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‘‘(e) ‘direct use’ means use of geothermal re-
sources for commercial, residential, agricultural, pub-
lic facilities, or other energy needs other than the 
commercial production of electricity; and’’. 
(d) Section 3 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1002) is amended by striking ‘‘SEC. 3. Subject’’ and 
inserting the following: 
‘‘SEC. 3 . LANDS SUBJECT TO GEOTHERMAL LEASING. 
‘‘Subject’’. 
(e) Section 5 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1004) is amended by striking ‘‘SEC. 5. Geothermal’’ 
and inserting the following: 
‘‘SEC. 5. RENTS AND ROYALTIES. 
‘‘Geothermal’’. 
(f) Section 6 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1005) is amended by striking ‘‘SEC. 6. (a) The’’ and 
inserting the following: 
‘‘SEC. 6. DURATION OF LEASES. 
‘‘(a) The’’. 
(g) Section 7 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1006) is amended by striking ‘‘SEC. 7. A geo-
thermal’’ and inserting the following: 
‘‘SEC. 7. ACREAGE OF GEOTHERMAL LEASE. 
‘‘A geothermal’’.
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(h) Section 8 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1007) is amended by striking ‘‘SEC. 8. (a) The’’ and 
inserting the following: 
‘‘SEC. 8. READJUSTMENT OF LEASE TERMS AND CONDI-
TIONS. 
‘‘(a) The’’. 
(i) Section 9 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1008) is amended by striking ‘‘SEC. 9. If’’ and in-
serting the following: 
‘‘SEC. 9. BYPRODUCTS. 
‘‘If’’. 
(j) Section 10 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1009) is amended by striking ‘‘SEC. 10. The’’ 
and inserting the following: 
‘‘SEC. 10. RELINQUISHMENT OF GEOTHERMAL RIGHTS. 
‘‘The’’. 
(k) Section 11 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1010) is amended by striking ‘‘SEC. 11. The’’ 
and inserting the following: 
‘‘SEC. 11. SUSPENSION OF OPERATIONS AND PRODUCTION. 
‘‘The’’. 
(l) Section 12 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1011) is amended by striking ‘‘SEC. 12. Leases’’ 
and inserting the following:
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‘‘SEC. 12. TERMINATION OF LEASES. 
‘‘Leases’’. 
(m) Section 13 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1012) is amended by striking ‘‘SEC. 13. The’’ 
and inserting the following: 
‘‘SEC. 13. WAIVER, SUSPENSION, OR REDUCTION OF RENTAL 
OR ROYALTY. 
‘‘The’’. 
(n) Section 14 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1013) is amended by striking ‘‘SEC. 14. Subject’’ 
and inserting the following: 
‘‘SEC. 14. SURFACE LAND USE. 
‘‘Subject’’. 
(o) Section 15 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1014) is amended by striking ‘‘SEC. 15. (a) Geo-
thermal’’ and inserting the following: 
‘‘SEC. 15. LANDS SUBJECT TO GEOTHERMAL LEASING. 
‘‘(a) Geothermal’’. 
(p) Section 16 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1015) is amended by striking ‘‘SEC. 16. Leases’’ 
and inserting the following: 
‘‘SEC. 16. REQUIREMENT FOR LESSEES. 
‘‘Leases’’. 
(q) Section 17 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1016) is amended by striking ‘‘SEC. 17. Admin-
istration’’ and inserting the following:
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‘‘SEC. 17. ADMINISTRATION. 
‘‘Administration’’. 
(r) Section 19 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1018) is amended by striking ‘‘SEC. 19. Upon’’ 
and inserting the following: 
‘‘SEC. 19. DATA FROM FEDERAL AGENCIES. 
‘‘Upon’’. 
(s) Section 20 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1019) is amended by striking ‘‘SEC. 20. Subject’’ 
and inserting the following: 
‘‘SEC. 20. DISPOSITION OF AMOUNTS RECEIVED FROM 
SALES, BONUSES, ROYALTIES, AND RENTALS. 
‘‘Subject’’. 
(t) Section 21 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1020) is amended by striking ‘‘SEC. 21.’’ and 
all that follows through ‘‘(b) Geothermal’’ and inserting the 
following: 
‘‘SEC. 21. PUBLICATION IN FEDERAL REGISTER; RESERVA-
TION OF MINERAL RIGHTS. 
‘‘Geothermal’’. 
(u) Section 22 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1021) is amended by striking ‘‘SEC. 22. Noth-
ing’’ and inserting the following: 
‘‘SEC. 22. FEDERAL EXEMPTION FROM STATE WATER LAWS. 
‘‘Nothing’’.
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(v) Section 23 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1022) is amended by striking ‘‘SEC. 23. (a) All’’ 
and inserting the following: 
‘‘SEC. 23. PREVENTION OF WASTE; EXCLUSIVITY. 
‘‘(a) All’’. 
(w) Section 24 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1023) is amended by striking ‘‘SEC. 24. The’’ 
and inserting the following: 
‘‘SEC. 24. RULES AND REGULATIONS. 
‘‘The’’. 
(x) Section 25 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1024) is amended by striking ‘‘SEC. 25. As’’ and 
inserting the following: 
‘‘SEC. 25. INCLUSION OF GEOTHERMAL LEASING UNDER 
CERTAIN OTHER LAWS. 
‘‘As’’. 
(y) Section 26 of the Geothermal Steam Act of 1970 
is amended by striking ‘‘SEC. 26. The’’ and inserting the 
following: 
‘‘SEC. 26. AMENDMENT. 
‘‘The’’. 
(z) Section 27 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1025) is amended by striking ‘‘SEC. 27. The’’ 
and inserting the following:
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‘‘SEC. 27. FEDERAL RESERVATION OF CERTAIN MINERAL 
RIGHTS. 
‘‘The’’. 
(aa) Section 28 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1026) is amended by striking ‘‘SEC. 28. (a)(1) 
The’’ and inserting the following: 
‘‘SEC. 28. SIGNIFICANT THERMAL FEATURES. 
‘‘(a)(1) The’’. 
