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103D CONGRESS

1ST SESSION H. R. 1282

To provide enhanced energy security through incentives to explore and develop

frontier areas of the Outer Continental Shelf and to enhance production

of the domestic oil and gas resources in deep water areas of the Outer

Continental Shelf.

IN THE HOUSE OF REPRESENTATIVES

MARCH 10, 1993

Mr. FIELDS of Texas (for himself, Mr. TAUZIN, Mr. YOUNG of Alaska, Mr.

LIVINGSTON, and Mr. LAUGHLIN) introduced the following bill; which was

referred jointly to the Committees on Natural Resources and Merchant

Marine and Fisheries

A BILL

To provide enhanced energy security through incentives to

explore and develop frontier areas of the Outer Continental Shelf and to enhance production of the domestic

oil and gas resources in deep water areas of the Outer

Continental Shelf.

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 ‘‘Outer Continental

5 Shelf Enhanced Exploration and Deep Water Incentives

6 Act’’.
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1 SEC. 2. AMENDMENTS TO THE OUTER CONTINENTAL

2 SHELF LANDS ACT.

3 (a) INCENTIVES.—Section 8(a)(3) of the Outer Con4 tinental Shelf Lands Act (43 U.S.C. 1337(a)(3)) is

5 amended to read as follows:

6 ‘‘(3)(A) The Secretary, at his own discretion or on

7 petition of a lessee, in order—

8 ‘‘(i) to promote development and new produc9 tion on producing or nonproducing leases, through

10 primary, secondary, or tertiary recovery means; or

11 ‘‘(ii) to encourage production of marginal or un12 economic resources on producing or nonproducing

13 leases, which may include the use of primary, sec14 ondary, or tertiary recovery means,

15 may reduce, suspend, or eliminate any royalty or net profit

16 share set forth in the leases. In the case of a petition of

17 a lessee, the Secretary shall make a final determination

18 under this subparagraph within 6 months after the

19 submittal of such petition.

20 ‘‘(B)(i) Notwithstanding any other provision of this

21 Act, except as provided in clauses (ii) and (iii) of this sub22 paragraph, no royalty payment shall be due on new pro23 duction from any lease located in water depths of 200 me24 ters or greater until the capital costs directly related to

25 such new production have been recovered by the lessee out

26 of the proceeds from such new production.
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1 ‘‘(ii) Notwithstanding clause (i), in any month during

2 which the arithmetic average of the closing prices for the

3 earliest delivery month on the New York Mercantile Ex4 change for Light Sweet crude oil exceeds $28.00 per bar5 rel, any production of oil described in clause (i) shall be

6 subject to royalties at the lease stipulated rate.

7 ‘‘(iii) Notwithstanding clause (i), in any month dur8 ing which the arithmetic average of the closing prices for

9 the earliest delivery month on the New York Mercantile

10 Exchange for natural gas exceeds $3.50 per million Brit11 ish thermal units, any production of natural gas described

12 in clause (i) shall be subject to royalties at the lease stipu13 lated rate.

14 ‘‘(iv) The prices referred to in clauses (ii) and (iii)

15 of this subparagraph shall be changed during any calendar

16 year after 1993 by the percentage if any by which the

17 consumer price index changed during the preceding cal18 endar year, as defined in section 111(f)(4) of the Internal

19 Revenue Code of 1986.

20 ‘‘(v) Nothing in this subparagraph shall be construed

21 to affect any requirement under this section to pay bonus

22 bids.

23 ‘‘(vi) For purposes of this subparagraph—

24 ‘‘(I) the term ‘capital costs’ shall be defined by

25 the Secretary, shall include exploration costs in-
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1 curred after the acquisition of the lease and develop2 ment and capital production costs directly related to

3 new production, shall not include any amounts paid

4 as bonus bids or paid as royalties pursuant to clause

5 (ii) or (iii), and shall be adjusted to reflect changes

6 in the consumer price index, as defined in section

7 111(f)(4) of the Internal Revenue Code of 1986; and

8 ‘‘(II) the term ‘new production’ means any pro9 duction from a lease from which no royalties have

10 been due on production, other than test production,

11 prior to the date of the enactment of the Outer Con12 tinental Shelf Enhanced Exploration and Deep

13 Water Incentives Act, or any production resulting

14 from lease development activities under a develop15 ment and production plan approved by the Secretary

16 under section 25 after the date of the enactment of

17 the Outer Continental Shelf Enhanced Exploration

18 and Deep Water Incentives Act.’’.

19 (b) FRONTIER AREAS.—Section 18 of the Outer Con20 tinental Shelf Lands Act (43 U.S.C. 1344) is amended

21 by adding at the end the following new subsection:

22 ‘‘(i) The Secretary shall, in each leasing program pre23 pared under this section, designate as frontier areas por24 tions of the outer Continental Shelf, if any, with respect

25 to which the Secretary will exercise authority under sec-
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1 tion 8(a)(3)(A) to reduce, suspend, or eliminate the re2 quirement to pay royalties. Any such designation shall in3 clude a full description of the terms of such reduction, sus4 pension, or elimination. In designating frontier areas

5 under this subsection, the Secretary shall take into consid6 eration the increased capital costs associated with explo7 ration and development in coastal or marine environments,

8 including arctic environments, with special environmental

9 protection requirements.’’.

10 SEC. 3. REGULATIONS.

11 (a) INCENTIVES.—The Secretary shall, within 180

12 days after the date of the enactment of this Act, issue

13 such rules and regulations as are necessary to implement

14 the amendment made by section 2(a).

15 (b) FRONTIER AREAS.—The Secretary shall, within

16 1 year after the date of the enactment of this Act, issue

17 regulations defining the term ‘‘frontier area’’ for purposes

18 of carrying out section 18(i) of the Outer Continental

19 Shelf Lands Act.

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