79–010

Calendar No. 939

106TH CONGRESS REPORT

2d Session " ! SENATE 106–490

POWDER RIVER BASIN RESOURCE DEVELOPMENT ACT OF

1999

OCTOBER 5 (legislative day SEPTEMBER 22), 2000.—Ordered to be printed

Mr. MURKOWSKI, from the Committee on Energy and Natural

Resources, submitted the following

REPORT

together with

MINORITY VIEWS

[To accompany S. 1950]

The Committee on Energy and Natural Resources, to which was

referred the bill (S. 1950) to amend the Mineral Leasing Act of

1920 to ensure the orderly development of coal, coalbed methane,

natural gas, and oil in the Powder River Basin, Wyoming and Montana, and for other purposes, having considered the same, reports

favorably thereon with an amendment and an amendment to the

title and recommends that the bill, as amended, do pass.

The amendments, are as follows:

1. Strike out all after the enacting clause and insert in lieu

thereof the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Powder River Basin Resource Development Act of

2000’’.

SEC. 2. FINDINGS AND PURPOSE.

(a) FINDINGS.—The Congress finds that:

(1) The Powder River Basin in Wyoming and Montana is one of the world’s

richest energy resource regions, possessing the largest reserves of coal in the

United States and significant deposits of oil and natural gas, including coalbed

methane.

(2) The coal is predominantly federally-owned—either as part of the public

lands or reserved from public lands that were sold under homestead laws enacted in 1909, 1910, and 1916—and may be leased to coal producers by the Bureau of Land Management, Department of the Interior, under the Mineral Leasing Act.

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(3) The gas and oil are owned by the Federal Government, the States, and

private parties.

(4) the federally-owned gas and oil, like the coal, are part of the public lands

and may be leased to oil and gas lessees by the Bureau of Land Management

under the Mineral Leasing Act.

(5) The privately-owned gas and oil were conveyed with the public lands purchased under the three homestead laws and may have been sold or leased to

oil and gas producers by the successors to those original purchasers.

(6) Development of those valuable energy resources is of critical importance

to the American public.

(7) These energy resources provide fuel to heat and light our homes and

power our industries.

(8) Extraction of these energy resources provides royalties, taxes, and wages

that contribute to national, State, and local treasuries and economies.

(9) Development of both the coal and the gas and oil is occurring in the Powder River Basin.

(10) In many locations the coal and the gas and oil have been leased or sold

to different parties. These resources are frequently extracted sequentially, but

for safety and operational reasons typically cannot be extracted simultaneously,

in the same location. Where concurrent development is impossible and even

where it may be possible, in certain of these locations disputes have arisen

among the different parties concerning plans for, and the course of, development

of these resources.

(11) The development of any one of these resources can result in loss of another, either by making recovery impossible in the case of coalbed methane or

uneconomic in the case of deep natural gas, oil, or coal.

(12) The nature, extent, and value of any loss or delay in development of the

gas, oil, or coal resource due to development of another of these resources in

the ‘‘common areas’’ within the Powder River Basin in which disputes between

the resources’ developers arise should be ascertained and fair market value for

the loss or delay should be provided by agreement between the developers or

by an expeditious adjudication procedure.

(13) The Federal law under which most of the coal and much of the gas and

oil in the Powder River Basin are made available for development should be

amended to provide a procedure that will assure the orderly development of the

energy resources, and fair treatment to the resources’ developers, in the ‘‘common areas’’ within the Powder River Basin in which disputes between the developers arise.

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

(1) amend the Mineral Leasing Act to provide a consistent procedure to resolve disputes between developers of coal and developers of natural gas and oil

in the ‘‘common areas’’ within the Powder River Basin to which this Act applies

concerning the sequence of development of those resources in the same location,

regardless of who owns the resources:

(2) encourage maximum recovery of the resources prior to the time at which

such disputes are likely to occur or thereafter until the procedure provided by

this Act is implemented;

(3) ensure that the procedure provided by this Act is employed as a last resort

if the disputes are not fully resolved by voluntary agreements between the resources’ developers or administrative policies and actions;

(4) determines fair and just compensation owed for the loss, or delay, in, the

opportunity to develop a resource resulting from implementation of the procedure provided by this Act; and

(5) provide expressly that the procedure provided by this Act will neither

apply to nor set any precedent for resolution of disputes between or among resource developers outside of the ‘‘common areas’’ within the Powder River Basin

to which this Act applies.

SEC. 3. AMENDMENT TO THE MINERAL LEASING ACT.

The Mineral Leasing Act (30 U.s.C. 181 et seq.) is amended by renumbering section 44 as section 45 and inserting the following new section.

‘‘SEC. 44. DEVELOPMENT OF COAL, NATURAL GAS, AND OIL IN THE POWDER RIVER BASIN.

‘‘(a) DEFINITIONS.—As used in this section:

‘‘(1) The term ‘Powder River Basin’ or ‘Basin’ means the area designated as

‘Powder River Basin’ on a map entitled ‘MLA Section 44 Powder River Basin

Area’, dated July 1, 1999, and on file in the Wyoming and Montana State Offices of the Bureau of Land Management, Department of the Interior.

‘‘(2) The term ‘Subsection (g) Lands’ means the area designated as ‘Subsection

(g) Lands’ on the map described in paragraph (1).

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‘‘(3) The term ‘Secretary’ means the Secretary of the Interior.

‘‘(4) The term ‘Federal coal lease’ means a lease of Federal coal in the Basin

issued pursuant to this Act.

‘‘(5) The term ‘Federal coal lessee’ means the holder of a Federal coal lease.

‘‘(6) The term ‘Federal oil and gas lease’ means a lease of Federal oil and gas

in the Basin issued pursuant to the Act.

‘‘(7) The term ‘oil an gas lease or right to develop’ means a Federal oil and

gas lease or a lease for or right to develop oil and gas in the Basin provided

by a State or private owner of the resources.

‘‘(8) The term ‘non-Federal oil and gas lease or right to develop’ means a lease

for or right to develop oil and gas in the Basin provided by a State or private

owner of the resources.

‘‘(9) The term ‘oil and gas developer’ means the holder of an oil or gas lease

or right to develop.

‘‘(10) The term ‘oil and gas property’ means an area in the Basin which is

subject to an oil or gas lease or right to develop held by an oil or gas developer.

‘‘(11) The term ‘common area’ means an area in the Basin in which all or a

portion of a Federal coal lease (including any area of State or private coal within a logical mining unit with the Federal coal lease) overlaps all or a portion

of an oil and gas property.

‘‘(12) The term ‘approved or proposed mining plan’ means a mining plan that

is approved by, or has been submitted for the approval, of the Secretary.

‘‘(13) The term ‘coalbed methane’ shall have the meaning given that term in

section 1339(p)(2) of the Energy Policy Act of 1992 (106 Stat. 2992, 42 U.S.C.

13368(p)(2)).

‘‘(14) the term ‘owners of any interest in the oil and gas property’ means persons who own the working interest, lease interest, operating interest, mineral

interest, royalty interest, or any other interest in the oil and gas property, and

any other persons who might receive compensation for unavoidable fixed expenses under an order concerning the oil and gas property issued pursuant to

subsection (e)(10(E).

‘‘(15) The term ‘owners of any non-Federal interest in the oil and gas property’

means all owners of any interest in the oil and gas property except the Federal

government or any agency or department thereof.

‘‘(16) The term ‘develop’ or ‘development’ means to develop or to produce, or

both, or the development or production, or both, respectively, including all incidental operations.

‘‘(b) PARTIES ENCOURAGED TO ENTER INTO WRITTEN AGREEMENT.—In any common

area, the Federal coal lessee and oil and gas developer, subject to applicable Federal

and State laws, regulations, and lease terms, may and are encouraged to enter into

a written agreement that details operations and assigns or assesses costs or compensation for the concurrent or sequential development of those resources.

‘‘(c) MINERAL CONSERVATION.—The Secretary shall employ any authority the Secretary possesses to encourage expedited development of any oil and gas resources

and any coal resource that—

‘‘(1) are leased pursuant to this Act;

‘‘(2) are within common areas; and

‘‘(3) otherwise may be lost or bypassed due to the development of another of

the resources.

‘‘(d) NEGOTIATIONS CONCERNING DEVELOPMENT PRIORITY FOR CERTAIN OPERATIONS IN THE BASIN.—

‘‘(1) OBLIGATION TO PROVIDE WRITTEN NOTICE OF CONFLICT.—Whenever a Federal coal lessee or an oil and gas developer determines that its Federal coal

lease (or a logical mining unit including the Federal coal lease) or its oil and

gas property is located in a common area, and, pursuant to an approved or proposed mining plan, mining operations or facilities in support of mining for coal

on the Federal coal lease or the logical mining unit will be located within the

common area, the Federal coal lessee or the oil and gas developer shall deliver

written notice of the determination to the other party and the Secretary no later

than 240 days prior to the date on which the mining operations or construction

of the mine support facilities is projected by the approved or proposed mining

plan to commence in the common area.

‘‘(2) OBLIGATION TO NEGOTIATE.—Promptly after providing the notice referred

to in paragraph (1), the party which provided the notice shall seek to negotiate

a written agreement with the other party that resolves any conflict between the

development of gas or oil and development of coal in the common area.

‘‘(e) COMPENSATION PROCEDURES FOR ASSIGNMENT OF DEVELOPMENT PRIORITY.—

‘‘(1) PETITION FOR RELIEF.—

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‘‘(A) If notice is submitted timely pursuant to subsection (d)(1) and the

Federal coal lessee and the oil and gas developer engage in negotiations,

but do not reach agreement, pursuant to subsection (d)(2), the Federal coal

lessee or the oil and gas developer may file a petition for relief as described

in subparagraph (C) in the United States district court for the district in

which the common area is located on any date which is not less than 180

days prior to the date on which the mining operations or construction of the

mine support facilities is projected by the approved or proposed mining plan

to commence in the common area.

‘‘(B) The petitioner shall serve the oil and gas developer or the Federal

coal lessee, as the case may be, and the Secretary with a copy of the petition for relief on the same date upon which the petition is filed with the

court pursuant to subparagraph (A).

‘‘(C) The petition for relief shall include the following:

‘‘(i) A description and map of the Federal coal lease, the oil and gas

property, and the common area.

‘‘(ii) A list containing the names and addresses of all owners of any

non-Federal interest in the oil and gas property and all owners of any

non-Federal interest in the Federal coal lease or logical mining unit.

The petitioner shall list those owners of any non-Federal interest in the

oil and gas property and of the Federal coal lease or logical mining unit

whom the petitioner is able to ascertain from the properly indexed

records of the county recorder of the county or counties in which the

oil and gas property and Federal coal lease or logical mining unit are

located, and the respondent shall file with the court and serve on the

petitioner and the Secretary any corrections of, additions to, or deletions from the list known to the respondent within 10 days of the date

of service of the petition for relief pursuant to subparagraph (B). Thereafter, whenever any correction of, addition to, or deletion from the list

becomes known to either the petitioner or the respondent, that party

shall promptly file with the court and serve on the other party and the

Secretary the addition, correction, or deletion. Any person who believes

he or she is an owner of any non-Federal interest in the oil and gas

property or in the Federal coal lease or logical mining unit and is omitted from the list may file a motion in the court to be added to the list

at any time prior to the issuance of an order pursuant to paragraph

(10)(E) or paragraph (11)(C).

‘‘(iii) A certified copy of the notice described in subsection (d)(1).

‘‘(iv) a sworn statement by a senior officer of the petitioner with authority to commit the petitioner in any negotiation under subsection

(d)(2) stating, and all documents demonstrating, that the petitioner negotiated or attempted to negotiate in good faith with the respondent a

voluntary agreement, pursuant to subsection (d)(2).

‘‘(D) The Federal coal lessee shall submit a copy of the approved or proposed mining plan for the mining operations or support facilities that are

the subject of the petition for relief—

‘‘(i) with the petition for relief if the Federal coal lessee is the petitioner; or

‘‘(ii) within 5 days of the date of service of the petition for relief pursuant to subparagraph (B) if the Federal coal lessee is the respondent.

‘‘(2) JOINDER OF PARTIES.—The Secretary and all owners of any non-Federal

interest in the oil and gas property and in the Federal coal lease or logical mining unit identified pursuant to paragraph (1)(C)(ii) shall be joined in the proceedings established pursuant to this subsection.

‘‘(3) PARTIES’ RESPONSE TO PETITION.—The non-Federal respondent or respondents may provide to the Secretary a response to the petition within 30

days from the date of filing of the petition for relief pursuant to paragraph

(1)(A). The Secretary may require the petitioner and the respondent or respondents to submit such documents and/or provide such testimony as the Secretary

deems appropriate within 60 days of such date of filing.

‘‘(4) SECRETARY’S INITIAL RESPONSE TO PETITION.—Within 90 days of the date

of filing of the petition for relief pursuant to paragraph (1)(A) the Secretary

shall take the following actions:

‘‘(A) The Secretary shall determine, with petitioner having the burden of

proof—

‘‘(i) whether a common area exists; and

‘‘(ii) whether the approved or proposed mining plan submitted pursuant to paragraph (3)(D) provides for the mining operations to intersect,

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or the mine support facilities to be constructed in, any portion of the

common area.

‘‘(B)(i) If existence of the common area and intersection of, or construction

in, the common area are determined pursuant to subparagraph (A), the Secretary shall determine whether the public interest is best realized by delaying or foregoing development of either—

‘‘(I) the oil or gas resource to permit the mining operations to intersect, or the mine support facilities to be constructed in, the common

area in accordance with the approved or proposed mining plan; or

‘‘(II) the coal resource to permit commencement or continuation of the

development of the oil or gas resource in the common area after the

date on which the mining operations of construction of the mine support facilities is projected by the approved or proposed mining plan to

commence in the common area.

‘‘(ii) The Secretary shall make the public interest determination described

in clause (i) solely by the calculation of the greater economic benefit to be

realized by comparison, on a net present value basis, of the Federal and

State revenues from royalties and severance taxes likely to be generated

from each resource underlying the common area to which the petition for

relief applies.

‘‘(C)(i) If any portion of the resource for which delayed or foregone development is determined to be in the public interest pursuant to subparagraph

(B) is subject to a lease issued pursuant to this Act, the Secretary shall suspend all or any portion of, including any geographical area of or zone or

reservoir subject to, the lease to accommodate development of the other resource in the common area during the period beginning on a date no later

than the commencement date referred to in paragraph (1)(A) and provided

in the notice submitted pursuant to paragraph (1)(C)(iii) and ending on the

date on which an order is issued pursuant to paragraph (10)(E) or paragraph (11)(C).