(bb) Section 29 of the Geothermal Steam Act of 1970 
(30 U.S.C. 1027) is amended by striking ‘‘SEC. 29. The’’ 
and inserting the following: 
‘‘SEC. 29. LAND SUBJECT TO PROHIBITION ON LEASING. 
‘‘The’’. 
Subtitle G—Hydroelectric 
SEC. 281. ALTERNATIVE CONDITIONS AND FISHWAYS. 
(a) FEDERAL RESERVATIONS.—Section 4(e) of the 
Federal Power Act (16 U.S.C. 797(e)) is amended by insert-
ing after ‘‘adequate protection and utilization of such res-
ervation.’’ at the end of the first proviso the following: ‘‘The 
license applicant and any party to the proceeding shall be 
entitled to a determination on the record, after opportunity 
for an agency trial-type hearing of no more than 90 days, 
on any disputed issues of material fact with respect to such 
conditions. All disputed issues of material fact raised by 
any party shall be determined in a single trial-type hearing 
to be conducted within a time frame established by the Com-
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mission for each license proceeding. Within 90 days of the 
date of enactment of this Act, the Secretaries of the Interior, 
Commerce, and Agriculture shall establish jointly, by rule, 
the procedures for such expedited trial-type hearing, includ-
ing the opportunity to undertake discovery and cross-exam-
ine witnesses, in consultation with the Federal Energy Reg-
ulatory Commission.’’. 
(b) FISHWAYS.—Section 18 of the Federal Power Act 
(16 U.S.C. 811) is amended by inserting after ‘‘and such 
fishways as may be prescribed by the Secretary of Com-
merce.’’ the following: ‘‘The license applicant and any party 
to the proceeding shall be entitled to a determination on 
the record, after opportunity for an agency trial-type hear-
ing of no more than 90 days, on any disputed issues of 
material fact with respect to such fishways. All disputed 
issues of material fact raised by any party shall be deter-
mined in a single trial-type hearing to be conducted within 
a time frame established by the Commission for each license 
proceeding. Within 90 days of the date of enactment of this 
Act, the Secretaries of the Interior, Commerce, and Agri-
culture shall establish jointly, by rule, the procedures for 
such expedited trial-type hearing, including the oppor-
tunity to undertake discovery and cross-examine witnesses, 
in consultation with the Federal Energy Regulatory Com-
mission.’’.
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(c) ALTERNATIVE CONDITIONS AND PRESCRIPTIONS.— 
Part I of the Federal Power Act (16 U.S.C. 791a et seq.) 
is amended by adding the following new section at the end 
thereof: 
‘‘SEC. 33. ALTERNATIVE CONDITIONS AND PRESCRIPTIONS. 
‘‘(a) ALTERNATIVE CONDITIONS.—(1) Whenever any 
person applies for a license for any project works within 
any reservation of the United States, and the Secretary of 
the department under whose supervision such reservation 
falls (referred to in this subsection as the ‘Secretary’) deems 
a condition to such license to be necessary under the first 
proviso of section 4(e), the license applicant or any other 
party to the license proceeding may propose an alternative 
condition. 
‘‘(2) Notwithstanding the first proviso of section 4(e), 
the Secretary shall accept the proposed alternative condi-
tion referred to in paragraph (1), and the Commission shall 
include in the license such alternative condition, if the Sec-
retary determines, based on substantial evidence provided 
by the license applicant, any other party to the proceeding, 
or otherwise available to the Secretary, that such alternative 
condition— 
‘‘(A) provides for the adequate protection and 
utilization of the reservation; and
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‘‘(B) the Secretary concurs with the license ap-
plicant’s judgment that the alternative condition will 
either— 
‘‘(i) cost significantly less to implement; or 
‘‘(ii) result in improved operation of the 
project works for electricity production, as com-
pared to the condition initially deemed necessary 
by the Secretary. 
‘‘(3) The Secretary concerned shall submit into the 
public record of the Commission proceeding with any condi-
tion under section 4(e) or alternative condition it accepts 
under this section, a written statement explaining the basis 
for such condition, and reason for not accepting any alter-
native condition under this section. The written statement 
must demonstrate that the Secretary gave equal consider-
ation to the effects of the condition adopted and alternatives 
not accepted on energy supply, distribution, cost, and use; 
flood control; navigation; water supply; and air quality (in 
addition to the preservation of other aspects of environ-
mental quality); based on such information as may be 
available to the Secretary, including information volun-
tarily provided in a timely manner by the applicant and 
others. The Secretary shall also submit, together with the 
aforementioned written statement, all studies, data, and
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other factual information available to the Secretary and rel-
evant to the Secretary’s decision. 
‘‘(4) If the Secretary does not accept an applicant’s 
alternative condition under this section, and the Commis-
sion finds that the Secretary’s condition would be incon-
sistent with the purposes of this part, or other applicable 
law, the Commission may refer the dispute to the Commis-
sion’s Dispute Resolution Service. The Dispute Resolution 
Service shall consult with the Secretary and the Commis-
sion and issue a non-binding advisory within 90 days. The 
Secretary may accept the Dispute Resolution Service advi-
sory unless the Secretary finds that the recommendation 
will not adequately protect the reservation. The Secretary 
shall submit the advisory and the Secretary’s final written 
determination into the record of the Commission’s pro-
ceeding. 
‘‘(b) ALTERNATIVE PRESCRIPTIONS.—(1) Whenever 
the Secretary of the Interior or the Secretary of Commerce 
prescribes a fishway under section 18, the license applicant 
or any other party to the license proceeding may propose 
an alternative to such prescription to construct, maintain, 
or operate a fishway. 
‘‘(2) Notwithstanding section 18, the Secretary of the 
Interior or the Secretary of Commerce, as appropriate, shall 
accept and prescribe, and the Commission shall require, the
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proposed alternative referred to in paragraph (1), if the 
Secretary of the appropriate department determines, based 
on substantial evidence provided by the license applicant, 
any other party to the proceeding, or otherwise available 
to the Secretary, that such alternative— 
‘‘(A) will be no less protective than the fishway 
initially prescribed by the Secretary; and 
‘‘(B) the Secretary concurs with the license ap-
plicant’s judgment that the alternative prescription 
will either— 
‘‘(i) cost significantly less to implement; or 
‘‘(ii) result in improved operation of the 
project works for electricity production, as com-
pared to the fishway initially deemed necessary 
by the Secretary. 
