SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Federal Oil and Gas
Royalty Simplification and Fairness Act of 1996’’.
SEC. 2. DEFINITIONS.
Section 3 of the Federal Oil and Gas Royalty Man-
agement Act of 1982 (30 U.S.C. 1701 et seq.) is amend-
ed—
(1) by amending paragraph (7) to read as fol-
lows:
‘‘(7) ‘lessee’ means any person to whom the
United States issues an oil and gas lease or any per-
son to whom operating rights in a lease have been
assigned;’’; and
(2) by striking ‘‘and’’ at the end of paragraph
(15), by striking the period at the end of paragraph
(16) and inserting a semicolon, and by adding at the
end the following:
‘‘(17) ‘adjustment’ means an amendment to a
previously filed report on an obligation, and any ad-
ditional payment or credit, if any, applicable thereto,
to rectify an underpayment or overpayment on an
obligation;
‘‘(18) ‘administrative proceeding’ means any
Department of the Interior agency process in which
a demand, decision or order issued by the Secretary
or a delegated State is subject to appeal or has been
appealed;
‘‘(19) ‘assessment’ means any fee or charge lev-
ied or imposed by the Secretary or a delegated State
other than—
‘‘(A) the principal amount of any royalty,
minimum royalty, rental bonus, net profit share
or proceed of sale;
‘‘(B) any interest; or
‘‘(C) any civil or criminal penalty;
‘‘(20) ‘commence’ means—
‘‘(A) with respect to a judicial proceeding,
the service of a complaint, petition, counter-
claim, cross claim, or other pleading seeking af-
firmative relief or seeking credit or recoupment:
Provided, That if the Secretary commences a
judicial proceeding against a designee, the Sec-
retary shall give notice of that commencement
to the lessee who designated the designee, but
the Secretary is not required to give notice to
other lessees who may be liable pursuant to sec-
tion 102(a) of this Act, for the obligation that
is the subject of the judicial proceeding; or
‘‘(B) with respect to a demand, the receipt
by the Secretary or a delegated State or a les-
see or its designee (with written notice to the
lessee who designated the designee) of the de-
mand;
‘‘(21) ‘credit’ means the application of an over-
payment (in whole or in part) against an obligation
which has become due to discharge, cancel or reduce
the obligation;
‘‘(22) ‘delegated State’ means a State which,
pursuant to an agreement or agreements under sec-
tion 205 of this Act, performs authorities, duties, re-
sponsibilities, or activities of the Secretary;
‘‘(23) ‘demand’ means—
‘‘(A) an order to pay issued by the Sec-
retary or the applicable delegated State to a les-
see or its designee (with written notice to the
lessee who designated the designee) that has a
reasonable basis to conclude that the obligation
in the amount of the demand is due and owing;
or
‘‘(B) a separate written request by a lessee
or its designee which asserts an obligation due
the lessee or its designee that provides a rea-
sonable basis to conclude that the obligation in
the amount of the demand is due and owing,
but does not mean any royalty or production re-
port, or any information contained therein, re-
quired by the Secretary or a delegated State;
‘‘(24) ‘designee’ means the person designated
by a lessee pursuant to section 102(a) of this Act,
with such written designation effective on the date
such designation is received by the Secretary and re-
maining in effect until the Secretary receives notice
in writing that the designation is modified or termi-
nated;
‘‘(25) ‘obligation’ means—
‘‘(A) any duty of the Secretary or, if appli-
cable, a delegated State—
‘‘(i) to take oil or gas royalty in kind;
or
‘‘(ii) to pay, refund, offset, or credit
monies including (but not limited to)—
‘‘(I) the principal amount of any
royalty, 
minimum 
royalty, 
rental,
bonus, net profit share or proceed of
sale; or
‘‘(II) any interest; and
‘‘(B) any duty of a lessee or its designee
(subject to the provision of section 102(a) of
this Act)—
‘‘(i) to deliver oil or gas royalty in
kind; or
‘‘(ii) to pay, offset or credit monies in-
cluding (but not limited to)—
‘‘(I) the principal amount of any
royalty, 
minimum 
royalty, 
rental,
bonus, net profit share or proceed of
sale;
‘‘(II) any interest;
‘‘(III) any penalty; or
‘‘(IV) any assessment,
which arises from or relates to any lease
administered by the Secretary for, or any
mineral leasing law related to, the explo-
ration, production and development of oil
or gas on Federal lands or the Outer Con-
tinental Shelf;
‘‘(26) ‘order to pay’ means a written order is-
sued by the Secretary or the applicable delegated
State to a lessee or its designee (with notice to the
lessee who designated the designee) which—
‘‘(A) asserts a specific, definite, and quan-
tified obligation claimed to be due, and
‘‘(B) specifically identifies the obligation by
lease, production month and monetary amount
of such obligation claimed to be due and or-
dered to be paid, as well as the reason or rea-
sons such obligation is claimed to be due, but
such term does not include any other commu-
nication or action by or on behalf of the Sec-
retary or a delegated State;
‘‘(27) ‘overpayment’ means any payment by a
lessee or its designee in excess of an amount legally
required to be paid on an obligation and includes the
portion of any estimated payment for a production
month that is in excess of the royalties due for that
month;
‘‘(28) ‘payment’ means satisfaction, in whole or
in part, of an obligation;
‘‘(29) ‘penalty’ means a statutorily authorized
civil fine levied or imposed for a violation of this Act,
any mineral leasing law, or a term or provision of
a lease administered by the Secretary;
‘‘(30) ‘refund’ means the return of an overpay-
ment;
‘‘(31) ‘State concerned’ means, with respect to
a lease, a State which receives a portion of royalties
or other payments under the mineral leasing laws
from such lease;
‘‘(4) perform automated verification; and
‘‘(5) issue demands, subpoenas, and orders to
perform restructured accounting, for royalty man-
agement enforcement purposes,
to any State with respect to all Federal land within the
State.