‘‘(ii) The Secretary may refrain from either making the determinations required by subparagraphs (A) and (B) or suspending all or any portion of a

lease issued pursuant to this Act as required by clause (i) only if the Secretary determines that—

‘‘(I) no common area exists; or

‘‘(II) the approved or proposed mining plan does not provide for the

mining operations to intersect, or the mine support facilities to be constructed in, the common area.

‘‘(D) The Secretary shall—

‘‘(i) report the determinations made pursuant to subparagraphs (A)

and (B) or subparagraph (C)(ii) and any suspension made pursuant to

subparagraph (C)(i), including the administrative record therefor, with

the court in which the petition for relief is filed pursuant to paragraph

(1)(A); and

‘‘(ii) provide the petitioner and respondent or respondents with copies

of the report and record.

‘‘(5) COURT’S INITIAL RESPONSE TO PETITION.—

‘‘(A)(i) The court in which the petition is filed pursuant to paragraph

(1)(A) shall have exclusive jurisdiction to receive and review the report of

the Secretary required by paragraph (4)(D), and the determinations made

and any action taken by the Secretary pursuant to paragraph (4).

‘‘(ii) The petitioner and respondent or respondents shall have 30 days

from the date upon which the report of the Secretary is filed with the court

pursuant to paragraph (4)(D) in which to file with the court any objection

to any determination of the Secretary required by paragraph (4).

‘‘(iii) If any objection is filed pursuant to clause (ii), the court shall, within

60 days of receipt of the report of the Secretary pursuant to paragraph

(4)(D), make the determination that is the subject of the objection on the

basis of the administrative record filed with the report and in accordance

with the applicable requirements or standards of subparagraph (A) or subparagraph (B) of paragraph (4).

‘‘(iv) Any determination made by the court pursuant to clause (iii) shall

be an independent judicial determination that is de novo, without regard

to the prior determination of the Secretary.

‘‘(v) If no objection is filed pursuant to clause (ii), the determinations of

the Secretary required by paragraph (4) shall be final and approved by the

court in the order issued pursuant to subparagraph (B) or subparagraph

(E).

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‘‘(B) Within 90 days of the date of receipt of the report of the Secretary

pursuant to paragraph (4)(D), the court, except as provided in subparagraph (E), shall issue an order that—

‘‘(i) suspends all or any part of, including any geographical area of

or reservoir subject to, any non-Federal oil and gas lease or right to develop, or any non-Federal interest in any logical mining unit that include the Federal coal lease, in the common area in accordance with

the determination of the Secretary pursuant to subclause (I) or subclause (II), respectively, of paragraph (4)(B)(i) or in accordance with the

determination of the court pursuant to subparagraph (A)(iii), and

‘‘(ii) if required by a determination of the court pursuant to subparagraph (A)(iii), terminates a suspension of a lease issued pursuant to

this Act imposed by the Secretary pursuant to paragraph (4)(C)(i), or

imposes a suspension of a lease issued pursuant to this Act, or both,

in accordance with the determination; and

‘‘(iii) if all or any part of the oil and gas lease or right to develop is

suspended pursuant to paragraph (4)(C)(i) or this subparagraph, fixes

the date upon which the Federal coal lease may commence mining operations or construction of mine support facilities in the common area,

which may be no later than the commencement date referred to in

paragraph (1)(A) and provided in the notice submitted pursuant to

paragraph (1)(C)(iii), except for good cause shown; and

‘‘(iv) if all or any part of the Federal coal lease and/or any non-Federal interest in the logical mining unit that includes the Federal coal

lease is suspended pursuant to paragraph (4)(C)(i) or this subparagraph, prohibits the mining operations from intersecting, or the support

facilities from being constructed in, all or a portion of the common area.

‘‘(C) The order of the court issued pursuant to subparagraph (B) shall

expire upon the issuance of an order pursuant to paragraph (10)(E) or

paragraph (11)(C).

‘‘(D) The court may refrain from issuing the order required by subparagraph (B), only if—

‘‘(i) the Secretary makes a determination described in paragraph

(4)(C)(ii); or

‘‘(ii) the court, acting on an objection filed pursuant to subparagraph

(A)(ii), determines that—

‘‘(I) no common area exists; or

‘‘(II) the approved or proposed mining plan submitted pursuant

to paragraph (1)(D) does not provide for the mining operations to

intersect, or the mine support facilities to be constructed in, the

common area.

‘‘(E) If the Secretary makes a determination described in paragraph

(4)(C)(ii) or the court makes a determination described in subparagraph

(D)(ii), the court shall issue an order terminating the proceeding under this

subsection.

‘‘(6) VALUATION PROCEDURE: APPOINTMENT OF EXPERTS.—

‘‘(A) Within 30 days of the date of issuance of an order pursuant to paragraph (5)(B), to assist the court in making the determinations pursuant to

paragraph (10) or paragraph (11), the Federal coal lessee and the oil and

gas developer shall each appoint a person who is an expert in appraising

the value of, and right to develop, gas or oil if all or any part of the oil

and gas lease or right to develop is suspended, or coal if all or any part

of the Federal coal lease and/or any non-Federal interest in the logical mining unit that includes the Federal coal lease is suspended, pursuant to

paragraph (4)(C) and/or paragraph (5)(B), and these persons shall agree

upon and appoint a third person with such expertise. If no agreement is

reached on the date of appointment of a third person, the court shall make

the appointment.

‘‘(B) The Federal coal lessee shall be responsible for compensation of the

expert appointed by it; the oil and gas developer shall be responsible for

compensation of the expert appointed by it; and the Federal coal lessee and

oil and gas developer shall each pay one-half of the compensation for the

third expert.

‘‘(7) INFORMATION AND DATA.—

‘‘(A) The Federal coal lessee, oil and gas developer, and Secretary shall

each submit to the panel of experts within 30 days of the date of appointment of the panel pursuant to paragraph (6) all information and data in

the possession of such party that is pertinent to the determinations to be

made pursuant to paragraph (10) or paragraph (11), and shall each submit

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to the panel of experts thereafter any additional pertinent information and

data in the possession of such party that the panel requests of such party

in writing.

‘‘(B) Except as provided in subparagraph (C), the court shall ensure that

any information and data submitted to the panel of experts pursuant to

subparagraphs (A) and (D) shall have the protection of confidentiality that

is applicable, and may be accorded, to them by law and the federal rules

of civil procedure and evidence.

‘‘(C) All information and data submitted to the panel of experts pursuant

to subparagraphs (A) and (D) shall be available for review by all parties unless an ex parte order is issued by the court.

‘‘(D)(i) The Federal coal lessee may drill for and otherwise collect data or

information on coalbed methane at any site or sites within the common

area that are not within a spacing unit containing a well that is producing

or capable of producing coalbed methane under the conditions set forth in

clause (ii).

‘‘(ii) The drilling or collection of data or information authorized by clause

(i) shall be for the sole purpose of submission of information and data pursuant to this paragraph.

‘‘(iii) The Federal coal lessee shall not produce any coalbed methane as

a result of any drilling authorized by clause (i) and shall comply with any

Federal or State requirements applicable to such activity.

‘‘(iv) The Federal coal lessee shall submit to the Secretary an exploration

plan to conduct any drilling pursuant to clause (i). The Secretary shall approve, approve as modified, or reject the plan, within 15 days of the date

of its submission. The Secretary may modify or reject the plan only for good

cause fully set forth in writing and provided to the Federal coal lessee. The

Federal coal lessee shall adhere to the plan, as approved by the Secretary.

‘‘(8) SUBMISSION OF BRIEFS AND HEARING.—

‘‘(A) Within 45 days of the date of appointment of the panel of experts

pursuant to paragraph (6), all parties may submit briefs concerning the determinations to be made pursuant to paragraph (10) or paragraph (11).

‘‘(B) Within 60 days of the date of appointment of the panel of experts

pursuant to paragraph (6), the panel may, or if requested by the petitioner

or a respondent shall, receive testimony from all parties concerning the determinations to be made pursuant to paragraph (10) or paragraph (11).

‘‘(9) EXPERTS’ REPORT.—Within 120 days of the date of appointment of the

panel of experts pursuant to paragraph (6), the panel shall submit a written report to the court providing in detail the panel’s recommendations on the determinations to be made pursuant to paragraph (10) or paragraph (11).

‘‘(10) COURT’S FINAL RESPONSE TO PETITION: VALUATION CONCERNING ECONOMICALLY RECOVERABLE OIL OR GAS RESOURCES LOST OR DELAYED, SUSPENSION OR

TERMINATION, AND PAYMENT ORDER.—Within 210 days of the date of issuance

of an order pursuant to paragraph (5)(B), by which, or by any action of the Secretary pursuant to paragraph (4)(C)(i), all or any part of the oil and gas lease

or right to develop is suspended, the court shall take the following actions:

‘‘(A)(i) The court shall determine whether, as a result of the order or any

action of the Secretary, all or any part of, including any geographical area

of or zone or reservoir subject to, the oil and gas lease or right to develop

should be suspended during any remaining period in which the mining operations or support facilities occupy the common area or whether the oil

and gas lease or right to develop should be terminated.

‘‘(ii) Any determination to suspend pursuant to clause (i) shall, wherever

possible or appropriate, limit the suspension or phase the suspension to

permit the optimum development of the oil or gas prior to the time at which

the mining operations would reach the area within the common area that

is subject to the suspension or particular phase of the suspension.

‘‘(iii) Any determination to terminate pursuant to clause (i) shall be made

only if the court finds that the economically recoverable oil and gas resources subject to compensation pursuant to subparagraph (E) would be entirely lost or rendered impracticable to produce as a consequence of the

mining operations in the common area and that such resources constitute

all of the economically recoverable resources within the oil and gas property.

‘‘(B) If the court makes a determination to suspend pursuant to subparagraph (A), the court shall determine—

‘‘(i) the amount of any net income that will not be realized due to

delay in development of economically recoverable resources of oil or gas,

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other than coalbed methane from common area, whether or not such

development has commenced;

‘‘(ii) the amount of any net income that will not be realized, whether

or not development of coalbed methane has commenced, that is due

to—

‘‘(I) delay in development of economically recoverable resources of

coalbed methane in the common area; and

‘‘(II) the loss of any economically recoverable resources of coalbed

methane from the coal to be extracted by the mining operations in

the common area; and

‘‘(III) the loss of any economically recoverable resources of coalbed methane underlying any area that is within the oil and gas

property associated with the common area and that extends outward from each exposed coal face of the mining operations for a

distance from which drainage of such resource is established to the

satisfaction of the court; and

‘‘(iii) any of the following damages that will be incurred by the owners of any interest in the oil and gas property as a consequence of the

suspension: any unavoidable fixed expenses (including, but not limited

to, the expenses of shutting in production from, maintenance of, testing

of, and redrilling or reconnecting an existing well; relaying pipeline;

and all other expenses reasonably related to reestablishing any existing

oil or gas production); expenses associated with stranded costs of drilling equipment and facilities; any lost royalties on oil or gas not produced by the oil and gas developer; and any lost income associated with

temporarily shutting in production from wells outside of the common

area as needed for reconnection to a gathering system or pipeline to

market.

‘‘(C) The determinations made pursuant to subparagraph (B) shall not include any decrease in net income or damages resulting from loss of any oil

or gas resources that occurred before the date of the determinations and is

caused by mining within or outside of the common area on the Federal coal

lease or logical mining unit that is the subject of the common area determination made pursuant to paragraph (4)(A)(i).

‘‘(D) If the court makes a determination to terminate pursuant to subparagraph (A), the court shall determine the amount of any net income that

will not be realized and any damages due to the loss of, or impracticability

to produce, the economically recoverable resources of oil or gas in the oil

and gas property in the same manner as provided in subparagraph (B).

‘‘(E) The court shall issue an order that—

‘‘(i) suspends all or any part of, suspends in phases parts of, or terminates the oil and gas lease or right to develop, including any applicable

payment or production obligations, in accordance with the determination made pursuant to subparagraph (A); and

‘‘(ii) awards to the oil and gas developer and all other owners of any

interest in the oil and gas property, as their interests may appear, a

sum of money from the Federal coal lessee equal to the net income

amount and damages determined pursuant to subparagraph (B) or subparagraph (D).

‘‘(F) In determining the amount of net income that will not be realized

pursuant to subparagraph (B) or subparagraph (D) and the sum of money

to be awarded pursuant to subparagraph (E), the court shall ensure to the

best of its ability that the Federal coal lessee is not required to pay for the

same gas lost, delayed in development, or rendered impracticable to develop

to more than one oil and gas developer or the owners of any interest in

more than one oil and gas property.

‘‘(11) COURT’S FINAL RESPONSE TO PETITION; VALUATION CONCERNING ECONOMICALLY RECOVERABLE COAL RESOURCES LOST OR DELAYED, SUSPENSION OR

TERMINATION AND PAYMENT ORDER.—Within 210 days of the date of issuance of

an order pursuant to paragraph (5)(B) by which or by any action by the Secretary pursuant to paragraph (4)(C)(i), the Federal coal lease and/or any nonFederal interest in the logical mining unit is suspended, the court—

‘‘(A) shall determine whether, as a result of the order or any action of the

Secretary, the Federal coal lease and/or any non-Federal interest in the logical mining unit shall be suspended in whole or in part to further accommodate oil or gas development in the common area; and

‘‘(B) shall determine the amount of any net income that will not be realized from the loss or delay in development of economically recoverable resources of coal, and the unavoidable fixed expenses (including, but not limVerDate 11-MAY-2000 19:22 Oct 09, 2000 Jkt 079010 PO 00000 Frm 00008 Fmt 6659 Sfmt 6621 E:\HR\OC\SR490.XXX pfrm02 PsN: SR490
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ited to, additional expenses associated with reclamation, expenses associated with stranded costs of mining equipment and facilities, a proportionate

refund of the lease bonus, and any lost royalties on coal not produced by

the Federal coal lessee) that will be incurred, by the Federal coal lessee as

a consequence of the suspension; and

‘‘(C) shall issue an order that—

‘‘(i) suspends, in accordance with the determination made pursuant

to subparagraph (A), all or any part of the Federal coal lease and/or

any non-Federal interested in the logical mining unit, including any applicable payment or production obligations on the lease or logical mining unit, for the period necessary for expeditious development in the

common area of the gas or oil that is the subject of the petition for relief as demonstrated to the court in a production plan submitted by the

oil and gas developer; and

‘‘(ii) awards to the Federal coal lessee and all other owners of any interest in the Federal coal lease or logical mining unit, as their interests

may appear, a sum of money equal to the net income amount and unavoidable fixed expenses determined pursuant to subparagraph (B).

‘‘(12) REVIEW OF EXPERTS’ REPORT.—

‘‘(A) The court shall make the determinations required by paragraph (10)

or paragraph (11) after reviewing the report of the panel of experts submitted pursuant to paragraph (9) and the hearing required by subparagraph (B).

