592 
or not mineral leasing should occur in the outer 
Continental Shelf within their Adjacent Zones; 
(4) it is not reasonably foreseeable that explo-
ration of a leased tract located more than 25 miles 
seaward of the coastline, development and produc-
tion of a natural gas discovery located more than 25 
miles seaward of the coastline, or development and 
production of an oil discovery located more than 50 
miles seaward of the coastline will adversely affect 
resources near the coastline; 
(5) transportation of oil from a leased tract 
might reasonably be foreseen, under limited cir-
cumstances, to have the potential to adversely affect 
such resources if the oil is within 50 miles of the 
coastline, but such potential to adversely affect such 
resources is likely no greater, and probably less, 
than the potential impacts from tanker transpor-
tation because tanker spills usually involve large re-
leases of oil over a brief period of time; and 
(6) among other bodies of inland waters, the 
Great Lakes, Long Island Sound, Delaware Bay, 
Chesapeake Bay, Albemarle Sound, San Francisco 
Bay, and Puget Sound are not part of the outer 
Continental Shelf, and are not subject to leasing by 
the Federal Government for the exploration, develop-
593 
ment, and production of any mineral resources that 
might lie beneath them. 
SEC. 6503. DEFINITIONS UNDER THE OUTER CONTINENTAL 
SHELF LANDS ACT. 
Section 2 of the Outer Continental Shelf Lands Act 
(43 U.S.C. 1331) is amended— 
(1) by amending paragraph (f) to read as fol-
lows: 
‘‘(f) The term ‘affected State’ means the Adjacent 
State.’’; 
(2) by striking the semicolon at the end of each 
of paragraphs (a) through (o) and inserting a pe-
riod; 
(3) by striking ‘‘; and’’ at the end of paragraph 
(p) and inserting a period; 
(4) by adding at the end the following: 
‘‘(r) The term ‘Adjacent State’ means, with respect 
to any program, plan, lease sale, leased tract or other ac-
tivity, proposed, conducted, or approved pursuant to the 
provisions of this Act, any State the laws of which are 
declared, pursuant to section 4(a)(2), to be the law of the 
United States for the portion of the outer Continental 
Shelf on which such program, plan, lease sale, leased tract 
or activity appertains or is, or is proposed to be, con-
ducted. For purposes of this paragraph, the term ‘State’
594 
includes Puerto Rico and the other Territories of the 
United States. 
‘‘(s) The term ‘Adjacent Zone’ means, with respect 
to any program, plan, lease sale, leased tract, or other ac-
tivity, proposed, conducted, or approved pursuant to the 
provisions of this Act, the portion of the outer Continental 
Shelf for which the laws of a particular Adjacent State 
are declared, pursuant to section 4(a)(2), to be the law 
of the United States. 
‘‘(t) The term ‘miles’ means statute miles. 
‘‘(u) The term ‘coastline’ has the same meaning as 
the term ‘coast line’ as defined in section 2(c) of the Sub-
merged Lands Act (43 U.S.C. 1301(c)). 
‘‘(v) The term ‘Neighboring State’ means a coastal 
state having a common boundary at the coastline with the 
Adjacent State; and’’. 
(5) in paragraph (a), by inserting after ‘‘con-
trol’’ the following: ‘‘or lying within the United 
States exclusive economic zone adjacent to the Terri-
tories of the United States’’. 
SEC. 6504. DETERMINATION OF ADJACENT ZONES AND 
PLANNING AREAS. 
Section 4(a)(2)(A) of the Outer Continental Shelf 
Lands Act (43 U.S.C. 1333(a)(2)(A)) is amended in the 
first sentence by striking ‘‘, and the President’’ and all
595 
that follows through the end of the sentence and inserting 
the following: ‘‘. The lines extending seaward and defining 
each State’s Adjacent Zone, and each OCS Planning Area, 
are as indicated on the maps for each outer Continental 
Shelf region entitled ‘Alaska OCS Region State Adjacent 
Zone and OCS Planning Areas’, ‘Pacific OCS Region 
State Adjacent Zones and OCS Planning Areas’, ‘Gulf of 
Mexico OCS Region State Adjacent Zones and OCS Plan-
ning Areas’, and ‘Atlantic OCS Region State Adjacent 
Zones and OCS Planning Areas’, all of which are dated 
September 2005 and on file in the Office of the Director, 
Minerals Management Service.’’. 
