Calendar No. 500

104TH CONGRESS

2D SESSION H. R. 1975

AN ACT

To improve the management of royalties from Fedleases, and for other purposes. eral and Outer Continental Shelf oil and gas

JULY 17, 1996

Received; read twice and placed on the calendar
II

Calendar No. 500

104TH CONGRESS

2D SESSION H. R. 1975

IN THE SENATE OF THE UNITED STATES

JULY 17, 1996

Received; read twice and placed on the calendar

AN ACT

To improve the management of royalties from Federal and

Outer Continental Shelf oil and gas leases, and for other

purposes.

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

2 This Act may be cited as the ‘‘Federal Oil and Gas

3 Royalty Simplification and Fairness Act of 1996’’.

4 SEC. 2. DEFINITIONS.

5 Section 3 of the Federal Oil and Gas Royalty Man6 agement Act of 1982 (30 U.S.C. 1701 et seq.) is amend7 ed—

8 (1) by amending paragraph (7) to read as fol9 lows:

10 ‘‘(7) ‘lessee’ means any person to whom the

11 United States issues an oil and gas lease or any per12 son to whom operating rights in a lease have been

13 assigned;’’; and

14 (2) by striking ‘‘and’’ at the end of paragraph

15 (15), by striking the period at the end of paragraph

16 (16) and inserting a semicolon, and by adding at the

17 end the following:

18 ‘‘(17) ‘adjustment’ means an amendment to a

19 previously filed report on an obligation, and any ad20 ditional payment or credit, if any, applicable thereto,

21 to rectify an underpayment or overpayment on an

22 obligation;

23 ‘‘(18) ‘administrative proceeding’ means any

24 Department of the Interior agency process in which

25 a demand, decision or order issued by the Secretary
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1 or a delegated State is subject to appeal or has been

2 appealed;

3 ‘‘(19) ‘assessment’ means any fee or charge lev4 ied or imposed by the Secretary or a delegated State

5 other than—

6 ‘‘(A) the principal amount of any royalty,

7 minimum royalty, rental bonus, net profit share

8 or proceed of sale;

9 ‘‘(B) any interest; or

10 ‘‘(C) any civil or criminal penalty;

11 ‘‘(20) ‘commence’ means—

12 ‘‘(A) with respect to a judicial proceeding,

13 the service of a complaint, petition, counter14 claim, cross claim, or other pleading seeking af15 firmative relief or seeking credit or recoupment:

16 Provided, That if the Secretary commences a

17 judicial proceeding against a designee, the Sec18 retary shall give notice of that commencement

19 to the lessee who designated the designee, but

20 the Secretary is not required to give notice to

21 other lessees who may be liable pursuant to sec22 tion 102(a) of this Act, for the obligation that

23 is the subject of the judicial proceeding; or

24 ‘‘(B) with respect to a demand, the receipt

25 by the Secretary or a delegated State or a les-
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1 see or its designee (with written notice to the

2 lessee who designated the designee) of the de3 mand;

4 ‘‘(21) ‘credit’ means the application of an over5 payment (in whole or in part) against an obligation

6 which has become due to discharge, cancel or reduce

7 the obligation;

8 ‘‘(22) ‘delegated State’ means a State which,

9 pursuant to an agreement or agreements under sec10 tion 205 of this Act, performs authorities, duties, re11 sponsibilities, or activities of the Secretary;

12 ‘‘(23) ‘demand’ means—

13 ‘‘(A) an order to pay issued by the Sec14 retary or the applicable delegated State to a les15 see or its designee (with written notice to the

16 lessee who designated the designee) that has a

17 reasonable basis to conclude that the obligation

18 in the amount of the demand is due and owing;

19 or

20 ‘‘(B) a separate written request by a lessee

21 or its designee which asserts an obligation due

22 the lessee or its designee that provides a rea23 sonable basis to conclude that the obligation in

24 the amount of the demand is due and owing,

25 but does not mean any royalty or production re-
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1 port, or any information contained therein, re2 quired by the Secretary or a delegated State;

3 ‘‘(24) ‘designee’ means the person designated

4 by a lessee pursuant to section 102(a) of this Act,

5 with such written designation effective on the date

6 such designation is received by the Secretary and re7 maining in effect until the Secretary receives notice

8 in writing that the designation is modified or termi9 nated;

10 ‘‘(25) ‘obligation’ means—

11 ‘‘(A) any duty of the Secretary or, if appli12 cable, a delegated State—

13 ‘‘(i) to take oil or gas royalty in kind;

14 or

15 ‘‘(ii) to pay, refund, offset, or credit

16 monies including (but not limited to)—

17 ‘‘(I) the principal amount of any

18 royalty, minimum royalty, rental,

19 bonus, net profit share or proceed of

20 sale; or

21 ‘‘(II) any interest; and

22 ‘‘(B) any duty of a lessee or its designee

23 (subject to the provision of section 102(a) of

24 this Act)—
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1 ‘‘(i) to deliver oil or gas royalty in

2 kind; or

3 ‘‘(ii) to pay, offset or credit monies in4 cluding (but not limited to)—

5 ‘‘(I) the principal amount of any

6 royalty, minimum royalty, rental,

7 bonus, net profit share or proceed of

8 sale;

9 ‘‘(II) any interest;

10 ‘‘(III) any penalty; or

11 ‘‘(IV) any assessment,

12 which arises from or relates to any lease

13 administered by the Secretary for, or any

14 mineral leasing law related to, the explo15 ration, production and development of oil

16 or gas on Federal lands or the Outer Con17 tinental Shelf;

18 ‘‘(26) ‘order to pay’ means a written order is19 sued by the Secretary or the applicable delegated

20 State to a lessee or its designee (with notice to the

21 lessee who designated the designee) which—

22 ‘‘(A) asserts a specific, definite, and quan23 tified obligation claimed to be due, and

24 ‘‘(B) specifically identifies the obligation by

25 lease, production month and monetary amount
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1 of such obligation claimed to be due and or2 dered to be paid, as well as the reason or rea3 sons such obligation is claimed to be due, but

4 such term does not include any other commu5 nication or action by or on behalf of the Sec6 retary or a delegated State;

7 ‘‘(27) ‘overpayment’ means any payment by a

8 lessee or its designee in excess of an amount legally

9 required to be paid on an obligation and includes the

10 portion of any estimated payment for a production

11 month that is in excess of the royalties due for that

12 month;

13 ‘‘(28) ‘payment’ means satisfaction, in whole or

14 in part, of an obligation;

15 ‘‘(29) ‘penalty’ means a statutorily authorized

16 civil fine levied or imposed for a violation of this Act,

17 any mineral leasing law, or a term or provision of

18 a lease administered by the Secretary;

19 ‘‘(30) ‘refund’ means the return of an overpay20 ment;