‘‘(B) After submission of the report of the panel of experts pursuant to

paragraph (9) and prior to making the determinations required by paragraph (10) or paragraph (11), the court shall hold a hearing in which the

panel of experts shall present their report and the parties to the proceeding

shall have the opportunity to examine the panel and provide to the court

any evidence or arguments they may have to support or contravene the recommendations of the report.

‘‘(13) DISBURSEMENT OF PAYMENTS.—

‘‘(A)(i) At the election of the oil and gas developer, the sum of money

awarded by the court pursuant to paragraph (10)(E) shall be—

‘‘(I) paid in full within 60 days of the date of issuance of the order

pursuant to paragraph (10)(E); or

‘‘(II) divided into the number of tons of recoverable coal in the common area and paid in per ton increments as the coal is mined in accordance with clause (ii) and subparagraph (C).

‘‘(ii) The Federal coal lessee shall make the payment required by clause

(i)(II) on a quarterly basis in advance based on the Federal coal lessee’s estimate of the number of tons of coal to be mined in the common area during

the following quarter, and shall add or subtract an amount to or from the

advance payment for the next quarter to reflect the coal actually sold or

transferred.

‘‘(B)(i) At the election of the Federal coal lessee, the sum of money awarded by the court pursuant to paragraph (11)(C) shall be:

‘‘(I) paid in full within 60 days of the date of issuance of the order

pursuant to paragraph (11)(C); or

‘‘(II) divided into the number of barrels of recoverable oil or cubic feet

of recoverable gas in the common area and paid in per barrel or cubic

feet increments as the oil or gas is produced in accordance with clause

(ii) and subparagraph (C).

‘‘(ii) The oil and gas developer shall make the payments required by

clause (i)(II) on a quarterly basis in advance based on the oil and gas developer’s estimate of the number of barrels of oil or cubic feet of gas to be produced in the common area during the following quarter, and shall add or

subtract an amount to or from the advance payment for the next quarter

to reflect the oil or gas actually produced.

‘‘(C) If the mining or production necessary to make full payment of the

sum of money awarded by the court in accordance with subparagraph

(A)(i)(II) or subparagraph (B)(i)(II) does not occur within 5 years of the date

of issuance of the court order pursuant to paragraph (10(E) or paragraph

(11)(C), the unpaid balance shall be paid within 60 days thereafter.

‘‘(14) TERMINATION OF OIL AND GAS LEASE SUSPENSION.—

‘‘(A) If the court issues an order to suspend all or any part of the oil and

gas lease or right to develop pursuant to paragraph (10(E)—

‘‘(i) the Federal coal lessee shall notify the court and the oil and gas

developer when the portion of the common area subject to the order

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issued pursuant to paragraph (10)(E) is no longer required for mining

operations or support facilities; and

‘‘(ii) within 120 days of the date of receipt by the court of the notification pursuant to clause (i) or within 60 days prior to the date on which

the period established by the court in the order issued pursuant to

paragraph (10)(E) concludes, the oil and gas lessee may petition the

court for an order that terminates the suspension and fixes the date

and terms on which the oil and gas lessee may resume operations within the portion of the common area subject to the order issued pursuant

to paragraph (10)(E).

‘‘(B) The court shall issue the order sought under subparagraph (A)(ii)

within 30 days of the date of receipt of the petition pursuant to subparagraph (A)(ii).

‘‘(C)(i) If the oil and gas developer determines that, as a consequence of

the order of the court issued pursuant to paragraph (5)(B) and an order to

suspend all or any part of the oil and gas lease or right to develop pursuant

to paragraph (10)(E), the conditions described in paragraph (10)(A)(iii)

exist, the oil and developer may petition the court to terminate the oil and

gas and lease or right to develop.

‘‘(ii) The petition referred to in clause (i) may be filed any time after

issuance of the order of the court pursuant to paragraph (10)(E) but not

later than 120 days after the date of receipt by the court of the notification

pursuant to subparagraph (A)(i).

‘‘(iii) Upon receipt of a petition pursuant to clause (i), the court shall

make a determination whether to issue an order to terminate the oil and

gas lease or right to develop and award an additional amount from the Federal coal lessee to the oil or gas developer and all other owners of any interest in the oil and gas property, as their interests may appear, in accordance

with the procedures and deadlines established in paragraphs (1) and (6)

through (13).

‘‘(15) TERMINATION OF COAL LEASE SUSPENSION.—

‘‘(A) If the court issues an order requiring suspension of all or any part

of the Federal coal lease and/or any non-Federal interest in the logical mining unit that includes the Federal coal lease pursuant to paragraph

(11)(C)—

‘‘(i) the oil and gas developer shall notify the court and the Federal

coal lessee when the portion of the common area subject to the order

issued pursuant to paragraph (11)(C) is no longer required for gas or

oil production from such portion; and

‘‘(ii) within 120 days of the date of receipt by the court of the notification pursuant to clause (i) or within 60 days prior to the date on which

the period established by the court in the order issued pursuant to

paragraph (11)(C) concludes, the Federal coal lessee may petition the

court for an order that fixes the date and terms on which the Federal

coal lessee may commence mining operations or construction of support

facilities in the portion of the common area subject to the order issued

pursuant to paragraph (11)(C) and, if all or any part of the Federal coal

lease and/or any non-Federal interest in the logical mining unit is suspended, terminates the suspension.

‘‘(B) The court shall issue the order sought under subparagraph (a)(ii)

within 30 days of the date of receipt of the petition pursuant to subparagraph (A)(ii).

‘‘(C)(i) If the Federal coal lessee determines that, as a consequence of the

order of the court issued pursuant to paragraph (11)(C), further development of all or any part of the Federal coal lease and/or any non-Federal

interest in the logical mining unit is impracticable, the Federal coal lessee

may petition the court to terminate all or any part of the Federal coal lease

and/or any non-Federal interest in the logical mining unit.

‘‘(ii) The petition referred to in clause (i) may be filed any time after

issuance of the order of the court pursuant to paragraph (11)(C) but not

later than 120 days after the date of receipt by the court of the notification

pursuant to subparagraph (A)(i).

‘‘(iii) Upon receipt of a petition pursuant to clause (i), the court shall

make a determination whether to issue an order to terminate all or any

part of the Federal coal lease and/or any non-Federal interest in the logical

mining unit and award an additional amount from the oil and gas developer to the Federal coal lessee and all other owners of any interest in the

Federal coal lease or logical mining unit, as their interests may appear, in

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accordance with the procedures and deadlines established in paragraphs (1)

and (6) through (13).

‘‘(16) SUPPLEMENTAL PETITION FOR RELIEF.—

‘‘(A) If, at any time after the issuance of an order pursuant to paragraph

(10(E) or paragraph (11)(C), the mining plan that is the basis of the order

is altered in a manner that may warrant suspension of an additional part

or all of, or termination of, the oil and gas lease or right to develop or suspension of an additional part of the Federal coal lease and/or any non-Federal interest in the local mining unit that includes the Federal coal lease

and/or an increase in the sum of money that was awarded under the order,

either the Federal coal lessee or the oil and gas developer may, if necessary

after compliance with the requirements of subsection (d), file a supplemental petition of relief with the court to amend the order.

‘‘(B) The requirements of paragraphs (1) and (6) through (13) shall apply

to the supplemental petition submitted pursuant to subparagraph (A).

‘‘(C)(i) Upon completion of the process required by subparagraph (B), the

court shall make a determination whether to suspend an additional part or

all of, or terminate, the oil and gas lease or right to develop or to suspend

an additional part of the Federal coal lease and/or any non-Federal interest

in the logical mining unit as described in, and to award an additional sum

of money calculated in accordance with, paragraph (10) or paragraph (11).

‘‘(ii) The court shall issue any order resulting from the determinations

made pursuant to clause (i) within 90 days of the date of filing of the supplemental petition for relief.

‘‘(iii) Any award of an additional sum of money shall be paid in accordance with paragraph (13).

‘‘(17) APPEAL OF COURT ORDERS.—

‘‘(A) Any order issued pursuant to paragraph (5)(B), paragraph (5)(E),

paragraph (14(B), or paragraph (15)(B) is final and may not be appealed.

‘‘(B) Any order issued pursuant to paragraph (10)(E), paragraph (11)(C),

paragraph (14)(C)(iii), paragraph (15)(C)(iii), or paragraph (16)(C)(ii) may be

appealed, but the appeal, and any disposition thereof, may not disturb any

order referred to in subparagraph (A).

‘‘(18) SUSPENSION TERM.—

‘‘(A) If all or any part of any lease issued pursuant to this Act is suspended in whole or in part by the Secretary or the court under this

subsection—

‘‘(i) the lessee shall not be required to pay any rental for the lease

for the period of the suspension; and

‘‘(ii) if the lease is a Federal oil or gas lease and is in the primary

term or if the lease is a Federal coal lease, the term of the lease shall

be extended by the length of the period of the suspension plus one year;

or

‘‘(iii) the lease shall not terminate due to lack of production for the

period of the suspension plus one year.

‘‘(B) If any non-Federal oil and gas lease or right to develop or any nonFederal interest in a logical mining unit is suspended in whole or in part

by the court under this subsection, the court shall establish terms for the

suspension comparable to the terms set forth in subparagraph (A).

‘‘(f) LIABILITY LIMITATION.—

‘‘(1) FEDERAL COAL LESSEE—Except as provided in a written agreement

reached pursuant to subsection (d)(2) or reached on or after September 1, 1999,

and before the date of enactment of this section, or as provided by an order of

the court pursuant to subsection (e), neither the holder of a Federal coal lease

subject to the agreement or order nor the United States shall be liable to the

oil and gas developer of, or any owner of an interest in, any oil and gas property

subject to the agreement or order for any decrease in or depletion of, or any

impairment of the ability to recover, any gas or oil from the property that may

result from the development of any coal on the Federal coal leasehold or within

a logical mining unit that includes the Federal coal lease.

‘‘(2) OIL AND GAS DEVELOPER.—Except as provided in a written agreement

reached pursuant to subsection (d)(2) or reached on or after September 1, 1999,

and before the date of enactment of this section, or as provided by an order of

the court pursuant to subsection (e), neither the oil and gas developer of an oil

and gas property subject to the agreement or order nor the United States shall

be liable to a holder of a Federal coal lease subject to the agreement or order,

or any owner of any non-Federal interest in a logical mining unit that includes

the Federal coal lease, or the United States for any impairment of the ability

12

to recover coal from the Federal coal leasehold or logical mining unit that may

result from the development of gas or oil on the property.

‘‘(g) CREDIT AGAINST ROYALTIES.—

‘‘(1) IN GENERAL.—

‘‘(A) Whenever a holder of a Federal coal lease is required by a written

agreement reached pursuant to subsection (d)(2) and approved by the Bureau of Land Management or reached prior to the date of enactment of this

section and approved by the Bureau of Land Management on or after September 1, 1999, or by a court order issued pursuant to paragraph (10(E),

paragraph (14)(C)(iii), or paragraph (16)(C)(ii) of subsection (e), to pay an

amount for suspension of all or part of, or termination of, a Federal oil and

gas lease for coalbed methane located within the Subsection (g) Lands, the

amount so paid shall be credited against any royalties on production required by section 7(a) or any other provision of this Act from any lease of

Federal coal issued under this Act to such holder or any affiliate thereof.

‘‘(B) Whenever a holder of a Federal oil and gas lease is required by a

written agreement reached pursuant to subsection (d)(2) and approved by

the Bureau of Land Management or reached prior to the date of enactment

of this section and approved by the Bureau of Land Management on or

after September 1, 1999, or by a court order issued pursuant to paragraph

(11)(C), paragraph (15)(C)(iii), or paragraph (16)(C)(ii) of subsection (e), to

pay an amount for suspension or termination of all or part of a Federal coal

lease located within the Subsection (g) Lands, the amount so paid shall be

credited against any royalties on production required by subsection (b)(1)(A)

or subsection (c)(1) of section 17 or any other provision of this Act from any

lease of Federal oil and gas issued under this Act to such holder or any affiliate thereof.

‘‘(2) TREATMENT OF ROYALTIES TO STATES.—The Secretary shall pay to the

State in which the Federal coal lease or Federal oil and gas lease referred to

in paragraph (1)(A) or paragraph (1)(B), respectively, is located 50 percent of

the amount of any credit against royalties provided under paragraph (1)(A) or

paragraph (1)(B), respectively,—

‘‘(A) in the same manner as if the credit against royalties had been paid

in money as royalties and distributed under section 35(a) of this Act; and

‘‘(B) from amounts received as royalties, rentals, or bonuses derived from

leases issued under this Act that otherwise would be deposited to miscellaneous receipts under section 35(a) of this Act.

‘‘(B) from amounts received as royalties, rentals, or bonuses derived from

leases issued under this Act that otherwise would be deposited to miscellaneous receipts under section 35(a) of this Act.

‘‘(h) DENIAL OF USE AS PRECEDENT.—Nothing in this section shall be applicable

to any lease under this Act for any mineral, or shall be applicable to, or supersede

any statutory or common law otherwise applicable in, any proceeding in any Federal

or State court involving development of any mineral, outside of any common area,

as defined in subsection (a)(11), within or outside of the Powder River Basin, as defined in subsection (a)(1).’’.

SEC. 4. EFFECTIVE DATE.

This Act shall be effective upon the date of its enactment.

2. Amend the title so as to read:

To Amend the Mineral Leasing Act of 1920 to ensure the orderly development of

coal, coalbed methane, natural gas, and oil in ‘‘common areas’’ of the Powder River

Basin, Wyoming and Montana, and for other purposes.

PURPOSE OF THE MEASURE

S. 1950 would amend the Mineral Leasing Act by establishing a

procedure for resolving disputes over the development of coal and

coalbed methane where the development rights are held by different parties.

BACKGROUND AND NEED

The energy-rich Powder River Basin is located in Wyoming and

Montana. It contains the largest reserves of coal in the United

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States and significant deposits of oil and natural gas. Some of the

gas, known as coalbed methane, is captured within the coal seams.

The coal is predominately federally owned and managed by the

Bureau of Land Management (BLM), Department of the Interior,

either as part of the public domain or reserved by the Government

when public domain lands were sold into private ownership under

homestead laws enacted in 1909, 1910, and 1916. The oil and gas

are under mixed Federal, State, and private ownership. The Federal coal, oil, and gas may be leased for development by the BLM

under the Mineral Leasing Act. The State-owned oil and gas are

also made available by leasing rights that were conveyed under the

three homestead acts. These rights are typically sold or leased to

oil and gas developers by successors to the original homesteaders.

