Union Calendar No. 341

104TH CONGRESS

2D SESSION H. R. 1975

[Report No. 104–667]

A BILL

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

JULY 11, 1996

Reported with an amendment, committed to the Commitordered to be printed tee of the Whole House on the State of the Union, and
IB

Union Calendar No. 341

104TH CONGRESS

2D SESSION H. R. 1975

[Report No. 104–667]

To improve the management of royalties from Federal and Outer Continental

Shelf oil and gas leases, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JUNE 30, 1995

Mr. CALVERT (for himself, Mr. BREWSTER, Mr. DOOLEY, Mr. TAUZIN, and

Mr. LUCAS) introduced the following bill; which was referred to the Committee on Resources

JULY 11, 1996

Additional sponsors: Mr. CREMEANS, Mr. THORNBERRY, Mr. ORTIZ, Mr.

RADANOVICH, Mr. HAYES, and Mr. EHRLICH

JULY 11, 1996

Reported with an amendment, committed to the Committee of the Whole

House on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on June 30, 1995]

A BILL

To improve the management of royalties from Federal and

Outer Continental Shelf oil and gas leases, and for other

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

3 SECTION 1. SHORT TITLE.

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

5 Royalty Simplification and Fairness Act of 1996’’.

6 SEC. 2. DEFINITIONS.

7 Section 3 of the Federal Oil and Gas Royalty Manage8 ment Act of 1982 (30 U.S.C. 1701 et seq.) is amended—

9 (1) by amending paragraph (7) to read as fol10 lows:

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

12 United States issues an oil and gas lease or any per13 son to whom operating rights in a lease have been as14 signed;’’; and

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

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

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

18 end the following:

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

20 previously filed report on an obligation, and any ad21 ditional payment or credit, if any, applicable thereto,

22 to rectify an underpayment or overpayment on an ob23 ligation;

24 ‘‘(18) ‘administrative proceeding’ means any De25 partment of the Interior agency process in which a
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1 demand, decision or order issued by the Secretary or

2 a delegated State is subject to appeal or has been ap3 pealed;

4 ‘‘(19) ‘assessment’ means any fee or charge levied

5 or imposed by the Secretary or a delegated State other

6 than—

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

8 minimum royalty, rental, bonus, net profit share

9 or proceed of sale;

10 ‘‘(B) any interest; or

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

12 ‘‘(20) ‘commence’ means—

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

14 the service of a complaint, petition, counter15 claim, crossclaim, or other pleading seeking af16 firmative relief or seeking credit or recoupment:

17 Provided, That if the Secretary commences a ju18 dicial proceeding against a designee, the Sec19 retary shall give notice of that commencement to

20 the lessee who designated the designee, but the

21 Secretary is not required to give notice to other

22 lessees who may be liable pursuant to section

23 102(a) of this Act, for the obligation that is the

24 subject of the judicial proceeding; or
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1 ‘‘(B) with respect to a demand, the receipt

2 by the Secretary or a delegated State or a lessee

3 or its designee (with written notice to the lessee

4 who designated the designee) of the demand;

5 ‘‘(21) ‘credit’ means the application of an over6 payment (in whole or in part) against an obligation

7 which has become due to discharge, cancel or reduce

8 the obligation;

9 ‘‘(22) ‘demand’ means—

10 ‘‘(A) an order to pay issued by the Sec11 retary or the applicable delegated State to a les12 see or its designee (with written notice to the les13 see who designated the designee) that has a rea14 sonable basis to conclude that the obligation in

15 the amount of the demand is due and owing; or

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

17 or its designee which asserts an obligation due

18 the lessee or its designee that provides a reason19 able basis to conclude that the obligation in the

20 amount of the demand is due and owing, but

21 does not mean any royalty or production report,

22 or any information contained therein, required

23 by the Secretary or a delegated State;

24 ‘‘(23) ‘designee’ means the person designated by

25 a lessee pursuant to section 102(a) of this Act, with
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1 such written designation effective on the date such

2 designation is received by the Secretary and remain3 ing in effect until the Secretary receives notice in

4 writing that the designation is modified or termi5 nated;

6 ‘‘(24) ‘obligation’ means—

7 ‘‘(A) any duty of the Secretary or, if appli8 cable, a delegated State—

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

10 or

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

12 monies including (but not limited to)—

13 ‘‘(I) the principal amount of any

14 royalty, minimum royalty, rental,

15 bonus, net profit share or proceed of

16 sale; or

17 ‘‘(II) any interest; and

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

19 (subject to the provisions of section 102(a) of this

20 Act)—

21 ‘‘(i) to deliver oil or gas royalty in

22 kind; or

23 ‘‘(ii) to pay, offset or credit monies in24 cluding (but not limited to)—
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1 ‘‘(I) the principal amount of any

2 royalty, minimum royalty, rental,

3 bonus, net profit share or proceed of

4 sale;

5 ‘‘(II) any interest;

6 ‘‘(III) any penalty; or

7 ‘‘(IV) any assessment,

8 which arises from or relates to any lease ad9 ministered by the Secretary for, or any

10 mineral leasing law related to, the explo11 ration, production and development of oil

12 or gas on Federal lands or the Outer Con13 tinental Shelf;

14 ‘‘(25) ‘order to pay’ means a written order is15 sued by the Secretary or the applicable delegated

16 State to a lessee or its designee (with notice to the les17 see who designated the designee) which—

18 ‘‘(A) asserts a specific, definite, and quan19 tified obligation claimed to be due, and

20 ‘‘(B) specifically identifies the obligation by

21 lease, production month and monetary amount

22 of such obligation claimed to be due and ordered

23 to be paid, as well as the reason or reasons such

24 obligation is claimed to be due, but such term

25 does not include any other communication or ac-
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1 tion by or on behalf of the Secretary or a dele2 gated State;

3 ‘‘(26) ‘overpayment’ means any payment by a

4 lessee or its designee in excess of an amount legally

5 required to be paid on an obligation and includes the

6 portion of any estimated payment for a production

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

8 month;

9 ‘‘(27) ‘payment’ means satisfaction, in whole or

10 in part, of an obligation;

11 ‘‘(28) ‘penalty’ means a statutorily authorized

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

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

14 a lease administered by the Secretary;

15 ‘‘(29) ‘refund’ means the return of an overpay16 ment by the drawing of funds from the United States