‘‘(b) After notice and opportunity for a hearing, the
Secretary is authorized to delegate such authorities and
responsibilities granted under this section as the State has
requested, if the Secretary finds that—
‘‘(1) it is likely that the State will provide ade-
quate resources to achieve the purposes of this Act;
‘‘(2) the State has demonstrated that it will ef-
fectively and faithfully administer the rules and reg-
ulations of the Secretary under this Act in accord-
ance with the requirements of subsections (c) and
(d) of this section;
‘‘(3) such delegation will not create an unrea-
sonable burden on any lessee;
‘‘(4) the State agrees to adopt standardized re-
porting procedures prescribed by the Secretary for
royalty and production accounting purposes, unless
the State and all affected parties (including the Sec-
retary) otherwise agree;
‘‘(5) the State agrees to follow and adhere to
regulations and guidelines issued by the Secretary
pursuant to the mineral leasing laws regarding valu-
ation of production; and
‘‘(6) where necessary for a State to have au-
thority to carry out and enforce a delegated activity,
the State agrees to enact such laws and promulgate
such regulations as are consistent with relevant Fed-
eral laws and regulations
with respect to the Federal lands within the State.
‘‘(c) After notice and opportunity for hearing, the
Secretary shall issue a ruling as to the consistency of a
State’s proposal with the provisions of this section and
regulations under subsection (d) within 90 days after sub-
mission of such proposal. In any unfavorable ruling, the
Secretary shall set forth the reasons therefor and state
whether the Secretary will agree to delegate to the State
if the State meets the conditions set forth in such ruling.
‘‘(d) After consultation with State authorities, the
Secretary shall by rule promulgate, within 12 months after
the date of enactment of this section, standards and regu-
lations pertaining to the authorities and responsibilities to
be delegated under subsection (a), including standards
and regulations pertaining to—
‘‘(1) audits to be performed;
‘‘(2) records and accounts to be maintained;
‘‘(3) reporting procedures to be required by
States under this section;
‘‘(4) receipt and processing of production and
financial reports;
‘‘(5) correction of erroneous report data;
‘‘(6) performance of automated verification;
‘‘(7) issuance of standards and guidelines in
order to avoid duplication of effort;
‘‘(8) transmission of report data to the Sec-
retary; and
‘‘(9) issuance of demands, subpoenas, and or-
ders to perform restructured accounting, for royalty
management enforcement purposes.
Such standards and regulations shall be designed to pro-
vide reasonable assurance that a uniform and effective
royalty management system will prevail among the States.
The records and accounts under paragraph (2) shall be
sufficient to allow the Secretary to monitor the perform-
ance of any State under this section.
‘‘(e) If, after notice and opportunity for a hearing,
the Secretary finds that any State to which any authority
or responsibility of the Secretary has been delegated under
this section is in violation of any requirement of this sec-
tion or any rule thereunder, or that an affirmative finding
by the Secretary under subsection (b) can no longer be
made, the Secretary may revoke such delegation. If, after
providing written notice to a delegated State and a reason-
able opportunity to take corrective action requested by the
Secretary, the Secretary determines that the State has
failed to issue a demand or order to a Federal lessee with-
in the State, that such failure may result in an underpay-
ment of an obligation due the United States by such les-
see, and that such underpayment may be uncollected with-
out Secretarial intervention, the Secretary may issue such
demand or order in accordance with the provisions of this
Act prior to or absent the withdrawal of delegated author-
ity.
‘‘(f) Subject to appropriations, the Secretary shall
compensate any State for those costs which may be nec-
essary to carry out the delegated activities under this Sec-
tion. Payment shall be made no less than every quarter
during the fiscal year. Compensation to a State may not
exceed the Secretary’s reasonably anticipated expenditure
for performance of such delegated activities by the Sec-
retary. Such costs shall be allocable for the purposes of
section 35(b) of the Act entitled ‘An act to promote the
mining of coal, phosphate, oil, oil shale, gas and sodium
on the public domain’, approved February 25, 1920 (com-
monly known as the Mineral Leasing Act) (30 U.S.C. 191
(b)) to the administration and enforcement of laws provid-
ing for the leasing of any onshore lands or interests in
land owned by the United States. Any further allocation
of costs under section 35(b) made by the Secretary for
oil and gas activities, other than those costs to compensate
States for delegated activities under this Act, shall be only
those costs associated with onshore oil and gas activities
and may not include any duplication of costs allocated
pursuant to the previous sentence. Nothing in this section
affects the Secretary’s authority to make allocations under
section 35(b) for non-oil and gas mineral activities. All
moneys received from sales, bonuses, rentals, royalties, as-
sessments and interest, including money claimed to be due
and owing pursuant to a delegation under this section,
shall be payable and paid to the Treasury of the United
States.
‘‘(g) Any action of the Secretary to approve or dis-
approve a proposal submitted by a State under this section
shall be subject to judicial review in the United States dis-
trict court which includes the capital of the State submit-
ting the proposal.
‘‘(h) Any State operating pursuant to a delegation
existing on the date of enactment of this Act may continue
to operate under the terms and conditions of the delega-
tion, except to the extent that a revision of the existing
agreement is adopted pursuant to this section.’’.
(b) CLERICAL AMENDMENT.—The item relating to
section 205 in the table of contents in section 1 of the
Federal Oil and Gas Royalty Management Act of 1982
(30 U.S.C. 1701) is amended to read as follows:
‘‘Sec. 205. Delegation of royalty collections and related activities.’’.