Last year, the Supreme Court ruled that coalbed methane underlying the homestead lands was conveyed with them as part of the

oil and gas estate and not retained by the federal government in

the reserved coal estate. Accordingly, rights to develop this privately-owned coalbed methane are leased or sold in the same manner as the development rights for private oil and deep gas.

Production of all three minerals, coal, gas, and oil, is occurring

in the Basin. The BLM frequently has issued both coal leases and

oil and gas leases for the same locations, allowing the minerals to

be developed without restrictions or guidance as to the timing of

their respective development processes. Although these minerals

are frequently developed sequentially, for safety and operational

reasons they typically cannot be developed concurrently. The order

of development of the minerals can be important because production of any one of them can result in the loss of another. For example, the coalbed methane will be vented if the coal is mined first;

the coal may be bypassed if the coalbed methane owner fails to

produce the gas before the mine face progresses past the gas lease.

Even if the one resource is not lost, costs can be incurred due to

the delay or interruption in its development to accommodate the

earlier production of the other resource. In such circumstances, disputes have arisen between the coal developers and the oil and gas

developers over their resource development plans.

No clear statutory or regulatory direction to resolve these disputes exists. The Federal lessor, the BLM, historically has taken

the position that the disputes must be settled by the lessees. In

some situations, the two resources’ developers have been able to

reach agreement on the timing of development of the multiple minerals in the same location and the equitable compensation the first

developer will pay to the second for its losses. There are, however,

situations in which the resource developers have not been able to

reach an accord. These unresolved disputes create business uncertainties, may make conservation of the resource difficult or impossible, and reduce Federal and State revenues. The legislation is intended to provide statutory direction and establish procedures for

resolution of these disputes within a well defined period of time.

LEGISLATIVE HISTORY

S. 1950 was introduced by Senator Enzi for himself and Senator

Thomas and referred to the Committee on Energy and Natural Resources on November 17, 1999. The Subcommittee on Forests and

14

Public Land Management held a hearing on S. 1950 on February

24, 2000.

During the consideration of S. 1950 on June 7, 2000, the Committee on Energy and Natural Resources adopted an amendment

in the nature of a substitute offered by Senator Thomas after rejecting a substitute to the Thomas amendment offered by Senator

Bingaman. The Committee on Energy and Natural Resources then

ordered S. 1950, as amended by the Thomas Substitute, favorably

reported.

COMMITTE RECOMMENDATIONS AND TABULATION OF VOTES

The Senate Committee on Energy and Natural Resources, in

open business session on June 7, 2000, by a majority voice vote of

a quorum present recommends that the Senate pass S. 1950 if

amended as described herein.

The rollcall vote on the Bingaman substitute to the Thomas substitute was not agreed to by a vote of 9 yeas, 11 nays as follows:

YEAS NAYS

Mr. Bingaman Mr. Murkowski

Mr. Akaka 1 Mr. Domenici 1

Mr. Dorgan Mr. Nickles 1

Mr. Graham Mr. Craig

Mr. Wyden Mr. Campbell

Mr. Johnson 1 Mr. Thomas

Ms. Landrieu 1 Mr. Smith

Mr. Bayh 1 Mr. Bunning

Ms. Lincoln Mr. Fitzgerald

Mr. Gorton

Mr. Burns 1 Indicates vote by proxy.

The Committee adopted the Thomas substitute by voice vote, and

ordered S. 1950, as amended, favorably reported by voice vote, with

Senator Bingaman asking that his vote against the bill as ordered

reported by the Committee be recorded.

COMMITTEE AMENDMENTS

During the consideration of S. 1950, the Committee adopted an

amendment in the nature of a substitute offered by Senator Thomas. The major changes made by the Thomas substitute are described in the section-by-section analysis.

SECTION-BY-SECTION ANALYSIS

Section 1 contains the short title.

Section 2 presents findings and purpose.

Section 3 amends the Mineral Leasing Act by renumbering section 44 as section 45 and adding a new section 44.

New section 44(a) defines terms used in the Act.

New subsection (b) contains provisions which emphasize that the

bill’s dispute resolution proceeding is to be considered and employed as a last resort.

New subsection (c) urges the Secretary of the Interior to use the

mineral conservation authorities he possesses to encourage expedited development in the common areas of any federally leased

15

minerals that otherwise may be lost or bypassed due to the development of another mineral.

New subsection (d) obligates both the coal developer and the oil

and gas developer to give written notice to each other and the Secretary if either determines that a common area exists and that coal

mining operations are planned in the common area. The subsection

also requires the party which provided the notice to attempt to negotiate a written settlement with the other party of any conflicts

regarding development in the common area.

New subsection (e) establishes the judicial dispute resolution

process that must be used if the negotiations required by subsection (d) do not result in the voluntary settlement of differences

between the coal developer and the oil and gas developer.

Paragraph (e)(1) provides that, if the negotiations required under

subsection (d) do not result in an agreement regarding priority of

mineral development, either the coal developer or the oil and gas

developer may file a petition asking the United States District

Court to resolve the conflict. The mineral developer which is the

petitioner is required to serve the petition on the Secretary and on

other mineral developer and any other owners of interests in the

lease or development right for that mineral.

Paragraph (e)(2) provides that all parties affected by the petition

are automatically joined in the proceedings.

Paragraph (e)(3) allows non-federal respondents to file their responses to the petition within 30 days after receipt of service.

Paragraph (e)(4) provides that within 90 days after the filing of

the petition, the Secretary will: (i) verify that a common area exists; (ii) determine that coal mining operations are planned in the

common area; and (iii) make an initial determination whether the

public interest is best served by delaying or foregoing the oil and

gas development or the coal development in the common area. The

Secretary will make this decision solely on the basis of which mineral (coal or oil/gas) will generate federal royalties and state severance taxes having the largest net present value. If the mineral

which will incur delayed or forgone development is subject to a federal lease, the Secretary will suspend all or any portion of, including any geographical area of or zone or reservoir subject to, the

lease to accommodate the development of the other mineral in the

common area. The Secretary will report to the Federal district

court his determinations and any lease suspension ordered under

this paragraph.

Paragraph (e)(5) provides for the District Courts response to the

Secretary’s determination. If no objection to the Secretary’s report

is made by the parties to the proceeding, the court shall approve

the Secretary’s decision. The Court will also suspend all or part of

any non-Federal lease or development right necessary to accommodate development of the prevailing mineral interest. If an objection

is filed to any determination or lease suspension decision of the

Secretary, then the Court shall make an independent determination. If the Secretary’s and/or the court’s suspension order suspends

oil and gas development, that order will set a date on which the

coal developer may commence activities in the common area. That

date must not be later than the date that the coal developer plans

to commence activities in the common area in accordance with the

developer’s mining plan approved, or submitted for approval, by the

16

BLM. The suspension will last until the court has determined compensation for lost or foregone oil and gas development and issued

its second order in the dispute resolution proceeding under paragraph (10). If the Secretary’s and/or the court’s order suspends coal

development in the common area, that order will prohibit coal mining activities in the common area until compensation is determined

for the lost or foregone coal development and a second court order

is issued under paragraph (11). The court may receive briefs and/

or testimony from the parties to assist it in these determinations.

The Secretary may refrain from issuing a suspension order and

the court may refrain from issuing its first order only if either finds

that no common area exists or that the coal developer plans no

mining operations in the common area. In such a case, the court

will dismiss the petition and the dispute resolution proceeding terminates.

Paragraph (e)(6) provides that where all or part of leases are suspended or terminated by order of the Court, the oil and coal developers shall appoint a panel of three experts in the valuation of

mineral properties to advise the court in the preparation of the

order under paragraph (10) or paragraph (11). Each party must

compensate its own selected panel member and share the cost of

the third member,

Paragraph (e)(7) requires the mineral developers to submit all

relevant data to the expert panel within 30 days of the panel’s appointment. It also ensures confidentiality for the data outside of

the dispute resolution proceeding. Finally, it allows the coal developer to drill for (but not develop) coalbed methane in spacing units

in the common area that have not been drilled by the oil and gas

developer, and to submit the drilling information to the panel.

Paragraph (e)(8) provide that, all parties (including the Secretary) may submit briefs and give testimony to the court on the

valuation issues described in paragraph (10) or (11) within 45 days

and 60 days, respectively, after appointment of the expert panel.

Paragraph (e)(9) requires that within 120 days after the appointment of the expert panel, the panel must issue a report to the court

with recommendations regarding the valuation issues described in

paragraph (10) or paragraph (11).

Paragraph (e)(10) provides that the court issued an initial order

to suspend or terminate the oil and gas lease or development right

under paragraph (5), within 210 days the court must make a final

determination whether to suspend further or terminate all or part

of the oil and gas lease or development right while the coal

developers’s mining operations occur in the common area. If the

court decides to suspend further or terminate all or part of the oil

and gas lease or development right, the court must issue a second

order to that effect and award to the oil and gas developer and all

other owners of interests in the oil and gas property a sum of

money from the coal developer equal to the net income lost and unavoidable fixed expenses incurred by the oil/gas interests owners

and certain other parties.

Paragraph (e)(11) states that if the court issued an initial order

to suspend the Federal coal lease under paragraph (5), within 210

days the court must make a final determination whether to suspend further the Federal coal lease to accommodate oil or gas production in the common area. If the court decides to suspend further

17

the Federal coal lease in the common area, the court must issue

the second order to that effect and award to the coal developer and

all other owners of interests in the Federal coal lease a sum of

money from the oil and gas developer equal to the net income lost

and unavoidable fixed expenses incurred by the Federal coal lease

interest owners.

Paragraph (e)(12) specifies that prior to making the determinations required by paragraph (10) or paragraph (11), the court will

receive the report of the panel of experts and hold a hearing at

which the petitioner and the respondents may question the panel

report.

Paragraph (e)(13) provides that the money awarded by the court

under paragraph (10) or paragraph (11) will be provided in either

of two manners, at the option of the mineral developer which receives the payment. The first manner is full payment within 60

days of the court’s order under paragraph (10) or paragraph (11).

The second manner is quarterly payments over a five-year period

(i) to the oil and gas developer and the other owners of interests

in the oil and gas lease or development right in per ton increments

as coal is mined, if coal is to be developed first, or (ii) to the to the

coal developer and other owners of interests in the Federal coal

lease in per barrel or cubic feet increments as oil or gas is extracted, if coal development is delayed.

Paragraphs (e)(14) and (15) provide for conclusion of the development of the economically superior mineral, and lifting of the suspension for development of the other mineral.

If the court has suspended the oil and gas lease or development

right in the common area, when the developer determines that it

no longer needs the common area for coal mining operations, it

must notify the court. The oil and gas developer may then petition

the court to terminate the suspension of the oil and gas lease or

development right. The court will issue an order granting the petition to terminate the suspension. If the oil and gas developer believes that the court’s suspension of the oil and gas lease or development right in the common area has made development of the oil

or gas impracticable, the oil and gas developer may petition the

court to terminate its lease or development right in the common

area.

Conversely, if the court has suspended a Federal coal lease in the

common area, when the oil and gas developer determines that it

no longer needs the common area for oil or gas extraction activities,

it must so notify the court. The coal developer may then petition

the court to terminate the suspension of the Federal coal lease. The

court will issue an order granting the petition to terminate the suspension of the Federal coal lease. If the coal developer believes that

the court’s suspension of the lease in the common area makes development impracticable, the developer may petition the court to

terminate all or part of the lease.

Paragraph (e)(16) provides that if there is a change in the mine

plan that was the basis for the court’s order under paragraph (10)

or paragraph (11), either party may petition the court for additional relief using procedures similar to those employed in the

original petition for relief.

Paragraph (e)(17) provides that lease suspension and termination

orders, or orders approving commencement of operations or prohibVerDate 11-MAY-2000 19:22 Oct 09, 2000 Jkt 079010 PO 00000 Frm 00017 Fmt 6659 Sfmt 6602 E:\HR\OC\SR490.XXX pfrm02 PsN: SR490
18

iting operations, or terminating proceedings, are final and may not

be appealed.

New subsection (f) states that, except for certain pre-existing

agreements, the liability of the United States and oil and gas and

coal developers for depletion or impairment in the ability to recover

the resource in question shall be limited to amounts ordered by the

Court under subsection (e).

New subsection (g) provides that when a court order issued

under subsection (e) or an agreement reached under subsection (d)

which the BLM ratifies requires a Federal coal lessee to pay an

amount of money to the owners of any interest in a Federal oil and

gas lease for termination or suspension of coalbed methane rights,

the Federal coal lessee, or any of its affiliates, will be allowed to

take credits in the same amount against Federal coal royalty payments otherwise due. Likewise, when a court order or an agreement ratified by BLM requires a Federal oil and gas lessee to pay

an amount of money to owners of any interest in a Federal coal

lease for suspension of the Federal coal lease, the oil and gas lessee, or any of its affiliates, shall be entitled to a credit in the same

amount against Federal oil and gas royalty payments otherwise

due.

New subsection (h) makes it clear that Congress does not intend

that this legislation apply to or affect any other mineral development dispute, or to affect how a court should rule concerning the

application of the common law in any such dispute, that is not subject to the bill’s dispute resolution procedure or that concerns minerals located outside of the common areas in the Basin.

Section 4 is the effective date and is self explanatory.

COST AND BUDGETARY CONSIDERATIONS

The following estimate of costs of this measure has been provided

by the Congressional Budget Office.

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, September 14, 2000.

Hon. FRANK H. MURKOWSKI, Chairman, Committee on Energy and Natural Resources,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1950, the Powder River

Basin Resource Development Act of 2000.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contacts are Megan Carroll (for federal costs), Marjorie Miller and Susan Van Deventer (for the impact on state, local and tribal governments), and Gail Cohen (for

the impact on the private sector).

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen.)

Enclosure.

19

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 1950—Powder River Basin Resource Development Act of 2000—

As ordered reported by the Senate Committee on Energy and

Natural Resources on June 7, 2000

SUMMARY

S. 1950 would establish a process for resolving disputes over the

development of coal and coalbed methane in cases where the rights

to develop those resources underlying the same piece of land are

owned by different parties. The bill would apply only to certain disputes within the Powder River Basin, located in Wyoming and

Montana and depicted on a map identified in the bill. CBO estimates that enacting this legislation would reduce offsetting receipts

from royalties on federal resources by at least $13 million over the

2001–2010 period. Because the bill would affect direct spending (including offsetting receipts), pay-as-you-go procedures would apply.

S. 1950 contains no intergovernmental mandates as defined in

the Unfunded Mandates Reform Act (UMRA). The bill could benefit

the states of Wyoming and Montana and some tribal governments

within those states if the process for revolving disputes allows for

the timely development of coal, oil, and gas resources, thereby protecting, and possibly increasing, revenues collected by those governments. Enactment of this legislation would have no impact on the

budgets of other state, local and tribal governments.

