II

106TH CONGRESS

1ST SESSION S. 1049

To improve the administration of oil and gas leases on Federal land, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

MAY 13, 1999

Mr. MURKOWSKI introduced the following bill; which was read twice and

referred to the Committee on Energy and Natural Resources

A BILL

To improve the administration of oil and gas leases on

Federal land, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Federal Oil and Gas Lease Management Improvement

6 Act of 1999’’.

7 (b) TABLE OF CONTENTS.—The table of contents of

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings and purposes.

Sec. 3. Definitions.

Sec. 4. No property right.
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TITLE I—STATE OPTION TO REGULATE OIL AND GAS LEASE

OPERATIONS ON FEDERAL LAND

Sec. 101. Transfer of authority.

Sec. 102. Activity following transfer of authority.

TITLE II—USE OF COST SAVINGS FROM STATE REGULATION

Sec. 201. Compensation for costs.

Sec. 202. Exclusion of costs of preparing planning documents and analyses.

Sec. 203. Receipt sharing.

TITLE III—STREAMLINING AND COST REDUCTION

Sec. 301. Applications.

Sec. 302. Timely issuance of decisions.

Sec. 303. Elimination of unwarranted denials and stays.

Sec. 304. Reports.

Sec. 305. Scientific inventory of oil and gas reserves.

TITLE IV—FEDERAL ROYALTY CERTAINTY

Sec. 401. Definitions.

Sec. 402. Amendment of Outer Continental Shelf Lands Act.

Sec. 403. Amendment of Mineral Leasing Act.

Sec. 404. Indian land.

TITLE V—ROYALTY REINVESTMENT IN AMERICA

Sec. 501. Royalty incentive program.

Sec. 502. Marginal well production incentives.

Sec. 503. Suspension of production on oil and gas operations.

1 SEC. 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—Congress finds that—

3 (1) State governments have a long and success4 ful history of regulation of operations to explore for

5 and produce oil and gas; the special role of the

6 States was recognized by Congress in 1935 through

7 its ratification under the Constitution of the Inter8 state Compact to Conserve Oil and Gas;

9 (2) under the guidance of the Interstate Oil and

10 Gas Compact Commission, States have established

11 effective regulation of the oil and natural gas indus-
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1 try and subject their programs to periodic peer re2 view through the Commission;

3 (3) it is significantly less expensive for State

4 governments than for the Federal Government to

5 regulate oil and gas lease operations on Federal

6 land;

7 (4) significant cost savings could be achieved,

8 with no reduction in environmental protection or in

9 the conservation of oil and gas resources, by having

10 the Federal Government defer to State regulation of

11 oil and gas lease operations on Federal land;

12 (5) State governments carry out regulatory

13 oversight on Federal, State, and private land; oil

14 and gas companies operating on Federal land are

15 burdened with the additional cost and time of dupli16 cative oversight by both Federal and State conserva17 tion authorities; additional cost savings could be

18 achieved within the private sector by having the Sec19 retary defer to State regulation;

20 (6) the Federal Government is presently cast in

21 opposing roles as a mineral owner and regulator;

22 State regulation of oil and gas operations on Federal

23 land would eliminate this conflict of interest;

24 (7) it remains the responsibility of the Sec25 retary of the Interior to carry out the Federal policy
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1 set forth in the Mining and Minerals Policy Act of

2 1970 (30 U.S.C. 21a) to foster and encourage pri3 vate sector enterprise in the development of eco4 nomically sound and stable domestic mineral indus5 tries, and the orderly and economic development of

6 domestic mineral resources and reserves, including

7 oil and gas resources; and

8 (8) resource management analyses and surveys

9 conducted under the conservation laws of the United

10 States benefit the public at large and are an expense

11 properly borne by the Federal Government.

