59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–713 

INNOVATION IN OFFSHORE LEASING ACT 

SEPTEMBER 6, 2016.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. BISHOP of Utah, from the Committee on Natural Resources, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 5577] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Natural Resources, to whom was referred the 

bill (H.R. 5577) to amend the Outer Continental Shelf Lands Act 

to authorize the Secretary of the Interior to conduct offshore oil 

and gas lease sales through Internet-based live lease sales, and for 

other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended 

do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Innovation in Offshore Leasing Act’’. 

SEC. 2. INTERNET-BASED OFFSHORE OIL AND GAS LEASE SALES. 

(a) AUTHORIZATION.—Section 8 of the Outer Continental Shelf Leasing Act (43 

U.S.C. 1337) is amended by adding at the end the following: 

‘‘(q) INTERNET-BASED OIL AND GAS LEASE SALES.— 

‘‘(1) IN GENERAL.—In order to modernize the Nation’s offshore leasing program to ensure the best return to the Federal taxpayer, reduce fraud, and ensure a fair and competitive leasing process, the Secretary may conduct lease 

sales under this section through Internet-based, sealed-bidding methods. 

‘‘(2) SALE REQUIREMENTS.—Sales conducted under paragraph (1) shall ensure— 

‘‘(A) a publicly and freely accessible digital delivery of the bid reading 

process, such as live Internet streaming, and an option for bidders to submit bids electronically; 


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‘‘(B) a bidder verification process that discloses to bidders, by no later 

than 5 p.m. Central Time of the day before each sale, a list of all bids submitted (including the person submitting each bid) on each lease tract without disclosing bid amounts; 

‘‘(C) the ability for a bidder to correct a possible misreading of a submitted bid; 

‘‘(D) a designee from within the Office of the Solicitor of the Department 

of the Interior to act as an independent, third-party observer who will be 

present during the bid reading process to prevent wrongdoing, independently certify the bidding process, and maintain transparency; 

‘‘(E) data security measures to ensure bidder data is kept secure; and 

‘‘(F) a participant survey soliciting voluntary feedback from bidders on 

the bidding process. 

‘‘(3) TRANSPARENCY IN SALE-DAY STATISTICS.— ‘‘(A) REQUIREMENT.—The Secretary shall publicly disclose statistical data 

regarding each lease sale under this subsection, on the day the sale is executed. 

‘‘(B) INCLUDED DATA.—Among data disclosed, the Secretary shall include— 

‘‘(i) the total value of high bids; 

‘‘(ii) the number of tracts offered; 

‘‘(iii) the number of acres offered; 

‘‘(iv) the number of tracts receiving bids; 

‘‘(v) the number of acres receiving bids; 

‘‘(vi) the total number of bids; 

‘‘(vii) the average number of bids per tract; 

‘‘(viii) the total number of bidders participating; 

‘‘(ix) bidding statistics by water depth; 

‘‘(x) the name of the entity that submitted each bid, the amount of 

the bid, and the tract for which the bid was submitted; 

‘‘(xi) of tracts receiving bids, the number of bids per tract by water 

depth; 

‘‘(xii) the tract receiving the greatest number of bids; 

‘‘(xiii) the tract receiving the highest bid; and 

‘‘(xiv) any other statistical data that may be disclosed in accordance 

with this Act. 

‘‘(C) DATA TRANSPARENCY.—The Secretary shall ensure all data regarding 

lease sales under this subsection is publicly available and easily accessible, 

free of charge, on the Internet, including for download and aggregation in 

machine-readable format.’’. 

(b) MODERNIZING LEASING THROUGH COLLABORATION.— 

(1) IN GENERAL.—Before conducting the first Internet-based lease sale under 

the amendment made by this section, the Secretary of the Interior shall issue 

a request for information from each company present for bidding at the ten 

most recent oil and gas lease sales conducted by the Secretary under the Outer 

Continental Shelf Lands Act, in order to provide the bidding public sufficient 

opportunity to share innovative ideas, methods, and concerns regarding Internet-based leasing. 

(2) INTEGRATION OF INFORMATION.—The Secretary shall review, evaluate, and 

integrate suggestions and concerns collected under paragraph (1) as the Secretary works to modernize the offshore leasing process through Internet-based 

leasing options. 

(3) USER WORKSHOP.—The Secretary shall conduct not less than one user 

workshop with viable bidders prior to conducting an Internet-based lease sale 

to provide the bidding public with an opportunity to beta test any prototype of 

an Internet-based leasing platform. 

(c) DEADLINE FOR GULF OF MEXICO LEASE SALE.—Not later than 18 months after 

the date of the enactment of this Act, the Secretary of the Interior shall conduct 

at least one Internet-based lease sale under the amendment made by subsection (a) 

for leasable acreage in the Gulf of Mexico. 

(d) EVALUATING INTERNET-BASED OFFSHORE LEASING.—Not later than 90 days 

after the third Internet-based lease sale conducted under the amendment made by 

subsection (a), the Secretary of the Interior shall analyze all such Internet-based 

lease sales and transmit to Congress a thorough analysis of the sales. The analysis 

shall include— 

(1) estimates of increases or decreases in such lease sales, compared to sales 

conducted by non-Internet-based bidding, in— 

(A) the number of bidders; 

(B) the average amount of bids; 


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(C) the highest bid; and 

(D) the lowest bid; 

(2) an estimate of the total cost or savings to the Department of the Interior 

as a result of such sales, compared to sales conducted by non-Internet-based 

bidding; 

(3) voluntary and anonymous feedback from persons participating in such 

sales, on the Internet-based leasing process and potential areas for improvement in such sales; and 

(4) an evaluation of the demonstrated or expected effectiveness of different 

structures for lease sales that may provide an opportunity to better maximize 

bidder participation, ensure the highest return to the Federal taxpayers, minimize opportunities for fraud or collusion, and ensure the security and integrity 

of the leasing process. 

PURPOSE OF THE BILL

The purpose of H.R. 5577 is to amend the Outer Continental 

Shelf Lands Act to authorize the Secretary of the Interior to conduct offshore oil and gas lease sales through Internet-based live 

lease sales. 

BACKGROUND AND NEED FOR LEGISLATION

Under the Outer Continental Shelf Lands Act (OCSLA), the Secretary of the Interior is authorized to conduct sealed-bid lease sales 

for oil and natural gas leasing on the 1.7 billion acres of U.S. outer 

Continental Shelf lands. The Secretary conducts these lease sales 

in accordance with the lease sale schedule presented every five 

years in the Outer Continental Shelf oil and natural gas leasing 

program, also known as the Five-Year Plan. A lease sale cannot be 

held unless it has been included in the Five-Year Plan. Lease sales 

are currently conducted in a sealed-bid format, with bids opened 

and read aloud at the Superdome in New Orleans, Louisiana. As 

of the July 2016 Combined Leasing Report, of the 1.7 billion offshore acres, only 21 million or 1.2% are currently under lease—for 

a total of 3,948 active leases held offshore. 

To qualify to bid on an OCS lease, you must be a U.S. citizen, 

an alien lawfully admitted for permanent residence, a private, public or municipal corporation, or an association of such aforementioned qualifying candidates. To participate in a lease sale, a bidder must submit qualifying documents and be certified by the Bureau of Ocean Energy Management (BOEM), which includes meeting specific bonding requirements to make sure the bidder is able 

to meet all potential present and future lease obligations, including 

costs to plug abandoned wells, remove platforms and other facilities, and restore the lease to its original condition. 