‘‘(3) The Secretary concerned shall submit into the 
public record of the Commission proceeding with any pre-
scription under section 18 or alternative prescription it ac-
cepts under this section, a written statement explaining the 
basis for such prescription, and reason for not accepting 
any alternative prescription under this section. The written 
statement must demonstrate that the Secretary gave equal 
consideration to the effects of the prescription adopted and 
alternatives not accepted on energy supply, distribution, 
cost, and use; flood control; navigation; water supply; and
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air quality (in addition to the preservation of other aspects 
of environmental quality); based on such information as 
may be available to the Secretary, including information 
voluntarily provided in a timely manner by the applicant 
and others. The Secretary shall also submit, together with 
the aforementioned written statement, all studies, data, and 
other factual information available to the Secretary and rel-
evant to the Secretary’s decision. 
‘‘(4) If the Secretary concerned does not accept an ap-
plicant’s alternative prescription under this section, and 
the Commission finds that the Secretary’s prescription 
would be inconsistent with the purposes of this part, or 
other applicable law, the Commission may refer the dispute 
to the Commission’s Dispute Resolution Service. The Dis-
pute Resolution Service shall consult with the Secretary and 
the Commission and issue a non-binding advisory within 
90 days. The Secretary may accept the Dispute Resolution 
Service advisory unless the Secretary finds that the rec-
ommendation will not adequately protect the fish resources. 
The Secretary shall submit the advisory and the Secretary’s 
final written determination into the record of the Commis-
sion’s proceeding.’’.
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SEC. 282. ALASKA STATE JURISDICTION OVER SMALL HY-
DROELECTRIC PROJECTS. 
Section 32 of the Federal Power Act (16 U.S.C. 823c) 
is amended— 
(1) in subsection (a)(3)(C), by inserting ‘‘except 
as provided in subsection (j),’’ before ‘‘conditions’’; 
and 
(2) by adding at the end the following: 
‘‘(j) FISH AND WILDLIFE.—If the State of Alaska de-
termines that a recommendation under subsection (a)(3)(C) 
is inconsistent with paragraphs (1) and (2) of subsection 
(a), the State of Alaska may decline to adopt all or part 
of the recommendations in accordance with the procedures 
established under section 10(j)(2).’’. 
SEC. 283. FLINT CREEK HYDROELECTRIC PROJECT. 
(a) EXTENSION OF TIME.—Notwithstanding the time 
period specified in section 5 of the Federal Power Act (16 
U.S.C. 798) that would otherwise apply to the Federal En-
ergy Regulatory Commission (referred to in this section as 
the ‘‘Commission’’) project numbered 12107, the Commis-
sion shall— 
(1) if the preliminary permit is in effect on the 
date of enactment of this Act, extend the preliminary 
permit for a period of 3 years beginning on the date 
on which the preliminary permit expires; or
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(2) if the preliminary permit expired before the 
date of enactment of this Act, on request of the per-
mittee, reinstate the preliminary permit for an addi-
tional 3-year period beginning on the date of enact-
ment of this Act. 
(b) LIMITATION ON CERTAIN FEES.—Notwithstanding 
section 10(e)(1) of the Federal Power Act (16 U.S.C. 
803(e)(1)) or any other provision of Federal law providing 
for the payment to the United States of charges for the use 
of Federal land for the purposes of operating and maintain-
ing a hydroelectric development licensed by the Commis-
sion, any political subdivision of the State of Montana that 
holds a Commission license for the Commission project 
numbered 12107 in Granite and Deer Lodge Counties, Mon-
tana, shall be required to pay to the United States for the 
use of that land for each year during which the political 
subdivision continues to hold the license for the project, the 
lesser of— 
(1) $25,000; or 
(2) such annual charge as the Commission or 
any other department or agency of the Federal Gov-
ernment may assess.
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Subtitle H—Renewable Portfolio 
Standard 
SEC. 291. RENEWABLE PORTFOLIO STANDARD. 
Title VI of the Public Utility Regulatory Policies Act 
of 1978 (16 U.S.C. 2601 et seq.) is amended by adding at 
the end the following: 
‘‘SEC. 609. FEDERAL RENEWABLE PORTFOLIO STANDARD. 
‘‘(a) RENEWABLE ENERGY REQUIREMENT.— 
‘‘(1) IN
GENERAL.—Each electric utility that 
sells electricity to electric consumers shall obtain a 
percentage of the base amount of electricity it sells to 
electric consumers in any calendar year from new re-
newable energy or existing renewable energy. The per-
centage obtained in a calendar year shall not be less 
than the amount specified in the following table: 
‘‘Calendar year: 
Minimum annual 
percentage: 
2008 through 2011 .........................................................................
2.5
2012 through 2015 .........................................................................
5.0
2016 through 2019 .........................................................................
7.5
2020 through 2030 .........................................................................
10.0. 
‘‘(2) MEANS OF COMPLIANCE.—An electric util-
ity shall meet the requirements of paragraph (1) by— 
‘‘(A) generating electric energy using new 
renewable energy or existing renewable energy; 
‘‘(B) purchasing electric energy generated 
by new renewable energy or existing renewable 
energy;
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‘‘(C) purchasing renewable energy credits 
issued under subsection (b); or 
‘‘(D) a combination of the foregoing. 
‘‘(b) RENEWABLE ENERGY CREDIT TRADING PRO-
GRAM.— 
‘‘(1) Not later than January 1, 2007, the Sec-
retary shall establish a renewable energy credit trad-
ing program to permit an electric utility that does 
not generate or purchase enough electric energy from 
renewable energy to meet its obligations under sub-
section (a)(1) to satisfy such requirements by pur-
chasing sufficient renewable energy credits. 
