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performed. Such notice may be issued under this
section only by an Assistant Secretary of the Inte-
rior 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 Regulations)
and may not be delegated.’’.
(d) STATE SUITS.—Section 204 of the Federal Oil
and Gas Royalty Management Act of 1982 (30 U.S.C.
1751) is amended by adding at the end the following:
‘‘(d) With respect to an obligation, a State bringing
an action under this section shall enjoy no greater rights
than the Secretary enjoys under this Act.’’.
(e) 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 114 the following
new item:
‘‘Sec. 115. Limitation periods and agency actions.’’.
SEC. 9514. 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 adding after section 111 the following new
section:
‘‘SEC. 111A. ADJUSTMENTS AND REFUNDS.
‘‘(a) ADJUSTMENTS.—
‘‘(1) If, during the adjustment period, a lessee
determines that an adjustment or refund request is
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necessary to correct an underpayment or overpay-
ment of an obligation, the lessee shall make such ad-
justment or request a refund within a reasonable pe-
riod of time and only during the adjustment period.
The filing of a royalty report which reflects the
underpayment or overpayment of an obligation shall
constitute prior written notice to the Secretary of an
adjustment.
‘‘(2)(A) For any adjustment, the lessee shall
calculate and report the interest due attributable to
such adjustment at the same time the lessee adjusts
the principal amount of the subject obligation, ex-
cept as provided by subparagraph (B).
‘‘(B) In the case of a lessee on whom the Sec-
retary determines that subparagraph (A) would im-
pose a hardship, the Secretary shall calculate the in-
terest due and notify the lessee within a reasonable
time of the amount of interest due, unless such les-
see elects to calculate and report interest in accord-
ance 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 during an audit of the period which
includes the production month for which the adjust-
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ment is being made. If an overpayment is identified
during an audit, then the Secretary 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 five-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.
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‘‘(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
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to later audit by the Secretary and subject to the
provisions of this Act.
‘‘(4) PROHIBITION AGAINST REDUCTION OF RE-
FUNDS
OR
CREDITS.—In no event shall the Sec-
retary directly or indirectly claim any amount or
amounts against, or reduce any refund or credit (or
interest accrued thereon) by the amount of any obli-
gation the enforcement of which is barred by section
115.’’.
(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 111 the following
new item:
‘‘Sec. 111A. Adjustments and refunds.’’.
SEC. 9515. REQUIRED RECORDKEEPING.
Section 103 of the Federal Oil and Gas Royalty Man-
agement Act of 1982 (30 U.S.C. 1713(b)) is amended by
adding at the end the following:
‘‘(c) Records required by the Secretary for the pur-
pose of determining compliance with any applicable min-
eral 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 de-
mand may be commenced under section 115(a). If a judi-
cial proceeding or demand is timely commenced, the
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record holder shall maintain such records until the final
nonappealable decision in such judicial proceeding is
made, or with respect to that demand is rendered, unless
the Secretary authorizes in writing an earlier release of
the requirement to maintain such records. Notwithstand-
ing anything herein to the contrary, under no cir-
cumstance 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 section 115.’’.
SEC. 9516. ROYALTY INTEREST, PENALTIES, AND PAY-
MENTS.
(a) PERIOD.—Section 111(f) of the Federal Oil and
Gas Royalty Management Act of 1982 (30 U.S.C.
1721(f)) is amended to read as follows:
‘‘(f) Upon a determination that it will further the ef-
fective and efficient performance of his duties and respon-
sibilities, the Secretary may waive or forego such interest
in whole or in part. Interest shall be charged under this
section only for the number of days a payment is late.’’.
(b) LESSEE INTEREST.—Section 111 of the Federal
Oil and Gas Royalty Management Act of 1982 (30 U.S.C.
1721) is amended by adding after subsection (g) the fol-
lowing:
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‘‘(h) Interest shall be allowed and the Secretary shall
pay or credit such interest 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. Interest which has ac-
crued on any overpayment may be applied to reduce an
underpayment. This subsection applies to overpayments
made later than six months after the date of enactment
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.’’.
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(c) LIMITATION ON INTEREST.—Section 111 of such
Act, as amended by subsection (b) of this Act, is further
amended by adding at the end the following:
‘‘(i) Upon a determination by the Secretary that an
excessive overpayment (based upon all obligations of a les-
see for a given reporting month) was made for the sole
purpose of receiving interest, interest shall not 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 pays for a given reporting
month (excluding payments for demands for obligations
as a result of judicial or administrative proceedings for
settlement agreements and for other similar payments) for
the aggregate of all of its Federal leases exceeds 25 per-
cent of the total royalties paid that month for those
leases.’’.