Leading up to a lease sale, BOEM will issue a Proposed Notice 

of Sale roughly four months prior to the sale date as well as a 

Final Notice of Sale no less than 30 days before the date of the 

lease sale. Lease sale notices are published in the Federal Register, 

allowing yet another opportunity after the multiple public comment 

periods for the Five-Year Plan for public comment on the specific 

lease sale. These sale notices contain details regarding the date, 

time, and location of the lease sale, as well as bidding instructions, 

maps of the lease blocks that will be available during the sale, 

lease terms (length of lease, rental fees and royalty rates) and 

other conditions or stipulations. A lease block is a three-mile by 

three-mile block, totaling 5,760 acres. 


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The sale notice also includes details of any site-specific stipulations for eligible lease blocks. For instance, in the most recent Central Gulf Lease Sale (#241) on March 23, 2016, the Final Notice of 

Sale makes note of the National Oceanic and Atmospheric Administration’s proposal to expand the boundaries of the Flower Garden 

Banks National Marine Sanctuary (FGBNMS), advising bidders 

that ‘‘. . . certain activities related to oil and gas exploration and 

development are already prohibited within a significant portion of 

each of the banks recommended for expansion . . .’’. While the expansion of the FGBNMS is not even through the Environmental 

Impact Statement phase, BOEM notified bidders of potential future 

limitations on oil and gas activities in lease blocks that are impacted by this proposed expansion. 

When an eligible company determines that it would like to bid 

on a lease block, it fills out a bidder form which fully describes the 

block and area number, the area name and/or map number, the 

company’s name, its BOEM-assigned company number, and the 

amount of the bid stated in whole dollars. Additionally, companies 

are required to make a bid deposit in accordance with requirements 

published in the Final Notice of Sale—generally 20 percent of the 

bid amount. A successful bidder must transfer 20 percent of the 

successful bid amount by electronic funds transfer (EFT) to BOEM 

in one lump sum to the New York Federal Reserve Bank no later 

than 2:00 p.m. Eastern Standard Time on the day following the bid 

opening. Because BOEM must ensure that each successful bid 

meets fair return thresholds to be leased, the funds are deposited 

into an interest-bearing account and if the bid is rejected, the funds 

plus interest earned are transferred back to the bid submitter by 

EFT the next business day after rejection. 

The sealed bid (bid form in a sealed envelope) is received by the 

BOEM Regional Director in the Gulf of Mexico within the time limits published in the Final Notice of Sale, generally closing at 10:00 

a.m. the day before the sale. Sealed bids are opened and read aloud 

in a public place (the Superdome) on the date and time specified 

in the Final Notice of Sale. 

Once BOEM deems a high bid to be acceptable and concurrence 

is achieved with the Department of Justice and the Federal Trade 

Commission, a lease package is delivered to the successful company 

with all necessary information, including copies of the lease. A company then must go through the permitting process with both 

BOEM and Bureau of Safety and Environmental Enforcement to 

obtain exploration plan approvals and applications for permits to 

drill a well on the lease block that has been acquired. The company 

must pay rental fees to BOEM for the duration of the lease if or 

until the company is able to reach commercial production, at which 

point the company then must pay a royalty to the federal government for all oil and natural gas developed from the lease. If a company does not conduct exploration or development activities on a 

lease within a specific period of time in accordance with the lease 

agreement, the lease could face cancellation. 

SALE STATISTICS

BOEM publishes sale statistics after each sale. Sale statistics include total acreage and number of lease blocks offered for sale, how 

many bids were received, how many companies were present for 


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1See Subcommittee hearing at http://naturalresources.house.gov/calendar/ 

eventsingle.aspx?EventID=400874. 

bidding, which lease blocks received the highest number of competitive bids, the highest bid amounts, and other information. For 

example, the Arctic Lease Sale #193 that took place in the Chukchi 

Sea in 2008 received four bids from different companies for Lease 

Block #6762. Given that the bids were sealed and each competing 

company could not see the each other’s bid, the bid amounts varied 

greatly. The bids on this lease block range from the highest, at $94 

million, to the lowest, at $104,000. Again, the bid amounts received 

is just one portion of the revenues generated from offshore leasing, 

as the company with the highest bid then must pay rental fees and 

royalties for eventual development on that block. 

CHANGES ADOPTED BY AMENDMENT

An amendment was offered by the bill sponsor, Congressman 

Garret Graves (R–LA), at the markup on July 13, 2016. This 

amendment reflected several changes requested by the Department 

of the Interior through BOEM as well as recommendations offered 

by witnesses at the hearing on the bill held on July 6, 2016. BOEM 

wanted the option to move forward with new Internet-ready capabilities that will allow bidders to submit sealed bids electronically 

rather than delivering the envelope in person, so text was included 

to reflect this addition. Furthermore, underlying bill language required a bidder verification process that discloses to bidders at 

least 24 hours before the bid reading process a list of bids submitted by all persons on each lease tract without disclosing bid 

amounts. While this is currently done for all lease sales, the Natural Resources Committee included this as a requirement to ensure 

this important data would continue to be disclosed in the future. 

However, BOEM noted that bids may still be coming in 24 hours 

prior to the sale, and therefore requested that the language be 

amended to require that this information be disclosed by 5:00 p.m. 

Central Time on the day before the sale. 

Offshore energy experts testifying at the hearing applauded the 

inclusion of an independent observer to be present for the Internet 

lease sale, but noted that ‘‘. . . by placing the Inspector General in 

an operational role, the legislation may inadvertently frustrate the 

Inspector General’s office’s ability to be independent should they 

need to investigate an irregularity in a future sale.’’ 1 For this reason, the amendment directs the independent observer to come from 

the Office of the Solicitor of the Department of the Interior. 

Finally, BOEM requested more time, specifically 18 months, to 

be able to conduct an Internet lease sale that meets all of the criteria in the legislation, so the amendment changed the deadline to 

conduct an Internet lease sale from one year to 18 months. Given 

that the amendment was adopted by unanimous consent and accommodated BOEM’s request to further extend this deadline, it is 

the Committee’s expectation that BOEM shall meet this deadline 

set by law. 

GOVERNMENT TRANSPARENCY ENHANCED

Nothing in the underlying legislation in any way prevents any 

public entity or person from voicing their support or opposition to 


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any leasing activity on the United States Outer Continental Shelf. 

In fact, as a result of this legislative effort, BOEM announced nine 

days after H.R. 5577 was ordered reported to the House of Representatives by the House Natural Resources Committee by unanimous consent on Friday, July 22, 2016, that the Western Gulf of 

Mexico Lease Sale 248, to be held on August 24, 2016, in New Orleans, Louisiana, would be the first federal offshore oil and gas auction broadcast live on the Internet. The Committee points out that 

leading up to Lease Sale 248, 18 public meetings were held related 

to the sale and five separate 45-day comment periods were provided to allow for public comment and input on this lease sale and 

offshore leasing in general. The Committee commends the August 

24, 2016, lease sale not only because it was conducted as planned 

(unlike other lease sales that were originally included in the 2012– 

2017 Five-Year plan and later canceled for no reason), but also because it was the first opportunity where the public was able to 

watch the live-stream of the lease sale over the Internet on 

www.boem.gov. The Committee also looks forward to future efforts 

by the Department of the Interior to further integrate innovative 

solutions that both enhance efficiency and foster transparency in 

the development of our Nation’s oil and gas resources. 