21 ‘‘(31) ‘State concerned’ means, with respect to

22 a lease, a State which receives a portion of royalties

23 or other payments under the mineral leasing laws

24 from such lease;
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1 ‘‘(32) ‘underpayment’ means any payment or

2 nonpayment by a lessee or its designee that is less

3 than the amount legally required to be paid on an

4 obligation; and

5 ‘‘(33) ‘United States’ means the United States

6 Government and any department, agency, or instru7 mentality thereof, the several States, the District of

8 Columbia, and the territories of the United States.’’.

9 SEC. 3. DELEGATION OF ROYALTY COLLECTIONS AND RE10 LATED ACTIVITIES.

11 (a) GENERAL AUTHORITY.—Section 205 of the Fed12 eral Oil and Gas Royalty Management Act of 1982 (30

13 U.S.C. 1735) is amended to read as follows:

14 ‘‘SEC. 205. DELEGATION OF ROYALTY COLLECTIONS AND

15 RELATED ACTIVITIES.

16 ‘‘(a) Upon written request of any State, the

17 Secretary is authorized to delegate, in accordance

18 with the provisions of this section, all or part of the

19 authorities and responsibilities of the Secretary

20 under this Act to:

21 ‘‘(1) conduct inspections, audits, and investiga22 tions;

23 ‘‘(2) receive and process production and finan24 cial reports;

25 ‘‘(3) correct erroneous report data;
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1 ‘‘(4) perform automated verification; and

2 ‘‘(5) issue demands, subpoenas, and orders to

3 perform restructured accounting, for royalty man4 agement enforcement purposes,

5 to any State with respect to all Federal land within the

6 State.

7 ‘‘(b) After notice and opportunity for a hearing, the

8 Secretary is authorized to delegate such authorities and

9 responsibilities granted under this section as the State has

10 requested, if the Secretary finds that—

11 ‘‘(1) it is likely that the State will provide ade12 quate resources to achieve the purposes of this Act;

13 ‘‘(2) the State has demonstrated that it will ef14 fectively and faithfully administer the rules and reg15 ulations of the Secretary under this Act in accord16 ance with the requirements of subsections (c) and

17 (d) of this section;

18 ‘‘(3) such delegation will not create an unrea19 sonable burden on any lessee;

20 ‘‘(4) the State agrees to adopt standardized re21 porting procedures prescribed by the Secretary for

22 royalty and production accounting purposes, unless

23 the State and all affected parties (including the Sec24 retary) otherwise agree;
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1 ‘‘(5) the State agrees to follow and adhere to

2 regulations and guidelines issued by the Secretary

3 pursuant to the mineral leasing laws regarding valu4 ation of production; and

5 ‘‘(6) where necessary for a State to have au6 thority to carry out and enforce a delegated activity,

7 the State agrees to enact such laws and promulgate

8 such regulations as are consistent with relevant Fed9 eral laws and regulations

10 with respect to the Federal lands within the State.

11 ‘‘(c) After notice and opportunity for hearing, the

12 Secretary shall issue a ruling as to the consistency of a

13 State’s proposal with the provisions of this section and

14 regulations under subsection (d) within 90 days after sub15 mission of such proposal. In any unfavorable ruling, the

16 Secretary shall set forth the reasons therefor and state

17 whether the Secretary will agree to delegate to the State

18 if the State meets the conditions set forth in such ruling.

19 ‘‘(d) After consultation with State authorities, the

20 Secretary shall by rule promulgate, within 12 months after

21 the date of enactment of this section, standards and regu22 lations pertaining to the authorities and responsibilities to

23 be delegated under subsection (a), including standards

24 and regulations pertaining to—

25 ‘‘(1) audits to be performed;
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1 ‘‘(2) records and accounts to be maintained;

2 ‘‘(3) reporting procedures to be required by

3 States under this section;

4 ‘‘(4) receipt and processing of production and

5 financial reports;

6 ‘‘(5) correction of erroneous report data;

7 ‘‘(6) performance of automated verification;

8 ‘‘(7) issuance of standards and guidelines in

9 order to avoid duplication of effort;

10 ‘‘(8) transmission of report data to the Sec11 retary; and

12 ‘‘(9) issuance of demands, subpoenas, and or13 ders to perform restructured accounting, for royalty

14 management enforcement purposes.

15 Such standards and regulations shall be designed to pro16 vide reasonable assurance that a uniform and effective

17 royalty management system will prevail among the States.

18 The records and accounts under paragraph (2) shall be

19 sufficient to allow the Secretary to monitor the perform20 ance of any State under this section.

21 ‘‘(e) If, after notice and opportunity for a hearing,

22 the Secretary finds that any State to which any authority

23 or responsibility of the Secretary has been delegated under

24 this section is in violation of any requirement of this sec25 tion or any rule thereunder, or that an affirmative finding
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1 by the Secretary under subsection (b) can no longer be

2 made, the Secretary may revoke such delegation. If, after

3 providing written notice to a delegated State and a reason4 able opportunity to take corrective action requested by the

5 Secretary, the Secretary determines that the State has

6 failed to issue a demand or order to a Federal lessee with7 in the State, that such failure may result in an underpay8 ment of an obligation due the United States by such les9 see, and that such underpayment may be uncollected with10 out Secretarial intervention, the Secretary may issue such

11 demand or order in accordance with the provisions of this

12 Act prior to or absent the withdrawal of delegated author13 ity.

14 ‘‘(f) Subject to appropriations, the Secretary shall

15 compensate any State for those costs which may be nec16 essary to carry out the delegated activities under this Sec17 tion. Payment shall be made no less than every quarter

18 during the fiscal year. Compensation to a State may not

19 exceed the Secretary’s reasonably anticipated expenditure

20 for performance of such delegated activities by the Sec21 retary. Such costs shall be allocable for the purposes of

22 section 35(b) of the Act entitled ‘An act to promote the

23 mining of coal, phosphate, oil, oil shale, gas and sodium

24 on the public domain’, approved February 25, 1920 (com25 monly known as the Mineral Leasing Act) (30 U.S.C. 191
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1 (b)) to the administration and enforcement of laws provid2 ing for the leasing of any onshore lands or interests in

3 land owned by the United States. Any further allocation

4 of costs under section 35(b) made by the Secretary for

5 oil and gas activities, other than those costs to compensate

6 States for delegated activities under this Act, shall be only

7 those costs associated with onshore oil and gas activities

8 and may not include any duplication of costs allocated

9 pursuant to the previous sentence. Nothing in this section

10 affects the Secretary’s authority to make allocations under

11 section 35(b) for non-oil and gas mineral activities. All

12 moneys received from sales, bonuses, rentals, royalties, as13 sessments and interest, including money claimed to be due

14 and owing pursuant to a delegation under this section,

15 shall be payable and paid to the Treasury of the United

16 States.

17 ‘‘(g) Any action of the Secretary to approve or dis18 approve a proposal submitted by a State under this section

19 shall be subject to judicial review in the United States dis20 trict court which includes the capital of the State submit21 ting the proposal.