S. 1950 would impose a private-sector mandate as defined by

UMRA on certain developers of mineral resources involved in disputes over the sequence of coal and oil or gas development in the

Powder River Basin. CBO estimates that the cost of complying with

the mandate would be well below the threshold established by

UMRA ($109 million in 2000, adjusted annually for inflation) for

any of the first five years that the mandate is in effect.

BACKGROUND

In the Powder River Basin, as in many parts of the west, ownership of the subsurface estate is split: the coal estate, oil and gas

estate, and hardrock mineral estate may all be separately owned.

Thus, conflicts may arise when overlapping rights to develop those

resources are owned by different parties. Historically, lessees of

coal rights and lessees of oil and gas rights have been able to develop both resources without significant loss of either resource because traditional oil and gas deposits lie far below the coal resources.

In the past several years conflicts have developed, however, between those who own the right to develop coal resources and those

who own the right to develop oil and gas resources, including coalbed methane, underlying the same piece of land. These conflicts

mostly concern a recent increase in oil and gas producers’ interest

in developing coalbed methane, a type of natural gas that is found

within coal reserves. Coal and coalbed methane cannot be produced

simultaneously, and initial development of one resource can make

recovery of the other more expensive, or even impossible.

In response to these types of conflicts between federal lessees,

the Bureau of Land Management (BLM) developed a policy, in February 2000, aimed at optimizing the development of both resources.

20

Historically, conflicts between federal lessees tended to be resolved

by allowing the lessee with the older lease to proceed with production ahead of junior lease. In the Powder River Basin, such a policy

would tend to favor oil and gas, and hence, coalbed methane producers, whose leases were issued before many federal coal leases.

Under BLM’s new policy, however, the agency uses its authority

under existing law and lease terms to require the optimal sequential recovery of coalbed methane and coal.

MAJOR PROVISIONS

S. 1950 would establish a process for resolving disputes over the

development of coal and coalbed methane in cases where the rights

to develop those resources underlying the same land are owned by

different parties. The bill would apply only to disputes that occur

in ‘‘common areas’’ within the Powder River Basin as defined by

the bill.

Under S. 1950, coal and oil and gas developers within common

areas would be required, at least 240 days prior to the date when

their operations are expected to intersect, to notify each other and

the Secretary of the Interior of the anticipated conflict. If the parties cannot negotiate a voluntary agreement to settle the conflict,

either party could file a petition asking the U.S. District Court to

resolve it. The Secretary of the Interior would have 90 days to recommend to the court whether either lease should be suspended to

allow production under the other lease to proceed. Within 90 days

of receiving the Secretary’s recommendations, the District Court

would review any objections to those recommendations and, if necessary, issue an order to suspend any federal or nonfederal lease.

S. 1950 would require the Secretary and the District Court to make

such decisions on the basis of maximizing the net present value of

the federal and state income from royalties and severance taxes

that would be generated from the production of both resources.

Once the District Court orders or confirms an initial suspension

of a lease, S. 1950 would require the court, within 210 days, to determine the amount of compensation to be awarded to the lessee

(and all other owners of any interest in the resource) whose lease

is suspended or terminated. A panel of experts would advise the

court on that amount, which would be based on the amount of net

income that would be forgone by owners of any interest in the resource whose production would be delayed as well as the amount

of any unavoidable fixed costs incurred by those parties. Decisions

regarding compensation awards would be subject to appeal. Under

the bill, compensation costs must be paid by the lessee who is permitted to proceed to develop a resource within 62 months of the

court order to pay such costs.

S. 1950 would allow certain federal lessees who are ordered by

the court to pay compensation to credit such compensation costs

against federal royalty payments that would otherwise be due

under current law. That provision of the bill also would apply to

federal lessees who must pay compensation costs pursuant to certain voluntarily negotiated settlement agreements ratified by BLM

on or after September 1, 1999. The royalty credit provision would

apply only to conflicts involving federally owned resources that

occur within areas identified in the bill.

21

ESTIMATED COST TO THE FEDERAL GOVERNMENT

For this estimate, CBO assumes that S. 1950 will be enacted

near the start of fiscal year 2001. The estimated budgetary impact

of S. 1950 on direct spending is shown in the following table. The

legislation also would affect spending subject to appropriation, but

CBO estimates that any such changes would be less than $500,000

a year. The costs of this legislation fall within budget function 300

(natural resources and environment).

By fiscal year, in millions of dollars

2001 2002 2003 2004 2005

CHANGES IN DIRECT SPENDING 1

Estimated Budget Authority .......................................................................... 3 4 1 2 2

Estimated Outlays ......................................................................................... 3 4 1 2 2

1 Implementing S. 1950 also would increase discretionary spending by less than $500,000 a year to conduct the new dispute resolution

process.

BASIS OF ESTIMATE

CBO estimates that allowing certain federal lessees to credit

their compensation costs against federal royalty payments would

reduce federal receipts from those payments. The provisions allowing for royalty credits to pay compensation costs in S. 1950 would

apply to a major settlement agreement between a coal operator and

an oil and gas operator that has already been resolved. Based on

information from BLM and parties to that agreement, CBO estimates that enactment of the bill would allow the operator to claim

royalty credits amounting to about $13 million over the 2001–2006

period.

Forgone royalty payments under S. 1950 could be higher over the

next 10 years if additional disputes arise between different resource developers, and more compensation costs must be paid.

However, the cost of any future compensation paid through royalty

credits could be at least partially offset, on a net present value

basis, by an increase in receipts from bonus bids paid by companies

to secure new leases for federal resources. According to BLM and

industry experts, there is considerable uncertainty regarding the

number of disputes that may occur in the future. Hence, CBO has

no basis for predicting the amount of compensation that may be ordered to be paid in the future, or the effect this might have on

bonus bids for land that has not yet been leased.

Royalty payments and compensation credits

Under current law, when federally owned resources are produced, the federal government collects royalty payments from those

who lease the right to develop those resources. States generally receive about 50 percent of those receipts. S. 1950 would allow certain federal lessees to take as a credit against royalties due to the

federal government the costs of compensation pursuant to a court

order issued under S. 1950 or a settlement agreement approved by

BLM on or after September 1, 1999. That provision would apply

only to conflicts between federal lessees operating within lands referenced in the bill. S. 1950 provides that subsequent payments to

states would not be reduced as a result of that provision.

22

Under S. 1950, certain producers that already have paid bonus

bids to secure leases for federal resources within the Powder River

Basin could qualify for credits against federal royalty payments.

CBO estimates that allowing those lessees to credit their compensation costs against federal royalties would result in forgone offsetting receipts totaling at least $13 million over the 2001–2010 period. That amount is based on information provided by parties to

one major recently negotiated settlement agreement that would be

included under the royalty credit provisions in S. 1950. Under that

agreement, we estimate that the amount of compensation costs

that could be credited against royalty payments would be about $3

million in 2001, and $10 million over the 2002–2006 period.

The total amount of forgone receipts from S. 1950’s royalty credit

provision could be greater depending on whether other eligible settlement agreements or court orders involving existing or future federal leases occur. Because any such effects depend on the outcome

of court proceedings or negotiations in involving nonfederal parties,

CBO cannot estimate the timing or magnitude of any additional

forgone receipts under S. 1950. Although the number of conflicts

that might occur is uncertain, we expect that, on average, there

would be a couple such conflicts each year. Based on information

from BLM and industry representatives, we expect that few, if any,

of those conflicts would result in compensation costs as large as

those that resulted from the settlement agreement referenced

above. Other recent settlement agreements in the region have involved compensation payments of less than $1 million.

Bonus bids

CBO estimates that allowing some federal lessees to take royalty

credits could affect bonus bids paid by producers to secure new

leases for federal resources, particularly for coal. A bonus bid reflects a company’s willingness to pay for the right to develop a federal resource, based on the estimated net present value of that

lease to that company. Under current law, coal companies typically

take the estimated cost of resolving conflicts with oil and gas producers that may arise into consideration when preparing bonus

bids. We expect that allowing certain producers to credit those

costs against royalty payments under some future leases would increase the value of those leases to the companies that would bid

on them.

Enacting S. 1950 could result in an increase in offsetting receipts

from higher bonus bids for coal lease within the areas of the Powder River Basin where the bill’s royalty credit provisions would

apply. Any higher bonus bids would partially offset, on a present

value basis, the cost to the government of forgone royalty payments

from those provisions. CBO cannot estimate the timing or magnitude of any increases in bonus bids because such a change would

depend on the judgments of resource developers about the likelihood of any future disputes in the Powder River Basin and the outcomes of such disputes. As mentioned above, and based on information from BLM and industry experts, we expect that any increases

to bonus bids under S. 1950 would involve leases where compensation costs are likely to range from less than $1 million to no more

than $13 million per conflict.

23

PAY-AS-YOU-GO CONSIDERATIONS

The Balanced Budget and Emergency Deficit Control Act sets up

pay-as-you-go procedures for legislation affecting direct spending or

recipes. Because S. 1950 would affect federal offsetting receipts

from royalties and bonus bids, pay-as-you-go procedures would

apply. The changes in outlays that are subject to pay-as-you-go procedures are shown in the following table. For the purposes of enforcing pay-as-you-go procedures, only the effects in the current

year, the budget year, and the succeeding four years are counted.

By fiscal year (in millions of dollars)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Changes in outlays .............................. 0 3 4 1 2 2 1 0 0 0 0

Changes in receipts ............................. Not applicable

ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

S. 1950 contains no intergovernmental mandates as defined in

UMRA. Coal, oil and gas development generates revenues for state

and tribal governments from bonus bids, rents, royalties, and taxes.

States received revenues from the development of state-owned resources and share in bonus bids, rentals, and royalties paid to the

federal government for federally owned resources. CBO expects

that enactment of this legislation could benefit the states of Wyoming, Montana, and some tribal governments within those states

insofar as it promotes the timely development of coal, oil, and gas

resources in the Powder River Basin.

In a few specific cases, S. 1950 could result in a decrease in revenues to state or tribal governments. Such a decrease could occur

if mining of resources owned by states or tribes were delayed or

forgone in order to allow mining under a federal lease to proceed,

and if the compensation the states or tribal governments received

failed to cover their litigation costs.

ESTIMATED IMPACT ON THE PRIVATE SECTOR

S. 1950 would impose a private-sector mandate as defined by

UMRA on certain developers of mineral resources involved in disputes over the sequence of coal and oil or gas development in the

Powder River Basin. CBO estimates that the cost of complying with

the mandate would be well below the threshold established by

UMRA ($109 million in 2000, adjusted annually for inflation) for

any of the first five years that the mandate is in effect.

The bill would require certain resource developers to participate

in a new dispute resolution process when a resource developer with

interests that conflict with another developer files a written notice

of conflict with the Secretary of the Interior. Typically, conflicts

that arise in the Powder River Basin occur when different parties

own overlapping rights to develop coal and oil or gas and the two

resources cannot be developed simultaneously. Currently, such conflicts between resource developers are settled (with a negotiated

settlement or by a court judgment) with one developer compensating the other for lost production or delays in production. The

bill’s dispute resolution process would require the parties involved

24

in such a dispute to adhere to time lines, procedures, and compensation mechanisms that differ from practices under current law.

Moreover, under the new resolution process, developers would not

be able to appeal a court order to suspend or terminate their right

to develop a resource. According to most industry experts, the

amount of compensation under the bill’s dispute resolution process

would tend to be less than it would be in the absence of the bill.

The cost of the mandate would be the difference between the settlements or judgments (net compensation) that certain developers of

mineral resources would be able to obtain under current law and

under S. 1950.

Based on information from various industry representatives and

state and private geologists, CBO estimates that the current net income of developers of mineral resources who would most likely be

subject to compensation under the bill is less than $20 million annually. Further, CBO estimates that net income of those developers

would be less than the private-sector threshold even if production

and prices of those mineral were to increase significantly over the

next five years as some industry observers predict. CBO expects

that only a subset of those developers would be affected by the

mandate and thus, the cost of the mandate would be some fraction

of the net income of the group as a whole. Consequently, CBO estimates that the direct costs of the mandate would be well below the

private-sector threshold for at least the first five years that the

mandate is in effect. Over time, the potential area of conflict under

the bill would expand as mineral producers continue to develop in

more areas of the Powder River Basin. Thus, to the extent that

conflicts among developers arise in those expanded areas, more developers in those areas would be subject to the bill’s dispute resolution process.

ESTIMATE PREPARED BY

Federal Costs: Megan Carroll.

Impact on State, Local, and Tribal Governments: Susan Van

Deventer and Marjorie Miller.

Impact on the Private Sector: Gail Cohen.

ESTIMATE APPROVED BY

Peter H. Fontaine, Deputy Assistant Director for Budget Analysis

REGULATORY IMPACT EVALUATION

In compliance with paragraph 11(b) of rule XXVI of the Standing

Rules of the Senate, the Committee makes the following evaluation

of the regulatory impact which would be incurred in carrying out

S. 1950.

The bill is not a regulatory measure in the sense of imposing

Government-established standards or significant economic responsibilities on private individuals and businesses.

No personal information would be collected in administering the

program. Therefore, there would be no impact on personal privacy.

Little, if any, additional paperwork would result from the enactment of S. 1950, as ordered reported.

25

EXECUTIVE COMMUNICATIONS

On June 7, 2000 the Committee on Energy and Natural Resources requested legislative reports from the Department of the

Interior and the Office of Management and budget setting forth Executive agency recommendations on S. 1950. These reports had not

been received at the time the report on S. 1950 was filed. When

the reports become available, the Chairman will request that they

be printed in the Congressional Record for the advice of the Senate.

The testimony provided by the Bureau of Land Management at the

Subcommittee hearing follows:

STATEMENT OF JOHN NORTHINGTON, SENIOR ADVISOR TO THE DIRECTOR, BUREAU OF LAND MANAGEMENT, DEPARTMENT OF THE

INTERIOR

Mr. Chairman, Members of the Committee, thank you

for the opportunity to come before you to provide the Administration’s views on S. 1950, another amendment to the

Mineral Leasing Act which seeks to ensure the orderly development of coal, coalbed methane, natural gas, and oil in

the Powder River Basin of Wyoming and Montana.

Regarding S. 1950, the Bureau of Land Management

(BLM) has sought to address the increasing demand for

coalbed methane gas. We thank the Members for their assistance as we have dealt with various aspects of this

issue. While we appreciate the Committee’s interest and

effort in attempting to resolve the conflicts between federal

oil and gas, coal and coalbed methane interests through S.

1950, we believe this legislation does not provide the most

effective remedy to resolve these issues. Consequently, the

Department of the Interior cannot support this bill.