COMMITTEE ACTION

H.R. 5577 was introduced on June 24, 2016, by Congressman 

Garret Graves (R–LA). The bill was referred to the Committee on 

Natural Resources, and within the Committee to the Subcommittee 

on Energy and Mineral Resources. On July 6, 2016, the Subcommittee held a hearing on the bill. On July 12, 2016, the Natural 

Resources Committee met to consider the bill. The Subcommittee 

was discharged by unanimous consent. Congressman Garret 

Graves (R–LA) offered an amendment designated 001; it was 

adopted by unanimous consent. No further amendments were offered and the bill, as amended, was ordered favorably reported to 

the House of Representatives by unanimous consent on July 13, 

2016. 

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 

Natural Resources’ oversight findings and recommendations are reflected in the body of this report. 

COMPLIANCE WITH HOUSE RULE XIII 

1. Cost of Legislation and Section 308(a) of the Congressional 

Budget Act. With respect to the requirements of clause 3(c)(2) and 

(3) of rule XIII of the Rules of the House of Representatives and 

sections 308(a) and 402 of the Congressional Budget Act of 1974, 

the Committee has received the enclosed cost estimate for the bill 

from the Director of the Congressional Budget Office: 


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U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, September 1, 2016. 

Hon. ROB BISHOP, 

Chairman, Committee on Natural Resources, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5577, the Innovation in 

Offshore Leasing Act. 

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

to provide them. The CBO staff contact is Kathleen Gramp. 

Sincerely, 

KEITH HALL. 

Enclosure. 

H.R. 5577—Innovation in Offshore Leasing Act 

H.R. 5577 would authorize the Bureau of Ocean Energy Management (BOEM) to use Internet-based bidding methods for auctions 

of federal oil and gas leases in the Outer Continental Shelf (OCS). 

Such Internet-based auctions would have to provide bidders the option of submitting bids electronically and make the agency’s reading of the scaled bids available in digital formats, such as live 

Internet streaming. Under this bill, BOEM would be required to 

conduct at least one Internet-based auction in the Gulf of Mexico 

within 18 months after enactment. Finally, the bill would direct 

BOEM to collect, analyze, and publish certain information about 

these auctions. 

Using information provided by the Department of the Interior 

and other agencies, CBO estimates that implementing the bill 

would cost about $2 million over the 2017–2021 period, assuming 

appropriation of the necessary amounts. Firms participating in 

OCS auctions submit sealed bids at rates ranging from 300 to 

3,000 bids a year, using standardized short forms developed by 

BOEM. CBO expects that the cost of developing and operating online systems to process such bids would be similar to the costs of 

other energy data collection and bidding systems, such as those 

used by the Energy Information Administration and for OCS auctions of renewable energy leases. 

H.R. 5577 could affect offsetting receipts from bonus payments, 

which are treated as reductions in direct spending; therefore, payas-you-go procedures apply. CBO estimates, however, that the net 

effect on direct spending would be negligible because the cost to 

firms of participating in OCS auctions is small relative to the 

amounts paid for the leases, which can range from a few hundred 

million dollars to more than $1 billion a year. Enacting the bill 

would not affect revenues. 

CBO estimates that enacting the legislation would not increase 

net direct spending or on-budget deficits by more than $5 billion 

in one or more of the four consecutive 10-year periods beginning in 

2027. 

H.R. 5577 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 


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The CBO staff contact for this estimate is Kathleen Gramp. The 

estimate was approved by Theresa Gullo, Assistant Direct for 

Budget Analysis. 

2. General Performance Goals and Objectives. As required by 

clause 3(c)(4) of rule XIII, the general performance goal or objective 

of this bill is to amend the Outer Continental Shelf Lands Act to 

authorize the Secretary of the Interior to conduct offshore oil and 

gas lease sales through Internet-based live lease sales. 

EARMARK STATEMENT

This bill does not contain any Congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined under clause 9(e), 

9(f), and 9(g) of rule XXI of the Rules of the House of Representatives. 

COMPLIANCE WITH PUBLIC LAW 104–4 

This bill contains no unfunded mandates. 

COMPLIANCE WITH H. RES. 5 

Directed Rule Making. The Chairman does not believe that this 

bill directs any executive branch official to conduct any specific 

rule-making proceedings. 

Duplication of Existing Programs. This bill does not establish or 

reauthorize a program of the federal government known to be duplicative of another program. Such program was not included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139 or identified in the 

most recent Catalog of Federal Domestic Assistance published pursuant to the Federal Program Information Act (Public Law 95–220, 

as amended by Public Law 98–169) as relating to other programs. 

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 (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

OUTER CONTINENTAL SHELF LANDS ACT 

* * * * * * * 

SEC. 8. LEASES, EASEMENTS, AND RIGHTS-OF-WAY ON THE OUTER

CONTINENTAL SHELF.—(a)(1) The Secretary is authorized to grant 

to the highest responsible qualified bidder or bidders by competitive bidding, under regulations promulgated in advance, any oil 

and gas lease on submerged lands of the outer Continental Shelf 

which are not covered by leases meeting the requirements of subsection (a) of section 6 of this Act. Such regulations may provide 

for the deposit of cash bids in an interest-bearing account until the 

Secretary announces his decision on whether to accept the bids, 

with the interest earned thereon to be paid to the Treasury as to 


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bids that are accepted and to the unsuccessful bidders as to bids 

that are rejected. The bidding shall be by sealed bid and, at the 

discretion of the Secretary, on the basis of— 

(A) cash bonus bid with a royalty at not less than 121⁄2 per 

centum fixed by the Secretary in amount or value of the production saved, removed, or sold; 

(B) variable royalty bid based on a per centum in amount or 

value of the production saved, removed, or sold, with either a 

fixed work commitment based on dollar amount for exploration 

or a fixed cash bonus as determined by the Secretary, or both; 

(C) cash bonus bid, or work commitment bid based on a dollar amount for exploration with a fixed cash bonus, and a diminishing or sliding royalty based on such formulae as the Secretary shall determine as equitable to encourage continued 

production from the lease area as resources diminish, but not 

less than 121⁄2 per centum at the beginning of the lease period 

in amount or value of the production saved, removed, or sold; 

(D) cash bonus bid with a fixed share of the net profits of no 

less than 30 per centum to be derived from the production of 

oil and gas from the lease area; 

(E) fixed cash bonus with the net profit share reserved as the 

bid variable; 

(F) cash bonus bid with a royalty at no less than 121⁄2 per 

centum fixed by the Secretary in amount or value of the production saved, removed, or sold and a fixed per centum share 

of net profits of no less than 30 per centum to be derived from 

the production of oil and gas from the lease area; 

(G) work commitment bid based on a dollar amount for exploration with a fixed cash bonus and a fixed royalty in 

amount or value of the production saved, removed, or sold; 

(H) cash bonus bid with royalty at no less than 12 and 1⁄2

per centum fixed by the Secretary in amount or value of production saved, removed, or sold, and with suspension of royalties for a period, volume, or value of production determined by 

the Secretary, which suspensions may vary based on the price 

of production from the lease; or 

(I) subject to the requirements of paragraph (4) of this subsection, any modification of bidding systems authorized in subparagraphs (A) through (G), or any other systems of bid variables, terms, and conditions which the Secretary determines to 

be useful to accomplish the purposes and policies of this Act, 

except that no such bidding system or modification shall have 

more than one bid variable. 