SEC. 4. SECRETARIAL AND DELEGATED STATES’ ACTIONS
AND LIMITATION PERIODS.
(a) IN GENERAL.—The Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1701 et seq.) is
amended by adding after section 114 the following new
section:
‘‘SEC. 115. SECRETARIAL AND DELEGATED STATES’ AC-
TIONS AND LIMITATION PERIODS.
‘‘(a) IN GENERAL.—The respective duties, respon-
sibilities, and activities with respect to a lease shall be per-
formed by the Secretary, delegated States, and lessees or
their designees in a timely manner.
‘‘(b) LIMITATION PERIOD.—
‘‘(1) IN GENERAL.—A judicial proceeding or de-
mand which arises from, or relates to an obligation,
shall be commenced within seven years from the
date on which the obligation becomes due and if not
so commenced shall be barred. If commencement of
a judicial proceeding or demand for an obligation is
barred by this section, the Secretary, a delegated
State, or a lessee or its designee (A) shall not take
any other or further action regarding that obliga-
tion, including (but not limited to) the issuance of
any order, request, demand or other communication
seeking any document, accounting, determination,
calculation, recalculation, payment, principal, inter-
est, assessment, or penalty or the initiation, pursuit
or completion of an audit with respect to that obliga-
tion; and (B) shall not pursue any other equitable or
legal remedy, whether under statute or common law,
with respect to an action on or an enforcement of
said obligation.
‘‘(2) RULE OF CONSTRUCTION.—A judicial pro-
ceeding or demand that is timely commenced under
paragraph (1) against a designee shall be considered
timely commenced as to any lessee who is liable pur-
suant to section 102(a) of this Act for the obligation
that is the subject of the judicial proceeding or de-
mand.
‘‘(3) APPLICATION OF CERTAIN LIMITATIONS.—
The limitations set forth in sections 2401, 2415,
2416, and 2462 of title 28, United States Code, and
section 42 of the Mineral Leasing Act (30 U.S.C.
226–2) shall not apply to any obligation to which
the proper reporting and payment of an obliga-
tion due the Secretary may be issued only by an
Assistant Secretary of the Interior or an Acting
Assistant Secretary of the Interior who is a
schedule C employee (as defined by section
213.3301 of title 5, Code of Federal Regula-
tions), or the Director or Acting Director of the
respective bureau or agency, and may not be
delegated to any other person. If a State has
been delegated authority pursuant to section
205, the State, acting through the highest State
official having ultimate authority over the col-
lection of royalties from leases on Federal lands
within the State, may issue such subpoena, but
may not delegate such authority to any other
person.
‘‘(ii) A subpoena described in clause (i)
may only be issued against a lessee or its des-
ignee during the limitation period provided in
this section and only after the Secretary or a
delegated State has in writing requested the
records from the lessee or its designee related
to the obligation which is the subject of the
subpoena and has determined that—
‘‘(I) the lessee or its designee has
failed to respond within a reasonable pe-
riod of time to the Secretary’s or the appli-
cable delegated State’s written request for
such records necessary for an audit, inves-
tigation or other inquiry made in accord-
ance with the Secretary’s or such delegated
State’s responsibilities under this Act; or
‘‘(II) the lessee or its designee has in
writing denied the Secretary’s or the appli-
cable delegated State’s written request to
produce such records in the lessee’s or its
designee’s possession or control necessary
for an audit, investigation or other inquiry
made in accordance with the Secretary’s or
such 
delegated 
State’s 
responsibilities
under this Act; or
‘‘(III) the lessee or its designee has
unreasonably delayed in producing records
necessary for an audit, investigation or
other inquiry made in accordance with the
Secretary’s or the applicable delegated
State’s responsibilities under this Act after
the Secretary’s or delegated State’s written
request.
‘‘(C) In seeking records, the Secretary or
the applicable delegated State shall afford the
lessee or its designee a reasonable period of
time after a written request by the Secretary or
such delegated State in which to provide such
records prior to the issuance of any subpoena.
‘‘(3) 
MISREPRESENTATION
OR
CONCEAL-
MENT.—The intentional misrepresentation or con-
cealment of a material fact for the purpose of evad-
ing the payment of an obligation in which case the
limitation period shall be tolled for the period of
such misrepresentation or such concealment.
‘‘(4) ORDER TO PERFORM RESTRUCTURED AC-
COUNTING.—A)(i) The issuance of a notice under
subparagraph (D) that the lessee or its designee has
not substantially complied with the requirement to
perform a restructured accounting shall toll the limi-
tation period with respect to the obligation which is
the subject of the notice only for the period begin-
ning on the date the lessee or its designee receives
the notice and ending 120 days after the date on
which (I) the Secretary or the applicable delegated
State receives written notice that the accounting or
other requirement has been performed, or (II) a
court has determined in a final decision that the les-
see is not required to perform the accounting, which-
ever occurs first.
‘‘(ii) If the lessee or its designee initiates an ad-
ministrative appeal or judicial proceeding to contest
an order to perform a restructured accounting is-
sued under subparagraph (B)(i), the limitation pe-
riod in subsection (b) shall be tolled from the date
the lessee or its designee received the order until a
final, nonappealable decision is issued in any such
proceeding.