12 (b) PURPOSES.—The purposes of this Act are—

13 (1) to transfer from the Secretary to each State

14 in which Federal land is present authority to regu15 late oil and gas operations on leased tracts and re16 lated operations as fully as if the operations were oc17 curring on privately owned land;

18 (2) to share the costs saved through more effi19 cient State enforcement among State governments

20 and the Federal treasury;

21 (3) to prevent the imposition of unwarranted

22 delays and recoupments of Federal administrative

23 costs on Federal oil and gas lessees;

24 (4) to effect no change in the administration of

25 Indian land; and
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1 (5) to ensure that funds deducted from the

2 States’ net receipt share are directly tied to adminis3 trative costs related to mineral leasing on Federal

4 land.

5 SEC. 3. DEFINITIONS.

6 In this Act:

7 (1) APPLICATION FOR A PERMIT TO DRILL.—

8 The term ‘‘application for a permit to drill’’ means

9 a drilling plan including design, mechanical, and en10 gineering aspects for drilling a well.

11 (2) FEDERAL LAND.—

12 (A) IN GENERAL.—The term ‘‘Federal

13 land’’ means all land and interests in land

14 owned by the United States that are subject to

15 the mineral leasing laws, including mineral re16 sources or mineral estates reserved to the

17 United States in the conveyance of a surface or

18 nonmineral estate.

19 (B) EXCLUSION.—The term ‘‘Federal

20 land’’ does not include—

21 (i) Indian land (as defined in section

22 3 of the Federal Oil and Gas Royalty Man23 agement Act of 1982 (30 U.S.C. 1702));

24 or
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1 (ii) submerged land on the outer Con2 tinental Shelf (as defined in section 2 of

3 the Outer Continental Shelf Lands Act (43

4 U.S.C. 1331)).

5 (3) OIL AND GAS CONSERVATION AUTHORITY.—

6 The term ‘‘oil and gas conservation authority’’

7 means the agency or agencies in each State respon8 sible for regulating for conservation purposes oper9 ations to explore for and produce oil and natural

10 gas.

11 (4) PROJECT.—The term ‘‘project’’ means an

12 activity by a lessee, an operator, or an operating

13 rights owner to explore for, develop, produce, or

14 transport oil or gas resources.

15 (5) SECRETARY.—The term ‘‘Secretary’’

16 means—

17 (A) the Secretary of the Interior, with re18 spect to land under the administrative jurisdic19 tion of the Department of the Interior; and

20 (B) the Secretary of Agriculture, with re21 spect to land under the administrative jurisdic22 tion of the Department of Agriculture.

23 (6) SURFACE USE PLAN OF OPERATIONS.—The

24 term ‘‘surface use plan of operations’’ means a plan

25 for surface use, disturbance, and reclamation.
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1 SEC. 4. NO PROPERTY RIGHT.

2 Nothing in this Act gives a State a property right

3 or interest in any Federal lease or land.

4 TITLE I—STATE OPTION TO REG5 ULATE OIL AND GAS LEASE

6 OPERATIONS ON FEDERAL

7 LAND

8 SEC. 101. TRANSFER OF AUTHORITY.

9 (a) NOTIFICATION.—Not before the date that is 180

10 days after the date of enactment of this Act, a State may

11 notify the Secretary of its intent to accept authority for

12 regulation of operations, as described in subparagraphs

13 (A) through (K) of subsection (b)(2), under oil and gas

14 leases on Federal land within the State.

15 (b) TRANSFER OF AUTHORITY.—

16 (1) IN GENERAL.—Effective 180 days after the

17 Secretary receives the State’s notice, authority for

18 the regulation of oil and gas leasing operations is

19 transferred from the Secretary to the State.

20 (2) AUTHORITY INCLUDED.—The authority

21 transferred under paragraph (1) includes—

22 (A) processing and approving applications

23 for permits to drill, subject to surface use

24 agreements and other terms and conditions de25 termined by the Secretary;

26 (B) production operations;
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1 (C) well testing;

2 (D) well completion;

3 (E) well spacing;

4 (F) communization;

5 (G) conversion of a producing well to a

6 water well;

7 (H) well abandonment procedures;

8 (I) inspections;

9 (J) enforcement activities; and

10 (K) site security.

