Mr. HODEL. Senator, the drilling in the wilderness issue was one which this administration strongly proposed be blocked last spring. We were prepared, as you know, to support legislation which would prohibit further activities including exploration activities on the ground in the wilderness.

Senator BUMPERS. When you say "we" you are not including Secretary Watt, are you?

Mr. HODEL. I surely am.

Senator BUMPERS. As being opposed to any exploration and drilling in the wilderness area?

Mr. HODEL. Senator, rather than proposing extending the Wilderness Act for 20 years, which had been one of the proposals under consideration last April or May, Secretary Watt proposed legislation which would have prohibited all activities on the ground in the wilderness areas for a 20year period, to the year 2000, at which time Congress would have the opportunity to reexamine.

Senator BUMPERS. The proposal was for 20 years. Right now there is a permanent ban. Is that not true?

Mr. HODEL. Right now, actually right now, at the end of 1983, it becomes a permanent ban in established wilderness. My understanding was we were proposing, if I recall the bill correctly, we were willing to forgo it in wilderness and say look, this is the wrong time to make this argument, if you can do satellite exploration, fine, but do not enter the wilderness to do further exploration. We were prepared to forgo that. It was my understanding that prior to that time it had been thought that was really a substantial move in the direction of trying to resolve that issue. It was not subsequently seen that way. It was not treated that way and the rest of it is history.

That certainly was our intention at that time.

[Subsequent to the hearing Mr. Hodel supplied the following:] THE SECRETARY OF ENERGY, Washington, D.C., December 6, 1982.

Hon. DALE BUMPERS,
U.S. Senate,

Washington, D.C.

DEAR SENATOR BUMPERS: This is a followup to our telephone conersation on December 1, 1982. You will recall that I was concerned whether my answer during the hearing to your question on the wilderness legislation had been completely accurate. Since the hearing, I have had the opportunity to read my answer from the transcript and also to review a copy of the legislation drafted by the Administration earlier this year (H.R. 5603).

During the hearing, you had inquired whether we opposed "exploration and drilling in a wilderness area," and I responded that I recalled our drafting legislation that would have prohibited exploration activities "on the ground" in the wilderness areas. Review of the proposed legislation shows that it permitted such activities subject to strict environmental standards. My response at the hearing correctly reflected my recollection that, in proposing the legislation, I did not believe that language would survive in the legislative process and that we actually were prepared to forego on the ground exploration activities in the wilderness.

I did want the record to be clear on this point and will submit this letter as an insert to the transcript of the hearing.

Thank you for your courtesy and understanding.

Sincerely,

DONALD PAUL HODEL.

Senator BUMPERS. Mr. Hodel, just two final questions.

No. 1, you have said in your statements you are a great proponent of conservation. Let me ask you this, what do you think is the best and fastest way to achieve conservation?

Mr. HODEL. The best and fastest way to achieve conservation is for there to be an incentive for the people who are installing energy using devices and using energy.

Senator BUMPERS. Do you agree with tax credits for conservation practices?

Mr. HODEL. Tax credits can have a stimulative effect on those practices. If there is an incentive, it will help encourage it.

Senator BUMPERS. That puts you in opposition to the President. Mr. HODEL. Only if I propose them.

Senator BUMPERS. We are just playing games here right now.

Mr. HODEL. I am sorry, Senator. I did not mean to be flip in that answer. What I am saying is I recognize that tax credits or other incentive systems will have an impact on the way in which conservation is utilized. I happen to believe that. You asked me what I think is the quickest and best way, it is an incentive. I happen to believe-one of the greatest incentives is if the energy companies, whether utilities or the local oil distributors or somebody else, also has an incentive to sell conservation.

That is why I like the approach we were trying to take where we were going to put insulation in homes of electric users because the utilities had an incentive to do that. They would turn into salesmen for conservation. Then it will happen.

As long as we force feed it and we decide this is the area we want to push this year and we will put this incentive here or next year we are going to put money over there, I think we are going to continue to have this wandering back and forth and the lack of consistency. It is very hard for the private sector to plan what it wants to do. In the long run, consistency there ought to be market oriented.

Senator BUMPERS. I would like to pursue that further but I will not. Let me ask you the final question. Do you favor the lottery system of leasing Federal lands for oil and gas? This happens to be one of my favorite subjects. The chairman is disappointed because I am just now getting around to it.