22 ‘‘(h) Any State operating pursuant to a delegation

23 existing on the date of enactment of this Act may continue

24 to operate under the terms and conditions of the delega-
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1 tion, except to the extent that a revision of the existing

2 agreement is adopted pursuant to this section.’’.

3 (b) CLERICAL AMENDMENT.—The item relating to

4 section 205 in the table of contents in section 1 of the

5 Federal Oil and Gas Royalty Management Act of 1982

6 (30 U.S.C. 1701) is amended to read as follows:

‘‘Sec. 205. Delegation of royalty collections and related activities.’’.

7 SEC. 4. SECRETARIAL AND DELEGATED STATES’ ACTIONS

8 AND LIMITATION PERIODS.

9 (a) IN GENERAL.—The Federal Oil and Gas Royalty

10 Management Act of 1982 (30 U.S.C. 1701 et seq.) is

11 amended by adding after section 114 the following new

12 section:

13 ‘‘SEC. 115. SECRETARIAL AND DELEGATED STATES’ AC14 TIONS AND LIMITATION PERIODS.

15 ‘‘(a) IN GENERAL.—The respective duties, respon16 sibilities, and activities with respect to a lease shall be per17 formed by the Secretary, delegated States, and lessees or

18 their designees in a timely manner.

19 ‘‘(b) LIMITATION PERIOD.—

20 ‘‘(1) IN GENERAL.—A judicial proceeding or de21 mand which arises from, or relates to an obligation,

22 shall be commenced within seven years from the

23 date on which the obligation becomes due and if not

24 so commenced shall be barred. If commencement of

25 a judicial proceeding or demand for an obligation is
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1 barred by this section, the Secretary, a delegated

2 State, or a lessee or its designee (A) shall not take

3 any other or further action regarding that obliga4 tion, including (but not limited to) the issuance of

5 any order, request, demand or other communication

6 seeking any document, accounting, determination,

7 calculation, recalculation, payment, principal, inter8 est, assessment, or penalty or the initiation, pursuit

9 or completion of an audit with respect to that obliga10 tion; and (B) shall not pursue any other equitable or

11 legal remedy, whether under statute or common law,

12 with respect to an action on or an enforcement of

13 said obligation.

14 ‘‘(2) RULE OF CONSTRUCTION.—A judicial pro15 ceeding or demand that is timely commenced under

16 paragraph (1) against a designee shall be considered

17 timely commenced as to any lessee who is liable pur18 suant to section 102(a) of this Act for the obligation

19 that is the subject of the judicial proceeding or de20 mand.

21 ‘‘(3) APPLICATION OF CERTAIN LIMITATIONS.—

22 The limitations set forth in sections 2401, 2415,

23 2416, and 2462 of title 28, United States Code, and

24 section 42 of the Mineral Leasing Act (30 U.S.C.

25 226–2) shall not apply to any obligation to which
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1 this Act applies. Section 3716 of title 31, United

2 States Code, may be applied to an obligation the en3 forcement of which is not barred by this Act, but

4 may not be applied to any obligation the enforce5 ment of which is barred by this Act.

6 ‘‘(c) OBLIGATION BECOMES DUE.—

7 ‘‘(1) IN GENERAL.—For purposes of this Act,

8 an obligation becomes due when the right to enforce

9 the obligation is fixed.

10 ‘‘(2) ROYALTY OBLIGATIONS.—The right to en11 force any royalty obligation for any given production

12 month for a lease is fixed for purposes of this Act

13 on the last day of the calendar month following the

14 month in which oil or gas is produced.

15 ‘‘(d) TOLLING OF LIMITATION PERIOD.—The run16 ning of the limitation period under subsection (b) shall

17 not be suspended, tolled, extended, or enlarged for any ob18 ligation for any reason by any action, including an action

19 by the Secretary or a delegated State, other than the fol20 lowing:

21 ‘‘(1) TOLLING AGREEMENT.—A written agree22 ment executed during the limitation period between

23 the Secretary or a delegated State and a lessee or

24 its designee (with notice to the lessee who designated

25 the designee) shall toll the limitation period for the
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1 amount of time during which the agreement is in ef2 fect.

3 ‘‘(2) SUBPOENA.—

4 ‘‘(A) The issuance of a subpoena to a les5 see or its designee (with notice to the lessee

6 who designated the designee, which notice shall

7 not constitute a subpoena to the lessee) in ac8 cordance with the provisions of subparagraph

9 (B)(i) shall toll the limitation period with re10 spect to the obligation which is the subject of

11 a subpoena only for the period beginning on the

12 date the lessee or its designee receives the sub13 poena and ending on the date on which (i) the

14 lessee or its designee has produced such subpoe15 naed records for the subject obligation, (ii) the

16 Secretary or a delegated State receives written

17 notice that the subpoenaed records for the sub18 ject obligation are not in existence or are not in

19 the lessee’s or its designee’s possession or con20 trol, or (iii) a court has determined in a final

21 decision that such records are not required to

22 be produced, whichever occurs first.

23 ‘‘(B)(i) A subpoena for the purposes of

24 this section which requires a lessee or its des25 ignee to produce records necessary to determine
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1 the proper reporting and payment of an obliga2 tion due the Secretary may be issued only by an

3 Assistant Secretary of the Interior or an Acting

4 Assistant Secretary of the Interior who is a

5 schedule C employee (as defined by section

6 213.3301 of title 5, Code of Federal Regula7 tions), or the Director or Acting Director of the

8 respective bureau or agency, and may not be

9 delegated to any other person. If a State has

10 been delegated authority pursuant to section

11 205, the State, acting through the highest State

12 official having ultimate authority over the col13 lection of royalties from leases on Federal lands

14 within the State, may issue such subpoena, but

15 may not delegate such authority to any other

16 person.

17 ‘‘(ii) A subpoena described in clause (i)

18 may only be issued against a lessee or its des19 ignee during the limitation period provided in

20 this section and only after the Secretary or a

21 delegated State has in writing requested the

22 records from the lessee or its designee related

23 to the obligation which is the subject of the

24 subpoena and has determined that—
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1 ‘‘(I) the lessee or its designee has

2 failed to respond within a reasonable pe3 riod of time to the Secretary’s or the appli4 cable delegated State’s written request for

5 such records necessary for an audit, inves6 tigation or other inquiry made in accord7 ance with the Secretary’s or such delegated

8 State’s responsibilities under this Act; or

9 ‘‘(II) the lessee or its designee has in

10 writing denied the Secretary’s or the appli11 cable delegated State’s written request to

12 produce such records in the lessee’s or its

13 designee’s possession or control necessary

14 for an audit, investigation or other inquiry

15 made in accordance with the Secretary’s or

16 such delegated State’s responsibilities

17 under this Act; or

18 ‘‘(III) the lessee or its designee has

19 unreasonably delayed in producing records

20 necessary for an audit, investigation or

21 other inquiry made in accordance with the

22 Secretary’s or the applicable delegated

23 State’s responsibilities under this Act after

24 the Secretary’s or delegated State’s written

25 request.
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1 ‘‘(C) In seeking records, the Secretary or

2 the applicable delegated State shall afford the

3 lessee or its designee a reasonable period of

4 time after a written request by the Secretary or

5 such delegated State in which to provide such

6 records prior to the issuance of any subpoena.