Conflicts between federal oil and gas and Federal coal

lessees have historically involved oil and gas resources

contained in reservoirs much deeper than the coal, thereby

allowing for development of one resource without loss of

the other. Heightened interest in coalbed methane development has prompted the BLM to take a second look at

these conflicts and put into place a policy which coincides

with our mandate to maximize recovery of all the resources. The BLM has existing authority under the Mineral Leasing Act and federal regulations to resolve the conflicts presented in such instances. In rectifying these disputes, we have three goals in mind—(1) protect the rights

of its lessee under the terms of its lease and the Mineral

Leasing Act, including implementing regulations and those

concerning conservation of natural resources; (2) optimize

the recovery of both resources, thereby maximizing the return to the public; and, (3) optimize the return to the public while protecting public safety and the environment and

minimizing impacts on local communities.

Our policy provides that the initial course of action is to

facilitate an agreement between the lessees. However, absent a settlement, we can and will utilize existing law and

regulations in conjunction with the lease provisions to optimize recovery of both resources. We expect a vast number

26

of oil and gas operators will readily comply with the BLM’s

regulatory and statutory orders. As a reinforcement measure, we would not oppose legislation which seeks to

strengthen our sanctioning power in cases where such operators fail to comply. The BLM believes this approach will

allow for needed flexibility and use of judgment in individual circumstances. While the BLM has sought to work

diligently with Committee staff to craft legislation to appropriately address this issue, S. 1950 deprives the Bureau

and industry of these options.

First, the bill is limited to the Powder River Basin of

Wyoming and Montana. As noted in the bill, the Powder

River Basin is indeed one of the world’s richest energy resource regions with significant deposits of oil and natural

gas, including coalbed methane. However, it is not the only

area of potential conflict. As development occurs in coalbed

methane basins throughout the United States—specifically, Utah, Colorado and New Mexico, the potential for

conflict remains. These disputes can be resolved by BLM

under our current regulatory and statutory authority.

Were S. 1950 to become law, unwarranted and unnecessary precedent could be set for additional legislation to resolve similar conflicts in other areas.

Second, the legislation usurps the regulatory authority

of the Secretary of the Interior and the BLM with regard

to such matters as suspension of leases, termination of

leases, and public interest determinations and diligence,

by placing these responsibilities under the jurisdiction of

the courts. Further, any financial loss incurred by the

dominant coal or oil and gas lessee as a result of the

court’s decision or an agreed upon settlement rests with

the American taxpayer. The prevailing party can recapture

any costs incurred through credit against future royalty. In

addition, the bill mandates that the taxpayer bears the

cost of compensating the state for its share of loss royalties—requiring the Secretary to compensate the state for

50% of any credit against royalties provided. Fundamental

fairness dictates that the state share equally in the risk

associated with such conflicts by sharing in the expense of

compensating one of the lessees. For taxpayers to bear

these costs while states remain financially whole is neither

a standard nor a precedent we wish to set.

Finally, Federal laws, regulations and lease terms applicable to federal mineral development provide authority to

the Secretary, upon determination that it is in the public

interest, to conserve natural resources, to encourage the

greatest ultimate recovery, and to protect the interests of

the United States. Accordingly, the BLM is vested with authority to require cooperative development and the power

to suspend operations of oil and gas leases, and to direct

the rate of oil and gas development. Likewise for coal,

BLM has authority to suspend lease operations, to ensure

Maximum Economic Recovery through approval of a Resource Recovery and Protection Plan, and to order immediate cessation of mining operations for non-compliance

27

with the regulations or lease terms. Under these existing

laws and authorities, the BLM is able to promote orderly,

environmentally sound development of all of the resources

in the Powder River Basin and elsewhere without detriment to the others.

The best case scenario provides that both coal and oil

and gas producers will converge and develop a production

agreement which promotes the greatest recovery of the

coalbed methane, coal, natural gas and oil resources. The

BLM stands ready to assist and foster this effort. However,

in cases where these entities cannot agree, the BLM is also

poised to exercise its existing authority to ensure optimized production of each resource.

Coalbed methane development and production has increased at an unprecedented rate, and we appreciate the

Committee’s support and assistance as the BLM has

sought to address the many issues surrounding this boom.

We look forward to continuing to work with you as we operate within our current authorities to promote orderly development of these resources in conflict areas.

Thank you for the opportunity to testify before you

today. I welcome any questions the Committee may have.

(28)

MINORITY VIEWS OF SENATOR BINGAMAN ON S. 1950

S. 1950 turns over the Federal Government’s power of eminent

domain to private mining companies so that they might take the

private property rights of other mining companies. To the best of

my knowledge, this measure is unprecedented. While some of the

states have extended state eminent domain authority to mining

companies, I am not aware of any instance in which Congress has

farmed out the federal eminent domain power to private mining

company to use for its economic advantage.

To make matters worse, the bill abandons the traditional, constitutional ‘‘public interest’’ test for when the United States may

take private property in favor of a new economic test that simply

measures which source is more valuable. It replaces the traditional

fair market value measure of just compensation with a new loss of

income plus consequential damages standard and passes the entire

expense on to the Federal Treasure and, ultimately, the taxpayers.

And, instead of relying on traditional condemnation law and procedures, it erects a complex and cumbersome new system.

Although I strongly disagree with the approach taken in S. 1950,

I recognize that the bill is a well intended effort to resolve a serious

conflict between the owners of coal beds in the Powder River Basin

and the owners of the coalbed methane imbedded with in the coal.

Ownership of the two resources often lies in separate hands and

one resource cannot be extracted without loss of interference with

the other.

The Supreme Court recognized the possibility of this conflict

when it ruled little more than a year ago that coalbed methane was

not part of the coal estate. ‘‘Were a case arise in which there are

two commercially valuable estates and one is to be damaged in the

course of extracting the other,’’ the Court said, ‘‘a dispute might result, but it could be resolved in the ordinary course of negotiation

or adjudication.’’ Time has proved the Court correct. The two major

conflicts between coal and coalbed methane producers in the Powder River Basin have been resolved by the parties without legislation, without the use of eminent domain, and without taxpayer

subsidies.

Even so, I was willing in Committee to agree to a reasonable legislation solution to the problem. I offered a substitute to Senator

Thomas’s substitute, which would have allowed the Secretary of

the Interior to begin eminent domain proceedings to acquire the

rights to coalbed methane deposits on behalf of the coal owner

where the Secretary determined that the public interest in the

timely and orderly development of the coal outweighed the public

interest in the development of the coalbed methane. Unlike S. 1950

and Senator Thomas’s substitute, my proposal would have made

use of existing condemnation law and procedures. Regrettably, the

Committee voted down my substitute on a party-line vote and

29

adopted Senator Thomas’s substitute, which retains the serious

problems inherent in S. 1950 as originally introduced.

JEFF BINGAMAN.

30

CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing

Rules of the Senate, changes in existing law made by the bill S.

1950, as ordered reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is

printed in italic, existing law in which no change is proposed is

shown in roman):

MINERAL LEASING ACT

* * * * * * *

SEC. 44. DEVELOPMENT OF COAL, NATURAL GAS, AND OIL IN THE

POWDER RIVER BASIN.

(a) DEFINITIONS.—As used in this section:

(1) The term ‘‘Powder River Basin’’ or ‘‘Basin’’ means the area

designated as ‘‘Powder River Basin’’ on a map entitled ‘‘MLA

Section 44 Powder River Basin Area,’’ dated July 1, 1999, and

on file in the Wyoming and Montana State Offices of the Bureau of Land Management, Department of the Interior.

(2) The term ‘‘Subsection (g) Lands’’ means the area designated as ‘‘Subsection (g) Lands’’ on the map described in

paragraph (1).

(3) The term ‘‘Secretary’’ means the Secretary of the Interior.

(4) The term ‘‘Federal coal lease’’ means a lease of Federal

coal in the Basin issued pursuant to this Act.

(5) The term ‘‘Federal coal lessee’’ means the holder of a Federal coal lease.

(6) The term ‘‘Federal oil and gas lease’’ means a lease of Federal oil and gas in the Basin issued pursuant to the Act.

(7) The term ‘‘oil and gas lease or right to develop’’ means a

Federal oil and gas lease or a lease for or right to develop oil

and gas in the Basin provided by a State or private owner of

the resources.

(8) The term ‘‘non-Federal oil and gas lease or right to develop’’ means a lease for or right to develop oil and gas in the

Basin provided by a State or private owner of the resources.

(9) The term ‘‘oil and gas developer’’ means the holder of an

oil or gas lease or right to develop.

(10) The term ‘‘oil and gas property’’ means an area in the

Basin which is subject to an oil or gas lease or right to develop

held by an oil or gas developer.

(11) The term ‘‘common area’’ means an area in the Basin in

which all or a portion of a Federal coal lease (including any

area of State or private coal within a logical mining unit with

the Federal coal lease) overlaps all or a portion of an oil and

gas property.

(12) The term ‘‘approved or proposed mining plan’’ means a

mining plan that is approved by, or has been submitted for the

approval of, the Secretary.

(13) The term ‘‘coalbed methane’’ shall be the meaning given

that term in section 1339(p)(2) of the Energy Policy Act of 1992

(106 Stat. 2992, 42 U.S.C 13368(p)(2)).

(14) The term ‘‘owners of any interest in the oil and gas property’’ means persons who own the working interest, lease interVerDate 11-MAY-2000 20:09 Oct 09, 2000 Jkt 079010 PO 00000 Frm 00030 Fmt 6602 Sfmt 6603 E:\HR\OC\SR490.XXX pfrm08 PsN: SR490
31

est, operating interest, mineral interest, royalty interest, or any

other interest in the oil and gas property, and any other persons

who might receive compensation for unavoidable fixed expense

under an order concerning the oil and gas property issued pursuant to subsection (e)(10)(E).

(15) The term ‘‘owners of any non-Federal interest in the oil

and gas property’’ means all owners of any interest in the oil

and gas property except the Federal government or any agency

or department thereof.

(16) The term ‘‘develop’’ or ‘‘development’’ means to develop or

to produce, or both, or the development or production, or both,

respectively, including all incidental operations.

(b) PARTIES ENCOURAGED TO ENTER INTO WRITTEN AGREE- MENT.—In any common area, the Federal coal lessee and oil and

gas developer, subject to applicable Federal and State laws, regulations, and lease terms, may and are encouraged to enter into a written agreement that details operations and assigns or assesses costs

or compensation for the concurrent or sequential development of

those resources.

(c) MINERAL CONSERVATION.—The Secretary shall employ any authority the Secretary possesses to encourage expedited development

of any oil and gas resources and any coal resource that—

(1) are leased pursuant to this Act;

(2) are within common areas; and

(3) otherwise may be lost or bypassed due to the development

of another of the resources.

(d) NEGOTIATIONS CONCERNING DEVELOPMENT PRIORITY FOR

CERTAIN OPERATIONS IN THE BASIN.— (1) OBLIGATION TO PROVIDE WRITTEN NOTICE OF CONFLICT.— Whenever a Federal coal lessee or an oil and gas developer determines that its Federal coal lease (or a logical mining unit including the Federal coal lease) or its oil and gas property is located in a common area, and, pursuant to an approved or proposed mining plan, mining operations or facilities in support of

mining for coal on the Federal coal lease or the logical mining

unit will be located within the common area, the Federal coal

lessee or the oil and gas developer shall deliver written notice

of the determination to the other party and the Secretary no

later than 240 days prior to the date on which the mining operations or construction of the mine support facilities is projected

by the approved or proposed mining plan to commence in the

common area.

(2) OBLIGATION TO NEGOTIATE.—Promptly after providing the

notice referred to in paragraph (1), the party which provided

the notice shall seek to negotiate a written agreement with the

other party that resolves any conflict between the development

of gas or oil and development of coal in the common area.

(e) COMPENSATION PROCEDURES FOR ASSIGNMENT OF DEVELOPMENT PRIORITY.—

(1) PETITION FOR RELIEF.—

(A) If notice is submitted timely pursuant to subsection

(d)(1) and the Federal coal lessee and the oil and gas developer engage in negotiations, but do not reach agreement,

pursuant to subsection (d)(2), the Federal coal lessee or the

32

oil and gas developer may file a petition for relief as described in subparagraph (C) in the United States district

court for the district in which the common area is located

on any date which is not less than 180 days prior to the

date on which the mining operations or construction of the

mine support facilities is projected by the approved or proposed mining plan to commence in the common area.

(B) The petitioner shall serve the oil and gas developer or

the Federal coal lessee, as the case may be, and the Secretary with a copy of the petition for relief on the same date

upon which the petition is filed with the court pursuant to

subparagraph (A).

(C) The petition for relief shall include the following:

(i) A description and map of the Federal coal lease,

the oil and gas property, and the common area.

(ii) A list containing the names and addresses of all

owners of any non-Federal interest in the oil and gas

property and all owners of any non-Federal interest in

the Federal coal lease or logical mining unit. The petitioner shall list those owners of any non-Federal interest in the oil and gas property and of the Federal coal

lease or logical mining unit whom the petitioner is able

to ascertain from the properly indexed records of the

county recorder of the county or counties in which the

oil and gas property and Federal coal lease or logical

mining unit are located, and the respondent shall file

with the court and serve on the petitioner and the Secretary any corrections of, additions to, or deletions

from the list known to the respondent within 10 days

of the date of service of the petition for relief pursuant

to subparagraph (B). Thereafter, whenever any correction of, addition to, or deletion from the list becomes

known to either the petitioner or the respondent, that

party shall promptly file with the court and serve on

the other party and the Secretary the addition, correction, or deletion. Any person who believes he or she is

an owner of any non-Federal interest in the oil and gas

property or in the Federal coal lease or logical mining

unit and is omitted from the list may file a motion in

the court to be added to the list at any time prior to

the issuance of an order pursuant to paragraph (10)(E)

or paragraph (11)(C).

(iii) A certified copy of the notice described in subsection (d)(1).

(iv) A sworn statement by a senior officer of the petitioner with authority to commit the petitioner in any

negotiation under subsection (d)(2) stating, and all

documents demonstrating, that the petitioner negotiated or attempted to negotiate in good faith with the

respondent a voluntary agreement, pursuant to subsection (d)(2).

(D) The Federal coal lessee shall submit a copy of the approved or proposed mining plan for the mining operations

33

or support facilities that are the subject of the petition for

relief—

(i) with the petition for relief if the Federal coal lessee is the petitioner; or

(ii) within 5 days of the date of service of the petition

for relief pursuant to subparagraph (B) if the Federal

coal lessee is the respondent.

