I
104TH CONGRESS
1ST SESSION
H. R. 1975
To improve the management of royalties from Federal and Outer Continental
Shelf oil and gas leases, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 30, 1995
Mr. CALVERT (for himself, Mr. BREWSTER, Mr. DOOLEY, Mr. TAUZIN, and
Mr. LUCAS) introduced the following bill; which was referred to the Com-
mittee on Resources
A BILL
To improve the management of royalties from Federal and
Outer Continental Shelf oil and gas leases, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as ‘‘The
Federal Oil and Gas Royalty Simplification and Fairness
Act of 1995’’.
(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Limitation periods.
Sec. 4. Overpayments: offsets and refunds.
Sec. 5. Required recordkeeping.
Sec. 6. Royalty interest, penalties, and payments.
Sec. 7. Limitation on assessments.
Sec. 8. Cost-effective audit and collection requirements.
Sec. 9. Elimination of notice requirement.
Sec. 10. Royalty in kind.
Sec. 11. Time and manner of royalty payment.
Sec. 12. Repeals.
Sec. 13. Indian lands.
Sec. 14. Effective date.
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 amended
as follows:
(1) In paragraph (5), by inserting ‘‘(including
any unit agreement and communitization agree-
ment)’’ after ‘‘agreement’’.
(2) By amending paragraph (7) to read as fol-
lows:
‘‘(7) ‘lessee’ means any person to whom the
United States issues a lease.’’.
(3) By striking ‘‘and’’ at the end of paragraph
(15), by striking the period at the end of paragraph
(16) and inserting ‘‘; and’’; and by adding at the
end the following:
‘‘(17) ‘administrative proceeding’ means any
agency process for rulemaking, adjudication or li-
censing, as defined in and governed by chapter 5 of
title 5, United States Code (relating to administra-
tive procedures);
‘‘(A) asserts a definite and quantified obli-
gation due the Secretary or the United States;
and
‘‘(B) specifically identifies the obligation by
lease, production month and amount of such
obligation ordered to be paid, as well as the rea-
son or reasons such obligation is claimed to be
due,
but such term does not include any other commu-
nication by or on behalf of the Secretary or the
United States;
‘‘(24) ‘overpayment’ means any payment (in-
cluding any estimated royalty payment) by a lessee
or by any person acting on behalf of a lessee in ex-
cess of an amount legally required to be paid on an
obligation;
‘‘(25) ‘payment’ means satisfaction, in whole or
in part, of an obligation due the Secretary or the
United States;
‘‘(26) ‘penalty’ means a statutorily authorized
civil fine levied or imposed by the Secretary or the
United States for a violation of this Act, a mineral
leasing law, or a term or provision of a lease admin-
istered by the Secretary;
‘‘(27) ‘refund’ means the return of an overpay-
ment by the Secretary or the United States by the
drawing of funds from the United States Treasury;
‘‘(28) ‘underpayment’ means any payment by a
lessee or person acting on behalf of a lessee that is
less than the amount legally required to be paid on
an obligation; and
‘‘(29) ‘United States’ means—
‘‘(A) the United States Government and
any department, agency, or instrumentality
thereof, and
‘‘(B) when such term is used in a geo-
graphic sense, includes the several States, the
District of Columbia, Puerto Rico, and the ter-
ritories and possessions of the United States.’’.
SEC. 3. 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. LIMITATION PERIODS.
‘‘(a) IN GENERAL.—
‘‘(1) SIX-YEAR PERIOD.—A judicial or adminis-
trative proceeding which arises from, or relates to,
an obligation may not be commenced unless such
proceeding is commenced within 6 years from the
date on which such obligation becomes due.
‘‘(2) LIMIT ON TOLLING OF LIMITATION PE-
RIOD.—The running of the limitation period under
paragraph (1) shall not be suspended or tolled by
any action of the United States or an officer or
agency thereof other than the commencement of a
judicial or administrative proceeding under para-
graph (1) or an agreement under paragraph (3).
‘‘(3) FRAUD OR CONCEALMENT.—For the pur-
pose of computing the limitation period under para-
graph (1), there shall be excluded therefrom any pe-
riod during which there has been fraud or conceal-
ment by a lessee in an attempt to defeat or evade
payment of any such obligation.
