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SEC. 2. AMENDMENTS TO THE OUTER CONTINENTAL
SHELF LANDS ACT.
Section 8(a) of the Outer Continental Shelf Lands
Act, (43 U.S.C. 1337(a)(3)), is amended by striking para-
graph (3) in its entirety and inserting the following:
‘‘(3)(A) The Secretary may, in order to—
‘‘(i) promote development or increased pro-
duction on producing or non-producing leases;
or
‘‘(ii) encourage production of marginal re-
sources on producing or non-producing leases;
through primary, secondary, or tertiary recovery
means, reduce or eliminate any royalty or net profit
share set forth in the lease(s). With the lessee’s con-
sent, the Secretary may make other modifications to
the royalty or net profit share terms of the lease in
order to achieve these purposes.
‘‘(B)(i) Notwithstanding the provisions of this
Act other than this subparagraph, with respect to
any lease or unit in existence on the date of enact-
ment of the Outer Continental Shelf Deep Water
Royalty Relief Act meeting the requirements of this
subparagraph, no royalty payments shall be due on
new production, as defined in clause (iv) of this sub-
paragraph, from any lease or unit located in water
depths of 200 meters or greater in the Western and
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Central Planning Areas of the Gulf of Mexico, in-
cluding that portion of the Eastern Planning Area
of the Gulf of Mexico encompassing whole lease
blocks lying west of 87 degrees, 30 minutes West
longitude, until such volume of production as deter-
mined pursuant to clause (ii) has been produced by
the lessee.
‘‘(ii) Upon submission of a complete application
by the lessee, the Secretary shall determine within
180 days of such application whether new produc-
tion from such lease or unit would be economic in
the absence of the relief from the requirement to pay
royalties provided for by clause (i) of this subpara-
graph. In making such determination, the Secretary
shall consider the increased technological and finan-
cial risk of deep water development and all costs as-
sociated with exploring, developing, and producing
from the lease. The lessee shall provide information
required for a complete application to the Secretary
prior to such determination. The Secretary shall
clearly define the information required for a com-
plete application under this section. Such application
may be made on the basis of an individual lease or
unit. If the Secretary determines that such new pro-
duction would be economic in the absence of the re-
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lief from the requirement to pay royalties provided
for by clause (i) of this subparagraph, the provisions
of clause (i) shall not apply to such production. If
the Secretary determines that such new production
would not be economic in the absence of the relief
from the requirement to pay royalties provided for
by clause (i), the Secretary must determine the vol-
ume of production from the lease or unit on which
no royalties would be due in order to make such new
production economically viable; except that for new
production as defined in clause (iv)(aa), in no case
will that volume be less than 17.5 million barrels of
oil equivalent in water depths of 200 to 400 meters,
52.5 million barrels of oil equivalent in 400 to 800
meters of water, and 87.5 million barrels of oil
equivalent in water depths greater than 800 meters.
Redetermination of the applicability of clause (i)
shall be undertaken by the Secretary when requested
by the lessee prior to the commencement of the new
production and upon significant change in the fac-
tors upon which the original determination was
made. The Secretary shall make such redetermina-
tion within 120 days of submission of a complete
application. The Secretary may extend the time pe-
riod for making any determination or redetermina-
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tion under this clause for 30 days, or longer if
agreed to by the applicant, if circumstances so war-
rant. The lessee shall be notified in writing of any
determination or redetermination and the reasons
for and assumptions used for such determination.
Any determination or redetermination under this
clause shall be a final agency action. The Secretary’s
determination or redetermination shall be judicially
reviewable under section 10(a) of the Administrative
Procedures Act (5 U.S.C. 702), only for actions filed
within 30 days of the Secretary’s determination or
redetermination.
‘‘(iii) In the event that the Secretary fails to
make the determination or redetermination called
for in clause (ii) upon application by the lessee with-
in the time period, together with any extension
thereof, provided for by clause (ii), no royalty pay-
ments shall be due on new production as follows:
‘‘(I) For new production, as defined in
clause (iv)(I) of this subparagraph, no royalty
shall be due on such production according to
the schedule of minimum volumes specified in
clause (ii) of this subparagraph.
‘‘(II) For new production, as defined in
clause (iv)(II) of this subparagraph, no royalty
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shall be due on such production for 1 year fol-
lowing the start of such production.
‘‘(iv) For purposes of this subparagraph, the
term ‘new production’ is—
‘‘(I) any production from a lease from
which no royalties are due on production, other
than test production, prior to the date of enact-
ment of the Outer Continental Shelf Deep
Water Royalty Relief Act; or
‘‘(II) any production resulting from lease
development activities pursuant to a Develop-
ment Operations Coordination Document, or
supplement thereto that would expand produc-
tion significantly beyond the level anticipated in
the Development Operations Coordination Doc-
ument, approved by the Secretary after the date
of enactment of the Outer Continental Shelf
Deep Water Royalty Relief Act.
‘‘(v) During the production of volumes deter-
mined pursuant to clause (ii) or (iii) of this subpara-
graph, in any year during which the arithmetic aver-
age of the closing prices on the New York Mer-
cantile Exchange for light sweet crude oil exceeds
$28.00 per barrel, any production of oil will be sub-
ject to royalties at the lease stipulated royalty rate.
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Any production subject to this clause shall be count-
ed toward the production volume determined pursu-
ant to clause (ii) or (iii). Estimated royalty pay-
ments will be made if such average of the closing
prices for the previous year exceeds $28.00. After
the end of the calendar year, when the new average
price can be calculated, lessees will pay any royalties
due, with interest but without penalty, or can apply
for a refund, with interest, of any overpayment.
‘‘(vi) During the production of volumes deter-
mined pursuant to clause (ii) or (iii) of this subpara-
graph, in any year during which the arithmetic aver-
age of the closing prices on the New York Mer-
cantile Exchange for natural gas exceeds $3.50 per
million British thermal units, any production of nat-
ural gas will be subject to royalties at the lease stip-
ulated royalty rate. Any production subject to this
clause shall be counted toward the production vol-
ume determined pursuant to clause (ii) or (iii). Esti-
mated royalty payments will be made if such average
of the closing prices for the previous year exceeds
$3.50. After the end of the calendar year, when the
new average price can be calculated, lessees will pay
any royalties due, with interest but without penalty,
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or can apply for a refund, with interest, of any over-
payment.
‘‘(vii) The prices referred to in clauses (v) and
(vi) of this subparagraph shall be changed during
any calendar year after 1994 by the percentage, if
any, by which the implicit price deflator for the
gross domestic product changed during the preced-
ing calendar year.’’.
SEC. 3. NEW LEASES.
(a) Section (8)(a)(1) of the Outer Continental Shelf
Lands Act, as amended, (43 U.S.C. 1337(a)(1)) is amend-
ed as follows:
(1) Redesignate section 8(a)(1)(H) as section
8(a)(1)(I);
(2) Add a new section 8(a)(1)(H) as follows:
‘‘(H) cash bonus bid with royalty at no less
than 121⁄2 per centum fixed by the Secretary in
amount or value of production saved, removed, or
sold, and with suspension of royalties for a period,
volume, or value of production determined by the
Secretary. Such suspensions may vary based on the
price of production from the lease.’’.
(b) For all tracts located in water depths of 200 me-
ters or greater in the Western and Central Planning Areas
of the Gulf of Mexico, including that portion of the East-