17 Treasury;

18 ‘‘(30) ‘State concerned’ means, with respect to a

19 lease, a State which receives a portion of royalties or

20 other payments under the mineral leasing laws from

21 such lease;

22 ‘‘(31) ‘underpayment’ means any payment or

23 nonpayment by a lessee or its designee that is less

24 than the amount legally required to be paid on an ob25 ligation; and
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1 ‘‘(32) ‘United States’ means the United States

2 Government and any department, agency, or instru3 mentality thereof, the several States, the District of

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

5 SEC. 3. DELEGATION OF ROYALTY COLLECTIONS AND RE6 LATED ACTIVITIES.

7 (a) GENERAL AUTHORITY.—Section 205 of the Federal

8 Oil and Gas Royalty Management Act of 1982 (30 U.S.C.

9 1735) is amended to read as follows:

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

11 RELATED ACTIVITIES.

12 ‘‘(a) STATE PROPOSAL.—A State may submit to the

13 Secretary a proposal to perform and enforce all or part of

14 the authorities and responsibilities of the Secretary under

15 this Act to conduct and enforce royalty collections and relat16 ed activities, including audits, inspections, investigations,

17 production and financial reports, correction of erroneous re18 port data, automated verification, demands, subpoenas, or19 ders to perform restructured accounting (as defined in this

20 Act), production accountability, with respect to all Federal

21 leases within that State.

22 ‘‘(b) DEMONSTRATION OF STATE ABILITY.—In the

23 proposal under subsection (a), the State shall demonstrate

24 the following:
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1 ‘‘(1) It is likely that the State will provide ade2 quate resources to achieve the purposes of this Act.

3 ‘‘(2) The State has demonstrated that it will ef4 fectively and faithfully administer the rules and regu5 lations of the Secretary under this Act in accordance

6 with the requirements or subsection (c).

7 ‘‘(3) Such delegation will not create an unrea8 sonable burden on the lessees within the State.

9 ‘‘(4) The State agrees to adopt standardized re10 porting procedures prescribed by the Secretary, unless

11 the State and all affected parties otherwise agree.

12 ‘‘(5) The State agrees to follow and adhere to

13 regulations issued pursuant to the mineral leasing

14 laws regarding valuation of production.

15 ‘‘(6) The State has enacted laws and promul16 gated regulations consistent with relevant Federal

17 laws and regulations.

18 ‘‘(7) The State has shown that delegation of the

19 authorities and responsibilities under this Act will re20 sult in a cost-savings to the United States.

21 ‘‘(c) REGULATIONS.—After consultation with the

22 States concerned, the Secretary shall by rule promulgate

23 standards within 18 months after the date of enactment of

24 this section pertaining to authorities and responsibilities

25 under subsection (a), including standards pertaining to the
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1 royalty collections and related activities enumerated in sub2 section (a). Such standards shall be designed to provide rea3 sonable assurance that uniformity and effectiveness will

4 prevail among the States, that State participation will

5 ensue in the development of procedures and policies affect6 ing the delegated activity, and that reasonable flexibility

7 will be provided to a State to perform any delegated author8 ity or responsibility in a more efficient and cost-effective

9 manner. The records and accounts maintained pursuant to

10 such regulations shall be sufficient to allow the Secretary

11 to monitor the performance of any State under this section.

12 Such standards shall, to the maximum extent possible, pre13 vent duplication by the Secretary of any activity delegated

14 to a State for all Federal land within a State.

15 ‘‘(d) DELEGATION.—

16 ‘‘(1) PRELIMINARY APPROVAL OR DISAPPROVAL

17 BY SECRETARY.—

18 ‘‘(A) REVIEW.—The Secretary shall review

19 a State’s proposal as to the consistency of such

20 proposal with subsections (b) and (c) and regula21 tions under subsection (c).

22 ‘‘(B) DECISION.—The Secretary shall issue

23 a preliminary approval or disapproval as to the

24 consistency of a State’s proposal with subsections

25 (b) and (c) and regulations under subsection (c)
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1 within six months after submission of such pro2 posal. If the Secretary disapproves any State

3 proposal in whole or in part, he shall notify the

4 State in writing of his decision and set forth in

5 detail the reasons therefore and state whether he

6 will agree to delegate to the State if the State

7 meets the conditions set forth in the disapproval.

8 ‘‘(C) RESUBMISSION.—The State shall have

9 60 days in which to resubmit a revised State

10 proposal or portion thereof. The Secretary shall

11 approve or disapprove the resubmitted State pro12 posal or portion thereof within 60 days from the

13 date of resubmission.

14 ‘‘(2) DELEGATION.—After notice and oppor15 tunity for a public hearing, if the Secretary deter16 mines that a State has satisfied the conditions con17 tained in a preliminary ruling and approves the

18 State’s proposal, the State shall assume and perform

19 such activities and responsibilities pursuant to such

20 approval. The provisions for delegation shall be set

21 forth in a delegation agreement between the Secretary

22 and the State within 90 days after the notice and

23 hearing. The agreement may be amended from time

24 to time to take into account new standards and proce25 dures affecting the delegated activity. Under any such
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1 agreement, the Secretary and the State shall share oil

2 or gas information.

3 ‘‘(3) FEDERAL INTERVENTION; WITHDRAWAL OF

4 AUTHORITY.—

5 ‘‘(A) SECRETARIAL INTERVENTION.—If after

6 providing written notice to a delegated State

7 (with a copy to the lessee or its designee) and a

8 reasonable opportunity to take corrective action

9 requested by the Secretary, the Secretary deter10 mines that the State has failed to issue a de11 mand or order to a Federal lessee within the

12 State, that such failure will result in an under13 payment of an obligation due the United States

14 by such lessee, and that such underpayment will

15 be uncollected without Secretarial intervention,

16 the Secretary may issue such demand or order in

17 accordance with the provisions of this Act prior

18 to or absent the withdrawal of the delegated ac19 tivity.

20 ‘‘(B) WITHDRAWAL OF DELEGATED ACTIV21 ITY.—Whenever the Secretary determines after

22 public hearing that a State is not performing the

23 delegated activity authorized under this section

24 in accordance with requirements of this section,

25 the Secretary shall provide written notice, to-
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1 gether with the reasons therefor, to the State and,

2 if corrective action is not taken within a reason3 able time, not to exceed 90 days, the Secretary

4 shall withdraw authorization of such delegated

5 activity and take the necessary actions to admin6 ister and enforce such withdrawn activity.