‘‘(2) As part of such program the Secretary 
shall— 
‘‘(A) issue renewable energy credits to gen-
erators of electric energy from new renewable en-
ergy; 
‘‘(B) sell renewable energy credits to electric 
utilities at the rate of 1.5 cents per kilowatt-hour 
(as adjusted for inflation under subsection (g)); 
‘‘(C) ensure that a kilowatt hour, including 
the associated renewable energy credit, shall be 
used only once for purposes of compliance with 
this section; and
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‘‘(D) allow double credits for generation 
from facilities on Indian Lands, and triple cred-
its for generation from small renewable distrib-
uted generators (meaning those those no larger 
than 1 megawatt). 
‘‘(3) Credits under paragraph (2)(A) may only 
be used for compliance with this section for 3 years 
from the date issued. 
‘‘(c) ENFORCEMENT.— 
‘‘(1) CIVIL PENALTIES.—Any electric utility that 
fails to meet the renewable energy requirements of 
subsection (a) shall be subject to a civil penalty. 
‘‘(2) AMOUNT OF PENALTY.—The amount of the 
civil penalty shall be determined by multiplying the 
number of kilowatt-hours of electric energy sold to 
electric consumers in violation of subsection (a) by the 
greater of 1.5 cents (adjusted for inflation under sub-
section (g)) or 200 percent of the average market 
value of renewable energy credits during the year in 
which the violation occurred. 
‘‘(3) MITIGATION
OR
WAIVER.—The Secretary 
may mitigate or waive a civil penalty under this sub-
section if the electric utility was unable to comply 
with subsection (a) for reasons outside of the reason-
able control of the utility. The Secretary shall reduce
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the amount of any penalty determined under para-
graph (2) by an amount paid by the electric utility 
to a State for failure to comply with the requirement 
of a State renewable energy program if the State re-
quirement is greater than the applicable requirement 
of subsection (a). 
‘‘(4) PROCEDURE
FOR
ASSESSING
PENALTY.— 
The Secretary shall assess a civil penalty under this 
subsection in accordance with the procedures pre-
scribed by section 333(d) of the Energy Policy and 
Conservation Act of 1954 (42 U.S.C. 6303). 
‘‘(d) STATE RENEWABLE ENERGY ACCOUNT PRO-
GRAM.— 
‘‘(1) The Secretary shall establish, not later than 
December 31, 2008, a State renewable energy account 
program. 
‘‘(2) All money collected by the Secretary from 
the sale of renewable energy credits and the assess-
ment of civil penalties under this section shall be de-
posited into the renewable energy account established 
pursuant to this subsection. The State renewable en-
ergy account shall be held by the Secretary and shall 
not be transferred to the Treasury Department. 
‘‘(3) Proceeds deposited in the State renewable 
energy account shall be used by the Secretary, subject
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to appropriations, for a program to provide grants to 
the State agency responsible for developing State en-
ergy conservation plans under section 362 of the En-
ergy Policy and Conservation Act (42 U.S.C. 6322) 
for the purposes of promoting renewable energy pro-
duction, including programs that promote tech-
nologies that reduce the use of electricity at customer 
sites such as solar water heating. 
‘‘(4) The Secretary may issue guidelines and cri-
teria for grants awarded under this subsection. State 
energy offices receiving grants under this section shall 
maintain such records and evidence of compliance as 
the Secretary may require. 
‘‘(5) In allocating funds under this program, the 
Secretary shall give preference— 
‘‘(A) to States in regions which have a dis-
proportionately small share of economically sus-
tainable renewable energy generation capacity; 
and 
‘‘(B) to State programs to stimulate or en-
hance innovative renewable energy technologies. 
‘‘(e) RULES.—The Secretary shall issue rules imple-
menting this section not later than 1 year after the date 
of enactment of this section.
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‘‘(f) EXEMPTIONS.—This section shall not apply in 
any calendar year to an electric utility— 
‘‘(1) that sold less than 4,000,000 megawatt- 
hours of electric energy to electric consumers during 
the preceding calendar year; or 
‘‘(2) in Hawaii. 
‘‘(g) INFLATION ADJUSTMENT.—Not later than Decem-
ber 31 of each year beginning in 2008, the Secretary shall 
adjust for inflation the price of a renewable energy credit 
under subsection (b)(2)(B) and the amount of the civil pen-
alty per kilowatt-hour under subsection (c)(2). 
‘‘(h) STATE PROGRAMS.—Nothing in this section shall 
diminish any authority of a State or political subdivision 
thereof to adopt or enforce any law or regulation respecting 
renewable energy, but, except as provided in subsection 
(c)(3), no such law or regulation shall relieve any person 
of any requirement otherwise applicable under this section. 
The Secretary, in consultation with States having such re-
newable energy programs, shall, to the maximum extent 
practicable, facilitate coordination between the Federal pro-
gram and State programs. 
‘‘(i) DEFINITIONS.—For purposes of this section: 
‘‘(1) BASE AMOUNT OF ELECTRICITY.—The term 
‘base amount of electricity’ means the total amount of
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electricity sold by an electric utility to electric con-
sumers in a calendar year, excluding— 
‘‘(A) electricity generated by a hydroelectric 
facility (including a pumped storage facility but 
excluding incremental hydropower); and 
‘‘(B) electricity generated through the incin-
eration of municipal solid waste. 
‘‘(2) DISTRIBUTED GENERATION FACILITY.—The 
term ‘distributed generation facility’ means a facility 
at a customer site. 
‘‘(3) EXISTING RENEWABLE ENERGY.—The term 
‘existing renewable energy’ means, except as provided 
in paragraph (7)(B), electric energy generated at a 
facility (including a distributed generation facility) 
placed in service prior to the date of enactment of this 
section from solar, wind, or geothermal energy; ocean 
energy; biomass (as defined in section 203(a) of the 
Energy Policy Act of 2005); or landfill gas. 
‘‘(4) GEOTHERMAL
ENERGY.—The term ‘geo-
thermal energy’ means energy derived from a geo-
thermal deposit (within the meaning of section 
613(e)(2) of the Internal Revenue Code of 1986). 