7 ‘‘(3) MISREPRESENTATION OR CONCEAL8 MENT.—The intentional misrepresentation or con9 cealment of a material fact for the purpose of evad10 ing the payment of an obligation in which case the

11 limitation period shall be tolled for the period of

12 such misrepresentation or such concealment.

13 ‘‘(4) ORDER TO PERFORM RESTRUCTURED AC14 COUNTING.—A)(i) The issuance of a notice under

15 subparagraph (D) that the lessee or its designee has

16 not substantially complied with the requirement to

17 perform a restructured accounting shall toll the limi18 tation period with respect to the obligation which is

19 the subject of the notice only for the period begin20 ning on the date the lessee or its designee receives

21 the notice and ending 120 days after the date on

22 which (I) the Secretary or the applicable delegated

23 State receives written notice that the accounting or

24 other requirement has been performed, or (II) a

25 court has determined in a final decision that the les-
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1 see is not required to perform the accounting, which2 ever occurs first.

3 ‘‘(ii) If the lessee or its designee initiates an ad4 ministrative appeal or judicial proceeding to contest

5 an order to perform a restructured accounting is6 sued under subparagraph (B)(i), the limitation pe7 riod in subsection (b) shall be tolled from the date

8 the lessee or its designee received the order until a

9 final, nonappealable decision is issued in any such

10 proceeding.

11 ‘‘(B)(i) The Secretary or the applicable dele12 gated State may issue an order to perform a restruc13 tured accounting to a lessee or its designee when the

14 Secretary or such delegated State determines during

15 an audit of a lessee or its designee that the lessee

16 or its designee should recalculate royalty due on an

17 obligation based upon the Secretary’s or the dele18 gated State’s finding that the lessee or its designee

19 has made identified underpayments or overpayments

20 which are demonstrated by the Secretary or the dele21 gated State to be based upon repeated, systemic re22 porting errors for a significant number of leases or

23 a single lease for a significant number of reporting

24 months with the same type of error which con25 stitutes a pattern of violations and which are likely
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1 to result in either significant underpayments or over2 payments.

3 ‘‘(ii) The power of the Secretary to issue an

4 order to perform a restructured accounting may not

5 be delegated below the most senior career profes6 sional position having responsibility for the royalty

7 management program, which position is currently

8 designated as the ‘Associate Director for Royalty

9 Management’, and may not be delegated to any

10 other person. If a State has been delegated authority

11 pursuant to section 205 of this Act, the State, act12 ing through the highest ranking State official having

13 ultimate authority over the collection of royalties

14 from leases on Federal lands within the State, may

15 issue such order to perform, which may not be dele16 gated to any other person. An order to perform a re17 structured accounting shall—

18 ‘‘(I) be issued within a reasonable period

19 of time from when the audit identifies the sys20 temic, reporting errors;

21 ‘‘(II) specify the reasons and factual bases

22 for such order;

23 ‘‘(III) be specifically identified as an ‘order

24 to perform a restructured accounting’;
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1 ‘‘(IV) provide the lessee or its designee a

2 reasonable period of time (but not less than 60

3 days) within which to perform the restructured

4 accounting; and

5 ‘‘(V) provide the lessee or its designee 60

6 days within which to file an administrative ap7 peal of the order to perform a restructured ac8 counting.

9 ‘‘(C) An order to perform a restructured ac10 counting shall not mean or be construed to include

11 any other action by or on behalf of the Secretary or

12 a delegated State.

13 ‘‘(D) If a lessee or its designee fails to substan14 tially comply with the requirement to perform a re15 structured accounting pursuant to this subsection, a

16 notice shall be issued to the lessee or its designee

17 that the lessee or its designee has not substantially

18 complied with the requirements to perform a re19 structured accounting. A lessee or its designee shall

20 be given a reasonable time within which to perform

21 the restructured accounting. Such notice may be is22 sued under this section only by an Assistant Sec23 retary of the Interior or an acting Assistant Sec24 retary of the Interior who is a schedule C employee

25 (as defined by section 213.3301 of title 5, Code of
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1 Federal Regulations) and may not be delegated to

2 any other person. If a State has been delegated au3 thority pursuant to section 205, the State, acting

4 through the highest State official having ultimate

5 authority over the collection of royalties from leases

6 on Federal lands within the State, may issue such

7 notice, which may not be delegated to any other per8 son.

9 ‘‘(e) TERMINATION OF LIMITATIONS PERIOD.—An

10 action or an enforcement of an obligation by the Secretary

11 or delegated State or a lessee or its designee shall be

12 barred under this section prior to the running of the

13 seven-year period provided in subsection (b) in the event—

14 ‘‘(1) the Secretary or a delegated State has no15 tified the lessee or its designee in writing that a time

16 period is closed to further audit; or

17 ‘‘(2) the Secretary or a delegated State and a

18 lessee or its designee have so agreed in writing.

19 For purposes of this subsection, notice to, or an agreement

20 by, the designee shall be binding on any lessee who is liable

21 pursuant to section 102(a) for obligations that are the

22 subject of the notice or agreement.

23 ‘‘(f) RECORDS REQUIRED FOR DETERMINING COL24 LECTIONS.—Records required pursuant to section 103 of

25 this Act by the Secretary or any delegated State for the
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1 purpose of determining obligations due and compliance

2 with any applicable mineral leasing law, lease provision,

3 regulation or order with respect to oil and gas leases from

4 Federal lands or the Outer Continental Shelf shall be

5 maintained for the same period of time during which a

6 judicial proceeding or demand may be commenced under

7 subsection (b). If a judicial proceeding or demand is timely

8 commenced, the record holder shall maintain such records

9 until the final nonappealable decision in such judicial pro10 ceeding is made, or with respect to that demand is ren11 dered, unless the Secretary or the applicable delegated

12 State authorizes in writing an earlier release of the re13 quirement to maintain such records. Notwithstanding any14 thing herein to the contrary, under no circumstance shall

15 a record holder be required to maintain or produce any

16 record relating to an obligation for any time period which

17 is barred by the applicable limitation in this section. In

18 connection with any hearing, administrative proceeding,

19 inquiry, investigation, or audit by the Secretary or a dele20 gated State under this Act, the Secretary or the delegated