(2) The Secretary may, in his discretion, defer any part of the 

payment of the cash bonus, as authorized in paragraph (1) of this 

subsection, according to a schedule announced at the time of the 

announcement of the lease sale, but such payment shall be made 

in total no later than five years after the date of the lease sale. 

(3)(A) The Secretary may, in order to promote increased production on the lease area, through direct, secondary, or tertiary recovery means, reduce or eliminate any royalty or net profit share set 

forth in the lease for such area. 

(B) In the Western and Central Planning Areas of the Gulf of 

Mexico and the portion of the Eastern Planning Area of the Gulf 

of Mexico encompassing whole lease blocks lying west of 87 deVerDate Sep 11 2014 01:40 Sep 09, 2016 Jkt 059006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6601 E:\HR\OC\HR713.XXX HR713

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grees, 30 minutes West longitude and in the Planning Areas offshore Alaska, the Secretary may, in order to— 

(i) promote development or increased production on producing or non-producing leases; or 

(ii) encourage production of marginal resources on producing 

or non-producing leases; 

through primary, secondary, or tertiary recovery means, reduce 

or eliminate any royalty or net profit share set forth in the 

lease(s). With the lessee’s consent, the Secretary may make 

other modifications to the royalty or net profit share terms of 

the lease in order to achieve these purposes. 

(C)(i) Notwithstanding the provisions of this Act other than this 

subparagraph, with respect to any lease or unit in existence on the 

date of enactment of the Outer Continental Shelf Deep Water Royalty Relief Act meeting the requirements of this subparagraph, no 

royalty payments shall be due on new production, as defined in 

clause (iv) of this subparagraph, from any lease or unit located in 

water depths of 200 meters or greater in the Western and Central 

Planning Areas of the Gulf of Mexico, including that portion of the 

Eastern Planning Area of the Gulf of Mexico encompassing whole 

lease blocks lying west of 87 degrees, 30 minutes West longitude, 

until such volume of production as determined pursuant to clause 

(ii) has been produced by the lessee. 

(ii) Upon submission of a complete application by the lessee, the 

Secretary shall determine within 180 days of such application 

whether new production from such lease or unit would be economic 

in the absence of the relief from the requirement to pay royalties 

provided for by clause (i) of this subparagraph. In making such determination, the Secretary shall consider the increased technological and financial risk of deep water development and all costs 

associated with exploring, developing, and producing from the 

lease. The lessee shall provide information required for a complete 

application to the Secretary prior to such determination. The Secretary shall clearly define the information required for a complete 

application under this section. Such application may be made on 

the basis of an individual lease or unit. If the Secretary determines 

that such new production would be economic in the absence of the 

relief from the requirement to pay royalties provided for by clause 

(i) of this subparagraph, the provisions of clause (i) shall not apply 

to such production. If the Secretary determines that such new production would not be economic in the absence of the relief from the 

requirement to pay royalties provided for by clause (i), the Secretary must determine the volume of production from the lease or 

unit on which no royalties would be due in order to make such new 

production economically viable; except that for new production as 

defined in clause (iv)(I), in no case will that volume be less than 

17.5 million barrels of oil equivalent in water depths of 200 to 400 

meters, 52.5 million barrels of oil equivalent in 400–800 meters of 

water, and 87.5 million barrels of oil equivalent in water depths 

greater than 800 meters. Redetermination of the applicability of 

clause (i) shall be undertaken by the Secretary when requested by 

the lessee prior to the commencement of the new production and 

upon significant change in the factors upon which the original determination was made. The Secretary shall make such redetermination within 120 days of submission of a complete application. 


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The Secretary may extend the time period for making any determination or redetermination under this clause for 30 days, or 

longer if agreed to by the applicant, if circumstances so warrant. 

The lessee shall be notified in writing of any determination or redetermination and the reasons for and assumptions used for such determination. Any determination or redetermination under this 

clause shall be a final agency action. The Secretary’s determination 

or redetermination shall be judicially reviewable under section 

10(a) of the Administrative Procedures Act (5 U.S.C. 702), only for 

actions filed within 30 days of the Secretary’s determination or redetermination. 

(iii) In the event that the Secretary fails to make the determination or redetermination called for in clause (ii) upon application by 

the lessee within the time period, together with any extension 

thereof, provided for by clause (ii), no royalty payments shall be 

due on new production as follows: 

(I) For new production, as defined in clause (iv)(I) of this 

subparagraph, no royalty shall be due on such production according to the schedule of minimum volumes specified in clause 

(ii) of this subparagraph. 

(II) For new production, as defined in clause (iv)(II) of this 

subparagraph, no royalty shall be due on such production for 

one year following the start of such production. 

(iv) For purposes of this subparagraph, the term ‘‘new production’’ is— 

(I) any production from a lease from which no royalties are 

due on production, other than test production, prior to the date 

of enactment of the Outer Continental Shelf Deep Water Royalty Relief Act; or 

(II) any production resulting from lease development activities pursuant to a Development Operations Coordination Document, or supplement thereto that would expand production significantly beyond the level anticipated in the Development Operations Coordination Document, approved by the Secretary 

after the date of enactment of the Outer Continental Shelf 

Deep Water Royalty Relief Act. 

(v) During the production of volumes determined pursuant to 

clauses (ii) or (iii) of this subparagraph, in any year during which 

the arithmetic average of the closing prices on the New York Mercantile Exchange for light sweet crude oil exceeds $28.00 per barrel, any production of oil will be subject to royalties at the lease 

stipulated royalty rate. Any production subject to this clause shall 

be counted toward the production volume determined pursuant to 

clause (ii) or (iii). Estimated royalty payments will be made if such 

average of the closing prices for the previous year exceeds $28.00. 

After the end of the calendar year, when the new average price can 

be calculated, lessees will pay any royalties due, with interest but 

without penalty, or can apply for a refund, with interest, of any 

overpayment. 

(vi) During the production of volumes determined pursuant to 

clause (ii) or (iii) of this subparagraph, in any year during which 

the arithmetic average of the closing prices on the New York Mercantile Exchange for natural gas exceeds $3.50 per million British 

thermal units, any production of natural gas will be subject to royalties at the lease stipulated royalty rate. Any production subject 


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to this clause shall be counted toward the production volume determined pursuant to clauses (ii) or (iii). Estimated royalty payments 

will be made if such average of the closing prices for the previous 

year exceeds $3.50. After the end of the calendar year, when the 

new average price can be calculated, lessees will pay any royalties 

due, with interest but without penalty, or can apply for a refund, 

with interest, of any overpayment. 

(vii) The prices referred to in clauses (v) and (vi) of this subparagraph shall be changed during any calendar year after 1994 by the 

percentage, if any, by which the implicit price deflator for the gross 

domestic product changed during the preceding calendar year. 

(4)(A) The Secretary of Energy shall submit any bidding system 

authorized in subparagraph (H) of paragraph (1) to the Senate and 

House of Respresentatives. The Secretary may institute such bidding system unless either the Senate or the House of Representatives passes a resolution of disapproval within thirty days after receipt of the bidding system. 