7 ‘‘(4) COURT ACTION.—The State may bring an

8 action in the Federal district court in a judicial dis9 trict in which a portion of the State is located if—

10 ‘‘(A) the Secretary does not agree to delegate

11 the requested activities, or

12 ‘‘(B) the Secretary withdraws an activity

13 under paragraph (3)(B).

14 ‘‘(e) SAVINGS PROVISION.—Any State operating pur15 suant to a delegation existing on the date of enactment of

16 this Act may continue to operate under the terms and con17 ditions of the delegation, subject to the requirements of sub18 section (i), except to the extent that a revision of the existing

19 agreement is adopted pursuant to this section.

20 ‘‘(f) STATE ACTION.—With respect to enforcement of

21 an obligation under this Act, a State bringing an action

22 under this section shall enjoy no greater rights than the Sec23 retary enjoys under this Act.

24 ‘‘(g) RECEIPTS.—The Secretary shall compensate any

25 State for those costs which may be necessary to carry out
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1 the delegated activities under this section. Payment shall

2 be made no less than every quarter during the fiscal year.

3 Compensation to a State shall not exceed the Secretary’s

4 reasonably anticipated expenditure for performance of such

5 delegated activities by the Secretary. Such costs shall be al6 locable for the purposes of section 35(b) of the Act entitled

7 ‘An act to promote the mining of coal, phosphate, oil, oil

8 shale, gas and sodium on the public domain’, approved Feb9 ruary 25, 1920 (commonly known as the Mineral Leasing

10 Act) (30 U.S.C. 191 (b)) to the administration and enforce11 ment of laws providing for the leasing of any onshore lands

12 or interests in land owned by the United States. The Sec13 retary shall compensate any State in the next succeeding

14 fiscal year for the aggregate amount of such costs incurred

15 but not compensated due to such allocation for the current

16 fiscal year. All moneys received from sales, bonuses, rentals,

17 royalties, assessments and interest, including money

18 claimed to be due and owing pursuant to a delegation under

19 this section, shall be payable and paid to the Treasury of

20 the United States. If a State’s cost for actions taken under

21 a delegated activity is subject to such section 35(b), the Sec22 retary shall not charge the State under such section 35(b)

23 for the Secretary’s costs for taking the same actions under

24 such activity.’’.
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1 (b) CLERICAL AMENDMENT.—The item relating to sec2 tion 205 in the table of contents in section 1 of the Federal

3 Oil and Gas Royalty Management Act of 1982 (30 U.S.C.

4 1701) is amended to read as follows:

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

5 SEC. 4. SECRETARIAL AND DELEGATED STATES’ ACTIONS

6 AND LIMITATION PERIODS.

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

8 Management Act of 1982 (30 U.S.C. 1701 et seq.) is amend9 ed by adding after section 114 the following new section:

10 ‘‘SEC. 115. SECRETARIAL AND DELEGATED STATES’ AC11 TIONS AND LIMITATION PERIODS.

12 ‘‘(a) IN GENERAL.—The respective duties, responsibil13 ities, and activities with respect to a lease shall be per14 formed by the Secretary, delegated States, and lessees or

15 their designees in a timely manner.

16 ‘‘(b) LIMITATION PERIOD.—

17 ‘‘(1) IN GENERAL.—A judicial proceeding or de18 mand which arises from, or relates to an obligation,

19 shall be commenced within seven years from the date

20 on which the obligation becomes due and if not so

21 commenced shall be barred. If commencement of a ju22 dicial proceeding or demand for an obligation is

23 barred by this section, the Secretary, a delegated

24 State, or a lessee or its designee (A) shall not take
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1 any other or further action regarding that obligation,

2 including (but not limited to) the issuance of any

3 order, request, demand or other communication seek4 ing any document, accounting, determination, cal5 culation, recalculation, payment, principal, interest,

6 assessment, or penalty or the initiation, pursuit or

7 completion of an audit with respect to that obligation;

8 and (B) shall not pursue any other equitable or legal

9 remedy, whether under statute or common law, with

10 respect to an action on or an enforcement of said obli11 gation.

12 ‘‘(2) RULE OF CONSTRUCTION.—A judicial pro13 ceeding or demand that is timely commenced under

14 paragraph (1) against a designee shall be considered

15 timely commenced as to any lessee who is liable pur16 suant to section 102(a) of this Act for the obligation

17 that is the subject of the judicial proceeding or de18 mand.

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

20 The limitations set forth in sections 2401, 2415, 2416,

21 and 2462 of title 28, United States Code, and section

22 42 of the Mineral Leasing Act (30 U.S.C. 226–2)

23 shall not apply to any obligation to which this Act

24 applies. Section 3716 of title 31, United States Code,

25 may be applied to an obligation the enforcement of
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1 which is not barred by this Act, but may not be ap2 plied to any obligation the enforcement of which is

3 barred by this Act.

4 ‘‘(c) OBLIGATION BECOMES DUE.—

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

6 obligation becomes due when the right to enforce the

7 obligation is fixed.

8 ‘‘(2) ROYALTY OBLIGATIONS.—The right to en9 force any royalty obligation for any given production

10 month for a lease is fixed for purposes of this Act on

11 the last day of the calendar month following the

12 month in which oil or gas is produced.

13 ‘‘(d) TOLLING OF LIMITATION PERIOD.—The running

14 of the limitation period under subsection (b) shall not be

15 suspended, tolled, extended, or enlarged for any obligation

16 for any reason by any action, other than the following:

17 ‘‘(1) TOLLING AGREEMENT.—A written agree18 ment executed during the limitation period between

19 the Secretary or a delegated State and a lessee or its

20 designee (with notice to the lessee who designated the

21 designee) shall toll the limitation period for the

22 amount of time during which the agreement is in ef23 fect.

24 ‘‘(2) SUBPOENA.—
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1 ‘‘(A) The issuance of a subpoena to a lessee

2 or its designee (with notice to the lessee who des3 ignated the designee, which notice shall not con4 stitute a subpoena to the lessee) in accordance

5 with the provisions of subparagraph (B)(i) shall

6 toll the limitation period with respect to the obli7 gation which is the subject of a subpoena only

8 for the period beginning on the date the lessee

9 or its designee receives the subpoena and ending

10 on the date on which (i) the lessee or its designee

11 has produced such subpoenaed records for the

12 subject obligation, (ii) the Secretary or a dele13 gated State receives written notice that the sub14 poenaed records for the subject obligation are not

15 in existence or are not in the lessee’s or its des16 ignee’s possession or control, or (iii) a court has

17 determined in a final decision that such records

18 are not required to be produced, whichever occurs

19 first.