‘‘(B)(i) The Secretary or the applicable dele-
gated State may issue an order to perform a restruc-
tured accounting to a lessee or its designee when the
Secretary or such delegated State determines during
an audit of a lessee or its designee that the lessee
or its designee should recalculate royalty due on an
obligation based upon the Secretary’s or the dele-
gated State’s finding that the lessee or its designee
has made identified underpayments or overpayments
which are demonstrated by the Secretary or the dele-
gated State to be based upon repeated, systemic re-
porting errors for a significant number of leases or
a single lease for a significant number of reporting
months with the same type of error which con-
stitutes a pattern of violations and which are likely
to result in either significant underpayments or over-
payments.
‘‘(ii) The power of the Secretary to issue an
order to perform a restructured accounting may not
be delegated below the most senior career profes-
sional position having responsibility for the royalty
management program, which position is currently
designated as the ‘Associate Director for Royalty
Management’, and may not be delegated to any
other person. If a State has been delegated authority
pursuant to section 205 of this Act, the State, act-
ing through the highest ranking State official having
ultimate authority over the collection of royalties
from leases on Federal lands within the State, may
issue such order to perform, which may not be dele-
gated to any other person. An order to perform a re-
structured accounting shall—
‘‘(I) be issued within a reasonable period
of time from when the audit identifies the sys-
temic, reporting errors;
‘‘(II) specify the reasons and factual bases
for such order;
‘‘(III) be specifically identified as an ‘order
to perform a restructured accounting’;
‘‘(IV) provide the lessee or its designee a
reasonable period of time (but not less than 60
days) within which to perform the restructured
accounting; and
‘‘(V) provide the lessee or its designee 60
days within which to file an administrative ap-
peal of the order to perform a restructured ac-
counting.
‘‘(C) An order to perform a restructured ac-
counting shall not mean or be construed to include
any other action by or on behalf of the Secretary or
a delegated State.
‘‘(D) If a lessee or its designee fails to substan-
tially comply with the requirement to perform a re-
structured accounting pursuant to this subsection, a
notice shall be issued to the lessee or its designee
that the lessee or its designee has not substantially
complied with the requirements to perform a re-
structured accounting. A lessee or its designee shall
be given a reasonable time within which to perform
the restructured accounting. Such notice may be is-
sued under this section only by an Assistant Sec-
retary of the Interior or an acting Assistant Sec-
retary of the Interior who is a schedule C employee
(as defined by section 213.3301 of title 5, Code of
Federal Regulations) and may not be delegated to
any other person. If a State has been delegated au-
thority pursuant to section 205, the State, acting
through the highest State official having ultimate
authority over the collection of royalties from leases
on Federal lands within the State, may issue such
notice, which may not be delegated to any other per-
son.
‘‘(e) TERMINATION OF LIMITATIONS PERIOD.—An
action or an enforcement of an obligation by the Secretary
or delegated State or a lessee or its designee shall be
barred under this section prior to the running of the
seven-year period provided in subsection (b) in the event—
‘‘(1) the Secretary or a delegated State has no-
tified the lessee or its designee in writing that a time
period is closed to further audit; or
‘‘(2) the Secretary or a delegated State and a
lessee or its designee have so agreed in writing.
For purposes of this subsection, notice to, or an agreement
by, the designee shall be binding on any lessee who is liable
pursuant to section 102(a) for obligations that are the
subject of the notice or agreement.
‘‘(f) RECORDS REQUIRED FOR DETERMINING COL-
LECTIONS.—Records required pursuant to section 103 of
this Act by the Secretary or any delegated State for the
purpose of determining obligations due and compliance
with any applicable mineral leasing law, lease provision,
regulation or order with respect to oil and gas leases from
Federal lands or the Outer Continental Shelf shall be
maintained for the same period of time during which a
judicial proceeding or demand may be commenced under
subsection (b). If a judicial proceeding or demand is timely
commenced, the record holder shall maintain such records
until the final nonappealable decision in such judicial pro-
ceeding is made, or with respect to that demand is ren-
dered, unless the Secretary or the applicable delegated
State authorizes in writing an earlier release of the re-
quirement to maintain such records. Notwithstanding any-
thing herein to the contrary, under no circumstance shall
a record holder be required to maintain or produce any
record relating to an obligation for any time period which
is barred by the applicable limitation in this section. In
connection with any hearing, administrative proceeding,
inquiry, investigation, or audit by the Secretary or a dele-
gated State under this Act, the Secretary or the delegated
State shall minimize the submission of multiple or redun-
dant information and make a good faith effort to locate
records previously submitted by a lessee or a designee to
the Secretary or the delegated State, prior to requiring
the lessee or the designee to provide such records.
‘‘(g) TIMELY COLLECTIONS.—In order to most effec-
tively utilize resources available to the Secretary to maxi-
mize the collection of oil and gas receipts from lease obli-
gations to the Treasury within the seven-year period of
limitations, and consequently to maximize the State share
of such receipts, the Secretary should not perform or re-
quire accounting, reporting, or audit activities if the Sec-
retary and the State concerned determine that the cost
of conducting or requiring the activity exceeds the ex-
pected amount to be collected by the activity, based on
the most current 12 months of activity. This subsection
shall not provide a defense to a demand or an order to
perform a restructured accounting. To the maximum ex-
tent possible, the Secretary and delegated States shall re-
duce costs to the United States Treasury and the States
by discontinuing requirements for unnecessary or duplica-
tive data and other information, such as separate allow-
ances and payor information, relating to obligations due.
If the Secretary and the State concerned determine that
collection will result sooner, the Secretary or the applicable
delegated State may waive or forego interest in whole or
in part.
