Outer Continental Shelf Enhanced Exploration and Deep Water Incentives Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Outer Continental Shelf Enhanced 
Exploration and Deep Water Incentives Act''.

SEC. 2. AMENDMENTS TO THE OUTER CONTINENTAL SHELF LANDS ACT.

    (a) Incentives.--Section 8(a)(3) of the Outer Continental Shelf 
Lands Act (43 U.S.C. 1337(a)(3)) is amended to read as follows:
    ``(3)(A) The Secretary, at his own discretion or on petition of a 
lessee, in order--
            ``(i) to promote development and new production on 
        producing or nonproducing leases, through primary, secondary, 
        or tertiary recovery means; or
            ``(ii) to encourage production of marginal or uneconomic 
        resources on producing or nonproducing leases, which may 
        include the use of primary, secondary, or tertiary recovery 
        means,
may reduce, suspend, or eliminate any royalty or net profit share set 
forth in the leases. In the case of a petition of a lessee, the 
Secretary shall make a final determination under this subparagraph 
within 6 months after the submittal of such petition.
    ``(B)(i) Notwithstanding any other provision of this Act, except as 
provided in clauses (ii) and (iii) of this subparagraph, no royalty 
payment shall be due on new production from any lease located in water 
depths of 200 meters or greater until the capital costs directly 
related to such new production have been recovered by the lessee out of 
the proceeds from such new production.
    ``(ii) Notwithstanding clause (i), in any month during which the 
arithmetic average of the closing prices for the earliest delivery 
month on the New York Mercantile Exchange for Light Sweet crude oil 
exceeds $28.00 per barrel, any production of oil described in clause 
(i) shall be subject to royalties at the lease stipulated rate.
    ``(iii) Notwithstanding clause (i), in any month during which the 
arithmetic average of the closing prices for the earliest delivery 
month on the New York Mercantile Exchange for natural gas exceeds $3.50 
per million British thermal units, any production of natural gas 
described in clause (i) shall be subject to royalties at the lease 
stipulated rate.
    ``(iv) The prices referred to in clauses (ii) and (iii) of this 
subparagraph shall be changed during any calendar year after 1993 by 
the percentage if any by which the consumer price index changed during 
the preceding calendar year, as defined in section 111(f)(4) of the 
Internal Revenue Code of 1986.
    ``(v) Nothing in this subparagraph shall be construed to affect any 
requirement under this section to pay bonus bids.
    ``(vi) For purposes of this subparagraph--
            ``(I) the term `capital costs' shall be defined by the 
        Secretary, shall include exploration costs incurred after the 
        acquisition of the lease and development and capital production 
        costs directly related to new production, shall not include any 
        amounts paid as bonus bids or paid as royalties pursuant to 
        clause (ii) or (iii), and shall be adjusted to reflect changes 
        in the consumer price index, as defined in section 111(f)(4) of 
        the Internal Revenue Code of 1986; and
            ``(II) the term `new production' means any production from 
        a lease from which no royalties have been due on production, 
        other than test production, prior to the date of the enactment 
        of the Outer Continental Shelf Enhanced Exploration and Deep 
        Water Incentives Act, or any production resulting from lease 
        development activities under a development and production plan 
        approved by the Secretary under section 25 after the date of 
        the enactment of the Outer Continental Shelf Enhanced 
        Exploration and Deep Water Incentives Act.''.
    (b) Frontier Areas.--Section 18 of the Outer Continental Shelf 
Lands Act (43 U.S.C. 1344) is amended by adding at the end the 
following new subsection:
    ``(i) The Secretary shall, in each leasing program prepared under 
this section, designate as frontier areas portions of the outer 
Continental Shelf, if any, with respect to which the Secretary will 
exercise authority under section 8(a)(3)(A) to reduce, suspend, or 
eliminate the requirement to pay royalties. Any such designation shall 
include a full description of the terms of such reduction, suspension, 
or elimination. In designating frontier areas under this subsection, 
the Secretary shall take into consideration the increased capital costs 
associated with exploration and development in coastal or marine 
environments, including arctic environments, with special environmental 
protection requirements.''.

SEC. 3. REGULATIONS.

    (a) Incentives.--The Secretary shall, within 180 days after the 
date of the enactment of this Act, issue such rules and regulations as 
are necessary to implement the amendment made by section 2(a).
    (b) Frontier Areas.--The Secretary shall, within 1 year after the 
date of the enactment of this Act, issue regulations defining the term 
``frontier area'' for purposes of carrying out section 18(i) of the 
Outer Continental Shelf Lands Act.

Summary: Outer Continental Shelf Enhanced Exloration and Deep Water Incentives Act - Amends the Outer Continental Shelf Lands Act to authorize the Secretary of the Interior to suspend any royalty or net profit share set forth in Outer Continental Shelf (OCS) oil or gas leases. Declares that no royalty payment shall be due on new production from leases located in depths of 200 meters or more until the capital costs directly related to such production have been recovered out of the resulting proceeds. Requires the Secretary to designate as frontier areas those portions of the OCS with respect to which the Secretary will exercise authority to modify royalty payment requirements.