11 (c) RETAINED AUTHORITY.—The Secretary shall—

12 (1) retain authority over the issuance of leases

13 and the approval of surface use plans of operations

14 and project-level environmental analyses; and

15 (2) spend appropriated funds to ensure that

16 timely decisions are made respecting oil and gas

17 leasing, taking into consideration multiple uses of

18 Federal land, socioeconomic and environmental im19 pacts, and the results of consultations with State

20 and local government officials.

21 SEC. 102. ACTIVITY FOLLOWING TRANSFER OF AUTHORITY.

22 (a) FEDERAL AGENCIES.—Following the transfer of

23 authority, no Federal agency shall exercise the authority

24 formerly held by the Secretary as to oil and gas lease oper25 ations and related operations on Federal land.
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1 (b) STATE AUTHORITY.—

2 (1) IN GENERAL.—Following the transfer of au3 thority, each State shall enforce its own oil and gas

4 conservation laws and requirements pertaining to

5 transferred oil and gas lease operations and related

6 operations with due regard to the national interest

7 in the expedited, environmentally sound development

8 of oil and gas resources in a manner consistent with

9 oil and gas conservation principles.

10 (2) APPEALS.—Following a transfer of author11 ity under section 101, an appeal of any decision

12 made by a State oil and gas conservation authority

13 shall be made in accordance with State administra14 tive procedures.

15 (c) PENDING ENFORCEMENT ACTIONS.—The Sec16 retary may continue to enforce any pending actions re17 specting acts committed before the date on which author18 ity is transferred to a State under section 101 until those

19 proceedings are concluded.

20 (d) PENDING APPLICATIONS.—

21 (1) TRANSFER TO STATE.—All applications re22 specting oil and gas lease operations and related op23 erations on Federal land pending before the Sec24 retary on the date on which authority is transferred

25 under section 101 shall be immediately transferred
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1 to the oil and gas conservation authority of the

2 State in which the lease is located.

3 (2) ACTION BY THE STATE.—The oil and gas

4 conservation authority shall act on the application in

5 accordance with State laws (including regulations)

6 and requirements.

7 TITLE II—USE OF COST SAVINGS

8 FROM STATE REGULATION

9 SEC. 201. COMPENSATION FOR COSTS.

10 (a) IN GENERAL.—Subject to the availability of ap11 propriations, the Secretary shall compensate any State for

12 costs incurred to carry out the authorities transferred

13 under section 101.

14 (b) PAYMENT SCHEDULE.—Payments shall be made

15 not less frequently than every quarter.

16 (c) COST BREAKDOWN REPORT.—Each State seek17 ing compensation shall report to the Secretary a cost

18 breakdown for the authorities transferred.

19 (d) LIMITATION ON AMOUNT.—

20 (1) IN GENERAL.—Compensation to a State

21 may not exceed 50 percent of the Secretary’s allo22 cated cost for oil and gas leasing activities under

23 section 35(b) of the Act of February 25, 1920 (com24 monly known as the ‘‘Mineral Leasing Act’’) (30

25 U.S.C. 191(b)) for the State for fiscal year 1997.
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1 (2) ADJUSTMENT.—The Secretary shall adjust

2 the maximum level of cost compensation at least

3 once every 2 years to reflect any increases in the

4 Consumer Price Index (all items, United States city

5 average) as prepared by the Department of Labor,

6 using 1997 as the baseline year.

7 SEC. 202. EXCLUSION OF COSTS OF PREPARING PLANNING

8 DOCUMENTS AND ANALYSES.

9 Section 35 of the Act of February 25, 1920 (30

10 U.S.C. 191(b)) is amended by adding at the end the fol11 lowing:

12 ‘‘(6) The Secretary shall not include, for the

13 purpose of calculating the deduction under para14 graph (1), costs of preparing resource management

15 planning documents and analyses for areas in which

16 mineral leasing is excluded or areas in which the pri17 mary activity under review is not mineral leasing

18 and development.’’.

