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[House Report 106-1012]
[From the U.S. Government Publishing Office]

106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                    106-1012

======================================================================

 
           MINERAL REVENUE PAYMENTS CLARIFICATION ACT OF 2000

                                _______
                                

October 26, 2000.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Young of Alaska, from the Committee on Resources, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 4340]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Resources, to whom was referred the bill 
(H.R. 4340) to simplify Federal oil and gas revenue 
distributions, and for other purposes, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                          Purpose of the Bill

    The purpose of H.R. 4340 is to simplify federal oil and gas 
revenue distributions, and for other purposes.

                  Background and Need For Legislation

    H.R. 4340 would amend the Mineral Leasing Act to change the 
method used to calculate amounts paid to States from federal 
onshore mineral leasing receipts.
    Under the Mineral Leasing Act (30 U.S.C. 181 et seq.) the 
federal government has shared half of the rental payments, 
royalties and bonus bids received from onshore public domain 
mineral leases with the states hosting these leases for oil, 
gas, coal, sodium minerals, potash, phosphate and oil shale. 
Congress extended this same authority to the Secretary of the 
Interior for acquired federal mineral rights by the Act of 
August 7, 1947 (30 U.S.C. 351-359). This Act provided that the 
receipts from such mineral leases be shared with State and 
local governments in the same manner as is prescribed for other 
receipts from the lands covered by the lease, which may be more 
or less than 50 percent. For example, 75 percent of mineral 
receipts on Army Corps of Engineers-acquired lands are returned 
to State and local governments. On National Forest lands 
acquired under the Weeks Act of 1911, only 25 percent of the 
mineral receipts are shared. In addition, under the President's 
Reorganization Plan No. 3 of 1946 (establishing the Bureau of 
Land Management), the Secretary of the Interior is authorized 
to lease minerals under acquired lands which would otherwise be 
locatable under the general mining laws, and to distribute the 
mineral receipts in the same manner as under the Act of August 
7, 1947. Lead mines in the Mark Twain National Forest in 
Missouri return significant revenues to the State and local 
governments under this authority.
    Importantly, under all these authorities, the States' 
shares are returned without further action by Congress (i.e., 
the receipts are treated as a permanent appropriation of 
funds). Many, if not most, of the States receiving mineral 
revenue payments have laws or State constitutional requirements 
to dedicate these receipts to educational purposes. States are 
able to forecast the amount of receipts to expect by comparison 
with other indicators of mineral prices and production levels, 
such as severance tax revenues.
    For some six decades, the sharing of receipts with the 
States was done without respect to the costs of administering 
the leasing programs. This was known as ``gross receipts 
sharing.'' During the Reagan Administration, the executive 
branch proposed a reduction in the permanent appropriation of 
the States' share by withholding 75 percent of the federal 
government's administrative costs before sharing the receipts. 
Congress rejected this diminution and amended the Mineral 
Leasing Act to expressly state that the revenue sharing 
payments to the States ``shall not be reduced by administrative 
or any other costs'' (Public Law 100-203).
    Nevertheless, budgetary pressures remained and in the 
Department of the Interior and Related Agencies appropriations 
bill for fiscal year 1991, Congress ultimately agreed to a 
formula where half of the federal government's administrative 
costs to administer the Mineral Leasing Act would be deducted 
from the revenue stream before apportionment to the States, 
thus requiring public lands States to bear one-fourth of the 
federal government's cost. This system is known as ``net 
receipts sharing.''
    For three fiscal years net receipts sharing was enacted as 
an annual rider to appropriation laws. States bore the burden 
of the federal government's costs based upon a pro rata or 
``revenue state share''. This meant that if a State had 
generated 35 percent of all onshore mineral revenues to the 
U.S. Treasury in one year, then that State would have 35 
percent of the federal government's cumulative costs allocated 
to it in the sharing formula.
    In the 1993 Omnibus Budget Reconciliation Act, net receipts 
sharing was made permanent law, but with a somewhat different 
methodology. The Minerals Management Service (MMS, the 
Department of the Interior agency charged with determining each 
State's burden) is now required to calculate federal 
administrative actual costs incurred by the Bureau of Land 
Management, the U.S. Forest Service and the Minerals Management 
Service Royalty Management Program attributable to each State. 
This is to determine whether, because of economies of scale, a 
State's burden is less than it would be if calculated under the 
simple pro rata formula. Each year since enactment of this dual 
calculation requirement, the States of Wyoming and New Mexico 
have had a lessened net receipts sharing burden than under the 
appropriation law riders of Fiscal Years (FY) 1991-1993. For 
example, in FY 2000 the burden to Wyoming is $7.4 million 
rather than $13.7 million under the revenue state share. 
Likewise, New Mexico's FY 2000 burden is $5.5 million, but 
would have been $8.1 million under the pro rata formula 
methodology utilized initially.
    However, the requirement to more equitably allocate the net 
receipts sharing burden for each State has proven difficult to 
administer. MMS must query two other agencies about their costs 
budgeted and spent within each State, and allocate nationwide 
overhead costs to each State's Bureau of Land Management, U.S. 
Forest Service and the MMS Royalty Management Program 
expenditures. Thus while the 1993 methodology is an improvement 
in fairness to States, it created an enormous uncertainty in 
the federal government's calculations compared to the 1991-1993 
period. The Inspector General of the Department of the Interior 
audited the net receipts sharing program in 1997 and concluded 
that the new system practically guaranteed to cause errors in 
the proper allocation of costs to each State receiving 
revenues. A return to the 1920-1991 practice of gross receipts 
sharing obviates this calculation nightmare for allocating 
federal administrative costs fairly.
    H.R. 4340 would repeal the current net receipts sharing 
formula of the Mineral Leasing Act and return the program to 
the gross receipts sharing requirement of the law prior to 
1991. The result of this repeal is that States will receive 
approximately $20.5 million more annually, which monies most 
public land States dedicate for educational purposes.