‘‘(5) 
INCREMENTAL
GEOTHERMAL
PRODUC-
TION.—
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‘‘(A) IN GENERAL.—The term ‘incremental 
geothermal production’ means for any year the 
excess of— 
‘‘(i) the total kilowatt hours of elec-
tricity produced from a facility (including 
a distributed generation facility) using geo-
thermal energy, over 
‘‘(ii) the average annual kilowatt hours 
produced at such facility for 5 of the pre-
vious 7 calendar years before the date of en-
actment of this section after eliminating the 
highest and the lowest kilowatt hour produc-
tion years in such 7-year period. 
‘‘(B) SPECIAL RULE.—A facility described 
in subparagraph (A) which was placed in service 
at least 7 years before the date of enactment of 
this section shall commencing with the year in 
which such date of enactment occurs, reduce the 
amount calculated under subparagraph (A)(ii) 
each year, on a cumulative basis, by the average 
percentage decrease in the annual kilowatt hour 
production for the 7-year period described in 
subparagraph (A)(ii) with such cumulative sum 
not to exceed 30 percent.
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‘‘(6) INCREMENTAL
HYDROPOWER.—The term 
‘incremental hydropower’ means additional energy 
generated as a result of efficiency improvements or 
capacity additions made on or after the date of enact-
ment of this section or the effective date of an existing 
applicable State renewable portfolio standard pro-
gram at a hydroelectric facility that was placed in 
service before that date. The term does not include ad-
ditional energy generated as a result of operational 
changes not directly associated with efficiency im-
provements or capacity additions. Efficiency im-
provements and capacity additions shall be measured 
on the basis of the same water flow information used 
to determine a historic average annual generation 
baseline for the hydroelectric facility and certified by 
the Secretary or the Federal Energy Regulatory Com-
mission. 
‘‘(7) NEW RENEWABLE ENERGY.—The term ‘new 
renewable energy’ means— 
‘‘(A) electric energy generated at a facility 
(including a distributed generation facility) 
placed in service on or after January 1, 2003, 
from— 
‘‘(i) solar, wind, or geothermal energy 
or ocean energy;
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‘‘(ii) biomass (as defined in section 
203(a) of the Energy Policy Act of 2005); 
‘‘(iii) landfill gas; or 
‘‘(iv) incremental hydropower; and 
‘‘(B) for electric energy generated at a facil-
ity (including a distributed generation facility) 
placed in service prior to the date of enactment 
of this section— 
‘‘(i) the additional energy above the 
average generation in the 3 years preceding 
the date of enactment of this section at the 
facility from— 
‘‘(I) solar or wind energy or ocean 
energy; 
‘‘(II) biomass (as defined in sec-
tion 203(a) of the Energy Policy Act of 
2005); 
‘‘(III) landfill gas; or 
‘‘(IV) incremental hydropower. 
‘‘(ii) the incremental geothermal pro-
duction. 
‘‘(8) OCEAN ENERGY.—The term ‘ocean energy’ 
includes current, wave, tidal, and thermal energy. 
‘‘(j) SUNSET.—This section expires on December 31, 
2030.’’.
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TITLE III—OIL AND GAS 
Subtitle A—Petroleum Reserve and 
Home Heating Oil 
SEC. 301. PERMANENT AUTHORITY TO OPERATE THE STRA-
TEGIC PETROLEUM RESERVE AND OTHER EN-
ERGY PROGRAMS. 
(a) AMENDMENT TO TITLE I OF THE ENERGY POLICY 
AND CONSERVATION ACT.—Title I of the Energy Policy and 
Conservation Act (42 U.S.C. 6212 et seq.) is amended— 
(1) by striking section 166 (42 U.S.C. 6246) and 
inserting the following: 
‘‘AUTHORIZATION OF APPROPRIATIONS 
‘‘SEC. 166. There are authorized to be appropriated 
to the Secretary such sums as are necessary to carry out 
this part and part D, to remain available until expended.’’; 
(2) by striking section 186 (42 U.S.C. 6250e); 
and 
(3) by striking part E (42 U.S.C. 6251). 
(b) AMENDMENT TO TITLE II OF THE ENERGY POLICY 
AND CONSERVATION ACT.—Title II of the Energy Policy 
and Conservation Act (42 U.S.C. 6271 et seq.) is amend-
ed— 
(1) by inserting before section 273 (42 U.S.C. 
6283) the following:
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‘‘PART C—SUMMER FILL AND FUEL BUDGETING 
PROGRAMS’’; 
(2) by striking section 273(e) (42 U.S.C. 
6283(e)); and 
(3) by striking part D (42 U.S.C. 6285). 
(c) TECHNICAL AMENDMENTS.—The table of contents 
for the Energy Policy and Conservation Act is amended— 
(1) by inserting after the items relating to part 
C of title I the following: 
‘‘PART D—NORTHEAST HOME HEATING OIL RESERVE 
‘‘Sec. 181. Establishment. 
‘‘Sec. 182. Authority. 
‘‘Sec. 183. Conditions for release; plan. 
‘‘Sec. 184. Northeast Home Heating Oil Reserve Account. 
‘‘Sec. 185. Exemptions.’’; 
(2) by amending the items relating to part C of 
title II to read as follows: 
‘‘PART C—SUMMER FILL AND FUEL BUDGETING PROGRAMS 
‘‘Sec. 273. Summer fill and fuel budgeting programs.’’; 
and 
(3) by striking the items relating to part D of 
title II. 
(d) AMENDMENT TO THE ENERGY POLICY AND CON-
SERVATION ACT.—Section 183(b)(1) of the Energy Policy 
and Conservation Act (42 U.S.C. 6250b(b)(1)) is amended 
by striking ‘‘by more’’ and all that follows through ‘‘mid- 
October through March’’ and inserting ‘‘by more than 60 
percent over its 5-year rolling average for the months of
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mid-October through March (considered as a heating season 
average)’’. 
(e) FILL STRATEGIC PETROLEUM RESERVE TO CAPAC-
ITY.—(1) IN GENERAL.—The Secretary shall, as expedi-
tiously as practicable, without incurring excessive cost or 
appreciably affecting the price of gasoline or heating oil to 
consumers, acquire petroleum in quantities sufficient to fill 
the Strategic Petroleum Reserve to the 1,000,000,000-barrel 
capacity authorized under section 154(a) of the Energy Pol-
icy and Conservation Act (42 U.S.C. 6234(a)), in accord-
ance with the sections 159 and 160 of that Act (42 U.S.C. 