20 ‘‘(B)(i) A subpoena for the purposes of this

21 section which requires a lessee or its designee to

22 produce records necessary to determine the prop23 er reporting and payment of an obligation due

24 the Secretary may be issued only by an Assistant

25 Secretary of the Interior or an Acting Assistant
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1 Secretary of the Interior who is a schedule C em2 ployee (as defined by section 213.3301 of title 5,

3 Code of Federal Regulations), or the Director or

4 Acting Director of the respective bureau or agen5 cy, and may not be delegated to any other per6 son. If a State has been delegated authority pur7 suant to section 205, the State, acting through

8 the highest elected State official having ultimate

9 authority over the collection of royalties from

10 leases on Federal lands within the State, may

11 issue such subpoena, but may not delegate such

12 authority to any other person.

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

14 may only be issued against a lessee or its des15 ignee during the limitation period provided in

16 this section and only after the Secretary or a del17 egated State has in writing requested the records

18 from the lessee or its designee related to the obli19 gation which is the subject of the subpoena and

20 has determined that—

21 ‘‘(I) the lessee or its designee has failed

22 to respond within a reasonable period of

23 time to the Secretary’s or the applicable del24 egated State’s written request for such

25 records necessary for an audit, investigation
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1 or other inquiry made in accordance with

2 the Secretary’s or such delegated State’s re3 sponsibilities under this Act; or

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

5 writing denied the Secretary’s or the appli6 cable delegated State’s written request to

7 produce such records in the lessee’s or its

8 designee’s possession or control necessary for

9 an audit, investigation or other inquiry

10 made in accordance with the Secretary’s or

11 such delegated State’s responsibilities under

12 this Act; or

13 ‘‘(III) the lessee or its designee has un14 reasonably delayed in producing records

15 necessary for an audit, investigation or

16 other inquiry made in accordance with the

17 Secretary’s or the applicable delegated

18 State’s responsibilities under this Act after

19 the Secretary’s or such delegated State’s

20 written request.

21 ‘‘(C) In seeking records, the Secretary or the

22 applicable delegated State shall afford the lessee

23 or its designee a reasonable period of time after

24 a written request by the Secretary or such dele-
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1 gated State in which to provide such records

2 prior to the issuance of any subpoena.

3 ‘‘(3) MISREPRESENTATION OR CONCEALMENT.—

4 The intentional misrepresentation or concealment of a

5 material fact for the purpose of evading the payment

6 of an obligation in which case the limitation period

7 shall be tolled for the period of such misrepresentation

8 or such concealment.

9 ‘‘(4) ORDER TO PERFORM A RESTRUCTURED AC10 COUNTING.—(A)(i) The issuance of a notice under

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

12 not substantially complied with the requirement to

13 perform a restructured accounting shall toll the limi14 tation period with respect to the obligation which is

15 the subject of the notice only for the period beginning

16 on the date the lessee or its designee receives the notice

17 and ending 120 days after the date on which (I) the

18 Secretary or the applicable delegated State receives

19 written notice the accounting or other requirement

20 has been performed, or (II) a court has determined in

21 a final decision that the lessee is not required to per22 form the accounting, whichever occurs first.

23 ‘‘(ii) If the lessee or its designee initiates an ad24 ministrative appeal or judicial proceeding to contest

25 an order to perform a restructured accounting issued
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1 under subparagraph (B)(i), the limitation period in

2 subsection (b) shall be tolled from the date the lessee

3 or its designee received the order until a final, non4 appealable decision is issued in any such proceeding.

5 ‘‘(B)(i) The Secretary or the applicable delegated

6 State may issue an order to perform a restructured

7 accounting to a lessee or its designee when the Sec8 retary or such delegated State determines during an

9 audit of a lessee or its designee that the lessee or its

10 designee should recalculate royalty due on an obliga11 tion based upon the Secretary’s or the delegated

12 State’s finding that the lessee or its designee has made

13 identified underpayments or overpayments which are

14 demonstrated by the Secretary or the delegated State

15 to be based upon repeated, systemic reporting errors

16 for a significant number of leases or a single lease for

17 a significant number of reporting months with the

18 same type of error which constitutes a pattern of vio19 lations and which are likely to result in either signifi20 cant underpayments or overpayments.

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

22 order to perform a restructured accounting may not

23 be delegated below the most senior career professional

24 position having responsibility for the royalty manage25 ment program, which position is currently designated
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1 as the ‘Associate Director for Royalty Management’,

2 and may not be delegated to any other person. If a

3 State has been delegated authority pursuant to section

4 205 of this Act, the State, acting through the highest

5 ranking State official having ultimate authority over

6 the collection of royalties from leases on Federal lands

7 within the State, may issue such order to perform,

8 which may not be delegated to any other person. An

9 order to perform a restructured accounting shall—

10 ‘‘(I) be issued within a reasonable period of

11 time from when the audit identifies the systemic,

12 reporting errors;

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

14 for such order;

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

16 to perform a restructured accounting’;

17 ‘‘(IV) provide the lessee or its designee a

18 reasonable period of time (but not less than 60

19 days) within which to perform the restructured

20 accounting; and

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

22 days within which to file an administrative ap23 peal of the order to perform a restructured ac24 counting.
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1 ‘‘(C) An order to perform a restructured account2 ing shall not mean or be construed to include any

3 other communication or action by or on behalf of the

4 Secretary or a delegated State.

5 ‘‘(D) If a lessee or its designee fails to substan6 tially comply with the requirement to perform a re7 structured accounting pursuant to this subsection, a

8 notice shall be issued to the lessee or its designee that

9 the lessee or its designee has not substantially com10 plied with the requirements to perform a restructured

11 accounting. A lessee or its designee shall be given a

12 reasonable time within which to perform the restruc13 tured accounting. Such notice may be issued under

14 this section only by an Assistant Secretary of the In15 terior or an acting Assistant Secretary of the Interior

16 who is a schedule C employee (as defined by section

17 213.3301 of title 5, Code of Federal Regulations) and

18 may not be delegated to any other person. If a State

19 has been delegated authority pursuant to section 205,

20 the State, acting through the highest elected State offi21 cial having ultimate authority over the collection of

22 royalties from leases on Federal lands within the

23 State, may issue such notice, which may not be dele24 gated to any other person.
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1 ‘‘(e) TERMINATION OF LIMITATIONS PERIOD.—An ac2 tion or an enforcement of an obligation by the Secretary

3 or delegated State or a lessee or its designee shall be barred

4 under this section prior to the running of the seven-year

5 period provided in subsection (b) in the event—

6 ‘‘(1) the Secretary or a delegated State has noti7 fied the lessee or its designee in writing that a time

8 period is closed to further audit; or

9 ‘‘(2) the Secretary or a delegated State and a les10 see or its designee have so agreed in writing.