Mr. HODEL. This may astonish you and it will probably astonish my friends at Interior but since it is not now my responsibilitySenator BUMPERS. We are going to get the truth now.

Mr. HODEL. I think we should examine this question of what constitutes a known geologic structure and make sure that the lottery system is not substantially affecting the Federal returns.

What I need to recognize and I know you know this better than I, in the end, the bulk of the money the Federal Government obtains from oil leases particularly comes not from the bonus but from the royalties and the taxes that are collected as a result of the development. There is a significant benefit to us, we believe as a society, in making it or encouraging people to look. That is a countervailing argument.

I do think we need to look at whether it makes sense to be leasing in a lottery a tract very close to tracts which we know have developed significant resources. I think that definition deserves to be reviewed and I believe it will be reviewed.

Senator BUMPERS. Do you agree with me that the present existing legal definition of a known geological structure absolutely defies the human mind's interpretation?

Mr. HODEL. As I say, I think it should be reviewed, Senator. I really do.

Senator BUMPERS. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you very much.

Secretary Hodel, you have been at the table for several hours answering a series of questions, sometimes very difficult to answer. I believe that everyone who has heard your answers to the questions must have the impression at this point that you are very candid. You are very willing to discuss the issues, very open in your re

sponses.

It is a difficult role for somebody in your position. You know that no matter what your personal opinions are, they are constrained by the policymaking processes of the administration, which are diverse and many, and they will bind your actions in the future, not just direct them.

I think there are some members of the committee who have indicated a desire to submit some questions in writing. I will ask that those questions be submitted by the close of business today. I hope that all of the members can accommodate that to give you the opportunity to get responses back at the end of the week so the members can judge those responses by the time we get to the scheduled business session next week. I hope that you and all members can comply with that schedule.

With that, let me thank you very much for your appearance and wish you well.

Mr. HODEL. Thank you, Senator. I appreciate the courtesies of the committee and all of its members. I look forward to responding promptly to those questions. Thank you.

Mr. CHAIRMAN. Thank you very much.

Our next witness is Ms. Martha Hesse, who has been nominated to be Assistant Secretary of Energy for Management and Administration.

The senior Senator from Illinois, Senator Percy, had hoped to be here today to introduce Ms. Hesse to the committee and support her nomination. Because of last minute conflicts, he had to change his plans. He cannot be here and he has asked that his statement be included in the record. Without objection, his statement will be included in the record at this point.

[The prepared statement of Senator Percy follows:]

PREPARED STATEMENT OF HON. CHARLES H. PERCY, A U.S. SENATOR FROM THE STATE OF ILLINOIS

Mr. Chairman, I am pleased to have the opportunity today to introduce Ms. Martha Hesse to this Committee, and urge that her nomination be acted upon favorably.

In her new post as Assistant Secretary for Management and Administration, Ms. Hesse will face the difficult challenge of helping the new Secretary restore morale and effective management to an agency which has always had a turbulent existence. In the Carter years, it suffered from too many conflicting priorities and crises-some of which were largely self-imposed. Over the past two years, budget and personnel cuts have taken their toll.

Martha Hesse brings excellent qualifications to the task, both as an Illinois businesswoman and as a top aide to Joe Wright in the Commerce Department and more

recently at OMB. Ms. Hesse worked long and hard on the Administration's energy reorganization proposal. If the Administration decides to resubmit that legislation, Ms. Hesse will be in a key position to help again the that effort.

And as an Illinoisan, Ms. Hesse knows about our energy concerns-about the high priority we give fossil fuels, conservation, renewable resources, and energy research of all kinds. We need Midwesterners in senior positions at the Energy Department to make sure policies developed there have the balance, the evenhandedness, the reasonableness, that people in our neck of the woods like to see.

I commend her highly to this committee, and wish her well.

The CHAIRMAN. I might just parenthetically note there are other statements in support of the nomination of Mr. Hodel that will also be made a part of the record in full at the conclusion of his testimony and at the conclusion of the questions of Mr. Hodel.1

Since February of last year Ms. Hesse has served in two management positions within the Federal Government. She was Associate Deputy Secretary of the Department of Commerce, and beginning in May of this year, she served as Executive Director of the President's Task Force on Management Reform.

Ms. Hesse holds an MBA degree from the University of Chicago, and she has 15 years of management experience in the private sector. For 12 years she was director and chief operating officer of SEI Information Technology, a data processing consulting company located in Chicago.