(B) Subparagraphs (C) through (J) of this paragraph are enacted 

by Congress— 

(i) as an exercise of the rulemaking power of the Senate and 

the House of Representatives, respectively, and as such they 

are deemed a part of the rules of each House, respectively, but 

they are applicable only with respect to the procedures to be 

followed in that House in the case of resolutions described by 

this paragraph, and they supersede other rules only to the extent that they are inconsistent therewith; and 

(ii) with full recognition of the constitutional right of either 

House to change the rules (so far as relating to the procedure 

of that House) at any time, in the same manner, and to the 

same extent as in the case of any other rule of that House. 

(C) A resolution disapproving a bidding system submitted pursuant to this paragraph shall immediately be referred to a committee 

(and all resolutions with respect to the same request shall be referred to the same committee) by the President of the Senate or the 

Speaker of the House of Representative, as the case may be. 

(D) If the committee to which has been referred any resolution 

disapproving the bidding system of the Secretary has not reported 

the resolution at the end of ten calendar days after its referral, it 

shall be in order to move either to discharge the committee from 

further consideration of the resolution or to discharge the committee from further consideration of any other resolution with respect to the same bidding system which has been referred to the 

committee. 

(E) A motion to discharge may be made only by an individual favoring the resolution, shall be highly privileged (except that it may 

not be made after the committee has reported a resolution with respect to the same recommendation), and debate thereon shall be 

limited to not more than one hour, to be divided equally between 

those favoring and those opposing the resolution. An amendment to 

the motion shall not be in order, and it shall not be in order to 

move to reconsider the vote by which the motion is agreed to or disagreed to. 

(F) If the motion to discharge is agreed to or disagreed to, the 

motion may not be renewed, nor may another motion to discharge 


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the committee be made with respect to any other resolution with 

respect to the same bidding system. 

(G) When the committee has reported, or has been discharged 

from further consideration of, a resolution as provided in this paragraph, it shall be at any time thereafter in order (even though a 

previous motion to the same effect has been disagreed to) to move 

to proceed to the consideration of the resolution. The motion shall 

be highly privileged and shall not be debatable. An amendment to 

the motion shall not be in order, and it shall not be in order to 

move to reconsider the vote by which the motion is agreed to or disagreed to. 

(H) Debate on the resolution is limited to not more than two 

hours, to be divided equally between those favoring and those opposing the resolution. A motion further to limit debate is not debatable. An amendment to, or motion to recommit, the resolution is 

not in order, and it is not in order to move to reconsider the vote 

by which the resolution is agreed to or disagreed to. 

(I) Motions to postpone, made with respect to the discharge from 

the committee, or the consideration of a resolution with respect to 

a bidding system, and motions to proceed to the consideration of 

other business, shall be decided without debate. 

(J) Appeals from the decisions of the Chair relating to the application of the rules of the Senate or the House of Representatives, 

as the case may be, to the procedure relating to a resolution with 

respect to a bidding system shall be decided without debate. 

(5)(A) During the five-year period commencing on the date of enactment of this subsection, the Secretary may, in order to obtain 

statistical information to determine which bidding alternatives will 

best accomplish the purposes and policies of this Act, require, as 

to no more than 10 per centum of the tracts offered each year, each 

bidder to submit bids for any area of the outer Continental Shelf 

in accordance with more than one of the bidding systems set forth 

in paragraph (1) of this subsection. For such statistical purposes, 

leases may be awarded using a bidding alternative selected at random for the acquisition of valid statistical data if such bidding alternative is otherwise consistent with the provisions of this Act. 

(B) The bidding systems authorized by paragraph (1) of this subsection, other than the system authorized by subparagraph (A), 

shall be applied to not less than 20 per centum and not more than 

60 per centum of the total area offered for leasing each year during 

the five-year period beginning on the date of enactment of this subsection, unless the Secretary determines that the requirements set 

forth in this subparagraph are inconsistent with the purposes and 

policies of this Act. 

(6) At least ninety days prior to notice of any lease sale under 

subparagraph (D), (E), (F), or, if appropriate, (H) of paragraph (1), 

the Secretary shall by regulation establish rules to govern the calculation of net profits. In the event of any dispute between the 

United States and a lessee concerning the calculation of the net 

profits under the regulation issued pursuant to this paragraph, the 

burden of proof shall be on the lessee. 

(7) After an oil and gas lease is granted pursuant to any of the 

work commitment options of paragraph (1) of this subsection— 

(A) the lessee, at its option, shall deliver to the Secretary 

upon issuance of the lease either (i) a cash deposit for the full 


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amount of the exploration work commitment, or (ii) a performance bond in form and substance and with a surety satisfactory 

to the Secretary, in the principal amount of such exploration 

work commitment assuring the Secretary that such commitment shall be faithfully discharged in accordance with this section, regulations, and the lease; and for purposes of this subparagraph, the principal amount of such cash deposit or bond 

may, in accordance with regulations, be periodically reduced 

upon proof, satisfactory to the Secretary, that a portion of the 

exploration work commitment has been satisfied; 

(B) 50 per centum of all exploration expenditures on, or directly related to, the lease, including, but not limited to (i) geological investigations and related activities, (ii) geophysical investigations including seismic, geomagnetic, and gravity surveys, data processing and interpretation, and (iii) exploratory 

drilling, core drilling, redrilling, and well completion or abandonment, including the drilling of wells sufficient to determine 

the size and area extent of any newly discovered field, and including the cost of mobilization and demobilization of drilling 

equipment, shall be included in satisfaction of the commitment, except that the lessee’s general overhead cost shall not 

be so included against the work commitment, but its cost (including employee benefits) of employees directly assigned to 

such exploration work shall be so included; and 

(C) if at the end of the primary term of the lease, including 

any extension thereof, the full dollar amount of the exploration 

work commitment has not been satisfied, the balance shall 

then be paid in cash to the Secretary. 

(8) Not later than thirty days before any lease sale, the Secretary 

shall submit to the Congress and publish in the Federal Register 

a notice— 

(A) identifying any bidding system which will be utilized for 

such lease sale and the reasons for the utilization of such bidding system; and 

(B) designating the lease tracts selected which are to be offered in such sale under the bidding system authorized by subparagraph (A) of paragraph (1) and the lease tracts selected 

which are to be offered under any one or more of the bidding 

systems authorized by subparagraphs (B) through (H) of paragraph (1), and the reasons such lease tracts are to be offered 

under a particular bidding system. 

(b) An oil and gas lease issued pursuant to this section shall— 

(1) be for a tract consisting of a compact area not exceeding 

five thousand seven hundred and sixty acres, as the Secretary 

may determine, unless the Secretary finds that a larger area 

is necessary to comprise a reasonable economic production 

unit; 

(2) be for an initial period of— 

(A) five years; or 

(B) not to exceed ten years where the Secretary finds 

that such longer period is necessary to encourage exploration and development in areas because of unusually deep 

water or other unusually adverse conditions, 

and as long after such initial period as oil or gas is produced 

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ing operations as approved by the Secretary are conducted 

thereon; 

(3) require the payment of amount or value as determined by 

one of the bidding systems set forth in subsection (a) of this 

section; 

(4) entitle the lessee to explore, develop, and produce the oil 

and gas contained within the lease area, conditioned upon due 

diligence requirements and the approval of the development 

and production plan required by this Act; 

(5) provide for suspension or cancellation of the lease during 

the initial lease term or thereafter pursuant to section 5 of this 

Act; 

(6) contain such rental and other provisions as the Secretary 

may prescribe at the time of offering the area for lease; and 

(7) provide a requirement that the lessee offer 20 per centum 

of the crude oil, condensate, and natural gas liquids produced 

on such lease, at the market value and point of delivery applicable to Federal royalty oil, to small or independent refiners as 

defined in the Emergency Petroleum Allocation Act of 1973. 

