II

106TH CONGRESS

1ST SESSION S. 924

Entitled the ‘‘Federal Royalty Certainty Act’’.

IN THE SENATE OF THE UNITED STATES

APRIL 29, 1999

Mr. NICKLES (for himself, Ms. LANDRIEU, Mr. MURKOWSKI, Mr. DOMENICI,

and Mrs. HUTCHISON) introduced the following bill; which was read twice

and referred to the Committee on Energy and Natural Resources

A BILL

Entitled the ‘‘Federal Royalty Certainty Act’’.

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 Royalty Cer5 tainty Act.’’

6 SEC. 2. AMENDMENT OF OUTER CONTINENTAL SHELF

7 LANDS ACT.

8 Section 8(b)(3) of the Outer Continental Shelf Lands

9 Act, as amended (43 U.S.C. § 1337(b)(3)), is amended by

10 striking the semicolon and adding the following proviso:

11 ‘‘: Provided, That if the payment is in value or amount,
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1 the royalty due in value shall be based on the value of

2 oil or gas production at the lease in marketable condition,

3 and the royalty due in amount shall be based on the roy4 alty share of production at the lease. If the payment in

5 value or amount is calculated from a point away from the

6 lease, the payment shall be adjusted for quality and loca7 tion differentials, and the lessee shall be allowed reim8 bursements at a reasonable commercial rate for transpor9 tation (including transportation to the point where the

10 production is put in marketable condition), marketing,

11 processing, and other services beyond the lease through

12 the point of sale, other disposition, or delivery.’’.

13 SEC. 3. AMENDMENT OF MINERAL LEASING ACT.

14 Section 17(c) of the Mineral Leasing Act, as amended

15 (30 U.S.C. § 226(c)), is amended by adding the following

16 paragraph:

17 ‘‘(3) Royalty due in value shall be based on the

18 value of oil or gas production at the lease in market19 able condition, and the royalty due in amount shall

20 be based on the royalty share of production at the

21 lease. If the payment in value or amount is cal22 culated from a point away from the lease, the pay23 ment shall be adjusted for quality and location dif24 ferentials, and the lessee shall be allowed reimburse25 ments at a reasonable commercial rate for transpor-
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1 tation (including transportation to the point where

2 the production is put in marketable condition), mar3 keting, processing and other services beyond the

4 lease through the point of sale, other disposition, or

5 delivery.’’.

6 SEC. 4. DEFINITIONS.

7 As used in this Act:

8 (a) The term ‘‘reasonable commercial rate’’ is—

9 (1) for an arm’s-length contract, the actual

10 cost incurred by the lessee;

11 (2) for a non-arm’s-length contract, the

12 rate charged in a contract for similar services

13 in the same area between parties with opposing

14 economic interests; or

15 (3) whenever there are no arm’s-length

16 contracts for similar services in the same area,

17 the just and reasonable rate for the transpor18 tation service rendered by the lessee or lessee’s

19 affiliate—disputes between the Secretary and a

20 lessee over what constitutes a just and reason21 able rate for such service will be resolved by the

22 Federal Energy Regulatory Commission.

23 (b) The term ‘‘marketable condition’’ means

24 lease production which is sufficiently free from im25 purities and otherwise in a condition that it will be
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1 accepted by a purchaser under a sales contract typ2 ical for the field or area.

3 SEC. 5. INDIAN LANDS.

4 (a) This Act shall not apply with respect to Indian

5 lands.

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