‘‘(h) APPEALS AND FINAL AGENCY ACTION.—
‘‘(1) 33-MONTH PERIOD.—Demands or orders
issued by the Secretary or a delegated State are sub-
ject to administrative appeal in accordance with the
regulations of the Secretary. No State shall impose
any conditions which would hinder a lessee’s or its
designee’s immediate appeal of an order to the Sec-
retary or the Secretary’s designee. The Secretary
shall issue a final decision in any administrative pro-
ceeding, including any administrative proceedings
pending on the date of enactment of this section,
within 33 months from the date such proceeding was
commenced or 33 months from the date of such en-
actment, whichever is later. The 33-month period
may be extended by any period of time agreed upon
in writing by the Secretary and the appellant.
‘‘(2) EFFECT
OF
FAILURE
TO
ISSUE
DECI-
SION.—If no such decision has been issued by the
Secretary within the 33-month period referred to in
paragraph (1)—
‘‘(A) the Secretary shall be deemed to have
issued and granted a decision in favor of the
appellant as to any nonmonetary obligation and
any monetary obligation the principal amount
of which is less than $10,000; and
‘‘(B) the Secretary shall be deemed to have
issued a final decision in favor of the Secretary,
which decision shall be deemed to affirm those
issues for which the agency rendered a decision
prior to the end of such period, as to any mone-
tary obligation the principal amount of which is
$10,000 or more, and the appellant shall have
a right to judicial review of such deemed final
decision in accordance with title 5 of the United
States Code.
‘‘(i) COLLECTIONS OF DISPUTED AMOUNTS DUE.—
To expedite collections relating to disputed obligations due
within the seven-year period beginning on the date the ob-
ligation became due, the parties shall hold not less than
one settlement consultation and the Secretary and the
State concerned may take such action as is appropriate
to compromise and settle a disputed obligation, including
waiving or reducing interest and allowing offsetting of ob-
ligations among leases.
‘‘(j) ENFORCEMENT OF A CLAIM FOR JUDICIAL RE-
VIEW.—In the event a demand subject to this section is
properly and timely commenced, the obligation which is
the subject of the demand may be enforced beyond the
seven-year limitations period without being barred by this
statute of limitations. In the event a demand subject to
this section is properly and timely commenced, a judicial
proceeding challenging the final agency action with respect
to such demand shall be deemed timely so long as such
judicial proceeding is commenced within 180 days from
receipt of notice by the lessee or its designee of the final
agency action.
‘‘(k) IMPLEMENTATION OF FINAL DECISION.—In the
event a judicial proceeding or demand subject to this sec-
tion is timely commenced and thereafter the limitation pe-
riod in this section lapses during the pendency of such
proceeding, any party to such proceeding shall not be
barred from taking such action as is required or necessary
to implement a final unappealable judicial or administra-
tive decision, including any action required or necessary
to implement such decision by the recovery or recoupment
of an underpayment or overpayment by means of refund
or credit.
‘‘(1) STAY OF PAYMENT OBLIGATION PENDING RE-
VIEW.—Any person ordered by the Secretary or a dele-
gated State to pay any obligation (other than an assess-
ment) shall be entitled to a stay of such payment without
bond or other surety instrument pending an administra-
tive or judicial proceeding if the person periodically dem-
onstrates to the satisfaction of the Secretary that such
person is financially solvent or otherwise able to pay the
obligation. In the event the person is not able to dem-
onstrate, the Secretary may require a bond or other surety
instrument satisfactory to cover the obligation. Any person
ordered by the Secretary or a delegated State to pay an
assessment shall be entitled to a stay without bond or
other surety instrument’’.
(b) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Federal Oil and Gas Royalty Manage-
ment Act of 1982 (30 U.S.C. 1701) is amended by insert-
ing after the item relating to section 114 the following
new item:
‘‘Sec.
115.
Secretarial and delegated States’ actions and limitation periods.’’.
SEC. 5 ADJUSTMENT AND REFUNDS.
(a) IN GENERAL.—The Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1701 et seq.) is
amended by inserting after section 111 the following:
‘‘SEC. 111A. ADJUSTMENTS AND REFUNDS.
‘‘(a) ADJUSTMENTS TO ROYALTIES PAID TO THE
SECRETARY OR A DELEGATED STATE.—
‘‘(1) If, during the adjustment period, a lessee
or its designee determines that an adjustment or re-
fund request is necessary to correct an underpay-
ment or overpayment of an obligation, the lessee or
its designee shall make such adjustment or request
a refund within a reasonable period of time and only
during the adjustment period. The filing of a royalty
report which reflects the underpayment or overpay-
ment of an obligation shall constitute prior written
notice to the Secretary or the applicable delegated
State of an adjustment.
‘‘(2)(A) For any adjustment, the lessee or its
designee shall calculate and report the interest due
attributable to such adjustment at the same time the
lessee or its designee adjusts the principle amount of
the subject obligation, except as provided by sub-
paragraph (B).
‘‘(B) In the case of a lessee or its designee who
determines that subparagraph (A) would impose a
hardship, the Secretary or such delegated State shall
calculate the interest due and notify the lessee or its
designee within a reasonable time of the amount of
interest due, unless such lessee or its designee elects
to calculate and report interest in accordance with
subparagraph (A).
‘‘(3) An adjustment or a request for a refund
for an obligation may be made after the adjustment
period only upon written notice to and approval by
the Secretary or the applicable delegated State, as
appropriate, during an audit of the period which in-
cludes the production month for which the adjust-
ment is being made. If an overpayment is identified
during an audit, then the Secretary or the applicable
delegated State, as appropriate, shall allow a credit
or refund in the amount of the overpayment.
‘‘(4) For purposes of this section, the adjust-
ment period for any obligation shall be the six-year
period following the date on which an obligation be-
came due. The adjustment period shall be sus-
pended, tolled, extended, enlarged, or terminated by
the same actions as the limitation period in section
115.