SEC. 6505. ADMINISTRATION OF LEASING. 
Section 5 of the Outer Continental Shelf Lands Act 
(43 U.S.C. 1334) is amended by adding at the end the 
following: 
‘‘(k) VOLUNTARY PARTIAL RELINQUISHMENT OF A 
LEASE.—Any lessee of a producing lease may relinquish 
to the Secretary any portion of a lease that the owner has 
no interest in producing and that the Secretary finds is 
geologically prospective. In return for any such relinquish-
ment, the Secretary shall provide to the owner a royalty 
incentive in accordance with regulations promulgated by 
the Secretary to carry out this subsection. The Secretary 
shall publish final regulations implementing this sub-
596 
section within 365 days after the date of the enactment 
of the Ocean State Options Act of 2005. 
‘‘(l) NATURAL GAS LEASE REGULATIONS.—Not later 
than October 1, 2006, the Secretary shall publish a final 
regulation that shall— 
‘‘(1) establish procedures for entering into nat-
ural gas leases; 
‘‘(2) ensure that natural gas leases are only 
available for tracts on the outer Continental Shelf 
that are wholly within 125 miles of the coastline 
within an area withdrawn from disposition by leas-
ing on the day after the date of enactment of the 
Ocean State Options Act of 2005; 
‘‘(3) provide that natural gas leases shall con-
tain the same rights and obligations established for 
oil and gas leases, except as otherwise provided in 
the Ocean State Options Act of 2005; 
‘‘(4) provide that, in reviewing the adequacy of 
bids for natural gas leases, the value of any crude 
oil estimated to be contained within any tract shall 
be excluded; 
‘‘(5) provide that any crude oil produced from 
a well and reinjected into the leased tract shall not 
be subject to payment of royalty, and that the Sec-
retary shall consider, in setting the royalty rates for
597 
a natural gas lease, the additional cost to the lessee 
of not producing any crude oil; and 
‘‘(6) provide that any Federal law that applies 
to an oil and gas lease on the outer Continental 
Shelf shall apply to a natural gas lease unless other-
wise clearly inapplicable.’’. 
SEC. 6506. GRANT OF LEASES BY SECRETARY. 
Section 8 of the Outer Continental Shelf Lands Act 
(43 U.S.C. 1337) is amended— 
(1) in subsection (a)(1) by inserting after the 
first sentence the following: ‘‘Further, the Secretary 
may grant natural gas leases in a manner similar to 
the granting of oil and gas leases and under the var-
ious bidding systems available for oil and gas 
leases.’’; 
(2) by adding at the end of subsection (b) the 
following: 
‘‘The Secretary may issue more than one lease for a given 
tract if each lease applies to a separate and distinct range 
of vertical depths, horizontal surface area, or a combina-
tion of the two. The Secretary may issue regulations that 
the Secretary determines are necessary to manage such 
leases consistent with the purposes of this Act.’’. 
(3) in subsection (p)(2)(B)—
598 
(A) by striking ‘‘27’’ and inserting ‘‘50’’; 
and 
(B) by striking ‘‘15’’ and inserting ‘‘200’’; 
(4) by adding at the end the following: 
‘‘(q) NATURAL GAS LEASES.— 
‘‘(1) RIGHT
TO
PRODUCE
NATURAL
GAS.—A 
lessee of a natural gas lease shall have the right to 
produce the natural gas from a natural gas leased 
tract if the Secretary estimates that the discovered 
field has at least 40 percent of the economically re-
coverable Btu content of the field contained within 
natural gas and such natural gas is economical to 
produce. 