‘‘(4) REASONABLE PERIOD FOR PROVIDING IN-
FORMATION.—In seeking information on which to
base an order to pay, the Secretary shall afford the
lessee or person acting on behalf of the lessee a rea-
sonable period in which to provide such information
before the end of the period under paragraph (1).
‘‘(b) FINAL AGENCY ACTION.—The Director of the
Minerals Management Service shall issue a final Director’s
decision in any administrative proceeding before the Direc-
tor within one year from the date such proceeding was
commenced. The Secretary shall issue a final agency deci-
sion in any administrative proceeding within 3 years from
the date such proceeding was commenced. If no such deci-
sion has been issued by the Director or Secretary within
the prescribed time periods referred to above:
‘‘(1) the Director’s or Secretary’s decision, as
the case may be, shall be deemed issued and granted
in favor of the lessee or lessees as to any
nonmonetary obligation and any obligation the prin-
cipal amount of which is less than $2,500; and
‘‘(2) in the case of a monetary obligation the
principal amount of which is $2,500 or more, the
Director’s or Secretary’s decision, as the case may
be, shall be deemed issued and final, and the lessee
shall have a right of de novo judicial review and ap-
peal of such final agency action.
‘‘(c) TOLLING BY AGREEMENT.—Prior to the expira-
tion of any period of limitation under subsections (a) or
(c), the Secretary and a lessee may consent in writing to
extend such period as it relates to any obligation under
the mineral leasing laws. The period so agreed upon may
be extended by subsequent agreement or agreements in
writing made before the expiration of the period previously
agreed upon.
‘‘(d) LIMITATION
ON CERTAIN ACTIONS
BY
THE
UNITED STATES.—When an action on or enforcement of
an obligation under the mineral leasing laws is barred
under subsection (a) or (b), the United States or an officer
or agency thereof may not take any other or further action
regarding that obligation including (but not limited to) the
issuance of any order, request, demand or other commu-
nication seeking any document, accounting, determination,
calculation, recalculation, principal, interest, assessment,
penalty or the initiation, pursuit or completion of an audit.
‘‘(e) OBLIGATION BECOMES DUE.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), an obligation becomes due when the right to en-
force the obligation is fixed.
‘‘(2) SPECIAL RULE REGARDING ROYALTY OBLI-
GATION.—The right to enforce any royalty obligation
is fixed for the purposes of this Act on the last day
of the calendar month following the month in which
oil or gas is produced, except that with respect to
any such royalty obligation which is altered by a ret-
roactive redetermination of working interest owner-
ship pursuant to a unit or communitization agree-
ment, the right to enforce such royalty obligation in
such amended unit or communitization agreement is
fixed for the purposes of this Act on the last day of
the calendar month in which such redetermination is
made. The Secretary shall issue any such redeter-
mination within 180 days of receipt of a request for
redetermination.
‘‘(f) JUDICIAL REVIEW OF ADMINISTRATIVE PRO-
CEEDINGS.—In the event an administrative proceeding
subject to subsection (a) is timely commenced and there-
after the limitation period in subsection (a) lapses during
the pendency of the administrative proceeding, no party
to such administrative proceeding shall be barred by this
section from commencing a judicial proceeding challenging
the final agency action in such administrative proceeding
so long as such judicial proceeding is commenced within
90 days from receipt of notice of the final agency action.
‘‘(g) IMPLEMENTATION OF FINAL DECISION.—In the
event a judicial or administrative proceeding subject to
subsection (a) is timely commenced and thereafter the lim-
itation period in subsection (a) lapses during the pendency
of such proceeding, any party to such proceeding shall not
be barred from taking such action as is required or nec-
essary to implement the final unappealable judicial or ad-
ministrative decision, including any action required or nec-
essary to implement such decision by the recovery or
recoupment of an underpayment or overpayment by means
of refund, credit or offset.
‘‘SEC. 111A. OVERPAYMENTS: OFFSETS AND REFUNDS.
‘‘(a) OFFSETS.—
‘‘(1) MANNER.—For each reporting month, a
lessee or person acting on behalf of a lessee shall
offset all underpayments and overpayments made for
that reporting month for all leases within the same
royalty distribution category established under per-
manent indefinite appropriations.