‘‘(b) REFUNDS.—
‘‘(1) IN GENERAL.—A request for refund is suf-
ficient if it—
‘‘(A) is made in writing to the Secretary
and, for purposes of section 115, is specifically
identified as a demand;
‘‘(B) identifies the person entitled to such
refund;
‘‘(C) provides the Secretary information
that reasonably enables the Secretary to iden-
tify the overpayment for which such refund is
sought; and
‘‘(D) provides the reasons why the pay-
ment was an overpayment.
‘‘(2) PAYMENT BY SECRETARY OF THE TREAS-
URY.—The Secretary shall certify the amount of the
refund to be paid under paragraph (1) to the Sec-
retary of the Treasury who shall make such refund.
Such refund shall be paid from amounts received as
current receipts from sales, bonuses, royalties (in-
cluding interest charges collected under this section)
and rentals of the public lands and the Outer Con-
tinental Shelf under the provisions of the Mineral
Leasing Act and the Outer Continental Shelf Lands
Act, which are not payable to a State or the Rec-
lamation Fund. The portion of any such refund at-
tributable to any amounts previously disbursed to a
State, the Reclamation Fund, or any recipient pre-
scribed by law shall be deducted from the next dis-
bursements to that recipient made under the appli-
cable law. Such amounts deducted from subsequent
disbursements shall be credited to miscellaneous re-
ceipts in the Treasury.
‘‘(3) PAYMENT PERIOD.—A refund under this
subsection shall be paid or denied (with an expla-
nation of the reasons for the denial) within 120 days
of the date on which the request for refund is re-
ceived by the Secretary. Such refund shall be subject
to later audit by the Secretary or the applicable dele-
gated State and subject to the provisions of this Act.
‘‘(4) PROHIBITION AGAINST REDUCTION OF RE-
FUNDS
OR
CREDITS.—In no event shall the Sec-
retary or any delegated State directly or indirectly
claim or offset any amount or amounts against, or
reduce any refund or credit (or interest accrued
thereon) by the amount of any obligation the en-
forcement of which is barred by section 115 of this
Act.’’.
(b) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Federal Oil and Gas Royalty Manage-
ment Act of 1982 (30 U.S.C. 1701) is amended by insert-
ing after the item relating to section 111 the following
new item:
‘‘Sec. 111A. Adjustments and refunds.’’.
SEC. 6. ROYALTY TERMS AND CONDITIONS, INTEREST, AND
PENALTIES.
(a) LESSEE OR DESIGNEE INTEREST.—Section 111
of the Federal Oil and Gas Royalty Management Act of
1982 (30 U.S.C. 1721) is amended by adding after sub-
section (g) the following:
‘‘(h) Interest shall be allowed and paid or credited
on any overpayment, with such interest to accrue from the
date such overpayment was made, at the rate obtained by
applying the provisions of subparagraphs (A) and (B) of
section 6621(a)(1) of the Internal Revenue Code of 1986,
but determined without regard to the sentence following
subparagraph (B) of section 6621(a)(1). Interest which
has accrued on any overpayment may be applied to reduce
an underpayment. This subsection applies to overpay-
ments made later than six months after the date of enact-
ment of this subsection or September 1, 1996, whichever
is later. Such interest shall be paid from amounts received
as current receipts from sales, bonuses, royalties (includ-
ing interest charges collected under this section) and rent-
als of the public lands and the Outer Continental Shelf
under the provisions of the Mineral Leasing Act, and the
Outer Continental Shelf Lands Act, which are not payable
to a State or the Reclamation Fund. The portion of any
such interest payment attributable to any amounts pre-
viously disbursed to a State, the Reclamation Fund, or
any other recipient designated by law shall be deducted
from the next disbursements to that recipient made under
the applicable law. Such amounts deducted from subse-
quent disbursements shall be credited to miscellaneous re-
ceipts in the Treasury.’’.
(b) LIMITATION ON INTEREST.—Section 111 of the
Federal Oil and Gas Royalty Management Act of 1982,
as amended by subsection (a), is further amended by add-
ing at the end the following:
‘‘(i) Upon a determination by the Secretary that an
excessive overpayment (based upon all obligations of a les-
see or its designee for a given reporting month) was made
for the sole purpose of receiving interest, interest shall be
paid on the excessive amount of such overpayment. For
purposes of this Act, an ‘excessive overpayment’ shall be
the amount that any overpayment a lessee or its designee
pays for a given reporting month (excluding payments for
demands for obligations determined to be due as a result
of judicial or administrative proceedings or agreed to be
paid pursuant to settlement agreements) for the aggregate
of all of its Federal leases exceeds 10 percent of the total
royalties paid that month for those leases.’’.
(c) ESTIMATED PAYMENT.—Section 111 of the Fed-
eral Oil and Gas Royalty Management Act of 1982 (30
U.S.C. 1721), as amended by subsections (a) and (b), is
further amended by adding at the end the following:
‘‘(j) A lessee or its designee may make a payment
for the approximate amount of royalties (hereinafter in
this subsection ‘estimated payment’) that would otherwise
be due for such lease by the rate royalties are due for
that lease. When an estimated payment is made, actual
royalties are payable at the end of the month following
the month in which the estimated payment is made. If
the estimated payment was less than the amount of actual
royalties due, interest is owned on the underpaid amount.
If the estimated payment exceeds the actual royalties due,
interest is owned on the overpayment. If the lessee or its
designee makes a payment for such actual royalties, the
lessee or its designee may apply the estimated payment
to future royalties. Any estimated payment may be ad-
justed, recouped, or reinstated at any time by the lessee
or its designee.’’.
