H. R. 6—104
SEC. 333. LAND CONVEYANCE, PORTION OF NAVAL PETROLEUM 
RESERVE NUMBERED 2, TO CITY OF TAFT, CALIFORNIA. 
(a) CONVEYANCE.—Effective on the date of the enactment of 
this Act, there is conveyed to the City of Taft, California (in this 
section referred to as the ‘‘City’’), all surface right, title, and interest 
of the United States in and to a parcel of real property consisting 
of approximately 220 acres located in the NE1⁄4, the NE1⁄4 of the 
NW1⁄4, and the N1⁄2 of the SE1⁄4 of the NW1⁄4 of section 18, township 
32 south, range 24 east, Mount Diablo meridian, Kern County, 
California. 
(b) CONSIDERATION.—The conveyance under subsection (a) is 
made without the payment of consideration by the City. 
(c) TREATMENT OF EXISTING RIGHTS.—The conveyance under 
subsection (a) is subject to valid existing rights, including Federal 
oil and gas lease SAC–019577. 
(d) TREATMENT
OF MINERALS.—All coal, oil, gas, and other 
minerals within the lands conveyed under subsection (a) are 
reserved to the United States, except that the United States and 
its lessees, licensees, permittees, or assignees shall have no right 
of surface use or occupancy of the lands. Nothing in this subsection 
shall be construed to require the United States or its lessees, 
licensees, permittees, or assignees to support the surface of the 
conveyed lands. 
(e) INDEMNIFY AND HOLD HARMLESS.—The City shall indemnify, 
defend, and hold harmless the United States for, from, and against, 
and the City shall assume all responsibility for, any and all liability 
of any kind or nature, including all loss, cost, expense, or damage, 
arising from the City’s use or occupancy of, or operations on, the 
land conveyed under subsection (a), whether such use or occupancy 
of, or operations on, occurred before or occur after the date of 
the enactment of this Act. 
(f) INSTRUMENT OF CONVEYANCE.—Not later than 1 year after 
the date of the enactment of this Act, the Secretary shall execute, 
file, and cause to be recorded in the appropriate office a deed 
or other appropriate instrument documenting the conveyance made 
by this section. 
SEC. 334. REVOCATION OF LAND WITHDRAWAL. 
Effective on the date of the enactment of this Act, the Executive 
Order of December 13, 1912, which created Naval Petroleum 
Reserve Numbered 2, is revoked in its entirety. 
Subtitle E—Production Incentives 
SEC. 341. DEFINITION OF SECRETARY. 
In this subtitle, the term ‘‘Secretary’’ means the Secretary 
of the Interior. 
SEC. 342. PROGRAM ON OIL AND GAS ROYALTIES IN-KIND. 
(a) APPLICABILITY
OF SECTION.—Notwithstanding any other 
provision of law, this section applies to all royalty in-kind accepted 
by the Secretary on or after the date of enactment of this Act 
under any Federal oil or gas lease or permit under— 
(1) section 36 of the Mineral Leasing Act (30 U.S.C. 192); 
(2) section 27 of the Outer Continental Shelf Lands Act 
(43 U.S.C. 1353); or
H. R. 6—105
(3) any other Federal law governing leasing of Federal 
land for oil and gas development. 
(b) TERMS AND CONDITIONS.—All royalty accruing to the United 
States shall, on the demand of the Secretary, be paid in-kind. 
If the Secretary makes such a demand, the following provisions 
apply to the payment: 
(1) SATISFACTION OF ROYALTY OBLIGATION.—Delivery by, 
or on behalf of, the lessee of the royalty amount and quality 
due under the lease satisfies royalty obligation of the lessee 
for the amount delivered, except that transportation and proc-
essing reimbursements paid to, or deductions claimed by, the 
lessee shall be subject to review and audit. 
(2) MARKETABLE CONDITION.— 
(A) DEFINITION OF MARKETABLE CONDITION.—In this 
paragraph, the term ‘‘in marketable condition’’ means suffi-
ciently free from impurities and otherwise in a condition 
that the royalty production will be accepted by a purchaser 
under a sales contract typical of the field or area in which 
the royalty production was produced. 
(B) REQUIREMENT.—Royalty production shall be placed 
in marketable condition by the lessee at no cost to the 
United States. 
(3) DISPOSITION BY THE SECRETARY.—The Secretary may— 
(A) sell or otherwise dispose of any royalty production 
taken in-kind (other than oil or gas transferred under 
section 27(a)(3) of the Outer Continental Shelf Lands Act 
(43 U.S.C. 1353(a)(3)) for not less than the market price; 
and 
(B) transport or process (or both) any royalty produc-
tion taken in-kind. 
(4) RETENTION BY THE SECRETARY.—The Secretary may, 
notwithstanding section 3302 of title 31, United States Code, 
retain and use a portion of the revenues from the sale of 
oil and gas taken in-kind that otherwise would be deposited 
to miscellaneous receipts, without regard to fiscal year limita-
tion, or may use oil or gas received as royalty taken in-kind 
(referred to in this paragraph as ‘‘royalty production’’) to pay 
the cost of— 
(A) transporting the royalty production; 
(B) processing the royalty production; 
(C) disposing of the royalty production; or 
(D) any combination of transporting, processing, and 
disposing of the royalty production. 
(5) LIMITATION.— 
(A) IN GENERAL.—Except as provided in subparagraph 
(B), the Secretary may not use revenues from the sale 
of oil and gas taken in-kind to pay for personnel, travel, 
or other administrative costs of the Federal Government. 
(B) EXCEPTION.—Notwithstanding subparagraph (A), 
the Secretary may use a portion of the revenues from 
royalty in-kind sales, without fiscal year limitation, to pay 
salaries and other administrative costs directly related to 
the royalty in-kind program. 
(c) REIMBURSEMENT OF COST.—If the lessee, pursuant to an 
agreement with the United States or as provided in the lease, 
processes the royalty gas or delivers the royalty oil or gas at 
a point not on or adjacent to the lease area, the Secretary shall—