‘‘(2) OFFSET AGAINST OBLIGATIONS.—The net
overpayment resulting within each category from the
offsetting described in paragraph (1) may be offset
and credited against any obligation for current or
subsequent reporting months which have become due
on leases within the same royalty distribution cat-
egory.
‘‘(3) PRIOR
APPROVAL
NOT
REQUIRED.—The
offsetting or crediting of any overpayment, in whole
or part, shall not require the prior request to or ap-
proval by the Secretary.
‘‘(4) EXCLUSION
OF
CERTAIN
UNDER- AND
OVERPAYMENTS.—Any underpayment or overpay-
ment upon which an order has been issued which is
subject to appeal shall be excluded from the offset-
ting provisions of this section.
‘‘(b) REFUNDS.—
‘‘(1) IN GENERAL.—A refund request may be
made to the Secretary not before one year after the
subject reporting month. After such one-year period
and when a lessee or a person acting on behalf of
a lessee has made a net overpayment to the Sec-
retary or the United States and has offset or cred-
ited in accordance with subsection (a), the Secretary
shall, upon request, refund to such lessee or person
the net overpayment, with accumulated interest
thereon determined in accordance with section 111.
If for any reason, a lessee or person acting on behalf
of a lessee is no longer accruing obligations on any
lease within a category, then such lessee or person
may immediately file a request for a refund of any
net overpayment and accumulated interest.
‘‘(2) REQUEST.—The request for refund is suf-
ficient if it—
‘‘(A) is made in writing to the Secretary;
‘‘(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.
‘‘(3) TREATMENT
AS
WRITTEN
REQUEST
OR
DEMAND.—Service of a request for refund shall be
a ‘written request or demand’ sufficient to com-
mence an administrative proceeding.
‘‘(4) 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 is authorized and di-
rected to make such refund.
‘‘(5) PAYMENT PERIOD.—A refund under this
subsection shall be paid within 90 days of the date
on which the request for refund was received by the
Secretary.
‘‘(c) LIMITATION ON OFFSETS AND REFUNDS.—
‘‘(1) LIMITATION
PERIOD
FOR
OFFSETS
AND
REFUNDS.—Except as provided by paragraph (2), a
lessee or person acting on behalf of a lessee may not
offset or receive a refund of any overpayment which
arises from or relates to an obligation unless such
offset or refund request is initiated within six years
from the date on which the obligation which is the
subject of the overpayment became due.
‘‘(2) EXCEPTION.—(A) For any overpayment
the recoupment of which (in whole or in part) by off-
set or refund, or both, may occur beyond the six-
year limitation period provided in paragraph (1),
where the issue of whether an overpayment occurred
has 
not 
been 
finally 
determined, 
or 
where
recoupment of the overpayment has not been accom-
plished within said six-year period, the lessee or per-
son acting on behalf of a lessee may preserve its
right to recover or recoup the overpayment beyond
the limitation period by filing a written notice of the
overpayment with the Secretary within the six-year
period.
‘‘(B) Notice under subparagraph (A) shall be
sufficient if it—
‘‘(i) identifies the person who made such
overpayment;
‘‘(ii) asserts the obligation due the lessee
or person; and
‘‘(iii) identifies the obligation by lease, pro-
duction month and amount, as well as the rea-
son or reasons such overpayment is due.
‘‘(d) PROHIBITION AGAINST REDUCTION
OF RE-
FUNDS OR OFFSETS.—In no event shall the Secretary di-
rectly or indirectly claim any amount or amounts against,
or reduce any offset or refund (or interest accrued there-
on) by, the amount of any obligation 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. Overpayments: offsets and refunds.’’.
SEC. 5. 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 an applicable mineral
leasing law, lease provision, regulation or order with re-
spect to oil and gas leases from Federal lands or the Outer
Continental Shelf shall be maintained for six years after
an obligation becomes due unless the Secretary com-
mences a judicial or administrative proceeding with re-
spect to an obligation within the time period prescribed
by section 115 in which such records may be relevant. In
that event, the Secretary may direct the record holder to
maintain such records until the final nonappealable deci-
sion in such judicial or administrative proceeding is ren-
dered. Under no circumstance shall a record holder be re-
quired to maintain or produce any record covering a time
period for which a substantive claim with respect to an
obligation to which the record relates would be barred by
the applicable statute of limitation in section 115.’’.