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

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

13 pursuant to section 102(a) for obligations that are the sub14 ject of the notice or agreement.

15 ‘‘(f) RECORDS REQUIRED FOR DETERMINING COLLEC16 TIONS.—Records required pursuant to section 103 of this

17 Act by the Secretary or any delegated State for the purpose

18 of determining obligations due and compliance with any

19 applicable mineral leasing law, lease provision, regulation

20 or order with respect to oil and gas leases from Federal

21 lands or the Outer Continental Shelf shall be maintained

22 for the same period of time during which a judicial proceed23 ing or demand may be commenced under subsection (b).

24 If a judicial proceeding or demand is timely commenced,

25 the record holder shall maintain such records until the final
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1 nonappealable decision in such judicial proceeding is made,

2 or with respect to that demand is rendered, unless the Sec3 retary or the applicable delegated State authorizes in writ4 ing an earlier release of the requirement to maintain such

5 records. Notwithstanding anything herein to the contrary,

6 under no circumstance shall a record holder be required to

7 maintain or produce any record relating to an obligation

8 for any time period which is barred by the applicable limi9 tation in this section. In connection with any hearing, ad10 ministrative proceeding, inquiry, investigation, or audit by

11 the Secretary or a delegated State under this Act, the Sec12 retary or the delegated State shall minimize the submission

13 of multiple or redundant information and make a good

14 faith effort to locate records previously submitted by a lessee

15 or a designee to the Secretary or the delegated State, prior

16 to requiring the lessee or the designee to provide such

17 records.

18 ‘‘(g) TIMELY COLLECTIONS.—In order to most effec19 tively utilize resources available to the Secretary to maxi20 mize the collection of oil and gas receipts from lease obliga21 tions to the Treasury within the seven-year period of limita22 tions, and consequently to maximize the State share of such

23 receipts, the Secretary may not perform or require account24 ing, reporting, or audit activities if the Secretary and the

25 State concerned determines that the cost of conducting or
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1 requiring the activity exceeds the expected amount to be col2 lected by the activity, based on the most current 12 months

3 of activity. This subsection shall not provide a defense to

4 a demand or an order to perform a restructured accounting.

5 To the maximum extent possible, the Secretary and dele6 gated States shall reduce costs to the United States Treas7 ury and the States by discontinuing requirements for un8 necessary or duplicative data and other information, such

9 as separate allowances and payor information, relating to

10 obligations due. If the Secretary and the State concerned

11 determine that collection will result sooner, the Secretary

12 or the applicable delegated State may waive or forego inter13 est in whole or in part.

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

15 ‘‘(1) 33-MONTH PERIOD.—Demands or orders is16 sued by the Secretary or a delegated State are subject

17 to administrative appeal in accordance with the regu18 lations of the Secretary. The Secretary shall issue a

19 final decision in any administrative proceeding, in20 cluding any administrative proceedings pending on

21 the date of enactment of this section, within 33

22 months from the date such proceeding was commenced

23 or 33 months from the date of such enactment, which24 ever is later. The 33-month period may be extended
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1 by any period of time agreed upon in writing by the

2 Secretary and the appellant.

3 ‘‘(2) EFFECT OF FAILURE TO ISSUE DECISION.—

4 If no such decision has been issued by the Secretary

5 within the 33-month period referred to in paragraph

6 (1)—

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

8 issued and granted a decision in favor of the ap9 pellant as to any nonmonetary obligation and

10 any monetary obligation the principal amount

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

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

13 issued a final decision in favor of the Secretary,

14 which decision shall be deemed to affirm those is15 sues for which the agency rendered a decision

16 prior to the end of such period, as to any mone17 tary obligation the principal amount of which is

18 $10,000 or more, and the appellant shall have a

19 right to judicial review of such deemed final de20 cision in accordance with title 5 of the United

21 States Code.

22 ‘‘(i) COLLECTIONS OF DISPUTED AMOUNTS DUE.—To

23 expedite collections relating to disputed obligations due

24 within the seven-year period beginning on the date the obli25 gation became due, the parties shall hold not less than one
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1 settlement consultation and the Secretary and the State

2 concerned may take such action as is appropriate to com3 promise and settle a disputed obligation, including waiving

4 or reducing interest and allowing offsetting of obligations

5 among leases.

6 ‘‘(j) ENFORCEMENT OF A CLAIM FOR JUDICIAL RE7 VIEW.—In the event a demand subject to this section is

8 properly and timely commenced, the obligation which is the

9 subject of the demand may be enforced beyond the seven10 year limitations period without being barred by this statute

11 of limitations. In the event a demand subject to this section

12 is properly and timely commenced, a judicial proceeding

13 challenging the final agency action with respect to such de14 mand shall be deemed timely so long as such judicial pro15 ceeding is commenced within 180 days from receipt of no16 tice by the lessee or its designee of the final agency action.

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

18 event a judicial proceeding or demand subject to this section

19 is timely commenced and thereafter the limitation period

20 in this section lapses during the pendency of such proceed21 ing, any party to such proceeding shall not be barred from

22 taking such action as is required or necessary to implement

23 a final unappealable judicial or administrative decision,

24 including any action required or necessary to implement
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1 such decision by the recovery or recoupment of an under2 payment or overpayment by means of refund or credit.

3 ‘‘(l) STAY OF PAYMENT OBLIGATION PENDING RE4 VIEW.—Any person ordered by the Secretary or a delegated

5 State to pay any obligation (other than an assessment)

6 shall be entitled to a stay of such payment without bond

7 or other surety instrument pending an administrative or

8 judicial proceeding if the person periodically demonstrates

9 to the satisfaction of the Secretary that such person is fi10 nancially solvent or otherwise able to pay the obligation.