19 SEC. 203. RECEIPT SHARING.

20 Section 35(b) of the Act of February 25, 1920 (30

21 U.S.C. 191(b)) is amended by striking ‘‘paid to States’’

22 and inserting ‘‘paid to States (other than States that ac23 cept a transfer of authority under section 101 of the Fed24 eral Oil and Gas Lease Management Act of 1999)’’.
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1 TITLE III—STREAMLINING AND

2 COST REDUCTION

3 SEC. 301. APPLICATIONS.

4 (a) LIMITATION ON COST RECOVERY.—Notwith5 standing sections 304 and 504 of the Federal Land Policy

6 and Management Act of 1976 (43 U.S.C. 1734, 1764) and

7 section 9701 of title 31, United States Code, the Secretary

8 shall not recover the Secretary’s costs with respect to ap9 plications and other documents relating to oil and gas

10 leases.

11 (b) COMPLETION OF PLANNING DOCUMENTS AND

12 ANALYSES.—

13 (1) IN GENERAL.—The Secretary shall complete

14 any resource management planning documents and

15 analyses not later than 90 days after receiving any

16 offer, application, or request for which a planning

17 document or analysis is required to be prepared.

18 (2) PREPARATION BY APPLICANT OR LESSEE.—

19 If the Secretary is unable to complete the document

20 or analysis within the time prescribed by paragraph

21 (1), the Secretary shall notify the applicant or lessee

22 of the opportunity to prepare the required document

23 or analysis for the agency’s review and use in deci24 sionmaking.
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1 (c) REIMBURSEMENT FOR COSTS OF NEPA ANAL2 YSES, DOCUMENTATION, AND STUDIES.—If—

3 (1) adequate funding to enable the Secretary to

4 timely prepare a project-level analysis required

5 under the National Environmental Policy Act of

6 1969 (42 U.S.C. 4321 et seq.) with respect to an oil

7 or gas lease is not appropriated; and

8 (2) the lessee, operator, or operating rights

9 owner voluntarily pays for the cost of the required

10 analysis, documentation, or related study;

11 the Secretary shall reimburse the lessee, operator, or oper12 ating rights owner for its costs through royalty credits at13 tributable to the lease, unit agreement, or project area.

14 SEC. 302. TIMELY ISSUANCE OF DECISIONS.

15 (a) IN GENERAL.—The Secretary shall ensure the

16 timely issuance of Federal agency decisions respecting oil

17 and gas leasing and operations on Federal land.

18 (b) OFFER TO LEASE.—

19 (1) DEADLINE.—The Secretary shall accept or

20 reject an offer to lease not later than 90 days after

21 the filing of the offer.

22 (2) FAILURE TO MEET DEADLINE.—If an offer

23 is not acted upon within that time, the offer shall be

24 deemed to have been accepted.

25 (c) APPLICATION FOR PERMIT TO DRILL.—
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1 (1) DEADLINE.—The Secretary and a State

2 that has accepted a transfer of authority under sec3 tion 101 shall approve or disapprove an application

4 for permit to drill not later than 30 days after re5 ceiving a complete application.

6 (2) FAILURE TO MEET DEADLINE.—If the ap7 plication is not acted on within the time prescribed

8 by paragraph (1), the application shall be deemed to

9 have been approved.

10 (d) SURFACE USE PLAN OF OPERATIONS.—The Sec11 retary shall approve or disapprove a surface use plan of

12 operations not later than 30 days after receipt of a com13 plete plan.

14 (e) ADMINISTRATIVE APPEALS.—

15 (1) DEADLINE.—From the time that a Federal

16 oil and gas lessee or operator files a notice of admin17 istrative appeal of a decision or order of an officer

18 or employee of the Department of the Interior or the

19 Forest Service respecting a Federal oil and gas Fed20 eral lease, the Secretary shall have 2 years in which

21 to issue a final decision in the appeal.

22 (2) FAILURE TO MEET DEADLINE.—If no final

23 decision has been issued within the time prescribed

24 by paragraph (1), the appeal shall be deemed to

25 have been granted.
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1 SEC. 303. ELIMINATION OF UNWARRANTED DENIALS AND

2 STAYS.

3 (a) IN GENERAL.—The Secretary shall ensure that

4 unwarranted denials and stays of lease issuance and un5 warranted restrictions on lease operations are eliminated

6 from the administration of oil and gas leasing on Federal

7 land.

