The taxpayers will bear that portion of the development of Naval Reserve 4 and the Navy will not. Senator YOUNG. Is this a one-shot deal, or are you going to continue competing with private industry? Mr. PERRY. Mr. Chairman. I must say I am inclined to look on it as a one-shot deal for two reasons. NEED FOR RESTRICTIVE LANGUAGE Senator YOUNG. Do we write a provision in the Defense appropriation bill to need to make sure it is a one-shot deal. Mr. PERRY. I am not familiar with the details of the arrangements for this oil exploration so I can't speak to it too thoroughly, but it appears to me that the fact is that the Navy does not yet have an approved contract but is expecting to get one approved. Senator YOUNG. Are you sending a draft of that contract to us? [The information follows:] CONTRACT NOD-10066 Contract NOd-10066 between Navy and Huskey Oil NPR Operations, Inc. is inserted in the record. This contract is presently under normal review by the Department of Justice and the Senate and House Armed Services Committees. The contract will not be effective until these reviews have been completed and the contract has been approved by the President of the United States. CONTRACT NO. NOd-10066 CONTRACT FOR THE OPERATION OF NAVAL PETROLEUM RESERVE NO. 4 NORTH SLOPE, ALASKA This CONTRACT, entered into in quadruplicate as of the 1st day of July 1975, by and between the UNITED STATES OF AMERICA acting by and through the Secretary of the Navy (hereinafter referred to as NAVY), and Husky Oil NPR Operations, Inc., (hereinafter referred to as OPERATOR or CONTRACTOR), a corporation organized and operating under the laws of the State of Delaware, whose principal place of business is 5100 Westheimer Road, Houston, Texas 77027. WITNESS ETH: WHEREAS, the United States Congress has enacted Title 10, United States Code Chapter 641, Sections 7421 through 7438, as amended, which directs the Secretary of the Navy to explore, prospect, conserve, develop, use and operate the Naval Petroleum and Oil Shale Reserves and WHEREAS, the Secretary of the Navy in his discretion has decided that the NAVY needs a contract OPERATOR to perform such services as are provided for herein, or may hereafter be required; and WHEREAS, the Secretary of the Navy has requested proposals for the services of an OPERATOR, upon notice and advertisement which he deemed proper; and WHEREAS, pursuant to Request For Proposals No. 62, as amended, OPERATOR submitted an offer containing certain representations, to induce NAVY to enter into this contract; and |