(c)(1) Following each notice of a proposed lease sale and before 

the acceptance of bids and the issuance of leases based on such 

bids, the Secretary shall allow the Attorney General, in consultation with the Federal Trade Commission, thirty days to review the 

results of such lease sale, except that the Attorney General, after 

consultation with the Federal Trade Commission, may agree to a 

shorter review period. 

(2) The Attorney General may, in consultation with the Federal 

Trade Commission, conduct such antitrust review on the likely effects the issuance of such leases would have on competition as the 

Attorney General, after consultation with the Federal Trade Commission, deems appropriate and shall advise the Secretary with respect to such review. The Secretary shall provide such information 

as the Attorney General, after consultation with the Federal Trade 

Commission, may require in order to conduct any antitrust review 

pursuant to this paragraph and to make recommendations pursuant to paragraph (3) of this subsection. 

(3) The Attorney General, after consultation with the Federal 

Trade Commission, may make such recommendations to the Secretary, including the nonacceptance of any bid, as may be appropriate to prevent any situation inconsistent with the antitrust laws. 

If the Secretary determines, or if the Attorney General advises the 

Secretary, after consultation with the Federal Trade Commission 

and prior to the issuance of any lease, that such lease may create 

or maintain a situation inconsistent with the antitrust laws, the 

Secretary may— 

(A) refuse (i) to accept an otherwise qualified bid for such 

lease, or (ii) to issue such lease, notwithstanding subsection (a) 

of this section; or 

(B) issue such lease, and notify the lessee and the Attorney 

General of the reason for such decision. 

(4)(A) Nothing in this subsection shall restrict the power under 

any other Act or the common law of the Attorney General, the Federal Trade Commission, or any other Federal department or agency 

to secure information, conduct reviews, make recommendations, or 

seek appropriate relief. 


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(B) Neither the issuance of a lease nor anything in this subsection shall modify or abridge any private right of action under 

the antitrust laws. 

(d) No bid for a lease may be submitted if the Secretary finds, 

after notice and hearing, that the bidder is not meeting due diligence requirements on other leases. 

(e) No lease issued under this Act may be sold, exchanged, assigned, or otherwise transferred except with the approval of the 

Secretary. Prior to any such approval, the Secretary shall consult 

with and give due consideration to the views of the Attorney General. 

(f) Nothing in this Act shall be deemed to convey to any person, 

association, corporation, or other business organization immunity 

from civil or criminal liability, or to create defenses to actions, 

under any antitrust law. 

(g)(1) At the time of soliciting nominations for the leasing of 

lands containing tracts wholly or partially within three nautical 

miles of the seaward boundary of any coastal State, and subsequently as new information is obtained or developed by the Secretary, the Secretary, in addition to the information required by 

section 26 of this Act, shall provide the Governor of such State— 

(A) an identification and schedule of the areas and regions 

proposed to be offered for leasing; 

(B) at the request of the Governor of such State, all information from all sources concerning the geographical, geological, 

and ecological characteristics of such tracts; 

(C) an estimate of the oil and gas reserves in the areas proposed for leasing; and 

(D) at the request of the Governor of such State, an identification of any field, geological structure, or trap located wholly 

or partially within three nautical miles of the seaward boundary of such coastal State, including all information relating to 

the entire field, geological structure, or trap. 

The provisions of the first sentence of subsection (c) and the provisions of subsections (e)–(h) of section 26 of this Act shall be applicable to the release by the Secretary of any information to any coastal State under this paragraph. In addition, the provisions of subsections (c) and (e)–(h) of section 26 of this Act shall apply in their 

entirety to the release by the Secretary to any coastal State of any 

information relating to Federal lands beyond three nautical miles 

of the seaward boundary of such coastal State. 

(2) Notwithstanding any other provision of this Act, the Secretary shall deposit into a separate account in the Treasury of the 

United States all bonuses, rents, and royalties, and other revenues 

(derived from any bidding system authorized under subsection 

(a)(1), excluding Federal income and windfall profits taxes, and derived from any lease issued after September 18, 1978 of any Federal tract which lies wholly (or, in the case of Alaska, partially 

until seven years from the date of settlement of any boundary dispute that is the subject of an agreement under section 7 of this Act 

entered into prior to January 1, 1986 or until April 15, 1993 with 

respect to any other tract) within three nautical miles of the seaward boundary of any coastal State, or, (except as provided above 

for Alaska) in the case where a Federal tract lies partially within 

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nuses, rents, royalties, and other revenues (derived from any bidding system authorized under subsection (a)(1), excluding Federal 

income and windfall profits taxes, and derived from any lease 

issued after September 18, 1978 of such tract equal to the percentage of surface acreage of the tract that lies within such three nautical miles. Except as provided in paragraph (5) of this subsection, 

not later than the last business day of the month following the 

month in which those revenues are deposited in the Treasury, the 

Secretary shall transmit to such coastal State 27 percent of those 

revenues, together with all accrued interest thereon. The remaining balance of such revenues shall be transmitted simultaneously 

to the miscellaneous receipts account of the Treasury of the United 

States. 

(3) Whenever the Secretary or the Governor of a coastal State determines that a common potentially hydrocarbon-bearing area may 

underlie the Federal and State boundary, the Secretary or the Governor shall notify the other party in writing of his determination 

and the Secretary shall provide to the Governor notice of the current and projected status of the tract or tracts containing the common potentially hydrocarbon-bearing area. If the Secretary has 

leased or intends to lease such tract or tracts, the Secretary and 

the Governor of the coastal State may enter into an agreement to 

divide the revenues from production of any common potentially hydrocarbon-bearing area, by unitization or other royalty sharing 

agreement, pursuant to existing law. If the Secretary and the Governor do not enter into an agreement, the Secretary may nevertheless proceed with the leasing of the tract or tracts. Any revenue received by the United States under such an agreement shall be subject to the requirements of paragraph (2). 

(4) The deposits in the Treasury account described in this section 

shall be invested by the Secretary of the Treasury in securities 

backed by the full faith and credit of the United States having maturities suitable to the needs of the account and yielding the highest reasonably available interest rates as determined by the Secretary of the Treasury. 

(5)(A) When there is a boundary dispute between the United 

States and a State which is subject to an agreement under section 

7 of this Act, the Secretary shall credit to the account established 

pursuant to such agreement all bonuses, rents, and royalties, and 

other revenues (derived from any bidding system authorized under 

subsection (a)(1)), excluding Federal income and windfall profits 

taxes, and derived from any lease issued after September 18, 1978 

of any Federal tract which lies wholly or partially within three 

nautical miles of the seaward boundary asserted by the State, if 

that money has not otherwise been deposited in such account. Proceeds of an escrow account established pursuant to an agreement 

under section 7 shall be distributed as follows: 

(i) Twenty-seven percent of all bonuses, rents, and royalties, 

and other revenues (derived from any bidding system authorized under subsection (a)(1)), excluding Federal income and 

windfall profits taxes, and derived from any lease issued after 

September 18, 1978, of any tract which lies wholly within three 

nautical miles of the seaward boundary asserted by the Federal Government in the boundary dispute, together with all accrued interest thereon, shall be paid to the State either— 


emcdonald on DSK9F6TC42PROD with HEARING
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(I) within thirty days of December 1, 1987, or 

(II) by the last business day of the month following the 

month in which those revenues are deposited in the Treasury, whichever date is later. 