(2) JOINDER OF PARTIES.—The Secretary and all owners of

any non-Federal interest in the oil and gas property and in the

Federal coal lease or logical mining unit identified pursuant to

paragraph (1)(C)(ii) shall be joined in the proceedings established pursuant to this subsection.

(3) PARTIES’ RESPONSE TO PETITION.—The non-Federal respondent or respondents may provide to the Secretary a response to the petition within 30 days from the date of filing of

the petition for relief pursuant to paragraph (1)(A). The Secretary may require the petitioner and the respondent or respondents to submit such documents and/or provide such testimony as the Secretary deems appropriate within 60 days of

such date of filing.

(4) SECRETARY’S INITIAL RESPONSE TO PETITION.—Within 90

days of the date of filing of the petition for relief pursuant to

paragraph (1)(A) the Secretary shall take the follow actions:

(A) The Secretary shall determine, with petitioner having

the burden of proof—

(i) whether a common area exists; and

(ii) whether the approved or proposed mining plan

submitted pursuant to paragraph (3)(D) provides for

the mining operations to intersect, or the mine support

facilities to be constructed in, any portion of the common area.

(B)(i) If existence of the common area and intersection of,

or construction in, the common area are determined pursuant to subparagraph (A), the Secretary shall determine

whether the public interest is best realized by delaying or

forgoing development of either—

(I) the oil or gas resource to permit the mining operations to intersect, or the mine support facilities to be

constructed in, the common area in accordance with

the approved or proposed mining plan; or

(II) the coal resource to permit commencement or

continuation of the development of the oil or gas resource in the common area after the date on which the

mining operations or construction of the mine support

facilities is projected by the approved or proposed mining plan to commence in the common area.

(ii) The Secretary shall make the public interest determination described in clause (i) solely by the calculation of

the greater economic benefit to be realized by comparison,

on a net present value basis, of the Federal and State revenues from royalties and severance taxes likely to be generated from each resource underlying the common area to

which the petition for relief applies.

34

(C)(i) If any portion of the resource for which delayed or

forgone development is determined to be in the public interest pursuant to subparagraph (B) is subject to a lease

issued pursuant to this Act, the Secretary shall suspend all

or any portion of, including any geographical area of or

zone or reservoir subject to, the lease to accommodate development of the other resource in the common area during

the period beginning on a date no later than the commencement date referred to in paragraph (1)(A) and provided in

the notice submitted pursuant to paragraph (1)(C)(iii) and

ending on the date on which an order is issued pursuant

to paragraph (10)(E) or paragraph (11)(C).

(ii) The Secretary may refrain from either making the determinations required by subparagraphs (A) and (B) or suspending all or any portion of a lease issued pursuant to

this Act as required by clause (i) only if the Secretary determines that—

(I) no common area exists; or

(II) the approved or proposed mining plan does not

provide for the mining operations to intersect, or the

mine support facilities to be constructed in, the common area.

(D) The Secretary shall—

(i) report the determinations made pursuant to subparagraph (A) and (B) or subparagraph (C)(ii) and any

suspension made pursuant to subparagraph (C)(i), including the administrative record therefor, with the

court in which the petition for relief is filed pursuant

to paragraph (1)(A); and

(ii) provide the petitioner and respondent or respondents with copies of the report and record.

(5) COURT INITIAL RESPONSE TO PETITION.—

(A)(i) The court in which the petition is filed pursuant to

paragraph (1)(A) shall have exclusive jurisdiction to receive

and review the report of the Secretary required by paragraph (4)(D), and the determinations made and any action

taken by the Secretary pursuant to paragraph (4).

(ii) The petitioner and respondent or respondents shall

have 30 days from the date upon which the report of the

Secretary is filed with the court pursuant to paragraph

(4)(D) in which to file with the court any objection to any

determination of the Secretary required by paragraph (4).

(iii) If any objection is filed pursuant to clause (ii), the

court shall, within 60 days of receipt of the report of the

Secretary pursuant to paragraph (4)(D), make the determination that is the subject of the objection on the basis of

the administrative record filed with the report and in accordance with the applicable requirements or standards of

subparagraph (A) or subparagraph (B) of paragraph (4).

(iv) Any determination made by the court pursuant to

clause (iii) shall be an independent judicial determination

that is de novo, without regard to the prior determination

of the Secretary.

35

(v) If no objection is filed pursuant to clause (ii), the determinations of the Secretary required by paragraph (4)

shall be final and approved by the court in the order issued

pursuant to subparagraph (B) or subparagraph (E).

(B) Within 90 days of the date of receipt of the report of

the Secretary pursuant to paragraph (4)(D), the court, except as provided in subparagraph (E), shall issue an order

that—

(i) suspends all or any part of, including any geographical area of or reservoir subject to, any non-Federal

oil and gas lease or right to develop, or any non-Federal interest in any logical mining unit that includes the Federal

coal lease, in the common area in accordance with the determination of the Secretary pursuant to subclause (I) or

subclause (II), respectively, of paragraph (4)(B)(i) or in accordance with the determination of the court pursuant to

subparagraph (A)(iii); and

(ii) if required by a determination of the court pursuant

to subparagraph (A)(iii), terminates a suspension of a lease

issued pursuant to this Act imposed by the Secretary pursuant to paragraph (4)(C)(i), or imposes a suspension of a

lease issued pursuant to this Act, or both, in accordance

with the determination; and

(iii) if all or any part of the oil and gas lease or right to

develop is suspended pursuant to paragraph (4)(C)(i) or

this subparagraph, fixes the date upon which the Federal

coal lessee may commence mining operations or construction of mine supported facilities in the common area, which

may be no later than the commencement date referred to in

paragraph (1)(A) and provided in the notice submitted pursuant to paragraph (1)(c)(iii), except for good cause shown;

and

(iv) if all or any part of the Federal coal lease and/or

any non-Federal interest in the logical mining unit that includes the Federal coal lease is suspended pursuant to

paragraph (4)(C)(i) or this paragraph, prohibits the mining

operations from intersecting, or the support facilities from

being constructed in, all or a portion of the common area.

(C) The order of the court issued pursuant to subparagraph (B) shall expire upon the issuance of an order pursuant to paragraph (10)(E) or paragraph (11)(C).

(D) The court may refrain from issuing the order required by subparagraph (B), only if—

(i) the Secretary makes a determination described in

paragraph (4)(C)(ii); or

(ii) the court, acting on an objection filed pursuant to

subparagraph (A)(ii), determines that—

(I) no common area exists; or

(II) the approved or proposed mining plan submitted pursuant to paragraph (1)(D) does not provide for the mining operations to intersect, or the

mine support facilities to be constructed in, the

common area.

36

(E) If the Secretary makes a determination described in

paragraph (4)(C)(ii) or the court makes a determination described in subparagraph (D)(ii), the court shall issue an

order terminating the proceeding under this subsection.

(6) VALUATION PROCEDURE: APPOINTMENT OF EXPERTS.— (A) Within 30 days of the date of issuance of an order

pursuant to paragraph (5)(B), to assist the court in making

the determinations pursuant to paragraph (10) or paragraph (11), the Federal coal lessee and the oil and gas developer shall each appoint a person who is an expert in appraising the value of, and right to develop, gas or oil if all

or any part of the oil and gas lease or right to develop is

suspended, or coal if all or any part of the Federal coal

lease and/or any non-Federal interest in the logical mining

unit that includes the Federal coal lease is suspended, pursuant to paragraph (4)(C) and/or paragraph (5)(B), and

these persons shall agree upon and appoint a third person

with such expertise. If no agreement is reached on the date

of appointment of a third person, the court shall make the

appointment.

(B) The Federal coal lessee shall be responsible for compensation of the expert appointed by it; the oil and gas developer shall be responsible for compensation of the expert

appointed by it; and the Federal coal lessee and oil and gas

developer shall each pay one-half of the compensation for

the third expert.

(7) INFORMATION AND DATA.— (A) The Federal coal lessee, oil and gas developer, and

Secretary shall each submit to the panel of experts within

30 days of the date of appointment of the panel pursuant

to paragraph (6) all information and data in the possession

of such party that is pertinent to the determinations to be

made pursuant to paragraph (10) or paragraph (11), and

shall each submit to the panel of experts thereafter any additional pertinent information and data in the possession of

such party that the panel requests of such party in writing.

(B) Except as provided in subparagraph (C), the court

shall ensure that any information and data submitted to

the panel of experts pursuant to subparagraphs (A) and (D)

shall have the protection of confidentiality that is applicable, and may be accorded, to them by and the federal rules

of civil procedure and evidence.

(C) All information and data submitted to the panel of

experts pursuant to subparagraphs (A) and (D) shall be

available for review by all parties unless an ex parte order

is issued by the court.

(D)(i) The Federal coal lessee may drill for an otherwise

collect data or information on coalbed methane at any site

or sites within the common area that are not within a spacing unit containing a well that is producing or capable of

producing coalbed methane under the conditions set forth

in clause (ii).

(ii) The drilling or collection of data or information authorized by clause (i) shall be for the sole purpose of subVerDate 11-MAY-2000 19:22 Oct 09, 2000 Jkt 079010 PO 00000 Frm 00036 Fmt 6602 Sfmt 6603 E:\HR\OC\SR490.XXX pfrm02 PsN: SR490
37

mission of information and data pursuant to this paragraph.

(iii) The Federal coal lessee shall not produce any coalbed methane as a result of any drilling authorized by

clause (i) and shall comply with any Federal or State requirements applicable to such activity.

(iv) The Federal coal lessee shall submit to the Secretary

an exploration plan to conduct any drilling pursuant to

clause (i). The Secretary shall approve, approve as modified, or reject the plan, within 15 days of the date of its

submission. The Secretary may modify or reject the plan

only for good cause fully set forth in writing and provided

to the Federal coal lessee. The Federal coal lessee shall adhere to the plan, as approved by the Secretary.

(8) SUBMISSION OF BRIEFS AND HEARING.—

(A) Within 45 days of the date of appointment of the

panel of experts pursuant to paragraph (6), all parties may

submit briefs concerning the determinations to be made

pursuant to paragraph (10) or paragraph (11).

(B) Within 60 days of the date of appointment of the

panel of experts pursuant to paragraph (6), the panel may,

or if requested by the petitioner or a respondent shall, receive testimony from all parties concerning the determination to be made pursuant to paragraph (10) or paragraph

(11).

(9) EXPERTS REPORT.—Within 120 days of the date of appointment of the panel of experts pursuant to paragraph (6), the

panel shall submit a written report to the court providing in detail the panel’s recommendations on the determinations to be

made pursuant to paragraph (10) or paragraph (11).

(10) COURT’S FINAL RESPONSE TO PETITION: VALUATION CONCERNING ECONOMICALLY RECOVERABLE OIL OR GAS RESOURCES

LOST OR DELAYED, SUSPENSION OR TERMINATION, AND PAYMENT

ORDER.—Within 210 days of the date of issuance of an order

pursuant to paragraph (5)(B), by which, or by any action of the

Secretary pursuant to paragraph (4)(C)(i), all or any part of the

oil and gas lease or right to develop is suspended, the court

shall take the following actions:

(A)(i) The court shall determine whether, as a result of

the order or any action of the Secretary, all or any part of,

including any geographical area of or zone or reservoir subject to, the oil and gas lease or right to develop should be

suspended during any remaining period in which the mining operations or support facilities occupy the common area

or whether the oil and gas lease or right to develop should

be terminated.

(ii) Any determination to suspend pursuant to clause (i)

shall, wherever possible or appropriate, limit the suspension or phase the suspension to permit the optimum development of the oil or gas prior to the time at which the mining operations would reach the area within the common

area that is subject to the suspension or particular phase

of the suspension.

38

(iii) Any determination to terminate pursuant to clause

(i) shall be made only if the court finds that the economically recoverable oil and gas resources subject to compensation pursuant to subparagraph (E) would be entirely lost or

rendered impracticable to produce as a consequence of the

mining operations in the common area and that such resources constitute all of the economically recoverable resources within the oil and gas property.

(B) If the court makes a determination to suspend pursuant to subparagraph (A), the court shall determine—

(i) the amount of any net income that will not be realized due to delay in development of economically recoverable resources of oil or gas, other than coalbed

methane, from the common area, whether or not such

development has commenced;

(ii) the amount of any net income that will not be realized, whether or not development of coalbed methane

has commenced, that is due to—

(I) delay in development of economically recoverable resources of coalbed methane in the common

area; and

(II) the loss of any economically recoverable resources of coalbed methane from the coal to be extracted by the mining operations in the common

area; and

(III) the loss of any economically recoverable resources of coalbed methane underlying any area

that is within the oil and gas property associated

with the common area and that extends outward

from each exposed coal face of the mining operations for a distance from which drainage of such

resources is established to the satisfaction of the

court; and

(iii) any of the following damages that will be incurred by the owners of any interest in the oil and gas

property as a consequence of the suspension: any unavoidable fixed expenses (including, but not limited to,

the expense of shutting in production from, maintenance of, testing of, and redrilling or reconnecting an

existing well; relaying pipeline; and all other expenses

reasonably related to reestablishing any existing oil or

gas production); expenses associated with stranded

costs of drilling equipment and facilities; any lost royalties on oil or gas not produced by the oil and gas developer; and any lost income associated with temporarily shutting in production from wells outside of the

common area as needed for reconnection to a gathering

system or pipeline to market.

(C) The determinations made pursuant to subparagraph

(B) shall not include any decrease in net income or damages resulting from loss of any oil or gas resources that occurred before the date of the determinations and is caused

by mining within or outside of the common area on the

Federal coal lease or logical mining unit that is the subject

39

of the common area determination made pursuant to paragraph (4)(A)(i).

(D) If the court makes a determination to terminate pursuant to subparagraph (A), the court shall determine the

amount of any net income that will not be realized and any

damages due to the loss of, or impracticability to produce

the economically recoverable resources of oil or gas in the

oil and gas property in the same manner as provided in

subparagraph (B).

(E) The court shall issue an order that—

(i) suspends all or any part of, suspends in phases

parts of, or terminates the oil and gas lease or right to

develop, including any applicable payment or production obligations, in accordance with the determination

made pursuant to subparagraph (A); and

(ii) awards to the oil and gas developer and all other

owners of any interest in the oil and gas property, as

their interests may appear, a sum of money from the

Federal coal lessee equal to the net income amount and

damages determined pursuant to subparagraph (B) or

subparagraph (D).

(F) In determining the amount of net income that will not

be realized pursuant to subparagraph (B) or subparagraph

(D) and the sum of money to be awarded pursuant to subparagraph (E), the court shall ensure to the best of its ability that the Federal coal lessee is not required to pay for the

same gas lost, delayed in development, or rendered impracticable to develop to more than one oil and gas developer

or the owners of any interest in more than one oil and gas

property.