11 In the event the person is not able to so demonstrate, the

12 Secretary may require a bond or other surety instrument

13 satisfactory to cover the obligation. Any person ordered by

14 the Secretary or a delegated State to pay an assessment

15 shall be entitled to a stay without bond or other surety in16 strument.’’.

17 (b) CLERICAL AMENDMENT.—The table of contents in

18 section 1 of the Federal Oil and Gas Royalty Management

19 Act of 1982 (30 U.S.C. 1701) is amended by inserting after

20 the item relating to section 114 the following new item:

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

21 SEC. 5. ADJUSTMENT AND REFUNDS.

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

23 Management Act of 1982 (30 U.S.C. 1701 et seq.) is amend24 ed by inserting after section 111 the following:
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1 ‘‘SEC. 111A. ADJUSTMENTS AND REFUNDS.

2 (a) ADJUSTMENTS.—

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

4 its designee determines that an adjustment or refund

5 request is necessary to correct an underpayment or

6 overpayment of an obligation, the lessee or its des7 ignee shall make such adjustment or request a refund

8 within a reasonable period of time and only during

9 the adjustment period. The filing of a royalty report

10 which reflects the underpayment or overpayment of

11 an obligation shall constitute prior written notice to

12 the Secretary or the applicable delegated State of an

13 adjustment.

14 ‘‘(2)(A) For any adjustment, the lessee or its des15 ignee shall calculate and report the interest due at16 tributable to such adjustment at the same time the les17 see or its designee adjusts the principal amount of the

18 subject obligation, except as provided by subpara19 graph (B).

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

21 determines that subparagraph (A) would impose a

22 hardship, the Secretary or such delegated State shall

23 calculate the interest due and notify the lessee or its

24 designee within a reasonable time of the amount of

25 interest due, unless such lessee or its designee elects to
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1 calculate and report interest in accordance with sub2 paragraph (A).

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

4 an obligation may be made after the adjustment pe5 riod only upon written notice to and approval by the

6 Secretary or the applicable delegated State, as appro7 priate, during an audit of the period which includes

8 the production month for which the adjustment is

9 being made. If an overpayment is identified during

10 an audit, then the Secretary or the applicable dele11 gated State, as appropriate, shall allow a credit or re12 fund in the amount of the overpayment.

13 ‘‘(4) For purposes of this section, the adjustment

14 period for any obligation shall be the six-year period

15 following the date on which an obligation became due.

16 The adjustment period shall be suspended, tolled, ex17 tended, enlarged, or terminated by the same actions

18 as the limitation period in section 115.

19 ‘‘(b) REFUNDS.—

20 ‘‘(1) IN GENERAL.—A request for refund is suffi21 cient if it—

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

23 and, for purposes of section 115, is specifically

24 identified as a demand;
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1 ‘‘(B) identifies the person entitled to such

2 refund;

3 ‘‘(C) provides the Secretary information

4 that reasonably enables the Secretary to identify

5 the overpayment for which such refund is sought;

6 and

7 ‘‘(D) provides the reasons why the payment

8 was an overpayment.

9 ‘‘(2) PAYMENT BY SECRETARY OF THE TREAS10 URY.—The Secretary shall certify the amount of the

11 refund to be paid under paragraph (1) to the Sec12 retary of the Treasury who shall make such refund.

13 Such refund shall be paid from amounts received as

14 current receipts from sales, bonuses, royalties (includ15 ing interest charges collected under this section) and

16 rentals of the public lands and the Outer Continental

17 Shelf under the provisions of the Mineral Leasing Act

18 and the Outer Continental Shelf Lands Act, which are

19 not payable to a State or the Reclamation Fund. The

20 portion of any such refund attributable to any

21 amounts previously disbursed to a State, the Rec22 lamation Fund, or any recipient prescribed by law

23 shall be deducted from the next disbursements to that

24 recipient made under the applicable law. Such

25 amounts deducted from subsequent disbursements
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1 shall be credited to miscellaneous receipts in the

2 Treasury.

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

4 subsection shall be paid or denied (with an expla5 nation of the reasons for the denial) within 120 days

6 of the date on which the request for refund is received

7 by the Secretary. Such refund shall be subject to later

8 audit by the Secretary or the applicable delegated

9 State and subject to the provisions of this Act.

10 ‘‘(4) PROHIBITION AGAINST REDUCTION OF RE11 FUNDS OR CREDITS.—In no event shall the Secretary

12 or any delegated State directly or indirectly claim or

13 offset any amount or amounts against, or reduce any

14 refund or credit (or interest accrued thereon) by the

15 amount of any obligation the enforcement of which is

16 barred by section 115 of this Act.’’.

17 (b) CLERICAL AMENDMENT.—The table of contents in

18 section 1 of the Federal Oil and Gas Royalty Management

19 Act of 1982 (30 U.S.C. 1701) is amended by inserting after

20 the item relating to section 111 the following new item:

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

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

22 PENALTIES.

23 (a) LESSEE OR DESIGNEE INTEREST.—Section 111 of

24 the Federal Oil and Gas Royalty Management Act of 1982
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1 (30 U.S.C. 1721) is amended by adding after subsection (g)

2 the following:

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

4 any overpayment, with such interest to accrue from the date

5 such overpayment was made, at the rate obtained by apply6 ing the provisions of subparagraphs (A) and (B) of section

7 6621(a)(1) of the Internal Revenue Code of 1986, but deter8 mined without regard to the sentence following subpara9 graph (B) of section 6621(a)(1). Interest which has accrued

10 on an overpayment may be applied to reduce an underpay11 ment (including any interest thereon). This subsection ap12 plies to overpayments made later than six months after the

13 date of enactment of this subsection or September 1, 1996,

14 whichever is later. Such interest shall be paid from amounts

15 received as current receipts from sales, bonuses, royalties

16 (including interest charges collected under this section) and

17 rentals of the public lands and the Outer Continental Shelf

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

19 Outer Continental Shelf Lands Act, which are not payable

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

21 such interest payment attributable to any amounts pre22 viously disbursed to a State, the Reclamation Fund, or any

23 other recipient designated by law shall be deducted from

24 the next disbursements to that recipient made under the ap25 plicable law. Such amounts deducted from subsequent dis-
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1 bursements shall be credited to miscellaneous receipts in the

2 Treasury.’’.

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

4 Federal Oil and Gas Royalty Management Act of 1982, as

5 amended by subsection (a), is further amended by adding

6 at the end the following:

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

8 excessive overpayment (based upon all obligations of a lessee

9 or its designee for a given reporting month) was made for

10 the sole purpose of receiving interest, interest shall not be

11 paid on the excessive amount of such overpayment. For pur12 poses of this Act, an ‘excessive overpayment’ shall be the

13 amount that any overpayment a lessee or its designee pays

14 for a given reporting month (excluding payments for de15 mands for obligations determined to be due as a result of

16 judicial or administrative proceedings or agreed to be paid

17 pursuant to settlement agreements) for the aggregate of all

18 of its Federal leases exceeds 10 percent of the total royalties

19 paid that month for those leases.’’.