SEC. 6. ROYALTY INTEREST, PENALTIES, AND PAYMENTS.
(a) INTEREST CHARGED ON LATE PAYMENTS AND
UNDERPAYMENTS.—Section 111(a) of the Federal Oil
and Gas Royalty Management Act of 1982 (30 U.S.C.
1721(a)) is amended to read as follows:
‘‘(a) In the case of oil and gas leases where royalty
payments are not received by the Secretary on the date
that such payments are due, or are less than the amount
due, the Secretary shall charge interest on a net late pay-
ment or underpayment at the rate published by the De-
partment of the Treasury as the Treasury Current Value
Of Funds Rate. The Secretary may waive or forego such
interest in whole or in part. In the case of a net
underpayment for a given reporting month, interest shall
be computed and charged only on the amount of the net
underpayment and not on the total amount due from the
date of the net underpayment. The net underpayment is
determined by offsetting in the same manner as required
under paragraphs (1) and (2) of section 111A(a). Interest
may only be billed by the Secretary for any net
underpayment not less than one year following the subject
reporting month.’’.
(b) CHARGE ON LATE PAYMENT MADE BY THE SEC-
RETARY.—Section 111(b) of the Federal Oil and Gas Roy-
alty Management Act of 1982 (30 U.S.C. 1721(b)) is
amended to read as follows:
‘‘(b) Any payment made by the Secretary to a State
under section 35 of the Mineral Leasing Act, and any
other payment made by the Secretary which is not paid
on the date required under such section 35, shall include
an interest charge computed at the rate published by the
Department of the Treasury as the Treasury Current
Value of Funds Rate. The Secretary shall not be required
to pay interest under this paragraph until collected or
when such interest has been waived or is otherwise not
collected. With respect to any obligation, the Secretary
may waive or forgo interest otherwise required under sec-
tion 3717 of title 31, United States Code.’’.
(c) 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) Unless waived or not collected pursuant to sub-
sections (a)(2) and (b)(2), interest shall be charged under
this section only for the number of days a payment is
late.’’.
(d) LESSEE INTEREST.—Section 111 of the Federal
Oil and Gas Royalty Management Act of 1982 (30 U.S.C.
1721) is amended by adding the following after subsection
(g):
‘‘(h) If a net overpayment, as determined by offset-
ting as required under section 111A(1) and (2) for a re-
porting month, interest shall be allowed and paid or cred-
ited on such net overpayment, with such interest to accrue
from the date such net overpayment was made, at the rate
published by the Department of the Treasury as the
Treasury Current Value of Funds Rate.’’.
(e) PAYMENT EXCEPTION FOR MINIMAL PRODUC-
TION.—Section 111 of the Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1721) is amended
by adding the following after subsection (h):
‘‘(i) For any well on a lease which produces on aver-
age less than 250 thousand cubic feet of gas per day or
25 barrels of oil per day, the royalty on the actual or allo-
cated lease production may be paid—
‘‘(A) for a 12-month period, only based on ac-
tual production removed or sold from the lease; and
‘‘(B) 6 months following such period, for addi-
tional production allocated to the lease during the
period.
No interest shall be allowed or accrued on any
underpayment resulting from this payment methodology
until the month following the applicable 12-month pe-
riod.’’.
SEC. 7. LIMITATION ON ASSESSMENTS.
Section 111 of the Federal Oil and Gas Royalty Man-
agement Act of 1982 (30 U.S.C. 1721) is amended by
adding the following after subsection (i):
‘‘(j) The Secretary may levy or impose an assessment
upon any person not to exceed $250 for any reporting
month for the inaccurate reporting of information required
under subsection (k). No assessment may be levied or im-
posed upon any person for any underpayment, late pay-
ment, or estimated payment or for any erroneous or in-
complete royalty or production related report for informa-
tion not required by subsection (k) absent a showing of
gross negligence or willful misconduct.’’.
SEC. 8. COST-EFFECTIVE AUDIT AND COLLECTION RE-
QUIREMENTS.