‘‘(2) RIGHT TO PRODUCE CRUDE OIL.—A lessee 
of a natural gas lease may produce crude oil from 
the lease unless the Governor and the legislature of 
the Adjacent State object to such production within 
180 days after receipt of written notice from the les-
see of intent to produce crude oil from the lease. If 
the leased tract is located within 50 miles of the 
nearest point on the coastline of a Neighboring 
State, the Governor and legislature of the Neigh-
boring State shall also receive such notice and have 
the right to object to such production within 180 
days after receipt of such notice.
599 
‘‘(3) ESTIMATES OF BTU CONTENT.—The Sec-
retary shall make estimates of the natural gas Btu 
content of discovered fields on a natural gas lease 
only after the completion of at least one exploration 
well, the data from which has been tied to the re-
sults of a three-dimensional seismic survey of the 
field. The Secretary may not require the lessee to 
further delineate any discovered field prior to mak-
ing such estimates. 
‘‘(4) TRANSPORTATION OF CRUDE OIL.—If an 
Adjacent State or any applicable Neighboring State 
does not object to production of crude oil from a 
natural gas lease, the lessee shall be permitted to 
transport the crude oil from the leased tract through 
Adjacent State waters, and Neighboring State wa-
ters if applicable, to facilities onshore in the Adja-
cent State, and Neighboring State if applicable, un-
less the lessee agreed to other arrangements with 
the Adjacent State or Neighboring State, or both. 
‘‘(5) REPURCHASE OF CERTAIN NATURAL GAS 
LEASES.—Upon request of the lessee and certifi-
cation by the Secretary of the Interior that a natural 
gas lease contains all or part of a commercial oil and 
gas discovery that is not allowed to be produced be-
cause it does not meet the standard set in paragraph
600 
(1), the Secretary of the Treasury shall repurchase 
the lease by issuance of a check or electronic pay-
ment from OCS Receipts to the lessee in full com-
pensation for the repurchase. The Secretary shall re-
coup from the State and local governments any 
funds previously shared with them that were derived 
from the repurchased lease. Such recoupment shall 
only be from the State and local governments’ 
shares of OCS receipts that are payable after the 
date of repurchase. 
‘‘(6) AMOUNT OF COMPENSATION.—Repurchase 
compensation for each lease repurchased under the 
authority of this section shall be in the amount of 
the lesser of the original bonus bid paid for the lease 
or, if the lessee is not the original lessee, the com-
pensation paid by the current lessee to obtain its in-
terest in the lease. In addition, the lessee shall be 
compensated for any expenses directly attributable 
to the lease that the lessee incurs after acquisition 
of its interest in the lease to be repurchased, includ-
ing rentals, seismic acquisition costs, drilling costs, 
and other reasonable expenses on the lease, includ-
ing expenses incurred in the repurchase process, to 
the extent that the lessee has not previously been 
compensated by the United States for such expenses.
601 
The lessee shall not be compensated for general 
overhead expenses or employee salaries. 
‘‘(7) PRIORITY RIGHT TO OBTAIN FUTURE OIL 
AND GAS LEASE.—The lessee, or a designee of the 
lessee, of a repurchased natural gas leased tract 
shall have the right to repurchase such tract as an 
oil and gas lease, on a noncompetitive basis, by re-
paying the amount received by the lessee if the tract 
is made available for lease under an oil and gas 
lease within 30 years after the repurchase. 
‘‘(8) DEFINITION OF NATURAL GAS.—For pur-
poses of a natural gas lease, natural gas means nat-
ural gas and all substances produced in association 
with gas, including, but not limited to, hydrocarbon 
liquids (other than crude oil) that are obtained by 
the condensation of hydrocarbon vapors and sepa-
rate out in liquid form from the produced gas 
stream. 