(ii) Upon the settlement of a boundary dispute which is subject to a section 7 agreement between the United States and 

a State, the Secretary shall pay to such State any additional 

moneys due such State from amounts deposited in or credited 

to the escrow account. If there is insufficient money deposited 

in the escrow account, the Secretary shall transmit, from any 

revenues derived from any lease of Federal lands under this 

Act, the remaining balance due such State in accordance with 

the formula set forth in section 8004(b)(1)(B) of the Outer Continental Shelf Lands Act Amendments of 1985. 

(B) This paragraph applies to all Federal oil and gas lease sales, 

under this Act, including joint lease sales, occurring after September 18, 1978. 

(6) This section shall be deemed to take effect on October 1, 1985, 

for purposes of determining the amounts to be deposited in the separate account and the States’ shares described in paragraph (2). 

(7) When the Secretary leases any tract which lies wholly or partially within three miles of the seaward boundary of two or more 

States, the revenues from such tract shall be distributed as otherwise provided by this section, except that the State’s share of such 

revenues that would otherwise result under this section shall be divided equally among such States. 

(h) Nothing contained in this section shall be construed to alter, 

limit, or modify any claim of any State to any jurisdiction over, or 

any right, title or interest in, any submerged lands. 

(i) In order to meet the urgent need for further exploration and 

development of the sulphur deposits in the submerged lands of the 

outer Continental Shelf, the Secretary is authorized to grant to the 

qualified persons offering the highest cash bonuses on a basis of 

competitive bidding sulphur leases on submerged lands of the outer 

Continental Shelf, which are not covered by leases which include 

sulphur and meet the requirements of subsection (a) of section 6 

of this Act, and which sulphur leases shall be offered for bid by 

sealed bids and granted on separate leases from oil and gas leases, 

and for a separate consideration, and without priority or preference 

accorded to oil and gas lessees on the same area. 

(j) A sulphur lease issued by the Secretary pursuant to this section shall (1) cover an area of such size and dimensions as the Secretary may determine, (2) be for a period of not more than ten 

years and so long thereafter as sulphur may be produced from the 

area in paying quantities or drilling, well reworking, plant construction, or other operations for the production of sulphur, as approved by the Secretary, are conducted thereon, (3) require the 

payment to the United States of such royalty as may be specified 

in the lease but not less than 5 per centum of the gross production 

of value of the sulphur at the wellhead, and (4) contained such 

rental provisions and such other terms and provisions as the Secretary may by regulation prescribe at the time of offering the area 

for lease. 

(k)(1) The Secretary is authorized to grant to the qualified persons offering the highest cash bonuses on a basis of competitive 


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bidding leases of any mineral other than oil, gas, and sulphur in 

any area of the outer Continental Shelf not then under lease for 

such mineral upon such royalty, rental, and other terms and conditions as the Secretary may prescribe at the time of offering the 

area for lease. 

(2)(A) Notwithstanding paragraph (1), the Secretary may negotiate with any person an agreement for the use of Outer Continental Shelf sand, gravel and shell resources— 

(i) for use in a program of, or project for, shore protection, 

beach restoration, or coastal wetlands restoration undertaken 

by a Federal, State, or local government agency; or 

(ii) for use in a construction project, other than a project described in clause (i), that is funded in whole or in part by or 

authorized by the Federal Government. 

(B) In carrying out a negotiation under this paragraph, the Secretary may assess a fee based on an assessment of the value of the 

resources and the public interest served by promoting development 

of the resources. No fee shall be assessed directly or indirectly 

under this subparagraph against a Federal, State, or local government agency. 

(C) The Secretary may, through this paragraph and in consultation with the Secretary of Commerce, seek to facilitate projects in 

the coastal zone, as such term is defined in section 304 of the 

Coastal Zone Management Act of 1972 (16 U.S.C. 1453), that promote the policy set forth in section 303 of that Act (16 U.S.C. 

1452). 

(D) Any Federal agency which proposes to make use of sand, 

gravel and shell resources subject to the provisions of this Act shall 

enter into a Memorandum of Agreement with the Secretary concerning the potential use of those resources. The Secretary shall 

notify the Committee on Merchant Marine and Fisheries and the 

Committee on Natural Resources of the House of Representatives 

and the Committee on Energy and Natural Resources of the Senate 

on any proposed project for the use of those resources prior to the 

use of those resources. 

(l) Notices of sale of leases, and the terms of bidding authorized 

by this section shall be published at least thirty days before the 

date of sale in accordance with rules and regulations promulgated 

by the Secretary. 

(m) All moneys paid to the Secretary for or under leases granted 

pursuant to this section shall be deposited in the Treasury in accordance with section 9 of this Act. 

(n) The issuance of any lease by the Secretary pursuant to this 

Act, or the making of any interim arrangements by the Secretary 

pursuant to section 7 of this Act shall not prejudice the ultimate 

settlement or adjudication of the question as to whether or not the 

area involved is in the outer Continental Shelf. 

(o) The Secretary may cancel any lease obtained by fraud or misrepresentation. 

(p) LEASES, EASEMENTS, OR RIGHTS-OF-WAY FOR ENERGY AND RE- LATED PURPOSES.— (1) IN GENERAL.—The Secretary, in consultation with the 

Secretary of the Department in which the Coast Guard is operating and other relevant departments and agencies of the Federal Government, may grant a lease, easement, or right-of-way 


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on the outer Continental Shelf for activities not otherwise authorized in this Act, the Deepwater Port Act of 1974 (33 U.S.C. 

1501 et seq.), the Ocean Thermal Energy Conversion Act of 

1980 (42 U.S.C. 9101 et seq.), or other applicable law, if those 

activities— 

(A) support exploration, development, production, or 

storage of oil or natural gas, except that a lease, easement, 

or right-of-way shall not be granted in an area in which 

oil and gas preleasing, leasing, and related activities are 

prohibited by a moratorium; 

(B) support transportation of oil or natural gas, excluding shipping activities; 

(C) produce or support production, transportation, or 

transmission of energy from sources other than oil and 

gas; or 

(D) use, for energy-related purposes or for other authorized marine-related purposes, facilities currently or previously used for activities authorized under this Act, except that any oil and gas energy-related uses shall not be 

authorized in areas in which oil and gas preleasing, leasing, and related activities are prohibited by a moratorium. 

(2) PAYMENTS AND REVENUES.—(A) The Secretary shall establish royalties, fees, rentals, bonuses, or other payments to 

ensure a fair return to the United States for any lease, easement, or right-of-way granted under this subsection. 

(B) The Secretary shall provide for the payment of 27 percent of the revenues received by the Federal Government as a 

result of payments under this section from projects that are located wholly or partially within the area extending three nautical miles seaward of State submerged lands. Payments shall 

be made based on a formula established by the Secretary by 

rulemaking no later than 180 days after the date of enactment 

of this section that provides for equitable distribution, based on 

proximity to the project, among coastal states that have a 

coastline that is located within 15 miles of the geographic center of the project. 