6239, 6240). 
(2) PROCEDURES.— 
(A) IN GENERAL.—The Secretary shall de-
velop, with an opportunity for public comment, 
procedures to obtain oil for the Reserve with the 
intent of maximizing the overall domestic supply 
of crude oil (including quantities stored in pri-
vate sector inventories) and minimizing the costs 
to the Department of the Interior and the De-
partment of Energy of acquiring such oil (in-
cluding foregone revenues to the Treasury when 
oil for the Reserve is obtained through the roy-
alty-in-kind program), consistent with national 
security.
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(B) 
CONSIDERATIONS.—The 
procedures 
shall provide that, for purposes of determining 
whether to acquire oil for the Reserve or defer de-
liveries of oil, the Secretary shall take into ac-
count— 
(i) current and future prices, supplies, 
and inventories of oil; 
(ii) national security; and 
(iii) other factors that the Secretary 
determines to be appropriate. 
(C) REVIEW OF REQUESTS FOR DEFERRALS 
OF
SCHEDULED
DELIVERIES.—The procedures 
shall include procedures and criteria for the re-
view of requests for the deferrals of scheduled de-
liveries. 
(D) DEADLINES.—The Secretary shall— 
(i) propose the procedures required 
under this paragraph not later than 120 
days after the date of enactment of this Act; 
(ii) promulgate the procedures not 
later than 180 days after the date of enact-
ment of this Act; and 
(iii) comply with the procedures in ac-
quiring oil for Reserve effective beginning
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on the date that is 180 days after the date 
of enactment of this Act. 
SEC. 302. NATIONAL OILHEAT RESEARCH ALLIANCE. 
Section 713 of the Energy Act of 2000 (Public Law 
106–469; 42 U.S.C. 6201 note) is amended by striking ‘‘4’’ 
and inserting ‘‘9’’. 
SEC. 303. SMALL BUSINESS AND AGRICULTURAL PRODUCER 
ENERGY EMERGENCY DISASTER LOAN PRO-
GRAM. 
(a) SMALL BUSINESS PRODUCER ENERGY EMER-
GENCY DISASTER LOAN PROGRAM.— 
(1) DISASTER LOAN AUTHORITY.—Section 7(b) 
of the Small Business Act (15 U.S.C. 636(b)) is 
amended by inserting after paragraph (3) the fol-
lowing: 
‘‘(4)(A) In this paragraph— 
‘‘(i) the term ‘base price index’ means the 
moving average of the closing unit price on the 
New York Mercantile Exchange for heating oil, 
natural gas, gasoline, or propane for the 10 
days, in each of the most recent 2 preceding 
years, which correspond to the trading days de-
scribed in clause (ii); 
‘‘(ii) the term ‘current price index’ means 
the moving average of the closing unit price on
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the New York Mercantile Exchange, for the 10 
most recent trading days, for contracts to pur-
chase heating oil, natural gas, gasoline, or pro-
pane during the subsequent calendar month, 
commonly known as the ‘front month’; and 
‘‘(iii) 
the 
term 
‘significant 
increase’ 
means— 
‘‘(I) with respect to the price of heating 
oil, natural gas, gasoline, or propane, any 
time the current price index exceeds the base 
price index by not less than 40 percent; and 
‘‘(II) with respect to the price of ker-
osene, any increase which the Adminis-
trator, in consultation with the Secretary of 
Energy, determines to be significant. 
‘‘(B) The Administration may make such loans, 
either directly or in cooperation with banks or other 
lending institutions through agreements to participate 
on an immediate or deferred basis, to assist a small 
business concern that has suffered or that is likely to 
suffer substantial economic injury on or after Janu-
ary 1, 2005, as the result of a significant increase in 
the price of heating oil, natural gas, gasoline, pro-
pane, or kerosene occurring on or after January 1, 
2005.
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‘‘(C) Any loan or guarantee extended pursuant 
to this paragraph shall be made at the same interest 
rate as economic injury loans under paragraph (2). 
‘‘(D) No loan may be made under this para-
graph, either directly or in cooperation with banks or 
other lending institutions through agreements to par-
ticipate on an immediate or deferred basis, if the 
total amount outstanding and committed to the bor-
rower under this subsection would exceed $1,500,000, 
unless such borrower constitutes a major source of em-
ployment in its surrounding area, as determined by 
the Administration, in which case the Administra-
tion, in its discretion, may waive the $1,500,000 lim-
itation. 
‘‘(E) For purposes of assistance under this para-
graph— 
‘‘(i) a declaration of a disaster area based 
on conditions specified in this paragraph shall 
be required, and shall be made by the President 
or the Administrator; or 
‘‘(ii) if no declaration has been made pursu-
ant to clause (i), the Governor of a State in 
which a significant increase in the price of heat-
ing oil, natural gas, gasoline, propane, or ker-
osene has occurred may certify to the Adminis-
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tration that small business concerns have suf-
fered economic injury as a result of such increase 
and are in need of financial assistance which is 
not otherwise available on reasonable terms in 
that State, and upon receipt of such certifi-
cation, the Administration may make such loans 
as would have been available under this para-
graph if a disaster declaration had been issued. 
‘‘(F) Notwithstanding any other provision of 
law, loans made under this paragraph may be used 
by a small business concern described in subpara-
graph (B) to convert from the use of heating oil, nat-
ural gas, gasoline, propane, or kerosene to a renew-
able or alternative energy source, including agri-
culture and urban waste, geothermal energy, cogen-
eration, solar energy, wind energy, or fuel cells.’’. 
(2) CONFORMING AMENDMENTS.—Section 3(k) of 
the Small Business Act (15 U.S.C. 632(k)) is amend-
ed— 
(A) by inserting ‘‘, significant increase in 
the price of heating oil, natural gas, gasoline, 
propane, or kerosene’’ after ‘‘civil disorders’’; and 
(B) by inserting ‘‘other’’ before ‘‘economic’’. 