                            Committee Action

    Congressman Tom Udall (D-NM) introduced H.R. 4340 on April 
13, 2000. The bill was referred to the Committee on Resources 
and within the Committee to the Subcommittee on Energy and 
Mineral Resources. On June 15, 2000, the Subcommittee held a 
hearing on the bill, hearing from witnesses from State 
governments, as well as from the Deputy Assistant Secretary of 
the Interior for Land and Minerals. On July 19, 2000, the 
Resources Committee met to consider the bill. The Subcommittee 
on Energy and Mineral Resources was discharged from further 
consideration of the bill by unanimous consent. No amendments 
were offered and the bill was ordered favorably reported to the 
House of Representatives by unanimous consent.

            Committee Oversight Findings and Recommendations

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   Constitutional Authority Statement

    Article I, section 8 of the Constitution of the United 
States grants Congress the authority to enact this bill.

                    Compliance With House Rule XIII

    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, credit 
authority, or an increase or decrease in tax expenditures. 
According to the Congressional Budget Office, enactment of this 
bill would increase direct spending over the 2001-2005 time 
period.
    3. Government Reform Oversight Findings. Under clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives, the Committee has received no report of 
oversight findings and recommendations from the Committee on 
Government Reform on this bill.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 8, 2000.
Hon. Don Young,
 Chairman, Committee on Resources,
House of Representatives, Washington, DC.
     Dear Mr. Chairman: the Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4340, the Mineral 
Revenue Payments Clarification Act of 2000.
     If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Megan 
Carroll.
             Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
     Enclosure.

 H.R. 4340--Mineral Revenue Payments Clarification Act of 2000

     Summary: H.R. 4340 would amend the Mineral Leasing Act to 
change the method used to calculate amounts paid to states from 
federal onshore mineral leasing receipts. CBO estimates that 
enacting this bill would increase direct spending by about $111 
million over the 2001-2005 period. Because the bill would 
affect direct spending, pay-as-you-go procedures would apply. 
Implementing H.R. 4340 also could affect discretionary 
spending, but we estimate that any such impacts would be less 
than $100,000 annually.
     H.R. 4340 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
Enactment of this legislation would benefit state and local 
governments by increasing the share of federal mineral revenues 
paid to the states.
     Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4340 is shown in the following table. 
The costs of this legislation fall within budget function 800 
(general government).

------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2001    2002    2003    2004    2005
------------------------------------------------------------------------
                      CHANGES IN DIRECT SPENDING \1\

Payments to States, under
 current law:
    Estimated budget authority..     617     624     620     612     629
     Estimated outlays..........     617     624     620     612     629
 Proposed changes:
     Estimated budget authority.      21      22      22      23      23
     Estimated outlays..........      21      22      22      23      23
 Payments to States under H.R.
 4340:
    Estimated budget authority..     638     646     642     635     652
     Estimated outlays..........     638     646     642     635     652
------------------------------------------------------------------------
\1\ H.R. 4340 also could affect discretionary spending, but by less than
  $100,000 a year.

