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(2) allow the lessee to deduct the transportation
or processing costs in reporting and paying royalties
in-value for other Federal oil and gas leases.
(d) BENEFIT TO THE UNITED STATES REQUIRED.—
The Secretary may receive oil or gas royalties in-kind only
if the Secretary determines that receiving royalties in-kind
provides benefits to the United States that are greater than
or equal to the benefits that are likely to have been received
had royalties been taken in-value.
(e) REPORTS.—
(1) IN GENERAL.—Not later than September 30,
2006, the Secretary shall submit to Congress a report
that addresses—
(A) actions taken to develop businesses proc-
esses and automated systems to fully support the
royalty-in-kind capability to be used in tandem
with the royalty-in-value approach in managing
Federal oil and gas revenue; and
(B) future royalty-in-kind businesses oper-
ation plans and objectives.
(2) REPORTS ON OIL OR GAS ROYALTIES TAKEN
IN-KIND.—For each of fiscal years 2006 through 2015
in which the United States takes oil or gas royalties
in-kind from production in any State or from the
outer Continental Shelf, excluding royalties taken in-
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kind and sold to refineries under subsection (h), the
Secretary shall submit to Congress a report that
describes—
(A) the 1 or more methodologies used by the
Secretary to determine compliance with sub-
section (d), including the performance standard
for comparing amounts received by the United
States derived from royalties in-kind to amounts
likely to have been received had royalties been
taken in-value;
(B) an explanation of the evaluation that
led the Secretary to take royalties in-kind from
a lease or group of leases, including the expected
revenue effect of taking royalties in-kind;
(C) actual amounts received by the United
States derived from taking royalties in-kind and
costs and savings incurred by the United States
associated with taking royalties in-kind, includ-
ing administrative savings and any new or in-
creased administrative costs; and
(D) an evaluation of other relevant public
benefits or detriments associated with taking
royalties in-kind.
(f) DEDUCTION OF EXPENSES.—
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(1) IN
GENERAL.—Before making payments
under section 35 of the Mineral Leasing Act (30
U.S.C. 191) or section 8(g) of the Outer Continental
Shelf Lands Act (43 U.S.C. 1337(g)) of revenues de-
rived from the sale of royalty production taken in-
kind from a lease, the Secretary shall deduct amounts
paid or deducted under subsections (b)(4) and (c) and
deposit the amount of the deductions in the miscella-
neous receipts of the Treasury.
(2) ACCOUNTING FOR DEDUCTIONS.—If the Sec-
retary allows the lessee to deduct transportation or
processing costs under subsection (c), the Secretary
may not reduce any payments to recipients of reve-
nues derived from any other Federal oil and gas lease
as a consequence of that deduction.
(g) CONSULTATION WITH STATES.—The Secretary—
(1) shall consult with a State before conducting
a royalty in-kind program under this subtitle within
the State;
(2) may delegate management of any portion of
the Federal royalty in-kind program to the State ex-
cept as otherwise prohibited by Federal law; and
(3) shall consult annually with any State from
which Federal oil or gas royalty is being taken in-
kind to ensure, to the maximum extent practicable,
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that the royalty in-kind program provides revenues to
the State greater than or equal to the revenues likely
to have been received had royalties been taken in-
value.
(h) SMALL REFINERIES.—
(1) PREFERENCE.—If the Secretary finds that
sufficient supplies of crude oil are not available in the
open market to refineries that do not have their own
source of supply for crude oil, the Secretary may
grant preference to those refineries in the sale of any
royalty oil accruing or reserved to the United States
under Federal oil and gas leases issued under any
mineral leasing law, for processing or use in those re-
fineries at private sale at not less than the market
price.
(2) PRORATION AMONG REFINERIES IN PRODUC-
TION AREA.—In disposing of oil under this subsection,
the Secretary may, at the discretion of the Secretary,
prorate the oil among refineries described in para-
graph (1) in the area in which the oil is produced.
(i) DISPOSITION TO FEDERAL AGENCIES.—
(1) ONSHORE ROYALTY.—Any royalty oil or gas
taken by the Secretary in-kind from onshore oil and
gas leases may be sold at not less than the market
price to any Federal agency.
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(2) OFFSHORE
ROYALTY.—Any royalty oil or
gas taken in-kind from a Federal oil or gas lease on
the outer Continental Shelf may be disposed of only
under section 27 of the Outer Continental Shelf Lands
Act (43 U.S.C. 1353).
(j) FEDERAL LOW-INCOME ENERGY ASSISTANCE PRO-
GRAMS.—
(1) PREFERENCE.—In disposing of royalty oil or
gas taken in-kind under this section, the Secretary
may grant a preference to any person, including any
Federal or State agency, for the purpose of providing
additional resources to any Federal low-income en-
ergy assistance program.
(2) REPORT.—Not later than 3 years after the
date of enactment of this Act, the Secretary shall sub-
mit a report to Congress—
(A) assessing the effectiveness of granting
preferences specified in paragraph (1); and
(B) providing a specific recommendation on
the continuation of authority to grant pref-
erences.
SEC. 313. MARGINAL PROPERTY PRODUCTION INCENTIVES.
(a) DEFINITION
OF MARGINAL PROPERTY.—Until
such time as the Secretary issues regulations under sub-
section (e) that prescribe a different definition, in this sec-