(b) AGRICULTURAL PRODUCER EMERGENCY LOANS.—
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(1) IN GENERAL.—Section 321(a) of the Consoli-
dated Farm and Rural Development Act (7 U.S.C. 
1961(a)) is amended— 
(A) in the first sentence— 
(i) by striking ‘‘operations have’’ and 
inserting ‘‘operations (i) have’’; and 
(ii) by inserting before ‘‘: Provided,’’ 
the following: ‘‘, or (ii)(I) are owned or op-
erated by such an applicant that is also a 
small business concern (as defined in sec-
tion 3 of the Small Business Act (15 U.S.C. 
632)), and (II) have suffered or are likely to 
suffer substantial economic injury on or 
after January 1, 2005, as the result of a 
significant increase in energy costs or input 
costs from energy sources occurring on or 
after January 1, 2005, in connection with 
an energy emergency declared by the Presi-
dent or the Secretary’’; 
(B) in the third sentence, by inserting before 
the period at the end the following: ‘‘or by an en-
ergy emergency declared by the President or the 
Secretary’’; and 
(C) in the fourth sentence—
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(i) by inserting ‘‘or energy emergency’’ 
after ‘‘natural disaster’’ each place that 
term appears; and 
(ii) by inserting ‘‘or declaration’’ after 
‘‘emergency designation’’. 
(2) FUNDING.—Funds available on the date of 
enactment of this Act for emergency loans under sub-
title C of the Consolidated Farm and Rural Develop-
ment Act (7 U.S.C. 1961 et seq.) shall be available to 
carry out the amendments made by subparagraph (A) 
to meet the needs resulting from natural disasters. 
(c) GUIDELINES AND RULEMAKING.— 
(1) GUIDELINES.—Not later than 30 days after 
the date of enactment of this Act, the Administrator 
of the Small Business Administration and the Sec-
retary of Agriculture shall each issue guidelines to 
carry out this section and the amendments made by 
this section, which guidelines shall become effective on 
the date of their issuance. 
(2) RULEMAKING.—Not later than 30 days after 
the date of enactment of this Act, the Administrator 
of the Small Business Administration, after consulta-
tion with the Secretary of Energy, shall promulgate 
regulations specifying the method for determining a 
significant increase in the price of kerosene under sec-
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tion 7(b)(4)(A)(iii)(II) of the Small Business Act (15 
U.S.C. 636(b)(4)(A)(iii)(II)), as added by this section. 
(d) REPORTS.— 
(1) SMALL
BUSINESS
ADMINISTRATION.—Not 
later than 12 months after the date on which the Ad-
ministrator of the Small Business Administration 
issues guidelines under subsection (c)(1), and annu-
ally thereafter, the Administrator shall submit to the 
Committee on Small Business and Entrepreneurship 
of the Senate and the Committee on Small Business 
of the House of Representatives, a report on the effec-
tiveness of the assistance made available under section 
7(b)(4) of the Small Business Act, as added by this 
section, including— 
(A) the number of small business concerns 
that applied for a loan under such section 
7(b)(4) and the number of those that received 
such loans; 
(B) the dollar value of those loans; 
(C) the States in which the small business 
concerns that received such loans are located; 
(D) the type of energy that caused the sig-
nificant increase in the cost for the participating 
small business concerns; and
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(E) recommendations for ways to improve 
the assistance provided under such section 
7(b)(4), if any. 
(2) DEPARTMENT OF AGRICULTURE.—Not later 
than 12 months after the date on which the Secretary 
of Agriculture issues guidelines under subsection 
(c)(1), and annually thereafter, the Secretary shall 
submit to the Committee on Small Business and En-
trepreneurship and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate and to the 
Committee on Small Business and the Committee on 
Agriculture of the House of Representatives, a report 
that— 
(A) describes the effectiveness of the assist-
ance made available under section 321(a) of the 
Consolidated Farm and Rural Development Act 
(7 U.S.C. 1961(a)), as amended by this section; 
and 
(B) contains recommendations for ways to 
improve the assistance provided under such sec-
tion 321(a). 
(e) EFFECTIVE DATE.— 
(1) SMALL BUSINESS.—The amendments made 
by subsection (a) shall apply during the 4-year period 
beginning on the earlier of the date on which guide-
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lines are published by the Administrator of the Small 
Business Administration under subsection (c)(1) or 
30 days after the date of enactment of this Act, with 
respect to assistance under section 7(b)(4) of the 
Small Business Act, as added by this section. 
(2) AGRICULTURE.—The amendments made by 
subsection (b) shall apply during the 4-year period 
beginning on the earlier of the date on which guide-
lines are published by the Secretary of Agriculture 
under subsection (c)(1) or 30 days after the date of 
enactment of this Act, with respect to assistance 
under section 321(a) of the Consolidated Farm and 
Rural Development Act (7 U.S.C. 1961(a)), as 
amended by this section. 
Subtitle B—Production Incentives 
SEC. 311. DEFINITION OF SECRETARY. 
In this subtitle, the term ‘‘Secretary’’ means the Sec-
retary of the Interior. 
SEC. 312. PROGRAM ON OIL AND GAS ROYALTIES IN-KIND. 
(a) APPLICABILITY
OF SECTION.—Notwithstanding 
any other provision of law, this section applies to all roy-
alty 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—
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(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 
(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 oil or gas. 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 roy-
alty obligation of the lessee for the amount delivered, 
except that transportation and processing reimburse-
ments paid to, or deductions claimed by, the lessee 
shall be subject to review and audit. 
(2) MARKETABLE CONDITION.— 
(A) DEFINITION
OF
MARKETABLE
CONDI-
TION.—In this paragraph, the term ‘‘in market-
able condition’’ means sufficiently free from im-
purities and otherwise in a condition that the 
royalty production will be accepted by a pur-
chaser under a sales contract typical of the field
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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 Sec-
retary 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 roy-
alty production taken in-kind. 