8 (b) LAND DESIGNATED FOR MULTIPLE USE.—

9 (1) IN GENERAL.—Land designated as available

10 for multiple use under Bureau of Land Management

11 resource management plans and Forest Service leas12 ing analyses shall be available for oil and gas leasing

13 without lease stipulations more stringent than re14 strictions on surface use and operations imposed

15 under the laws (including regulations) of the State

16 oil and gas conservation authority unless the Sec17 retary includes in the decision approving the man18 agement plan or leasing analysis a written expla19 nation why more stringent stipulations are war20 ranted.

21 (2) APPEAL.—Any decision to require a more

22 stringent stipulation shall be administratively ap23 pealable and, following a final agency decision, shall

24 be subject to judicial review.

25 (c) REJECTION OF OFFER TO LEASE.—
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1 (1) IN GENERAL.—If the Secretary rejects an

2 offer to lease on the ground that the land is unavail3 able for leasing, the Secretary shall provide a writ4 ten, detailed explanation of the reasons the land is

5 unavailable for leasing.

6 (2) PREVIOUS RESOURCE MANAGEMENT DECI7 SION.—If the determination of unavailability is

8 based on a previous resource management decision,

9 the explanation shall include a careful assessment of

10 whether the reasons underlying the previous decision

11 are still persuasive.

12 (3) SEGREGATION OF AVAILABLE LAND FROM

13 UNAVAILABLE LAND.—The Secretary may not reject

14 an offer to lease land available for leasing on the

15 ground that the offer includes land unavailable for

16 leasing, and the Secretary shall segregate available

17 land from unavailable land, on the offeror’s request

18 following notice by the Secretary, before acting on

19 the offer to lease.

20 (d) DISAPPROVAL OR REQUIRED MODIFICATION OF

21 SURFACE USE PLANS OF OPERATIONS AND APPLICATION

22 FOR PERMIT TO DRILL.—The Secretary shall provide a

23 written, detailed explanation of the reasons for dis24 approving or requiring modifications of any surface use

25 plan of operations or application for permit to drill.
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1 (e) EFFECTIVENESS OF DECISION.—A decision of the

2 Secretary respecting an oil and gas lease shall be effective

3 pending administrative appeal to the appropriate office

4 within the Department of the Interior or the Department

5 of Agriculture unless that office grants a stay in response

6 to a petition satisfying the criteria for a stay established

7 by section 4.21(b) of title 43, Code of Federal Regulations

8 (or any successor regulation).

9 SEC. 304. REPORTS.

10 (a) IN GENERAL.—Not later than March 31, 2000,

11 the Secretaries shall jointly submit to the President of the

12 Senate and the Speaker of the House of Representatives

13 a report explaining the most efficient means of eliminating

14 overlapping jurisdiction, duplication of effort, and incon15 sistent policymaking and policy implementation as be16 tween the Bureau of Land Management and the Forest

17 Service.

18 (b) RECOMMENDATIONS.—The report shall include

19 recommendations on statutory changes needed to imple20 ment the report’s conclusions.

21 SEC. 305. SCIENTIFIC INVENTORY OF OIL AND GAS RE22 SERVES.

23 (a) IN GENERAL.—Not later than March 31, 2000,

24 the Secretary of the Interior, in consultation with the Di25 rector of the United States Geological Survey, shall pub-
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1 lish, through notice in the Federal Register, a science2 based national inventory of the oil and gas reserves and

3 potential resources underlying Federal land and the outer

4 Continental Shelf.

5 (b) CONTENTS.—The inventory shall—

6 (1) indicate what percentage of the oil and gas

7 reserves and resources is currently available for leas8 ing and development; and

9 (2) specify the percentages of the reserves and

10 resources that are on—

11 (A) land that is open for leasing as of the

12 date of enactment of this Act that has never

13 been leased;

14 (B) land that is open for leasing or devel15 opment subject to no surface occupancy stipula16 tions; and

17 (C) land that is open for leasing or devel18 opment subject to other lease stipulations that

19 have significantly impeded or prevented, or are

20 likely to significantly impede or prevent, devel21 opment; and

22 (3) indicate the percentage of oil and gas re23 sources that are not available for leasing or are

24 withdrawn from leasing.