(3) COMPETITIVE OR NONCOMPETITIVE BASIS.—Except with respect to projects that meet the criteria established under section 388(d) of the Energy Policy Act of 2005, the Secretary 

shall issue a lease, easement, or right-of-way under paragraph 

(1) on a competitive basis unless the Secretary determines 

after public notice of a proposed lease, easement, or right-ofway that there is no competitive interest. 

(4) REQUIREMENTS.—The Secretary shall ensure that any activity under this subsection is carried out in a manner that 

provides for— 

(A) safety; 

(B) protection of the environment; 

(C) prevention of waste; 

(D) conservation of the natural resources of the outer 

Continental Shelf; 

(E) coordination with relevant Federal agencies; 

(F) protection of national security interests of the United 

States; 


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(G) protection of correlative rights in the outer Continental Shelf; 

(H) a fair return to the United States for any lease, easement, or right-of-way under this subsection; 

(I) prevention of interference with reasonable uses (as 

determined by the Secretary) of the exclusive economic 

zone, the high seas, and the territorial seas; 

(J) consideration of— 

(i) the location of, and any schedule relating to, a 

lease, easement, or right-of-way for an area of the 

outer Continental Shelf; and 

(ii) any other use of the sea or seabed, including use 

for a fishery, a sealane, a potential site of a deepwater 

port, or navigation; 

(K) public notice and comment on any proposal submitted for a lease, easement, or right-of-way under this 

subsection; and 

(L) oversight, inspection, research, monitoring, and enforcement relating to a lease, easement, or right-of-way 

under this subsection. 

(5) LEASE DURATION, SUSPENSION, AND CANCELLATION.—The 

Secretary shall provide for the duration, issuance, transfer, renewal, suspension, and cancellation of a lease, easement, or 

right-of-way under this subsection. 

(6) SECURITY.—The Secretary shall require the holder of a 

lease, easement, or right-of-way granted under this subsection 

to— 

(A) furnish a surety bond or other form of security, as 

prescribed by the Secretary; 

(B) comply with such other requirements as the Secretary considers necessary to protect the interests of the 

public and the United States; and 

(C) provide for the restoration of the lease, easement, or 

right-of-way. 

(7) COORDINATION AND CONSULTATION WITH AFFECTED STATE

AND LOCAL GOVERNMENTS.—The Secretary shall provide for coordination and consultation with the Governor of any State or 

the executive of any local government that may be affected by 

a lease, easement, or right-of-way under this subsection. 

(8) REGULATIONS.—Not later than 270 days after the date of 

enactment of the Energy Policy Act of 2005, the Secretary, in 

consultation with the Secretary of Defense, the Secretary of the 

Department in which the Coast Guard is operating, the Secretary of Commerce, heads of other relevant departments and 

agencies of the Federal Government, and the Governor of any 

affected State, shall issue any necessary regulations to carry 

out this subsection. 

(9) EFFECT OF SUBSECTION.—Nothing in this subsection displaces, supersedes, limits, or modifies the jurisdiction, responsibility, or authority of any Federal or State agency under any 

other Federal law. 

(10) APPLICABILITY.—This subsection does not apply to any 

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life Refuge System, or National Marine Sanctuary System, or 

any National Monument. 

(q) INTERNET-BASED OIL AND GAS LEASE SALES.— (1) IN GENERAL.—In order to modernize the Nation’s offshore 

leasing program to ensure the best return to the Federal taxpayer, reduce fraud, and ensure a fair and competitive leasing 

process, the Secretary may conduct lease sales under this section through Internet-based, sealed-bidding methods. 

(2) SALE REQUIREMENTS.—Sales conducted under paragraph 

(1) shall ensure— 

(A) a publicly and freely accessible digital delivery of the 

bid reading process, such as live Internet streaming, and 

an option for bidders to submit bids electronically; 

(B) a bidder verification process that discloses to bidders, 

by no later than 5 p.m. Central Time of the day before each 

sale, a list of all bids submitted (including the person submitting each bid) on each lease tract without disclosing bid 

amounts; 

(C) the ability for a bidder to correct a possible 

misreading of a submitted bid; 

(D) a designee from within the Office of the Solicitor of 

the Department of the Interior to act as an independent, 

third-party observer who will be present during the bid 

reading process to prevent wrongdoing, independently certify the bidding process, and maintain transparency; 

(E) data security measures to ensure bidder data is kept 

secure; and 

(F) a participant survey soliciting voluntary feedback 

from bidders on the bidding process. 

(3) TRANSPARENCY IN SALE-DAY STATISTICS.— 

(A) REQUIREMENT.—The Secretary shall publicly disclose 

statistical data regarding each lease sale under this subsection, on the day the sale is executed. 

(B) INCLUDED DATA.—Among data disclosed, the Secretary shall include— 

(i) the total value of high bids; 

(ii) the number of tracts offered; 

(iii) the number of acres offered; 

(iv) the number of tracts receiving bids; 

(v) the number of acres receiving bids; 

(vi) the total number of bids; 

(vii) the average number of bids per tract; 

(viii) the total number of bidders participating; 

(ix) bidding statistics by water depth; 

(x) the name of the entity that submitted each bid, 

the amount of the bid, and the tract for which the bid 

was submitted; 

(xi) of tracts receiving bids, the number of bids per 

tract by water depth; 

(xii) the tract receiving the greatest number of bids; 

(xiii) the tract receiving the highest bid; and 

(xiv) any other statistical data that may be disclosed 

in accordance with this Act. 

(C) DATA TRANSPARENCY.—The Secretary shall ensure all 

data regarding lease sales under this subsection is publicly 


emcdonald on DSK9F6TC42PROD with HEARING
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available and easily accessible, free of charge, on the Internet, including for download and aggregation in machinereadable format. 

* * * * * * * 


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(24) 

ADDITIONAL VIEWS 

While I respect the goals of openness, transparency, and fair return for the taxpayer in offshore lease sales as laid out by the 

sponsors of H.R. 5577, I fear that the impact of the bill would be 

to actually reduce the levels of openness and transparency in the 

offshore lease sale process, while providing little additional benefit 

for taxpayers. 

Moving offshore oil and gas lease sales online diminishes the opportunities for public access and participation in the process. Ever 

since the Deepwater Horizon tragedy, there has been tremendous 

public interest in where offshore drilling would be allowed to take 

place, if it should be allowed at all. Over 300 people attended a recent offshore lease sale in order to make their opposition to offshore drilling heard, and moving lease sales online will only result 

in shutting those voices out without addressing any of their concerns. 

Furthermore, because of the sealed-bid nature of the offshore 

leasing process, it isn’t clear how having companies submit those 

bids electronically would result in a better return for the taxpayer. 

Instead of mailing a bid into the Bureau of Ocean Energy Management, companies would instead simply email the exact same bid. 

In fact, the expense of setting up a new online system could actually result in a cost to taxpayers, rather than a better return. 

It is disappointing that the Administration has already taken 

steps to limit public participation, such as shutting the public out 

of the August 2016 Western Gulf of Mexico offshore lease sale. This 

is an unfortunate trend that I believe H.R. 5577 will only exacerbate, and for that reason I cannot support the bill. 

RAU ́ L M. GRIJALVA, 

Ranking Member, 

Committee on Natural Resources. 

Æ 


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