20 (c) ESTIMATED PAYMENT.—Section 111 of the Federal

21 Oil and Gas Royalty Management Act of 1982 (30 U.S.C.

22 1721), as amended by subsections (a) and (b), is further

23 amended by adding at the end the following:

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

25 the approximate amount of royalties (hereinafter in this
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1 subsection ‘estimated payment’) that would otherwise be due

2 for such lease by the date royalties are due for that lease.

3 When an estimated payment is made, actual royalties are

4 payable at the end of the month following the month in

5 which the estimated payment is made. If the estimated pay6 ment was less than the amount of actual royalties due, in7 terest is owed on the underpaid amount. If the estimated

8 payment exceeds the actual royalties due, interest is owed

9 on the overpayment. If the lessee or its designee makes a

10 payment for such actual royalties, the lessee or its designee

11 may apply the estimated payment to future royalties. Any

12 estimated payment may be adjusted, recouped, or reinstated

13 at any time by the lessee or its designee.’’.

14 (d) VOLUME ALLOCATION OF OIL AND GAS PRODUC15 TION.—Section 111 of the Federal Oil and Gas Royalty

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

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

18 end the following:

19 ‘‘(k)(1) Except as otherwise provided by this sub20 section—

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

22 or communitization agreement which contains only

23 Federal leases with the same royalty rate and funds

24 distribution shall report and pay royalties on oil and

25 gas production for each production month based on
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1 the actual volume of production sold by or on behalf

2 of that lessee;

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

4 other unit or communitization agreement shall report

5 and pay royalties on oil and gas production for each

6 production month based on the volume of oil and gas

7 produced from such agreement and allocated to the

8 lease in accordance with the terms of the agreement;

9 and

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

11 not contained in a unit or communitization agree12 ment shall report and pay royalties on oil and gas

13 production for each production month based on the

14 actual volume of production sold by or on behalf of

15 that lessee.

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

17 reporting and paying royalties. Nothing in this subsection

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

19 or gas production based on the share of production allocated

20 to the lease in accordance with the terms of the lease, a

21 unit or communitization agreement, or any other agree22 ment.

23 ‘‘(3) For any unit or communitization agreement, if

24 all lessees contractually agree to an alternative method of

25 royalty reporting and payment, the lessees may submit such
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1 alternative method to the Secretary or the delegated State

2 for approval and make payments in accordance with such

3 approved alternative method so long as such alternative

4 method does not reduce the amount of the royalty obliga5 tion.

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

7 an exception from the reporting and payment requirements

8 for marginal properties by allowing for any calendar year

9 or portion thereof royalties to be paid each month based

10 on the volume of production sold. Interest shall not accrue

11 on the difference for the entire calendar year or portion

12 thereof between the amount of oil and gas actually sold and

13 the share of production allocated to the lease until the begin14 ning of the month following such calendar year or portion

15 thereof. Any additional royalties due or overpaid royalties

16 and associated interest shall be paid, refunded, or credited

17 within six months after the end of each calendar year in

18 which royalties are paid based on volumes of production

19 sold. For the purpose of this subsection, the term ‘marginal

20 property’ means a lease that produces on average the com21 bined equivalent of less than 15 barrels of oil per well per

22 day or 90 thousand cubic feet of gas per well per day, or

23 a combination thereof, determined by dividing the average

24 daily production of crude oil and natural gas from produc25 ing wells on such lease by the number of such wells, unless
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1 the Secretary, together with the State concerned, determines

2 that a different production is more appropriate.

3 ‘‘(5) Not later than two years after the date of the en4 actment of this subsection, the Secretary shall issue any ap5 propriate demand for all outstanding royalty payment dis6 putes regarding who is required to report and pay royalties

7 on production from units and communitization agreements

8 outstanding on the date of the enactment of this subsection,

9 and collect royalty amounts owed on such production.’’.

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

11 Federal Oil and Gas Royalty Management Act of 1982 (30

12 U.S.C. 1721), as amended by subsections (a) through (d),

13 is amended by adding at the end the following:

14 ‘‘(l) The Secretary shall expeditiously issue all deter15 minations of allocations of production for units and

16 communitization agreements of a request for determination.

17 If the Secretary or the delegated State fails to issue a deter18 mination within a reasonable period, the Secretary shall

19 waive interest due on obligations subject to the determina20 tion from the date the request was received until the end

21 of the month following the month in which the determina22 tion is made.’’.

23 (f) NEW ASSESSMENT TO ENCOURAGE PROPER ROY24 ALTY PAYMENTS.—
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1 (1) IN GENERAL.—The Federal Oil and Gas

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

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

4 adding at the end the following:

5 ‘‘SEC. 116. ASSESSMENTS.

6 ‘‘Upon the date of enactment of this section, to encour7 age proper royalty payment the Secretary or the delegated

8 State shall impose assessments on a person who chronically

9 submits erroneous reports under this Act. Assessments under

10 this Act may only be issued as provided for in this section.’’.

11 (2) CLERICAL AMENDMENT.—The table of con12 tents in section 1 of such Act (30 U.S.C. 1701) is

13 amended by adding after the item relating to section

14 115 the following new item:

‘‘Sec. 116. Assessments.’’.