25 (c) PUBLIC COMMENT.—
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1 (1) IN GENERAL.—The Secretary of the Inte2 rior shall invite public comment on the inventory to

3 be filed not later than September 30, 2000.

4 (2) RESOURCE MANAGEMENT DECISIONS.—Spe5 cifically, the Secretary of the Interior shall invite

6 public comment on the effect of Federal resource

7 management decisions on past and future oil and

8 gas development.

9 (d) REPORT.—

10 (1) IN GENERAL.—Not later than March 31,

11 2001, the Secretary of the Interior shall submit to

12 the President of the Senate and the Speaker of the

13 House of Representatives a report comprised of the

14 revised inventory and responses to the public com15 ments.

16 (2) CONTENTS.—The report shall specifically

17 indicate what steps the Secretaries believe are nec18 essary to increase the percentage of land open for

19 development of oil and gas resources.

20 TITLE IV—FEDERAL ROYALTY

21 CERTAINTY

22 SEC. 401. DEFINITIONS.

23 In this title:

24 (1) MARKETABLE CONDITION.—The term

25 ‘‘marketable condition’’ means lease production that
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1 is sufficiently free from impurities and otherwise in

2 a condition that the production will be accepted by

3 a purchaser under a sales contract typical for the

4 field or area.

5 (2) REASONABLE COMMERCIAL RATE.—

6 (A) IN GENERAL.—The term ‘‘reasonable

7 commercial rate’’ means—

8 (i) in the case of an arm’s-length con9 tract, the actual cost incurred by the les10 see; or

11 (ii) in the case of a non-arm’s-length

12 contract—

13 (I) the rate charged in a contract

14 for similar services in the same area

15 between parties with opposing eco16 nomic interests; or

17 (II) if there are no arm’s-length

18 contracts for similar services in the

19 same area, the just and reasonable

20 rate for the transportation service

21 rendered by the lessee or lessee’s affil22 iate.

23 (B) DISPUTES.—Disputes between the

24 Secretary and a lessee over what constitutes a

25 just and reasonable rate for such service shall
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1 be resolved by the Federal Energy Regulatory

2 Commission.

3 SEC. 402. AMENDMENT OF OUTER CONTINENTAL SHELF

4 LANDS ACT.

5 Section 8(b)(3) of the Outer Continental Shelf Lands

6 Act (43 U.S.C. 1337(b)(3)) is amended by striking the

7 semicolon at the end and adding the following:

8 ‘‘Provided: That if the payment is in value or amount,

9 the royalty due in value shall be based on the value of

10 oil or gas production at the lease in marketable condition,

11 and the royalty due in amount shall be based on the roy12 alty share of production at the lease; if the payment in

13 value or amount is calculated from a point away from the

14 lease, the payment shall be adjusted for quality and loca15 tion differentials, and the lessee shall be allowed reim16 bursements at a reasonable commercial rate for transpor17 tation (including transportation to the point where the

18 production is put in marketable condition), marketing,

19 processing, and other services beyond the lease through

20 the point of sale, other disposition, or delivery;’’.

21 SEC. 403. AMENDMENT OF MINERAL LEASING ACT.

22 Section 17(c) of the Act of February 25, 1920 (30

23 U.S.C. 226(c)) (commonly known as the ‘‘Mineral Leasing

24 Act’’), is amended by adding at the end the following:

25 ‘‘(3) ROYALTY DUE IN VALUE.—
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1 ‘‘(A) IN GENERAL.—Royalty due in value

2 shall be based on the value of oil or gas produc3 tion at the lease in marketable condition, and

4 the royalty due in amount shall be based on the

5 royalty share of production at the lease.