(11) COURT’S FINAL RESPONSE TO PETITION: VALUATION CON- CERNING ECONOMICALLY RECOVERABLE COAL RESOURCES LOST

OR DELAYED, SUSPENSION OR TERMINATION AND PAYMENT

ORDER.—Within 210 days of the date of issuance of an order

pursuant to paragraph (5)(B) by which, or by any action by the

Secretary pursuant to paragraph (4)(C)(i), the Federal coal

lease and/or any non-Federal interest in the logical mining

unit is suspended, the court—

(A) shall determine whether, as a result of the order or

any action of the Secretary, the Federal coal lease and/or

any non-Federal interest in the logical mining unit shall be

suspended in whole or in part to further accommodate oil

or gas development in the common area; and

(B) shall determine the amount of any net income that

will not be realized from the loss or delay in development

of economically recoverable resources of coal, and the unavoidable fixed expenses (including, but not limited to, additional expenses associated with reclamation, expenses associated with stranded costs of mining equipment and facilities, a proportionate refund of the lease bonus, and any

lost royalties on coal not produced by the Federal coal lessee) that will be incurred, by the Federal coal lessee as a

consequence of the suspension; and

(C) shall issue an order that—

40

(i) suspends, in accordance with the determination

made pursuant to subparagraph (A), all or any part of

the Federal coal lease and/or any non-Federal interest

in the logical mining unit, including any applicable

payment or production obligations on the lease or logical mining unit, for the period necessary for expeditious development in the common area of the gas or oil

that is the subject of the petition for relief as demonstrated to the court in a production plan submitted

by the oil and gas developer; and

(ii) awards to the Federal coal lessee and all other

owners of any interest in the Federal coal lease or logical mining unit, as their interests may appear, a sum

of money equal to the net income amount and unavoidable fixed expenses determined pursuant to subparagraph (B).

(12) REVIEW OF EXPERTS’ REPORT.— (A) The court shall make the determinations required by

paragraph (10) or paragraph (11) after reviewing the report

of the panel of experts submitted pursuant to paragraph (9)

and the hearing required by subparagraph (B).

(B) After submission of the report of the panel of experts

pursuant to paragraph (9) and prior to making the determinations required by paragraph (10) or paragraph (11),

the court shall hold a hearing in which the panel of experts

shall present their report and the parties to the proceeding

shall have the opportunity to examine the panel and provide to the court any evidence or arguments they may have

to support or contravene the recommendations of the report.

(13) DISBURSEMENT OF PAYMENTS.— (A)(i) At the election of the oil and gas developer, the sum

of money awarded by the court pursuant to paragraph

(10)(E) shall be—

(I) paid in full within 60 days of the date of issuance

of the order pursuant to paragraph (10)(E); or

(II) divided into the number of tons of recoverable

coal in the common area and paid in per ton increments as the coal is mined in accordance with clause

(ii) and subparagraph (C).

(ii) The Federal coal lessee shall make the payments required by clause (i)(II) on a quarterly basis in advance

based on the Federal coal lessee’s estimate of the number of

tons of coal to be mined in the common area during the following quarter, and shall add or subtract an amount to or

from the advance payment for the next quarter to reflect the

coal actually sold or transferred.

(B)(i) At the election of the Federal coal lessee, the sum

of money awarded by the court pursuant to paragraph

(11)(C) shall be:

(I) paid in full within 60 days of the date of issuance

of the order pursuant to paragraph (11)(C); or

(II) divided into the number of barrels of recoverable

oil or cubic feet of recoverable gas in the common area

and paid in per barrel or cubic feet increments as the

41

oil or gas is produced in accordance with clause (ii)

and subparagraph (C).

(ii) The oil and gas developer shall make the payments

required by clause (i)(II) on a quarterly basis in advance

based on the oil and gas developer’s estimate of the number

of barrels of oil or cubic feet of gas to be produced in the

common area during the following quarter, and shall add

or subtract an amount to or from the advance payment for

the next quarter to reflect the oil or gas actually produced.

(C) If the mining or production necessary to make full

payment of the sum of money awarded by the court in accordance with subparagraph (A)(i)(II) or subparagraph

(B)(i)(II) does not occur within 5 years of the date of

issuance of the court order pursuant to paragraph (10)(E)

or paragraph (11)(C), the unpaid balance shall be paid

within 60 days thereafter.

(14) TERMINATION OF OIL AND GAS LEASE SUSPENSION.— (A) If the court issues an order to suspend all or any part

of the oil and gas lease or right to develop pursuant to

paragraph (10)(E)—

(i) the Federal coal lessee shall notify the court and

the oil and gas developer when the portion of the common area subject to the order issued pursuant to paragraph (10)(E) is no longer required for mining operations or support facilities; and

(ii) within 120 days of the date of receipt by the court

of the notification pursuant to clause (i) or within 60

days prior to the date on which the period established

by the court in the order issued pursuant to paragraph

(10)(E) concludes, the oil and gas lessee may petition

the court for an order that terminates the suspension

and fixes the date and terms on which the oil and gas

lessee may resume operations within the portion of the

common area subject to the order issued pursuant to

paragraph (10)(E).

(B) The court shall issue the order sought under subparagraph (A)(ii) within 30 days of the date of receipt of the petition pursuant to subparagraph (A)(ii).

(C)(i) If the oil and gas developer determines that, as a

consequence of the order of the court issued pursuant to

paragraph (5)(B) and an order to suspend all or any part

of the oil and gas lease or right to develop pursuant to

paragraph (10)(E), the conditions described in paragraph

(10)(A)(iii) exist, the oil and gas developer may petition the

court to terminate the oil and gas lease or right to develop.

(ii) The petition referred to in clause (i) may be filed any

time after issuance of the order of the court pursuant to

paragraph (10)(E) but not later than 120 days after the

date of receipt by the court of the notification pursuant to

subparagraph (A)(i).

(iii) Upon receipt of a petition pursuant to clause (i), the

court shall make a determination whether to issue an order

to terminate the oil and gas lease or right to develop and

award an additional mount from the Federal coal lessee to

42

the oil or gas developer and all other owners of any interest

in the oil and gas property, as their interests may appear,

in accordance with the procedures and deadlines established in paragraphs (1) and (6) through (13).

(15) TERMINATION OF COAL LEASE SUSPENSION.— (A) If the court issues an order requiring suspension of

all or any part of the Federal coal lease and/or any nonFederal interest in the logical mining unit that includes the

Federal coal lease pursuant to paragraph (11)(C)—

(i) the oil and gas developer shall notify the court

and the Federal coal lessee when the portion of the

common area subject to the order issued pursuant to

paragraph (11)(C) is no longer required for gas or oil

production from such portion; and

(ii) within 120 days of the date of receipt by the court

of the notification pursuant to clause (i) or within 60

days prior to the date on which the period established

by the court in the order issued pursuant to paragraph

(11)(C) concludes, the Federal coal lessee may petition

the court for an order that fixes the date and terms on

which the Federal coal lessee may commence mining

operations or construction of support facilities in the

portion of the common area subject to the order issued

pursuant to paragraph (11)(C) and, if all or any part

of the Federal coal lease and/or non-Federal interest in

the logical mining unit is suspended, terminates the

suspension.

(B) The court shall issue the order sought under subparagraph (A)(ii) within 30 days of the date of receipt of the petition pursuant to subparagraph (A)(ii).

(C)(i) If the Federal coal lessee determines that, as a consequence of the order of the court issued pursuant to paragraph (11)(C), further development of all or any part of the

Federal coal lease and/or any non-Federal interest in the

logical mining unit is impracticable, the Federal coal lessee

may petition the court to terminate all or part of the Federal coal lease and/or any non-Federal interest in the logical mining unit.

(ii) The petition referred to in clause (i) may be filed any

time after issuance of the order of the court pursuant to

paragraph (11)(C) but not later than 120 days after the

date of receipt by the court of the notification pursuant to

subparagraph (A)(i).

(iii) Upon receipt of a petition pursuant to clause (i), the

court shall make a determination whether to issue an order

to terminate all or any part of the Federal coal lease and/

or any non-Federal interest in the logical mining unit and

award an additional amount from the oil and gas developer to the Federal coal lease and all other owners of any

interest in the Federal coal lease or logical mining unit, as

their interests may appear, in accordance with the procedures and deadlines established in paragraphs (1) and (6)

through (13).

(16) SUPPLEMENTAL PETITION FOR RELIEF.—

43

(A) If, at any time after the issuance of an order pursuant

to paragraph (10)(E) or paragraph (11)(C), the mining plan

that is the basis of the order is altered in a manner that

may warrant suspension of an additional part or all of, or

termination of, the oil and gas lease or right to develop or

suspension of an additional part of the Federal coal lease

and/or any non-Federal interest in the logical mining unit

that includes the Federal coal lease and/or an increase in

the sum of money that was awarded under the order, either

the Federal coal lessee or the oil and gas developer may, if

necessary after compliance with the requirements of subsection (d), file a supplemental petition for relief with the

court to amend the order.

(B) The requirements of paragraphs (1) and (6) through

(13) shall apply to the supplemental petition submitted pursuant to subparagraph (A).

(C)(i) Upon completion of the process required by subparagraph (B), the court shall make a determination

whether to suspend an additional part or all of, or terminate, the oil and gas lease or right to develop or to suspend

an additional part of the Federal coal lease and/or any

non-Federal interest in the logical mining unit as described

in, and to award an additional sum of money calculated in

accordance with, paragraph (10) or paragraph (11).

(ii) The court shall issue any order resulting from the determinations made pursuant to clause (i) within 90 days of

the date of filing of the supplemental petition for relief.

(iii) Any award of an additional sum of money shall be

paid in accordance with paragraph (13).

(17) APPEAL OF COURT ORDERS.—

(A) Any order issued pursuant to paragraph (5)(B), paragraph (5)(E), paragraph (14)(B), or paragraph (15)(B) is

final and may not be appealed.

(B) Any order issued pursuant to paragraph (10)(E)

paragraph (11)(C), paragraph (14)(C)(iii), paragraph

(15)(C)(iii), or paragraph (16)(C)(ii) may be appealed, but

the appeal, and any disposition thereof, may not disturb

any order referred to in subparagraph (A).

(18) SUSPENSION TERM.—

(A) If all or any part of any lease issued pursuant to this

Act is suspended in whole or in part by the Secretary or the

court under this subsection—

(i) the lessee shall not be required to pay any rental

for the lease for the period of the suspension; and

(ii) if the lease is a Federal oil or gas lease and is

in the primary term or if the lease is a Federal coal

lease, the term of the lease shall be extended by the

length of the period of the suspension plus one year; or

(iii) the lease shall not terminate due to lack of production for the period of the suspension plus one year.

(B) If any non-Federal oil and gas lease or right to develop or any non-Federal interest in a logical mining unit

is suspended in whole or in part by the court under this

44

subsection, the court shall establish terms for the suspension comparable to the terms set forth in subparagraph (A).

(f) LIABILITY LIMITATION.— (1) FEDERAL COAL LESSEE.—Except as provided in a written

agreement reached pursuant to subsection (d)(2) or reached on

or after September 1, 1999, and before the date of enactment of

this section, or as provided by an order of the court pursuant

to subsection (e), neither the holder of a Federal coal lease subject to the agreement or order nor the United States shall be liable to the oil and gas developer of, or any owner of an interest

in, any oil and gas property subject to the agreement or order

for any decrease in or depletion of, or any impairment of the

ability to recover, any gas or oil from the property that may result from the development of any coal on the Federal coal leasehold or within a logical mining unit that includes the Federal

coal lease.

(2) OIL AND GAS DEVELOPER.—Except as provided in a written

agreement reached pursuant to subsection (d)(2) or reached on

or after September 1, 1999, and before the date of enactment of

this section, or as provided by an order of the court pursuant

to subsection (e), neither the oil and gas developer of an oil and

gas property subject to the agreement or order nor the United

States shall be liable to a holder of a Federal coal lease subject

to the agreement or order, or any owner of any non-Federal interest in a logical mining unit that includes the Federal coal

lease, or the United States for any impairment of the ability to

recover coal from the Federal coal leasehold or logical mining

unit that may result from the development of gas or oil on the

property.

(g) CREDIT AGAINST ROYALTIES.— (1) IN GENERAL.— (A) Whenever a holder of a Federal coal lease is required

by a written agreement reached pursuant to subsection

(d)(2) and approved by the Bureau of Land Management or

reached prior to the date of enactment of this section and

approved by the Bureau of Land Management on or after

September 1, 1999, or by a court order issued pursuant to

paragraph (10)(E), paragraph (14)(C)(iii), or paragraph

(16)(C)(ii) of subsection (e), to pay an amount of suspension

of all or part of, or termination of, a Federal oil and gas

lease for coalbed methane located within the Subsection (g)

Lands, the amount so paid shall be credited against any

royalties on production required by section 7(a) or any

other provision of this Act from any lease of Federal coal

issued under this Act to such holder or any affiliate thereof.

(B) Whenever a holder of a Federal oil and gas lease is

required by a written agreement reached pursuant to subsection (d)(2) and approved by the Bureau of Land Management or reached prior to the date of enactment of this

section and approved by the Bureau of Land Management

on or after September 1, 1999, or by a court order issued

pursuant to paragraph (11)(C), paragraph (15)(C)(iii), or

paragraph (16)(C)(ii) of subsection (e), to pay an amount

for suspension or termination of all or part of a Federal

45

coal lease located within the Subsection (g) Lands, the

amount so paid shall be credited against any royalties on

production required by subsection (b)(1)(A) or subsection

(c)(1) of section 17 or any other provision of this Act from

any lease of Federal oil and gas issued under this Act to

such holder or any affiliate thereof.

(2) TREATMENT OF ROYALTIES TO STATES.—The Secretary

shall pay to the State in which the Federal coal lease or Federal

oil and gas lease referred to in paragraph (1)(A) or paragraph

(1)(B), respectively, is located 50 percent of the amount of any

credit against royalties provided under paragraph (1)(A) or

paragraph (1)(B) respectively,—

(A) in the same manner as if the credit against royalties

had been paid in money as royalties and distributed under

section 35(a) of this Act; and

(B) from amounts received as royalties, rentals, or bonuses derived from leases issued under this Act that otherwise would be deposited to miscellaneous receipts under

section 35(a) of this Act.

(h) DENIAL OF USE AS PRECEDENT.—Nothing in this section shall

be applicable to any lease under this Act for any mineral, or shall

be applicable to, or supersede any statutory or common law otherwise applicable in, any proceeding in any Federal or State court involving development of any mineral, outside of any common area,

as defined in subsection (a)(11), within or outside of the Powder

River Basin, as defined in subsection (a)(1).

[SEC. ø44¿ 45. SHORT TITLE

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