(d) VOLUME ALLOCATION OF OIL AND GAS PRODUC-
TION.—Section 111 of the Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1721), as amended
by subsections (a) through (c), is amended by adding at
the end the following:
‘‘(k)(1) Except as otherwise provided by this sub-
section—
‘‘(A) a lessee or its designee of a lease in a unit
or communitization agreement which contains only
Federal leases with the same royalty rate and funds
distribution shall report and pay royalties on oil and
gas production for each production month base on
the actual volume of production sold by or on behalf
of that lessee;
‘‘(B) a lessee or its designee of a lease in any
other unit or communitization agreement shall re-
port and pay royalties on oil and gas production for
each production month based on the volume of oil
and gas produced from such agreement and allo-
cated to the lease in accordance with the terms of
the agreement; and
‘‘(C) a lessee or its designee of a lease that is
not contained in a unit or communitization agree-
ment shall report and pay royalties on oil and gas
production for each production month based on the
actual volume of production sold by or on behalf of
that lessee.
‘‘(2) This subsection applies only to requirements for
reporting and paying royalties. Nothing in this subsection
is intended to alter a lessee’s liability for royalties on oil
or gas production based on the share of production allo-
cated to the lease in accordance with the terms of the
lease, a unit or communitization agreement, or any other
agreement.
‘‘(3) For any unit or communitization agreement if
all lessees contractually agree to an alternative method of
royalty reporting and payment, the lessees may submit
such alternative method to the Secretary or the delegated
State for approval and make payments in accordance with
such approved alternative method so long as such alter-
native method does not reduce the amount of the royalty
obligation.
‘‘(4) The Secretary or the delegated State shall grant
an exception from the reporting and payment require-
ments for marginal properties by allowing for any calendar
year or portion thereof royalties to be paid each month
based on the volume of production sold. Interest shall not
accrue on the difference for the entire calendar year or
portion thereof between the amount of oil and gas actually
sold and the share of production allocated to the lease
until the beginning of the month following such calendar
year or portion thereof. Any additional royalties dues or
overpaid royalties and associated interest shall be paid, re-
funded, or credited within six months after the end of each
calendar year in which royalties are paid based on volumes
of production sold. For the purpose of this subsection, the
term ‘marginal property’ means a lease that produces on
average the combined equivalent of less than 15 barrels
of oil per well per day or 90 thousand cubic feet of gas
per well per day, or a combination thereof, determined by
dividing the average daily production of crude oil and nat-
ural gas from producing wells on such lease by the number
of such wells, unless the Secretary, together with the State
concerned, determines that a different production is more
appropriate.
‘‘(5) Not later than two years after the date of the
enactment of this subsection, the Secretary shall issue any
appropriate demand for all outstanding royalty payment
disputes regarding who is required to report and pay roy-
alties on production from units and communitization
agreements outstanding on the date of the enactment of
this subsection, and collect royalty amounts owed on such
production.’’.
(e) PRODUCTION ALLOCATION.—Section 111 of the
Federal Oil and Gas Royalty Management Act of 1982
(30 U.S.C. 1721), as amended by subsections (a) through
(d), is amended by adding at the end the following:
‘‘(l) The Secretary shall issue all determinations of
allocations of production for units and communitization
agreements within 120 days of a request for determina-
tion. If the Secretary fails to issue a determination within
such 120-day period, the Secretary shall waive interest
due on obligations subject to the determination until the
end of the month following the month in which the deter-
mination is made.’’.
(f) NEW ASSESSMENT TO ENCOURAGE PROPER ROY-
ALTY PAYMENTS.—
(1) IN GENERAL.—The Federal Oil and Gas
Royalty Management Act of 1982 (30 U.S.C. 1721),
as amended by section 4(a), is further amended by
adding at the end the following:
‘‘SEC. 116. ASSESSMENTS.
‘‘Beginning eighteen months after the date of enact-
ment of this section, to encourage proper royalty payment
the Secretary or the delegated State shall impose assess-
ments on a person who chronically submits erroneous re-
ports under this Act. Assessments under this Act may only
be issued as provided for in this section.’’.
(2) CLERICAL AMENDMENT.—The table of con-
tents in section 1 of such Act (30 U.S.C. 1701) is
amended by adding after the item relating to section
115 the following new item:
‘‘Sec. 116. Assessments.’’.
(g) LIABILITY FOR ROYALTY PAYMENTS.—Section
102(a) of the Federal Oil and Gas Royalty Management
Act of 1982 (30 U.S.C. 1712(a)) is amended to read as
follows:
‘‘(a) In order to increase receipts and achieve effec-
tive collections of royalty and other payments, a lessee who
is required to make any royalty or other payment under
a lease or under the mineral leasing laws, shall make such
payments in the time and manner as may be specified by
the Secretary or the applicable delegated State. A lessee
may designate a person to make all or part of the pay-
ments due under a lease on the lessee’s behalf and shall
notify the Secretary or the applicable delegated State in
writing of such designation, in which event said designated
person may, in its own name, pay, offset or credit monies,
make adjustments, request and receive refunds and sub-
mit reports with respect to payments required by the les-
see. Notwithstanding any other provision of this Act to
the contrary, a designee shall not be liable for any pay-
ment obligation under the lease. The person owning oper-
ating rights in a lease shall be primarily liable for its pro
rata share of payment obligations under the lease. If the
person owning the legal record title in a lease is other than
the operating rights owner, the person owning the legal
record title shall be secondarily liable for its pro rata share
of such payment obligations under the lease.’’.