‘‘(r) REMOVAL OF RESTRICTIONS ON JOINT BIDDING 
IN
CERTAIN
AREAS
OF
THE
OUTER
CONTINENTAL 
SHELF.—Restrictions on joint bidders shall no longer 
apply to tracts located in the Alaska OCS Region. Such 
restrictions shall not apply to tracts in other OCS regions 
determined to be ‘frontier tracts’ or otherwise ‘high cost 
tracts’ under final regulations that shall be published by
602 
the Secretary by not later than 365 days after the date 
of the enactment of the Ocean State Options Act of 
2005.’’; 
(5) by striking subsection (a)(3)(A) and redes-
ignating the subsequent subparagraphs as subpara-
graphs (A) and (B), respectively; 
(6) in subsection (a)(3)(A) (as so redesignated) 
by striking ‘‘In the Western’’ and all that follows 
through ‘‘the Secretary’’ the first place it appears 
and inserting ‘‘The Secretary’’; and 
(7) effective October 1, 2013, in subsection 
(g)— 
(A) by striking all after ‘‘(g)’’, except para-
graph (3); 
(B) by striking the last sentence of para-
graph (3); and 
(C) by striking ‘‘(3)’’. 
SEC. 6507. DISPOSITION OF RECEIPTS. 
Section 9 of the Outer Continental Shelf Lands Act 
(43 U.S.C. 1338) is amended— 
(1) by designating the existing text as sub-
section (a); 
(2) in subsection (a) (as so designated) by in-
serting ‘‘, if not paid as otherwise provided in this 
title’’ after ‘‘receipts’’; and
603 
(3) by adding the following: 
‘‘(b) TREATMENT OF OCS RECEIPTS FROM TRACTS 
COMPLETELY WITHIN 125 MILES OF THE COASTLINE.— 
‘‘(1) DEPOSIT.—The Secretary shall deposit 
into a separate account in the Treasury the portion 
of OCS Receipts for each fiscal year that will be 
shared under paragraphs (2) and (3). 
‘‘(2) RECEIPTS SHARING BEGINNING OCTOBER 
1, 2010.— 
‘‘(A) Beginning October 1, 2010, the Sec-
retary shall share OCS Receipts derived from 
the following areas: 
‘‘(i) Lease tracts located on portions 
of the Gulf of Mexico OCS Region com-
pletely within 125 miles of any coastline 
that are available for leasing under the 
2002–2007 5-Year Oil and Gas Leasing 
Program in effect prior to the date of the 
enactment of the Ocean State Options Act 
of 2005. 
‘‘(ii) Lease tracts in production prior 
to January 1, 2006, completely within 125 
miles of any coastline located on portions 
of the OCS that were not available for 
leasing under the 2002–2007 5-Year OCS
604 
Oil and Gas Leasing Program in effect 
prior to the date of the enactment of the 
Ocean State Options Act of 2005. 
‘‘(iii) Lease tracts for which leases are 
issued prior to January 1, 2006, located in 
the Alaska OCS Region completely within 
125 miles of the coastline. 
‘‘(B) The Secretary shall share the fol-
lowing percentages of OCS Receipts from the 
leases described in subparagraph (A) derived 
during the fiscal year indicated: 
‘‘(i) For fiscal year 2011, 4.5 percent. 
‘‘(ii) For fiscal year 2012, 5.0 per-
cent. 
‘‘(iii) For fiscal year 2013, 5.5 per-
cent. 
‘‘(iv) For fiscal year 2014, 6.0 per-
cent. 
‘‘(v) For fiscal year 2015, 6.5 percent. 
‘‘(vi) For fiscal year 2016, 7.5 per-
cent. 
‘‘(vii) For fiscal year 2017, 10.0 per-
cent. 
‘‘(viii) For fiscal year 2018, 12.5 per-
cent.
605 
‘‘(ix) For fiscal year 2019, 15.0 per-
cent. 
‘‘(x) For fiscal year 2020, 17.5 per-
cent. 
‘‘(xi) For fiscal year 2021, 20.0 per-
cent. 