21 State shall minimize the submission of multiple or redun22 dant information and make a good faith effort to locate

23 records previously submitted by a lessee or a designee to

24 the Secretary or the delegated State, prior to requiring

25 the lessee or the designee to provide such records.
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1 ‘‘(g) TIMELY COLLECTIONS.—In order to most effec2 tively utilize resources available to the Secretary to maxi3 mize the collection of oil and gas receipts from lease obli4 gations to the Treasury within the seven-year period of

5 limitations, and consequently to maximize the State share

6 of such receipts, the Secretary should not perform or re7 quire accounting, reporting, or audit activities if the Sec8 retary and the State concerned determine that the cost

9 of conducting or requiring the activity exceeds the ex10 pected amount to be collected by the activity, based on

11 the most current 12 months of activity. This subsection

12 shall not provide a defense to a demand or an order to

13 perform a restructured accounting. To the maximum ex14 tent possible, the Secretary and delegated States shall re15 duce costs to the United States Treasury and the States

16 by discontinuing requirements for unnecessary or duplica17 tive data and other information, such as separate allow18 ances and payor information, relating to obligations due.

19 If the Secretary and the State concerned determine that

20 collection will result sooner, the Secretary or the applicable

21 delegated State may waive or forego interest in whole or

22 in part.

23 ‘‘(h) APPEALS AND FINAL AGENCY ACTION.—

24 ‘‘(1) 33-MONTH PERIOD.—Demands or orders

25 issued by the Secretary or a delegated State are sub-
27

•HR 1975 PCS

1 ject to administrative appeal in accordance with the

2 regulations of the Secretary. No State shall impose

3 any conditions which would hinder a lessee’s or its

4 designee’s immediate appeal of an order to the Sec5 retary or the Secretary’s designee. The Secretary

6 shall issue a final decision in any administrative pro7 ceeding, including any administrative proceedings

8 pending on the date of enactment of this section,

9 within 33 months from the date such proceeding was

10 commenced or 33 months from the date of such en11 actment, whichever is later. The 33-month period

12 may be extended by any period of time agreed upon

13 in writing by the Secretary and the appellant.

14 ‘‘(2) EFFECT OF FAILURE TO ISSUE DECI15 SION.—If no such decision has been issued by the

16 Secretary within the 33-month period referred to in

17 paragraph (1)—

18 ‘‘(A) the Secretary shall be deemed to have

19 issued and granted a decision in favor of the

20 appellant as to any nonmonetary obligation and

21 any monetary obligation the principal amount

22 of which is less than $10,000; and

23 ‘‘(B) the Secretary shall be deemed to have

24 issued a final decision in favor of the Secretary,

25 which decision shall be deemed to affirm those
28

•HR 1975 PCS

1 issues for which the agency rendered a decision

2 prior to the end of such period, as to any mone3 tary obligation the principal amount of which is

4 $10,000 or more, and the appellant shall have

5 a right to judicial review of such deemed final

6 decision in accordance with title 5 of the United

7 States Code.

8 ‘‘(i) COLLECTIONS OF DISPUTED AMOUNTS DUE.—

9 To expedite collections relating to disputed obligations due

10 within the seven-year period beginning on the date the ob11 ligation became due, the parties shall hold not less than

12 one settlement consultation and the Secretary and the

13 State concerned may take such action as is appropriate

14 to compromise and settle a disputed obligation, including

15 waiving or reducing interest and allowing offsetting of ob16 ligations among leases.

17 ‘‘(j) ENFORCEMENT OF A CLAIM FOR JUDICIAL RE18 VIEW.—In the event a demand subject to this section is

19 properly and timely commenced, the obligation which is

20 the subject of the demand may be enforced beyond the

21 seven-year limitations period without being barred by this

22 statute of limitations. In the event a demand subject to

23 this section is properly and timely commenced, a judicial

24 proceeding challenging the final agency action with respect

25 to such demand shall be deemed timely so long as such
29

•HR 1975 PCS

1 judicial proceeding is commenced within 180 days from

2 receipt of notice by the lessee or its designee of the final

3 agency action.

4 ‘‘(k) IMPLEMENTATION OF FINAL DECISION.—In the

5 event a judicial proceeding or demand subject to this sec6 tion is timely commenced and thereafter the limitation pe7 riod in this section lapses during the pendency of such

8 proceeding, any party to such proceeding shall not be

9 barred from taking such action as is required or necessary

10 to implement a final unappealable judicial or administra11 tive decision, including any action required or necessary

12 to implement such decision by the recovery or recoupment

13 of an underpayment or overpayment by means of refund

14 or credit.

15 ‘‘(1) STAY OF PAYMENT OBLIGATION PENDING RE16 VIEW.—Any person ordered by the Secretary or a dele17 gated State to pay any obligation (other than an assess18 ment) shall be entitled to a stay of such payment without

19 bond or other surety instrument pending an administra20 tive or judicial proceeding if the person periodically dem21 onstrates to the satisfaction of the Secretary that such

22 person is financially solvent or otherwise able to pay the

23 obligation. In the event the person is not able to dem24 onstrate, the Secretary may require a bond or other surety

25 instrument satisfactory to cover the obligation. Any person
30

•HR 1975 PCS

1 ordered by the Secretary or a delegated State to pay an

2 assessment shall be entitled to a stay without bond or

3 other surety instrument’’.

4 (b) CLERICAL AMENDMENT.—The table of contents

5 in section 1 of the Federal Oil and Gas Royalty Manage6 ment Act of 1982 (30 U.S.C. 1701) is amended by insert7 ing after the item relating to section 114 the following

8 new item:

‘‘Sec. 115. Secretarial and delegated States’ actions and limitation periods.’’.

9 SEC. 5 ADJUSTMENT AND REFUNDS.

10 (a) IN GENERAL.—The Federal Oil and Gas Royalty

11 Management Act of 1982 (30 U.S.C. 1701 et seq.) is

12 amended by inserting after section 111 the following:

13 ‘‘SEC. 111A. ADJUSTMENTS AND REFUNDS.

14 ‘‘(a) ADJUSTMENTS TO ROYALTIES PAID TO THE

15 SECRETARY OR A DELEGATED STATE.—

16 ‘‘(1) If, during the adjustment period, a lessee

17 or its designee determines that an adjustment or re18 fund request is necessary to correct an underpay19 ment or overpayment of an obligation, the lessee or

20 its designee shall make such adjustment or request

21 a refund within a reasonable period of time and only

22 during the adjustment period. The filing of a royalty

23 report which reflects the underpayment or overpay24 ment of an obligation shall constitute prior written
31

•HR 1975 PCS

1 notice to the Secretary or the applicable delegated

2 State of an adjustment.

3 ‘‘(2)(A) For any adjustment, the lessee or its

4 designee shall calculate and report the interest due

5 attributable to such adjustment at the same time the

6 lessee or its designee adjusts the principle amount of

7 the subject obligation, except as provided by sub8 paragraph (B).