(d) ESTIMATED PAYMENT.—Section 111 of such Act,
as amended by subsections (b) and (c) of this Act, is fur-
ther amended by adding at the end the following:
‘‘(j) A lessee may make a payment for the approxi-
mate amount of royalties (hereinafter in this subsection
‘estimated payment’) that would otherwise be due to the
Secretary for such lease to avoid underpayment or
nonpayment interest charges. When an estimated payment
is made, actual royalties become due at the end of the
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month following the period covered by the estimated pay-
ment. If the lessee makes a payment for such actual royal-
ties, the lessee may apply the estimated payment to future
royalties. Any estimated payment may be adjusted, re-
couped, or reinstated at any time by the lessee.’’.
(e) VOLUME ALLOCATION OF OIL AND GAS PRODUC-
TION.—Section 111 of such Act (30 U.S.C. 1721), as
amended by subsections (b) through (d) of this Act, is
amended by adding at the end the following:
‘‘(k)(1) Except as otherwise provided by this sub-
section—
‘‘(A) a lessee of a lease in a unit or
communitization agreement which contains only
Federal leases with the same royalty rate and funds
distribution must 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;
‘‘(B) a lessee of a lease in any other unit or
communitization agreement must report and pay
royalties on oil and gas production for each produc-
tion month based on the volume of oil and gas pro-
duced from such agreement and allocated to the
lease in accordance with the terms of the agreement;
and
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‘‘(C) a lessee of a lease that is not contained in
a unit or communitization agreement must report
and pay royalties on oil and gas production for each
production month based on the actual volume of pro-
duction 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 for approval and
make payments in accordance with such approved alter-
native method so long as such alternative method does not
reduce the amount of the royalty obligation.
‘‘(4) The Secretary shall grant an exception from the
reporting and payment requirements for marginal prop-
erties 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
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amount of oil and gas actually sold and the share of pro-
duction allocated to the lease until the beginning of the
month following calendar year or portion thereof. Any ad-
ditional royalties due or overpaid royalties and associated
interest shall be paid, refunded, or credited within six
months after the end of each calendar year in which royal-
ties are paid based on volumes of production sold. For
the purpose of this subsection, the term ‘marginal prop-
erty’ means a lease that produces on average the combined
equivalent of less than 15 barrels of oil per day or 90 thou-
sand cubic feet of gas per day, or a combination thereof,
determined by dividing the average daily production of do-
mestic crude oil and domestic natural gas from producing
wells on such lease by the number of such wells, unless
the Secretary, together with the State concerned, deter-
mines 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.’’.
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(f) PRODUCTION ALLOCATION.—Section 111 of such
Act (30 U.S.C. 1721), as amended by subsections (b)
through (e) of this Act, 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.’’.
SEC. 9517. LIMITATION ON ASSESSMENTS.
Section 111 of the Federal Oil and Gas Royalty Man-
agement Act of 1982 (30 U.S.C. 1721), as amended by
section 9516, is further amended by adding at the end
the following:
‘‘(m)(1) After the date of enactment of this sub-
section, the Secretary shall not impose any assessment for
any late payment or underpayment. After the date of en-
actment of this subsection, the Secretary may impose an
assessment only for erroneous reports submitted by lessees
subject to the limitations of paragraph (2). Nothing in this
section shall prohibit the Secretary from imposing pen-
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alties or interest under other sections of this Act for late
payments or underpayments.
‘‘(2) No assessment for erroneous reports shall be im-
posed for 18 months following the date of enactment of
this subsection, or until the Secretary issues a final rule
which provides for imposition of an assessment only on
a lessee who chronically submits erroneous reports and
which establishes what constitutes chronic errors for a les-
see, whichever is later. However, if the Secretary deter-
mines during that 18-month period that the reporting
error rate for all reporters for all Federal leases has in-
creased by one-third for three consecutive report months
for either production reporting or royalty reporting over
the 12 months preceding the date of enactment of this
subsection, the Secretary may impose an assessment for
erroneous reports only for the increased category of report
under regulations in effect on the date of enactment of
this subsection.’’.
SEC. 9518. 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 9513 of this Act, is further amended
by adding at the end the following:
‘‘SEC. 116. ALTERNATIVES FOR MARGINAL PROPERTIES.
‘‘(a) SELLING THE REVENUE STREAM.—