15 (g) LIABILITY FOR ROYALTY PAYMENTS.—Section

16 102(a) of the Federal Oil and Gas Royalty Management

17 Act of 1982 (30 U.S.C. 1712(a)) is amended to read as fol18 lows:

19 ‘‘(a) In order to increase receipts and achieve effective

20 collections of royalty and other payments, a lessee who is

21 required to make any royalty or other payment under a

22 lease or under the mineral leasing laws, shall make such

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

24 the Secretary or the applicable delegated State. A lessee may

25 designate a person to make all or part of the payments due
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1 under a lease on the lessee’s behalf and shall notify the Sec2 retary or the applicable delegated State in writing of such

3 designation, in which event said designated person may,

4 in its own name, pay, offset or credit monies, make adjust5 ments, request and receive refunds and submit reports with

6 respect to payments required by the lessee. Notwithstanding

7 any other provision of this Act to the contrary, a designee

8 shall not be liable for any payment obligation under the

9 lease. The person owning operating rights in a lease shall

10 be primarily liable for its pro rata share of payment obliga11 tions under the lease. If the person owning the legal record

12 title in a lease is other than the operating rights owner,

13 the person owning the legal record title shall be secondarily

14 liable for its pro rata share of such payment obligations

15 under the lease.’’.

16 (h) CLERICAL AMENDMENTS.—(1) The heading of sec17 tion 111 of the Federal Oil and Gas Royalty Management

18 Act of 1982 (30 U.S.C. 1721) is amended to read as follows:

19 ‘‘ROYALTY TERMS AND CONDITIONS, INTEREST, AND

20 PENALTIES’’.

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

22 contents in section 1 of such Act (30 U.S.C. 1701) is amend23 ed to read as follows:

‘‘Sec. 111. Royalty terms and conditions, interest, and penalties.’’.
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1 SEC. 7. ALTERNATIVES FOR MARGINAL PROPERTIES.

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

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

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

5 adding at the end the following:

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

7 ‘‘(a) DETERMINATION OF BEST INTERESTS OF STATE

8 CONCERNED AND THE UNITED STATES.—The Secretary

9 and the State concerned, acting in the best interests of the

10 United States and the State concerned to promote produc11 tion, reduce administrative costs, and increase net receipts

12 to the United States and the States, shall jointly determine,

13 on a case by case basis, the amount of what marginal pro14 duction from a lease or leases or well or wells, or parts

15 thereof, shall be subject to a prepayment under subsection

16 (b) or regulatory relief under subsection (c). If the State

17 concerned does not consent, such prepayments or regulatory

18 relief shall not be made available under this section for such

19 marginal production: Provided, That if royalty payments

20 from a lease or leases, or well or wells is not shared with

21 any State, such determination shall be made solely by the

22 Secretary.

23 ‘‘(b) PREPAYMENT OF ROYALTY.—

24 ‘‘(1) IN GENERAL.—Notwithstanding the provi25 sions of any lease to the contrary, for any lease or

26 leases or well or wells identified by the Secretary and
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1 the State concerned pursuant to subsection (a), the

2 Secretary is authorized to accept a prepayment for

3 royalties in lieu of monthly royalty payments under

4 the lease for the remainder of the lease term if the af5 fected lessee so agrees. Any prepayment agreed to by

6 the Secretary, State concerned and lessee which is less

7 than an average $500 per month in total royalties

8 shall be effectuated under this section not earlier than

9 two years after the date of enactment of this section

10 and, any prepayment which is greater than an aver11 age $500 per month in total royalties shall be effec12 tuated under this section not earlier than three years

13 after the date of enactment of this section. The Sec14 retary and the State concerned may condition their

15 acceptance of the prepayment authorized under this

16 section on the lessee’s agreeing to such terms and con17 ditions as the Secretary and the State concerned deem

18 appropriate and consistent with the purposes of this

19 Act. Such terms may—

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

21 result in a loss of revenue to the United States

22 in present value terms;

23 ‘‘(B) include provisions for receiving addi24 tional prepayments or royalties for developments

25 in the lease or leases or well or wells that deviate
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1 significantly from the assumptions and facts on

2 which the valuation is determined; and

3 ‘‘(C) require the lessee or its designee to pro4 vide such periodic production reports as may be

5 necessary to allow the Secretary and the State

6 concerned to monitor production for the purposes

7 of subparagraph (B).

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

9 section shall be shared by the Secretary with any

10 State or other recipient to the same extent as any

11 royalty payment for such lease.

12 ‘‘(3) SATISFACTION OF OBLIGATION.—Except as

13 may be provided in the terms and conditions estab14 lished by the Secretary under subsection (b), a lessee

15 or its designee who makes a prepayment under this

16 section shall have satisfied in full the lessee’s obliga17 tion to pay royalty on the production stream sold

18 from the lease or leases or well or wells.

19 ‘‘(c) ALTERNATIVE ACCOUNTING AND AUDITING RE20 QUIREMENTS.—Within one year after the date of the enact21 ment of this section, the Secretary or the delegated State

22 shall provide accounting, reporting, and auditing relief that

23 will encourage lessees to continue to produce and develop

24 properties subject to subsection (a): Provided, That such re25 lief will only be available to lessees in a State that concurs,
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1 which concurrence is not required if royalty from the lease

2 or leases or well or wells is not shared with any State. Prior

3 to granting such relief, the Secretary and, if appropriate,

4 the State concerned shall agree that the type of marginal

5 wells and relief provided under this paragraph is in the

6 best interest of the United States and, if appropriate, the

7 State concerned.’’.

8 (b) CLERICAL AMENDMENT.—The table of contents in

9 section 1 of such Act (30 U.S.C. 1701) is amended by add10 ing after the item relating to section 116 the following new

11 item:

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

12 SEC. 8. REPEALS.

13 (a) FOGRMA.—With respect to Federal lands, sec14 tions 202 and 307 of the Federal Oil and Gas Royalty Man15 agement Act of 1982 (30 U.S.C. 1732 and 1755), are no

16 longer applicable. Such inapplicability shall not affect co17 operative agreements involving Indian tribes or Indian

18 lands.

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

20 of this Act, section 10 of the Outer Continental Shelf Lands

21 Act (43 U.S.C. 1339) is repealed.

22 SEC. 9. INDIAN LANDS.

23 The amendments and repeals made by this Act shall

24 not apply with respect to Indian lands, and the provisions

25 of the Federal Oil and Gas Royalty Management Act of
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1 1982 as in effect on the day before the date of enactment

2 of this Act shall continue to apply after such date with re3 spect to Indian lands.

4 SEC. 10. PRIVATE LANDS.

5 This Act shall not apply to any privately owned min6 erals.

7 SEC. 11. EFFECTIVE DATE.

8 Except as provided by section 115(f), section 111(h),

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

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

11 Act), this Act, and the amendments made by this Act, shall

12 apply with respect to the production of oil and gas after

13 the first day of the month following the date of the enact14 ment of this Act.