9 ‘‘(B) In the case of a lessee or its designee who

10 determines that subparagraph (A) would impose a

11 hardship, the Secretary or such delegated State shall

12 calculate the interest due and notify the lessee or its

13 designee within a reasonable time of the amount of

14 interest due, unless such lessee or its designee elects

15 to calculate and report interest in accordance with

16 subparagraph (A).

17 ‘‘(3) An adjustment or a request for a refund

18 for an obligation may be made after the adjustment

19 period only upon written notice to and approval by

20 the Secretary or the applicable delegated State, as

21 appropriate, during an audit of the period which in22 cludes the production month for which the adjust23 ment is being made. If an overpayment is identified

24 during an audit, then the Secretary or the applicable
32

•HR 1975 PCS

1 delegated State, as appropriate, shall allow a credit

2 or refund in the amount of the overpayment.

3 ‘‘(4) For purposes of this section, the adjust4 ment period for any obligation shall be the six-year

5 period following the date on which an obligation be6 came due. The adjustment period shall be sus7 pended, tolled, extended, enlarged, or terminated by

8 the same actions as the limitation period in section

9 115.

10 ‘‘(b) REFUNDS.—

11 ‘‘(1) IN GENERAL.—A request for refund is suf12 ficient if it—

13 ‘‘(A) is made in writing to the Secretary

14 and, for purposes of section 115, is specifically

15 identified as a demand;

16 ‘‘(B) identifies the person entitled to such

17 refund;

18 ‘‘(C) provides the Secretary information

19 that reasonably enables the Secretary to iden20 tify the overpayment for which such refund is

21 sought; and

22 ‘‘(D) provides the reasons why the pay23 ment was an overpayment.

24 ‘‘(2) PAYMENT BY SECRETARY OF THE TREAS25 URY.—The Secretary shall certify the amount of the
33

•HR 1975 PCS

1 refund to be paid under paragraph (1) to the Sec2 retary of the Treasury who shall make such refund.

3 Such refund shall be paid from amounts received as

4 current receipts from sales, bonuses, royalties (in5 cluding interest charges collected under this section)

6 and rentals of the public lands and the Outer Con7 tinental Shelf under the provisions of the Mineral

8 Leasing Act and the Outer Continental Shelf Lands

9 Act, which are not payable to a State or the Rec10 lamation Fund. The portion of any such refund at11 tributable to any amounts previously disbursed to a

12 State, the Reclamation Fund, or any recipient pre13 scribed by law shall be deducted from the next dis14 bursements to that recipient made under the appli15 cable law. Such amounts deducted from subsequent

16 disbursements shall be credited to miscellaneous re17 ceipts in the Treasury.

18 ‘‘(3) PAYMENT PERIOD.—A refund under this

19 subsection shall be paid or denied (with an expla20 nation of the reasons for the denial) within 120 days

21 of the date on which the request for refund is re22 ceived by the Secretary. Such refund shall be subject

23 to later audit by the Secretary or the applicable dele24 gated State and subject to the provisions of this Act.
34

•HR 1975 PCS

1 ‘‘(4) PROHIBITION AGAINST REDUCTION OF RE2 FUNDS OR CREDITS.—In no event shall the Sec3 retary or any delegated State directly or indirectly

4 claim or offset any amount or amounts against, or

5 reduce any refund or credit (or interest accrued

6 thereon) by the amount of any obligation the en7 forcement of which is barred by section 115 of this

8 Act.’’.

9 (b) CLERICAL AMENDMENT.—The table of contents

10 in section 1 of the Federal Oil and Gas Royalty Manage11 ment Act of 1982 (30 U.S.C. 1701) is amended by insert12 ing after the item relating to section 111 the following

13 new item:

‘‘Sec. 111A. Adjustments and refunds.’’.

14 SEC. 6. ROYALTY TERMS AND CONDITIONS, INTEREST, AND

15 PENALTIES.

16 (a) LESSEE OR DESIGNEE INTEREST.—Section 111

17 of the Federal Oil and Gas Royalty Management Act of

18 1982 (30 U.S.C. 1721) is amended by adding after sub19 section (g) the following:

20 ‘‘(h) Interest shall be allowed and paid or credited

21 on any overpayment, with such interest to accrue from the

22 date such overpayment was made, at the rate obtained by

23 applying the provisions of subparagraphs (A) and (B) of

24 section 6621(a)(1) of the Internal Revenue Code of 1986,

25 but determined without regard to the sentence following
35

•HR 1975 PCS

1 subparagraph (B) of section 6621(a)(1). Interest which

2 has accrued on any overpayment may be applied to reduce

3 an underpayment. This subsection applies to overpay4 ments made later than six months after the date of enact5 ment of this subsection or September 1, 1996, whichever

6 is later. Such interest shall be paid from amounts received

7 as current receipts from sales, bonuses, royalties (includ8 ing interest charges collected under this section) and rent9 als of the public lands and the Outer Continental Shelf

10 under the provisions of the Mineral Leasing Act, and the

11 Outer Continental Shelf Lands Act, which are not payable

12 to a State or the Reclamation Fund. The portion of any

13 such interest payment attributable to any amounts pre14 viously disbursed to a State, the Reclamation Fund, or

15 any other recipient designated by law shall be deducted

16 from the next disbursements to that recipient made under

17 the applicable law. Such amounts deducted from subse18 quent disbursements shall be credited to miscellaneous re19 ceipts in the Treasury.’’.

20 (b) LIMITATION ON INTEREST.—Section 111 of the

21 Federal Oil and Gas Royalty Management Act of 1982,

22 as amended by subsection (a), is further amended by add23 ing at the end the following:

24 ‘‘(i) Upon a determination by the Secretary that an

25 excessive overpayment (based upon all obligations of a les-
36

•HR 1975 PCS

1 see or its designee for a given reporting month) was made

2 for the sole purpose of receiving interest, interest shall be

3 paid on the excessive amount of such overpayment. For

4 purposes of this Act, an ‘excessive overpayment’ shall be

5 the amount that any overpayment a lessee or its designee

6 pays for a given reporting month (excluding payments for

7 demands for obligations determined to be due as a result

8 of judicial or administrative proceedings or agreed to be

9 paid pursuant to settlement agreements) for the aggregate

10 of all of its Federal leases exceeds 10 percent of the total

11 royalties paid that month for those leases.’’.