6 ‘‘(B) CALCULATION OF VALUE OR AMOUNT

7 FROM A POINT AWAY FROM A LEASE.—If the

8 payment in value or amount is calculated from

9 a point away from the lease—

10 ‘‘(i) the payment shall be adjusted for

11 quality and location differentials; and

12 ‘‘(ii) the lessee shall be allowed reim13 bursements at a reasonable commercial

14 rate for transportation (including transpor15 tation to the point where the production is

16 put in marketable condition), marketing,

17 processing, and other services beyond the

18 lease through the point of sale, other dis19 position, or delivery;’’.

20 SEC. 404. INDIAN LAND.

21 This title shall not apply with respect to Indian land.
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1 TITLE V—ROYALTY

2 REINVESTMENT IN AMERICA

3 SEC. 501. ROYALTY INCENTIVE PROGRAM.

4 (a) IN GENERAL.—To encourage exploration and de5 velopment expenditures on Federal land and the outer

6 Continental Shelf for the development of oil and gas re7 sources when the cash price of West Texas Intermediate

8 crude oil, as posted on the Dow Jones Commodities Index

9 chart is less than $18 per barrel for 90 consecutive pricing

10 days or when natural gas prices as delivered at Henry

11 Hub, Louisiana, are less than $2.30 per million British

12 thermal units for 90 consecutive days, the Secretary shall

13 allow a credit against the payment of royalties on Federal

14 oil production and gas production, respectively, in an

15 amount equal to 20 percent of the capital expenditures

16 made on exploration and development activities on Federal

17 oil and gas leases.

18 (b) NO CREDITING AGAINST ONSHORE FEDERAL

19 ROYALTY OBLIGATIONS.—In no case shall such capital ex20 penditures made on Outer Continental Shelf leases be

21 credited against onshore Federal royalty obligations.

22 SEC. 502. MARGINAL WELL PRODUCTION INCENTIVES.

23 To enhance the economics of marginal oil and gas

24 production by increasing the ultimate recovery from mar25 ginal wells when the cash price of West Texas Inter-
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1 mediate crude oil, as posted on the Dow Jones Commod2 ities Index chart is less than $18 per barrel for 90 con3 secutive pricing days or when natural gas prices are deliv4 ered at Henry Hub, Louisiana, are less than $2.30 per

5 million British thermal units for 90 consecutive days, the

6 Secretary shall reduce the royalty rate as production de7 clines for—

8 (1) onshore oil wells producing less than 30

9 barrels per day;

10 (2) onshore gas wells producing less than 120

11 million British thermal units per day;

12 (3) offshore oil well producing less than 300

13 barrels of oil per day; and

14 (4) offshore gas wells producing less than 1,200

15 million British thermal units per day.

16 SEC. 503. SUSPENSION OF PRODUCTION ON OIL AND GAS

17 OPERATIONS.

18 (a) IN GENERAL.—Any person operating an oil well

19 under a lease issued under the Act of February 25, 1920

20 (commonly known as the ‘‘Mineral Leasing Act’’) (30

21 U.S.C. 181 et seq.) or the Mineral Leasing Act for Ac22 quired Lands (30 U.S.C. 351 et seq.) may submit a notice

23 to the Secretary of the Interior of suspension of operation

24 and production at the well.
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1 (b) PRODUCTION QUANTITIES NOT A FACTOR.—A

2 notice under subsection (a) may be submitted without re3 gard to per day production quantities at the well and with4 out regard to the requirements of subsection (a) of section

5 3103.4–4 of title 43 of the Code of Federal Regulations

6 (or any successor regulation) respecting the granting of

7 such relief, except that the notice shall be submitted to

8 an office in the Department of the Interior designated by

9 the Secretary of the Interior.

10 (c) PERIOD OF RELIEF.—On submission of a notice

11 under subsection (a) for an oil well, the operator of the

12 well may suspend operation and production at the well for

13 a period beginning on the date of submission of the notice

14 and ending on the later of—

15 (1) the date that is 2 years after the date on

16 which the suspension of operation and production

17 commences; or

18 (2) the date on which the cash price of West

19 Texas Intermediate crude oil, as posted on the Dow

20 Jones Commodities Index chart is greater than $15

21 per barrel for 90 consecutive pricing days.

Æ