(h) CLERICAL AMENDMENTS.—(1) The heading of
section 111 of the Federal Oil and Gas Royalty manage-
ment Act of 1982 (30 U.S.C. 1721) is amended to read
as follows:
‘‘ROYALTY TERMS AND CONDITIONS, INTEREST, AND
PENALTIES’’.
(2) The item relating to section 111 in the table of
contents in section 1 of such Act (30 U.S.C. 1701) is
amended to read as follows:
‘‘Sec. 111. Royalty terms and conditions, interest, and penalties.’’.
SEC. 7. ALTERNATIVES FOR MARGINAL PROPERTIES.
(a) IN GENERAL.—The Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1701 et seq.), as
amended by section 6 of this Act, is further amended by
adding at the end the following:
‘‘SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.
‘‘(a) DETERMINATION
OF
BEST
INTERESTS
OF
STATE CONCERNED
AND
THE UNITED STATES.—The
Secretary and the State concerned, acting in the best in-
terests of the United States and the State concerned to
promote production, reduce administrative costs, and in-
crease net receipts to the United States and the States,
shall jointly determine, on a case by case basis, the
amount of what marginal production from a lease or leases
or well or wells, or parts thereof, shall be subject to a pre-
payment under subsection (b) or regulatory relief under
subsection (c). If the State concerned does not consent,
such prepayments or regulatory relief shall not be made
available under this section for such marginal production:
Provided, That if royalty payments from a lease or leases,
or well or wells are not shared with any State, such deter-
mination shall be made solely by the Secretary.
‘‘(b) PREPAYMENT OF ROYALTY.—
‘‘(1) IN GENERAL.—Notwithstanding the provi-
sions of any lease to the contrary, for any lease or
leases or well or wells identified by the Secretary
and the State concerned pursuant to subsection (a),
the Secretary is authorized to accept a prepayment
for royalties in lieu of monthly royalty payments
under the lease for the remainder of the lease term
if the affected lessee so agrees. Any prepayment
agreed to by the Secretary, State concerned and les-
see which is less than an average $500 per month
in total royalties shall be effectuated under this sec-
tion not earlier than two years after the date of en-
actment of this section and, any prepayment which
is greater than an average $500 per month in total
royalties shall be effectuated under this section not
earlier than three years after the date of enactment
of this section. The Secretary and the State con-
cerned may condition their acceptance of the prepay-
ment authorized under this section on the lessee’s
agreeing to such terms and conditions as the Sec-
retary and the State concerned deem appropriate
and consistent with the purposes of this Act. Such
terms may—
‘‘(A) provide for prepayment that does not
result in a loss of revenue to the United States
in present value terms;
‘‘(B) include provisions for receiving addi-
tional prepayments or royalties for develop-
ments in the lease or leases or well or wells that
deviate significantly from the assumptions and
facts on which the valuation is determined; and
‘‘(C) require the lessee or it designee to
provide such periodic production reports as may
be necessary to allow the Secretary and the
State concerned to monitor production for the
purposes of subparagraph (B).
‘‘(2) STATE SHARE.—A prepayment under this
section shall be shared by the Secretary with any
State or other recipient to the same extent as any
royalty payment for such lease.
‘‘(3) SATISFACTION
OF
OBLIGATION.—Except
as may be provided in the terms and conditions es-
tablished by the Secretary under subsection (b), a
lessee or its designee who makes a prepayment
under this section shall have satisfied in full the les-
see’s obligation to pay royalty on the production
stream sold from the lease or leases or well or wells.
‘‘(c) ALTERNATIVE ACCOUNTING AND AUDITING RE-
QUIREMENTS.—Within one year after the date of the en-
actment of this section, the Secretary or the delegated
State shall provide accounting, reporting, and auditing re-
lief that will encourage lessees to continue to produce and
develop properties subject to subsection (a): Provided,
That such relief will only be available to lessees in a State
that concurs, which concurrence is not required if royalty
payments from the lease or leases or well or wells are not
shared with any State. Prior to granting such relief, the
Secretary and, if appropriate, the State concerned shall
agree that the type of marginal wells and relief provided
under this paragraph is in the best interest of the United
States and, if appropriate, the State concerned.’’.
(b) CLERICAL AMENDMENT.—The table of contents
in section 1 of such Act (30 U.S.C. 1701) is amended by
adding after the item relating to section 116 the following
new item:
‘‘Sec. 117. Alternatives for marginal properties.’’.
SEC. 8. APPLICABILITY.
(a) FOGRMA.—With respect to Federal lands, sec-
tions 202 and 307 of the Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1732 and 1755), are
no longer applicable. The applicability of those sections to
Indian leases is not affected.
(b) OCSLA.—Effective on the date of the enactment
of this Act, section 10 of the Outer Continental Shelf
Lands Act (43 U.S.C. 1339) is repealed.
SEC. 9. INDIAN LANDS.
The amendments made by this Act shall not apply
with respect to Indian lands, and the provisions of the
Federal Oil and Gas Royalty Management Act of 1982
as in effect on the day before the date of enactment of
this Act shall continue to apply after such date with re-
spect to Indian lands.
SEC. 10. PRIVATE LANDS.
This Act shall not apply to any privately owned min-
erals.
SEC. 11. EFFECTIVE DATE.
Except as provided by section 115(h), section 111(h),
section 111(k)(5), and section 117 of the Federal Oil and
Gas Royalty Management Act of 1982 (as added by this
Act), this Act, and the amendments made by this Act,
shall apply with respect to the production of oil and gas
after the first day of the month following the date of the
enactment of this Act.
SEC. 12. SAVINGS CLAUSE.
Nothing in this Act shall be construed to give a State
a property right or interest in any Federal lease or land.
Passed the House of Representatives July 16, 1996.
Attest:
Clerk.