12 (c) ESTIMATED PAYMENT.—Section 111 of the Fed13 eral Oil and Gas Royalty Management Act of 1982 (30

14 U.S.C. 1721), as amended by subsections (a) and (b), is

15 further amended by adding at the end the following:

16 ‘‘(j) A lessee or its designee may make a payment

17 for the approximate amount of royalties (hereinafter in

18 this subsection ‘estimated payment’) that would otherwise

19 be due for such lease by the rate royalties are due for

20 that lease. When an estimated payment is made, actual

21 royalties are payable at the end of the month following

22 the month in which the estimated payment is made. If

23 the estimated payment was less than the amount of actual

24 royalties due, interest is owned on the underpaid amount.

25 If the estimated payment exceeds the actual royalties due,
37

•HR 1975 PCS

1 interest is owned on the overpayment. If the lessee or its

2 designee makes a payment for such actual royalties, the

3 lessee or its designee may apply the estimated payment

4 to future royalties. Any estimated payment may be ad5 justed, recouped, or reinstated at any time by the lessee

6 or its designee.’’.

7 (d) VOLUME ALLOCATION OF OIL AND GAS PRODUC8 TION.—Section 111 of the Federal Oil and Gas Royalty

9 Management Act of 1982 (30 U.S.C. 1721), as amended

10 by subsections (a) through (c), is amended by adding at

11 the end the following:

12 ‘‘(k)(1) Except as otherwise provided by this sub13 section—

14 ‘‘(A) a lessee or its designee of a lease in a unit

15 or communitization agreement which contains only

16 Federal leases with the same royalty rate and funds

17 distribution shall report and pay royalties on oil and

18 gas production for each production month base on

19 the actual volume of production sold by or on behalf

20 of that lessee;

21 ‘‘(B) a lessee or its designee of a lease in any

22 other unit or communitization agreement shall re23 port and pay royalties on oil and gas production for

24 each production month based on the volume of oil

25 and gas produced from such agreement and allo-
38

•HR 1975 PCS

1 cated to the lease in accordance with the terms of

2 the agreement; and

3 ‘‘(C) a lessee or its designee of a lease that is

4 not contained in a unit or communitization agree5 ment shall report and pay royalties on oil and gas

6 production for each production month based on the

7 actual volume of production sold by or on behalf of

8 that lessee.

9 ‘‘(2) This subsection applies only to requirements for

10 reporting and paying royalties. Nothing in this subsection

11 is intended to alter a lessee’s liability for royalties on oil

12 or gas production based on the share of production allo13 cated to the lease in accordance with the terms of the

14 lease, a unit or communitization agreement, or any other

15 agreement.

16 ‘‘(3) For any unit or communitization agreement if

17 all lessees contractually agree to an alternative method of

18 royalty reporting and payment, the lessees may submit

19 such alternative method to the Secretary or the delegated

20 State for approval and make payments in accordance with

21 such approved alternative method so long as such alter22 native method does not reduce the amount of the royalty

23 obligation.

24 ‘‘(4) The Secretary or the delegated State shall grant

25 an exception from the reporting and payment require-
39

•HR 1975 PCS

1 ments for marginal properties by allowing for any calendar

2 year or portion thereof royalties to be paid each month

3 based on the volume of production sold. Interest shall not

4 accrue on the difference for the entire calendar year or

5 portion thereof between the amount of oil and gas actually

6 sold and the share of production allocated to the lease

7 until the beginning of the month following such calendar

8 year or portion thereof. Any additional royalties dues or

9 overpaid royalties and associated interest shall be paid, re10 funded, or credited within six months after the end of each

11 calendar year in which royalties are paid based on volumes

12 of production sold. For the purpose of this subsection, the

13 term ‘marginal property’ means a lease that produces on

14 average the combined equivalent of less than 15 barrels

15 of oil per well per day or 90 thousand cubic feet of gas

16 per well per day, or a combination thereof, determined by

17 dividing the average daily production of crude oil and nat18 ural gas from producing wells on such lease by the number

19 of such wells, unless the Secretary, together with the State

20 concerned, determines that a different production is more

21 appropriate.

22 ‘‘(5) Not later than two years after the date of the

23 enactment of this subsection, the Secretary shall issue any

24 appropriate demand for all outstanding royalty payment

25 disputes regarding who is required to report and pay roy-
40

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1 alties on production from units and communitization

2 agreements outstanding on the date of the enactment of

3 this subsection, and collect royalty amounts owed on such

4 production.’’.

5 (e) PRODUCTION ALLOCATION.—Section 111 of the

6 Federal Oil and Gas Royalty Management Act of 1982

7 (30 U.S.C. 1721), as amended by subsections (a) through

8 (d), is amended by adding at the end the following:

9 ‘‘(l) The Secretary shall issue all determinations of

10 allocations of production for units and communitization

11 agreements within 120 days of a request for determina12 tion. If the Secretary fails to issue a determination within

13 such 120-day period, the Secretary shall waive interest

14 due on obligations subject to the determination until the

15 end of the month following the month in which the deter16 mination is made.’’.

17 (f) NEW ASSESSMENT TO ENCOURAGE PROPER ROY18 ALTY PAYMENTS.—

19 (1) IN GENERAL.—The Federal Oil and Gas

20 Royalty Management Act of 1982 (30 U.S.C. 1721),

21 as amended by section 4(a), is further amended by

22 adding at the end the following:

23 ‘‘SEC. 116. ASSESSMENTS.

24 ‘‘Beginning eighteen months after the date of enact25 ment of this section, to encourage proper royalty payment
41

•HR 1975 PCS

1 the Secretary or the delegated State shall impose assess2 ments on a person who chronically submits erroneous re3 ports under this Act. Assessments under this Act may only

4 be issued as provided for in this section.’’.

5 (2) CLERICAL AMENDMENT.—The table of con6 tents in section 1 of such Act (30 U.S.C. 1701) is

7 amended by adding after the item relating to section

8 115 the following new item:

‘‘Sec. 116. Assessments.’’.

9 (g) LIABILITY FOR ROYALTY PAYMENTS.—Section

10 102(a) of the Federal Oil and Gas Royalty Management

11 Act of 1982 (30 U.S.C. 1712(a)) is amended to read as

12 follows:

13 ‘‘(a) In order to increase receipts and achieve effec14 tive collections of royalty and other payments, a lessee who

15 is required to make any royalty or other payment under

16 a lease or under the mineral leasing laws, shall make such

17 payments in the time and manner as may be specified by

18 the Secretary or the applicable delegated State. A lessee

19 may designate a person to make all or part of the pay20 ments due under a lease on the lessee’s behalf and shall

21 notify the Secretary or the applicable delegated State in

22 writing of such designation, in which event said designated

23 person may, in its own name, pay, offset or credit monies,

24 make adjustments, request and receive refunds and sub25 mit reports with respect to payments required by the les-
42

•HR 1975 PCS

1 see. Notwithstanding any other provision of this Act to

2 the contrary, a designee shall not be liable for any pay3 ment obligation under the lease. The person owning oper4 ating rights in a lease shall be primarily liable for its pro

5 rata share of payment obligations under the lease. If the

6 person owning the legal record title in a lease is other than

7 the operating rights owner, the person owning the legal

8 record title shall be secondarily liable for its pro rata share

9 of such payment obligations under the lease.’’.

