To prohibit the Secretary of the Interior from issuing any new lease that authorizes the production of oil or natural gas under the Outer Continental Shelf Lands Act to a person that does not renegotiate existing leases held by the person to incorporate limitations on royalty relief based on market price that are equal to or less than price thresholds that apply to other leases under that Act, and for other purposes.

Summary: Deficit Reduction Through Fair Oil Royalties Act - Prohibits the Secretary of the Interior from issuing new oil or natural gas production leases in the Gulf of Mexico under the Outer Continental Shelf Lands Act (OCSLA) to a person that does not renegotiate its existing leases in order to require royalty payments if oil and natural gas prices are greater than or equal to specified price thresholds.

Authorizes the Secretary, in the case of multiple lessees, to implement a separate agreement modifying payment responsibilities (including such price thresholds) with any lessee that owns a lease share. Prescribes analogous requirements for lease transfers.

Requires rentals or royalties received by the United States to be deposited in the Treasury for federal budget deficit reduction or, if there is no federal budget deficit, for reducing the federal debt.

Directs the Secretary to agree to a lessee's request to amend any lease issued for any Central and Western Gulf of Mexico tract in the period of January 1, 1996, through November 28, 2000, to incorporate price thresholds applicable to royalty suspension requirements that are equal to or less than the price thresholds specified under OCSLA.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Deficit Reduction Through Fair Oil 
Royalties Act''.

SEC. 2. ELIGIBILITY FOR NEW LEASES AND THE TRANSFER OF LEASES.

    (a) Issuance of New Leases.--
            (1) In general.--The Secretary shall not issue any new 
        lease that authorizes the production of oil or natural gas 
        under the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et 
        seq.) to a person described in paragraph (2) unless the person 
        has renegotiated each covered lease with respect to which the 
        person is a lessee, to modify the payment responsibilities of 
        the person to require the payment of royalties if the price of 
        oil and natural gas is greater than or equal to the price 
        thresholds described in clauses (v) through (vii) of section 
        8(a)(3)(C) of the Outer Continental Shelf Lands Act (43 U.S.C. 
        1337(a)(3)(C)).
            (2) Persons described.--A person referred to in paragraph 
        (1) is a person that--
                    (A) is a lessee that--
                            (i) holds a covered lease on the date on 
                        which the Secretary considers the issuance of 
                        the new lease; or
                            (ii) was issued a covered lease before the 
                        date of enactment of this Act, but transferred 
                        the covered lease to another person or entity 
                        (including a subsidiary or affiliate of the 
                        lessee) after the date of enactment of this 
                        Act; or
                    (B) any other person that has any direct or 
                indirect interest in, or that derives any benefit from, 
                a covered lease.
            (3) Multiple lessees.--
                    (A) In general.--For purposes of paragraph (1), if 
                there are multiple lessees that own a share of a 
                covered lease, the Secretary may implement separate 
                agreements with any lessee with a share of the covered 
                lease that modifies the payment responsibilities with 
                respect to the share of the lessee to include price 
                thresholds that are equal to or less than the price 
                thresholds described in clauses (v) through (vii) of 
                section 8(a)(3)(C) of the Outer Continental Shelf Lands 
                Act (43 U.S.C. 1337(a)(3)(C)).
                    (B) Treatment of share as covered lease.--Beginning 
                on the effective date of an agreement under 
                subparagraph (A), any share subject to the agreement 
                shall not constitute a covered lease with respect to 
                any lessees that entered into the agreement.
    (b) Transfers.--A lessee or any other person who has any direct or 
indirect interest in, or who derives a benefit from, a lease shall not 
be eligible to obtain by sale or other transfer (including through a 
swap, spinoff, servicing, or other agreement) any covered lease, the 
economic benefit of any covered lease, or any other lease for the 
production of oil or natural gas in the Gulf of Mexico under the Outer 
Continental Shelf Lands Act (43 U.S.C. 1331 et seq.), unless the lessee 
or other person has--
            (1) renegotiated each covered lease with respect to which 
        the lessee or person is a lessee, to modify the payment 
        responsibilities of the lessee or person to include price 
        thresholds that are equal to or less than the price thresholds 
        described in clauses (v) through (vii) of section 8(a)(3)(C) of 
        the Outer Continental Shelf Lands Act (43 U.S.C. 
        1337(a)(3)(C)); or
            (2) entered into an agreement with the Secretary to modify 
        the terms of all covered leases of the lessee or other person 
        to include limitations on royalty relief based on market prices 
        that are equal to or less than the price thresholds described 
        in clauses (v) through (vii) of section 8(a)(3)(C) of the Outer 
        Continental Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)).
    (c) Use of Amounts for Deficit Reduction.--Notwithstanding any 
other provision of law, any amounts received by the United States as 
rentals or royalties under covered leases shall be deposited in the 
Treasury and used for Federal budget deficit reduction or, if there is 
no Federal budget deficit, for reducing the Federal debt in such manner 
as the Secretary of the Treasury considers appropriate.
    (d) Definitions.--In this section--
            (1) Covered lease.--The term ``covered lease'' means a 
        lease for oil or gas production in the Gulf of Mexico that is--
                    (A) in existence on the date of enactment of this 
                Act;
                    (B) issued by the Department of the Interior under 
                section 304 of the Outer Continental Shelf Deep Water 
                Royalty Relief Act (43 U.S.C. 1337 note; Public Law 
                104-58); and
                    (C) not subject to limitations on royalty relief 
                based on market price that are equal to or less than 
                the price thresholds described in clauses (v) through 
                (vii) of section 8(a)(3)(C) of the Outer Continental 
                Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)).
            (2) Lessee.--The term ``lessee'' includes any person or 
        other entity that controls, is controlled by, or is in or under 
        common control with, a lessee.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.

SEC. 3. PRICE THRESHOLDS FOR ROYALTY SUSPENSION PROVISIONS.

    The Secretary of the Interior shall agree to a request by any 
lessee to amend any lease issued for any Central and Western Gulf of 
Mexico tract in the period of January 1, 1996, through November 28, 
2000, to incorporate price thresholds applicable to royalty suspension 
provisions, that are equal to or less than the price thresholds 
described in clauses (v) through (vii) of section 8(a)(3)(C) of the 
Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(3)(C)). Any 
amended lease shall impose the new or revised price thresholds 
effective October 1, 2010. Existing lease provisions shall prevail 
through September 30, 2010.