‘‘(xii) For fiscal year 2022, 22.5 per-
cent. 
‘‘(xiii) For fiscal year 2023, 25.0 per-
cent. 
‘‘(xiv) For fiscal year 2024, 27.5 per-
cent. 
‘‘(xv) For fiscal year 2025, 30.0 per-
cent. 
‘‘(xvi) For fiscal year 2026, 32.5 per-
cent. 
‘‘(xvii) For fiscal year 2027, 35.0 per-
cent. 
‘‘(xviii) For fiscal year 2028, 37.5 
percent. 
‘‘(xix) For fiscal year 2029 and each 
subsequent fiscal year, 40.0 percent. 
‘‘(3) RECEIPTS SHARING BEGINNING JANUARY 
1, 2006.—Beginning January 1, 2006, the Secretary 
shall share 40 percent of OCS Receipts derived on
606 
and after January 1, 2006, from all leases located 
completely within 125 miles of any coastline not in-
cluded within the provisions of paragraph (2) or the 
receipts sharing provisions of section 8(g). 
‘‘(4) ALLOCATIONS.—The Secretary shall allo-
cate the OCS Receipts deposited into the separate 
account established by paragraph (1) that are 
shared under paragraphs (2) and (3) as follows: 
‘‘(A) BONUS BIDS.—Deposits derived from 
bonus bids from a leased tract, including inter-
est thereon, shall be allocated at the end of 
each fiscal year as follows: 
‘‘(i) 87.5 percent to the Adjacent 
State. 
‘‘(ii) 6.25 percent into the Treasury, 
which shall be allocated to the account es-
tablished by section 6514 of the Ocean 
State Options Act of 2005. 
‘‘(iii) 5 percent into the account es-
tablished by section 6523 of the Ocean 
State Options Act of 2005. 
‘‘(iv) 1.25 percent into the account es-
tablished by section 6526 of the Ocean 
State Options Act of 2005.
607 
‘‘(B) ROYALTIES.—Deposits derived from 
royalties from a leased tract, including interest 
thereon, shall be allocated at the end of each 
fiscal year as follows: 
‘‘(i) 87.5 percent to the Adjacent 
State and any other producing State or 
States with a leased tract within its Adja-
cent Zone within 125 miles of its coastline 
that generated royalties during the fiscal 
year, if the other producing or States have 
a coastline point within 300 miles of any 
portion of the leased tract, in which case 
the amount allocated for the leased tract 
shall be— 
‘‘(I) one-third to the Adjacent 
State; and 
‘‘(II) two-thirds to each pro-
ducing State, including the Adjacent 
State, inversely proportional to the 
distance between the nearest point on 
the coastline of the producing State 
and the geographic center of the 
leased tract. 
‘‘(ii) 6.25 percent into the Treasury, 
which shall be allocated to the account es-
608 
tablished by section 6514 of the Ocean 
State Options Act of 2005. 
‘‘(iii) 5 percent into the account es-
tablished by section 6523 of the Ocean 
State Options Act of 2005. 
‘‘(iv) 1.25 percent into the account es-
tablished by section 6526 of the Ocean 
State Options Act of 2005. 
‘‘(c) TREATMENT OF OCS RECEIPTS FROM TRACTS 
PARTIALLY OR COMPLETELY BEYOND 125 MILES OF THE 
COASTLINE.— 
‘‘(1) DEPOSIT.—The Secretary shall deposit 
into a separate account in the Treasury the portion 
of OCS Receipts for each fiscal year that will be 
shared under paragraphs (2) and (3). 
‘‘(2) RECEIPTS SHARING BEGINNING OCTOBER 
1, 2010.— 
‘‘(A) Beginning October 1, 2010, the Sec-
retary shall share OCS Receipts derived from 
the following areas: 
‘‘(i) Lease tracts located on portions 
of the Gulf of Mexico OCS Region partially 
or completely beyond 125 miles of any 
coastline that are available for leasing 
under the 2002–2007 5-Year Oil and Gas