10 (h) CLERICAL AMENDMENTS.—(1) The heading of

11 section 111 of the Federal Oil and Gas Royalty manage12 ment Act of 1982 (30 U.S.C. 1721) is amended to read

13 as follows:

14 ‘‘ROYALTY TERMS AND CONDITIONS, INTEREST, AND

15 PENALTIES’’.

16 (2) The item relating to section 111 in the table of

17 contents in section 1 of such Act (30 U.S.C. 1701) is

18 amended to read as follows:

‘‘Sec. 111. Royalty terms and conditions, interest, and penalties.’’.

19 SEC. 7. ALTERNATIVES FOR MARGINAL PROPERTIES.

20 (a) IN GENERAL.—The Federal Oil and Gas Royalty

21 Management Act of 1982 (30 U.S.C. 1701 et seq.), as

22 amended by section 6 of this Act, is further amended by

23 adding at the end the following:
43

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1 ‘‘SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.

2 ‘‘(a) DETERMINATION OF BEST INTERESTS OF

3 STATE CONCERNED AND THE UNITED STATES.—The

4 Secretary and the State concerned, acting in the best in5 terests of the United States and the State concerned to

6 promote production, reduce administrative costs, and in7 crease net receipts to the United States and the States,

8 shall jointly determine, on a case by case basis, the

9 amount of what marginal production from a lease or leases

10 or well or wells, or parts thereof, shall be subject to a pre11 payment under subsection (b) or regulatory relief under

12 subsection (c). If the State concerned does not consent,

13 such prepayments or regulatory relief shall not be made

14 available under this section for such marginal production:

15 Provided, That if royalty payments from a lease or leases,

16 or well or wells are not shared with any State, such deter17 mination shall be made solely by the Secretary.

18 ‘‘(b) PREPAYMENT OF ROYALTY.—

19 ‘‘(1) IN GENERAL.—Notwithstanding the provi20 sions of any lease to the contrary, for any lease or

21 leases or well or wells identified by the Secretary

22 and the State concerned pursuant to subsection (a),

23 the Secretary is authorized to accept a prepayment

24 for royalties in lieu of monthly royalty payments

25 under the lease for the remainder of the lease term

26 if the affected lessee so agrees. Any prepayment
44

•HR 1975 PCS

1 agreed to by the Secretary, State concerned and les2 see which is less than an average $500 per month

3 in total royalties shall be effectuated under this sec4 tion not earlier than two years after the date of en5 actment of this section and, any prepayment which

6 is greater than an average $500 per month in total

7 royalties shall be effectuated under this section not

8 earlier than three years after the date of enactment

9 of this section. The Secretary and the State con10 cerned may condition their acceptance of the prepay11 ment authorized under this section on the lessee’s

12 agreeing to such terms and conditions as the Sec13 retary and the State concerned deem appropriate

14 and consistent with the purposes of this Act. Such

15 terms may—

16 ‘‘(A) provide for prepayment that does not

17 result in a loss of revenue to the United States

18 in present value terms;

19 ‘‘(B) include provisions for receiving addi20 tional prepayments or royalties for develop21 ments in the lease or leases or well or wells that

22 deviate significantly from the assumptions and

23 facts on which the valuation is determined; and

24 ‘‘(C) require the lessee or it designee to

25 provide such periodic production reports as may
45

•HR 1975 PCS

1 be necessary to allow the Secretary and the

2 State concerned to monitor production for the

3 purposes of subparagraph (B).

4 ‘‘(2) STATE SHARE.—A prepayment under this

5 section shall be shared by the Secretary with any

6 State or other recipient to the same extent as any

7 royalty payment for such lease.

8 ‘‘(3) SATISFACTION OF OBLIGATION.—Except

9 as may be provided in the terms and conditions es10 tablished by the Secretary under subsection (b), a

11 lessee or its designee who makes a prepayment

12 under this section shall have satisfied in full the les13 see’s obligation to pay royalty on the production

14 stream sold from the lease or leases or well or wells.

15 ‘‘(c) ALTERNATIVE ACCOUNTING AND AUDITING RE16 QUIREMENTS.—Within one year after the date of the en17 actment of this section, the Secretary or the delegated

18 State shall provide accounting, reporting, and auditing re19 lief that will encourage lessees to continue to produce and

20 develop properties subject to subsection (a): Provided,

21 That such relief will only be available to lessees in a State

22 that concurs, which concurrence is not required if royalty

23 payments from the lease or leases or well or wells are not

24 shared with any State. Prior to granting such relief, the

25 Secretary and, if appropriate, the State concerned shall
46

•HR 1975 PCS

1 agree that the type of marginal wells and relief provided

2 under this paragraph is in the best interest of the United

3 States and, if appropriate, the State concerned.’’.

4 (b) CLERICAL AMENDMENT.—The table of contents

5 in section 1 of such Act (30 U.S.C. 1701) is amended by

6 adding after the item relating to section 116 the following

7 new item:

‘‘Sec. 117. Alternatives for marginal properties.’’.

8 SEC. 8. APPLICABILITY.

9 (a) FOGRMA.—With respect to Federal lands, sec10 tions 202 and 307 of the Federal Oil and Gas Royalty

11 Management Act of 1982 (30 U.S.C. 1732 and 1755), are

12 no longer applicable. The applicability of those sections to

13 Indian leases is not affected.

14 (b) OCSLA.—Effective on the date of the enactment

15 of this Act, section 10 of the Outer Continental Shelf

16 Lands Act (43 U.S.C. 1339) is repealed.

17 SEC. 9. INDIAN LANDS.

18 The amendments made by this Act shall not apply

19 with respect to Indian lands, and the provisions of the

20 Federal Oil and Gas Royalty Management Act of 1982

21 as in effect on the day before the date of enactment of

22 this Act shall continue to apply after such date with re23 spect to Indian lands.
47

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1 SEC. 10. PRIVATE LANDS.

2 This Act shall not apply to any privately owned min3 erals.

4 SEC. 11. EFFECTIVE DATE.

5 Except as provided by section 115(h), section 111(h),

6 section 111(k)(5), and section 117 of the Federal Oil and

7 Gas Royalty Management Act of 1982 (as added by this

8 Act), this Act, and the amendments made by this Act,

9 shall apply with respect to the production of oil and gas

10 after the first day of the month following the date of the

11 enactment of this Act.

12 SEC. 12. SAVINGS CLAUSE.

13 Nothing in this Act shall be construed to give a State

14 a property right or interest in any Federal lease or land.

Passed the House of Representatives July 16, 1996.

Attest: ROBIN H. CARLE,

Clerk.