     Basis of Estimate: For this estimate, CBO assumes that 
H.R. 4340 will be enacted near the start of fiscal year 2001.
     Changes in Direct Spending: Under current law, a portion 
of the federal government's annual costs to administer onshore 
mineral leasing programs is deducted from gross onshore mineral 
receipts prior to making payments to states in the following 
year. States receive 50 percent of those net receipts, except 
Alaska, which receives 90 percent of net onshore mineral 
receipts generated in that state. H.R. 4340 would amend current 
law so that no federal administrative costs would be deducted 
from gross onshore mineral receipts before making payments to 
states.
     According to the Minerals Management Service (MMS), the 
agency responsible for calculating these payments to states, 
about $21 million--18 percent of federal administrative costs 
for the onshore minerals management program incurred during 
1999--will be deducted from payments made to states for fiscal 
year 2000. Under this bill, such deductions would no longer be 
made. As a result, based on information from the MMS, CBO 
estimates that enacting H.R. 4340 would increase direct 
spending for payments to states by $21 million in 2001 and by 
$111 million over the 2001-2005 period. That estimate assumes 
that federal costs for administering onshore mineral leasing 
will continue to be about $117 million a year (adjusted 
annually for inflation) and that, under current law, payments 
to states would be reduced by 18 percent of those 
administrative costs.
    Changes in Discretionary Spending: By changing the formula 
for calculating payments to states, this legislation could 
affect administrative costs for the MMS. Based on information 
from the agency, however, we estimate that any changes in 
discretionary spending to calculate payments to states would be 
less than $100,000 a year.
    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 receipts. Because 
H.R. 4340 would increase direct spending for certain payments 
to states, pay-as-you-go procedures would apply. The net change 
in outlays that are subject to pay-as-you-go procedures is 
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
                                           ---------------------------------------------------------------------
                                             2001   2002   2003   2004   2005   2006   2007   2008   2009   2010
----------------------------------------------------------------------------------------------------------------
Changes in outlays........................     21     22     22     23     23     24     24     25     26     26
Changes in receipts.......................                              Not applicable
----------------------------------------------------------------------------------------------------------------

    Estimated Impact on State, Local, and Tribal Governments: 
H.R. 4340 contains no intergovernmental mandates as defined in 
UMRA. Enactment of this legislation would benefit state and 
local governments by increasing the share of federal mineral 
revenues paid to the states.
    Estimated Impact on the Private Sector: This bill contains 
no new private-sector mandates as defined in UMRA.
    Estimate Prepared by: Federal Costs: Megan Carroll. Impact 
on State, Local, and Tribal Governments: Marjorie Miller. 
Impact on the Private Sector: Sarah Sitarek.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                    Compliance With Public Law 104-4

    This bill contains no unfunded mandates.

                Preemption of State, Local or Tribal Law

    This bill is not intended to preempt any State, local or 
tribal law.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as 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):

                 SECTION 35 OF THE MINERAL LEASING ACT

  Sec. 35. (a)  * * *
  [(b)(1) In calculating the amount to be paid to States during 
any fiscal year under this section or under any other provision 
of law requiring payment to a State of any revenues derived 
from the leasing of any onshore lands or interest in land owned 
by the United States for the production of the same types of 
minerals leasable under this Act or of geothermal steam, 50 
percent of the portion of the enacted appropriation of the 
Department of the Interior and any other agency during the 
preceding fiscal year allocable to the administration of all 
laws providing for the leasing of any onshore lands or interest 
in land owned by the United States for the production of the 
same types of minerals leasable under this Act or of geothermal 
steam, and to enforcement of such laws, shall be deducted from 
the receipts derived under those laws in approximately equal 
amounts each month (subject to paragraph (4)) prior to the 
division and distribution of such receipts between the States 
and the United States.
  [(2) The proportion of the deduction provided in paragraph 
(1) allocable to each State shall be determined by dividing the 
monies disbursed to the State during the preceding fiscal year 
derived from onshore mineral leasing referred to in paragraph 
(1) in that State by the total money disbursed to States during 
the preceding fiscal year from such onshore mineral leasing in 
all States.
  [(3) In the event the deduction apportioned to any State 
under this subsection exceeds 50 percent of the Secretary of 
the Interior's estimate of the amounts attributable to onshore 
mineral leasing referred to in paragraph (1) within that State 
during the preceding fiscal year, the deduction from receipts 
received from leases in that State shall be limited to such 
estimated amounts and the total amount to be deducted from such 
onshore mineral leasing receipts shall be reduced accordingly.
  [(4) If the amount otherwise deductible under this subsection 
in any month from the portion of receipts to be distributed to 
a State exceeds the amount payable to the State during that 
month, any amount exceeding the amount payable shall be carried 
forward and deducted from amounts payable to the State in 
subsequent months. If any amount remains to be carried forward 
at the end of the fiscal year, such amount shall not be 
deducted from any disbursements in any subsequent fiscal year.
  [(5) All deductions to be made pursuant to this subsection 
shall be made in full during the fiscal year in which such 
deductions were incurred.]
  (b) In determining the amount of payments to the States under 
this section, the amount of such payments shall not be reduced 
by any administrative or other costs incurred by the United 
States.

                                
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