On the basis of her demonstrated ability and experience, Ms. Hesse is well qualified for the position of Assistant Secretary of Energy for Management and Administration.

Ms. Hesse, we welcome you to the committee. We are looking forward to your testimony. As you know, before we proceed, the rules of the committee require that all nominees be sworn in connection with their testimony. In addition, all nominees are asked four questions.

[Whereupon, Ms. Hesse was duly sworn by the chairman.] The CHAIRMAN. Please be seated.

Those four questions that are asked of all nominees who are nominated to positions in the administration are as follows.

Will you be available to appear before this committee and other congressional committees to represent Departmental positions and respond to issues of concern to the Congress?

MS. HESSE. I will.

The CHAIRMAN. Your informational statement has been submitted to the committee. However, it is required that this statement be made public unless the committee decides special circumstances justify an exception. Do you have any objection to the publication of your informational statement?

MS. HESSE. I have no objection.

The CHAIRMAN. Are you aware of any personal holdings, investments or interests that could constitute a conflict of interest or create the appearance of such a conflict should you be confirmed and assume the office for which you have been nominated by the President?

MS. HESSE. As I have indicated in my informational statement to the committee, I maintain a commodities investment account with Bear Stearns & Co. By letter to Bear Stearns, I have directed them

1 The statements are set forth in Appendix IV.

to invest only in interest rate futures for my account. A copy of this letter is on file with the committee. To my knowledge, I have no conflicts of interest or appearances thereof.

The CHAIRMAN. Are you involved or do you have any assets held in a blind trust?

MS. HESSE. No.

The CHAIRMAN. You may proceed.

STATEMENT OF MARTHA O. HESSE, NOMINEE TO BE ASSISTANT SECRETARY OF ENERGY FOR MANAGEMENT AND ADMINISTRATION

Ms. HESSE. Thank you, Mr. Chairman. I do have a prepared statement but because of the late hour, I would like to submit my statement for the record and then answer any questions you may have.

The CHAIRMAN. Fine. It will be made a part of the record. [The prepared statement of Ms. Hesse follows:]

PREPARED STATEMENT OF MARTHA O. HESSE

Mr. Chairman and distinguished members of the committee, this is a special occasion for me, as I consider it a great honor to be President Reagan's nominee for Assistant Secretary for Management and Administration in the Department of Energy.

I am particularly pleased since this position deals with the business side of the Department where my years as a manager are particularly relevant. I do not represent myself as an experienced Government technician, despite my service over the last 2 years, but rather as an experienced corporate manager who has had responsibility for management activities similar to those of the Assistant Secretary for Management and Administration. I believe I can bring the best of the private sector approaches to the improvement of DOE's operations.

Since you are already aware of the major functions of the office, I would like to spend the next few minutes describing to you my qualifications and why I believe I am well qualified to assume this role. I have over 17 years of management experience, the last 2 of which have been in this administration. I am particularly proud of my role in cofounding a company where I served as director and chief operating officer. This company began with just two people, and we built a multi-million dollar professional services company without outside financing. I was responsible for the business side of the company, including corporate strategies, market approaches, organizational structures, financial plans, and personnel and compensation structures. I was also responsible for the recruitment and management of an extensive professional staff. As I am certain you are aware, when you start a new business you must be a jack of all trades. In performing these multiple functions I developed a number of skills which are clearly relevant to the duties of the Assistant Secretary. These skills will enable me to perform the job efficiently and effectively.

During the last 2 years I served as the Associate Deputy Secretary of Commerce and as the Executive Director of the President's Task Force on Management Reform. While in the Commerce Department, I was directly involved in assisting the Deputy Secretary in managing the overall operations of the Department. This experience gave me my first introduction to Government operations.

I then moved to the Office of Management and Budget to assist in the reform of the management systems of the Federal Government. It is my view that such a reform can only be conducted with the cooperation and assistance of the career civil service. For that reason, my entire task force was composed of career Government employees. The task force has now completed its first assignment to develop a basic framework for systems improvement, and is in the process of turning these management projects over to the agencies where they belong.

I have come here today to tell you not that I am a Government manager, but that I am a business executive who will utilize sound business practices in improving the operations for which I will be responsibile. I am committed to effectively managing the ongoing energy programs of the Department. I believe my experience in the Government is useful and demonstrates my commitment to manage well, using