(4) RETENTION BY THE SECRETARY.—The Sec-
retary 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 re-
ceipts, without regard to fiscal year limitation, or 
may use oil or gas received as royalty taken in-kind 
(referred to in this paragraph as ‘‘royalty produc-
tion’’) to pay the cost of— 
(A) transporting the royalty production;
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(B) processing the royalty production; 
(C) disposing of the royalty production; or 
(D) any combination of transporting, proc-
essing, 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 ad-
ministrative costs of the Federal Government. 
(B) 
EXCEPTION.—Notwithstanding 
sub-
paragraph (A), the Secretary may use a portion 
of the revenues from royalty in-kind sales, with-
out fiscal year limitation, to pay salaries and 
other administrative costs directly related to the 
royalty in-kind program. 
(c) REIMBURSEMENT OF COST.—If a 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— 
(1) reimburse the lessee for the reasonable costs 
of transportation (not including gathering) from the 
lease to the point of delivery or for processing costs; 
or
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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 de-
scribes— 
(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-
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tion, the term ‘‘marginal property’’ means an onshore unit, 
communitization agreement, or lease not within a unit or 
communitization agreement, that produces on average the 
combined equivalent of less than 15 barrels of oil per well 
per day or 90,000,000 British thermal units of gas per well 
per day calculated based on the average over the 3 most 
recent production months, including only wells that produce 
on more than half of the days during those 3 production 
months. 
(b) CONDITIONS
FOR
REDUCTION
OF
ROYALTY 
RATE.—Until such time as the Secretary issues regulations 
under subsection (e) that prescribe different standards or 
requirements, the Secretary shall reduce the royalty rate 
on— 
(1) oil production from marginal properties as 
prescribed in subsection (c) if the spot price of West 
Texas Intermediate crude oil at Cushing, Oklahoma, 
is, on average, less than $15 per barrel (adjusted in 
accordance with the Consumer Price Index for all- 
urban consumers, United States city average, as pub-
lished by the Bureau of Labor Statistics) for 90 con-
secutive trading days; and 
(2) gas production from marginal properties as 
prescribed in subsection (c) if the spot price of nat-
ural gas delivered at Henry Hub, Louisiana, is, on
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average, less than $2.00 per million British thermal 
units (adjusted in accordance with the Consumer 
Price Index for all-urban consumers, United States 
city average, as published by the Bureau of Labor 
Statistics) for 90 consecutive trading days. 
(c) REDUCED ROYALTY RATE.— 
(1) IN GENERAL.—When a marginal property 
meets the conditions specified in subsection (b), the 
royalty rate shall be the lesser of— 
(A) 5 percent; or 
(B) the applicable rate under any other 
statutory or regulatory royalty relief provision 
that applies to the affected production. 
(2) PERIOD
OF
EFFECTIVENESS.—The reduced 
royalty rate under this subsection shall be effective be-
ginning on the first day of the production month fol-
lowing the date on which the applicable condition 
specified in subsection (b) is met. 
(d) TERMINATION OF REDUCED ROYALTY RATE.—A 
royalty rate prescribed in subsection (c)(1)(A) shall termi-
nate— 
(1) with respect to oil production from a mar-
ginal property, on the first day of the production 
month following the date on which—
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(A) the spot price of West Texas Inter-
mediate crude oil at Cushing, Oklahoma, on av-
erage, exceeds $15 per barrel (adjusted in accord-
ance with the Consumer Price Index for all- 
urban consumers, United States city average, as 
published by the Bureau of Labor Statistics) for 
90 consecutive trading days; or 
(B) the property no longer qualifies as a 
marginal property; and 
(2) with respect to gas production from a mar-
ginal property, on the first day of the production 
month following the date on which— 
(A) the spot price of natural gas delivered 
at Henry Hub, Louisiana, on average, exceeds 
$2.00 per million British thermal units (ad-
justed in accordance with the Consumer Price 
Index for all-urban consumers, United States 
city average, as published by the Bureau of 
Labor Statistics) for 90 consecutive trading 
days; or 
(B) the property no longer qualifies as a 
marginal property. 
(e) REGULATIONS
PRESCRIBING
DIFFERENT
RE-
LIEF.—
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(1) DISCRETIONARY
REGULATIONS.—The Sec-
retary may by regulation prescribe different param-
eters, standards, and requirements for, and a different 
degree or extent of, royalty relief for marginal prop-
erties in lieu of those prescribed in subsections (a) 
through (d). 
(2) ROYALTY RELIEF FOR OFFSHORE WELLS.— 
With respect to royalty relief for oil or gas produced 
from wells located on the outer Continental Shelf, the 
Secretary shall use authority available to the Sec-
retary as of the day before the date of enactment of 
this Act— 
(A) to accept and consider petitions from 
persons seeking, and providing justification for, 
royalty relief for 1 or more of those wells; and 
(B) not later than 90 days after the date of 
receipt of a petition, on a case-by-case basis— 
(i) approve the petition and provide 
royalty relief or a royalty reduction for oil 
or gas produced from the wells covered by 
the petition; or 
(ii) disapprove the petition. 
(3) CONSIDERATIONS.—In issuing regulations 
under this subsection, the Secretary may consider— 
(A) oil and gas prices and market trends;
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(B) production costs; 
(C) abandonment costs; 
(D) Federal and State tax provisions and 
the effects of those provisions on production eco-
nomics; 
(E) other royalty relief programs; 
(F) regional differences in average wellhead 
prices; 
(G) national energy security issues; and 
(H) other relevant matters, as determined 
by the Secretary. 
(f) SAVINGS PROVISION.—Nothing in this section pre-
vents a lessee from receiving royalty relief or a royalty re-
duction pursuant to any other law (including a regulation) 
that provides more relief than the amounts provided by this 
section. 
SEC. 314. INCENTIVES FOR NATURAL GAS PRODUCTION 
FROM DEEP WELLS IN THE SHALLOW WATERS 
OF THE GULF OF MEXICO. 
(a) DEFINITIONS.—In this section: 
(1) LEASE ISSUED IN SHALLOW WATERS.—The 
term ‘‘lease issued in shallow waters’’ means— 
(A) a lease entirely in water less than 200 
meters deep; or 
(B) a lease—