Section 101 of the Federal Oil and Gas Royalty Man-
agement Act of 1982 (30 U.S.C. 1701 et seq.) is amended
by adding the following after subsection (c):
‘‘(d)(1) If the Secretary determines that the cost of
accounting for and collecting of any obligation due for any
oil or gas production exceeds or is likely to exceed the
amount of the obligation to be collected, the Secretary
shall waive such obligation.
‘‘(2) The Secretary shall develop a lease level report-
ing and audit strategy which eliminates multiple or redun-
dant reporting of information.
‘‘(3) In carrying out this section, for onshore produc-
tion from any well which is less than 250 thousand cubic
feet of gas per day or 25 barrels of oil per day, or for
offshore production for any well less than 1,500,000 cubic
feet of gas per day or 150 barrels of oil per day, the Sec-
retary shall only require the lessee to submit the informa-
tion described in section 111(k). For such onshore and
offshore production, the Secretary shall not conduct roy-
alty reporting compliance and enforcement activities, levy
or impose assessments described in such section 111(k)
and shall not bill for comparisons between royalty report-
ing and production information. The Secretary may only
conduct audits on such leases if the Secretary has reason
to believe that the lessee has not complied with payment
obligations for at least three months during a twelve
month period. The Secretary shall not perform such audit
if the Secretary determines that the cost of conducting the
audit exceeds or is likely to exceed the additional royalties
expected to be received as a result of such audit.’’.
SEC. 9. ELIMINATION OF NOTICE REQUIREMENT.
Section 23(a)(2) of the Outer Continental Shelf
Lands Act (43 U.S.C. 1349(a)(2)) is amended to read as
follows:
‘‘(2) Except as provided in paragraph (3) of this sub-
section, no action may be commenced under subsection
(a)(1) of this section if the Attorney General has com-
menced and is diligently prosecuting a civil action in a
court of the United States or a State with respect to such
matter, but in any such action in a court of the United
States any person having a legal interest which is or may
be adversely affected may intervene as a matter of right.’’.
SEC. 10. ROYALTY IN KIND.
(a) IN GENERAL.—Section 27(a)(1) of the Outer
Continental Shelf Lands Act (43 U.S.C. 1353(a)(1)) and
the first undesignated paragraph of section 36 of the Min-
eral Leasing Act (30 U.S.C. 192) are each amended by
adding at the end the following: ‘‘Any royalty or net profit
share of oil or gas accruing to the United States under
any lease issued or maintained by the Secretary for the
exploration, production and development of oil and gas on
Federal lands or the Outer Continental Shelf, at the Sec-
retary’s option, may be taken in kind at or near the lease
upon 90 days prior written notice to the lessee. Once the
United States has commenced taking royalty in kind, it
shall continue to do so until 90 days after the Secretary
has provided written notice to the lessee that it will resume
taking royalty in value. Delivery of royalty in kind by the
lessee shall satisfy in full the lessee’s royalty obligation.
Once the oil or gas is delivered in kind, the lessee shall
not be subject to the reporting and recordkeeping require-
ments, including requirements under section 103, except
for those reports and records necessary to verify the vol-
ume of oil or gas produced and delivered prior to or at
the point of delivery.’’.
(b) SALE.—Section 27(c)(1) of the Outer Continental
Shelf Lands Act (43 U.S.C. 1353(c)(1)) is amended by
striking ‘‘competitive bidding for not more than its regu-
lated price, or if no regulated price applies, not less than
its fair market value’’ and inserting ‘‘competitive bidding
or private sale’’.
SEC. 11. TIME, MANNER, AND INFORMATION REQUIRE-
MENTS FOR ROYALTY PAYMENT AND RE-
PORTING.
Section 111 of the Federal Oil and Gas Royalty Man-
agement Act of 1982 (30 U.S.C. 1721) is amended by
adding the following after subsection (j):
‘‘(k)(1) Any royalty payment on an obligation due the
United States for oil or gas produced pursuant to an oil
and gas lease administered by the Secretary shall be pay-
able at the end of the month following the month in which
oil or gas is removed or sold from such lease.
‘‘(2) Royalty reporting with respect to any obligation
shall be by lease and shall include only the following infor-
mation:
‘‘(A) identification of the lease;