262 
TITLE VIII—STUDY OF ACTIONS 
TO IMPROVE THE ACCURACY 
OF COLLECTION OF ROYAL-
TIES 
SEC. 801. SHORT TITLE. 
This title may be cited as the ‘‘Study of Ways To 
Improve the Accuracy of the Collection of Federal Oil, 
Condensate, and Natural Gas Royalties Act of 2011’’. 
SEC. 802. STUDY OF ACTIONS TO IMPROVE THE ACCURACY 
OF COLLECTION OF FEDERAL OIL, CONDEN-
SATE, AND NATURAL GAS ROYALTIES. 
The Secretary of the Interior shall seek to enter into 
an arrangement with the National Academy of Engineer-
ing under which the Academy, by not later than six 
months after the date of the enactment of this Act, shall 
study and report to the Secretary regarding whether the 
accuracy of collection of royalties on production of oil, con-
densate, and natural gas under leases of Federal lands (in 
eluding submerged and deep water lands) and Indian 
lands would be improved by any of the following: 
(1) Requiring the installation of digital meters, 
calibrated at least monthly to an absolute zero value, 
for all lands from which natural gas (including con-
densate) is produced under such leases. 
(2) Requiring that— 
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(A) the size of every orifice plate on each 
natural gas well operated under such leases be 
inspected at least quarterly by the Secretary; 
and 
(B) chipped orifice plates and wrong-sized 
orifice plates be replaced immediately after 
those inspections and reported to the Secretary 
for retroactive volume measurement corrections 
and royalty payments with interest of 8 percent 
compounded monthly. 
(3) Requiring that any plug valves that are in 
natural gas gathering lines be removed and replaced 
with ball valves. 
(4) Requiring that— 
(A) all meter runs should be opened for in-
spection by the Secretary and the producer at 
all times; and 
(B) any welding or closing of the meter 
runs leading to the orifice plates should be pro-
hibited unless authorized by the Secretary. 
(5) Requiring the installation of straightening 
vanes approximately 10 feet before natural gas en-
ters each orifice meter, including each master meter 
and each sales meter. 
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(6) Requiring that all master meters be in-
spected and the results of such inspections be made 
available to the Secretary and the producers imme-
diately. 
(7) Requiring that— 
(A) all sampling of natural gas for heating 
content analysis be performed monthly up-
stream of each natural gas meter, including up-
stream of each master meter; 
(B) records of such sampling and heating 
content analysis be maintained by the pur-
chaser and made available to the Secretary and 
to the producer monthly; 
(C) probes for such upstream sampling be 
installed upstream within three feet of each 
natural gas meter; 
(D) any oil and natural gas lease for which 
heat content analysis is falsified shall be subject 
to cancellation; 
(E) natural gas sampling probes be lo-
cated— 
(i) upstream of the natural gas meter 
at all times; 
(ii) within a few feet of the natural 
gas meter; and 
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(iii) after the natural gas goes 
through a Welker or Y–Z vanishing cham-
ber; and 
(F) temperature probes and testing probes 
be located between the natural gas sampling 
probe and the orifice of the natural gas meter. 
(8) Prohibiting the dilution of natural gas with 
inert nitrogen or inert carbon dioxide gas for royalty 
determination, sale, or resale at any point. 
(9) Requiring that both the measurement of the 
volume of natural gas and the heating content anal-
yses be reported only on the basis of 14.73 PSI and 
60 degrees Fahrenheit, regardless of the elevation 
above sea level of such volume measurement and 
heating content analysis, for both purchases and 
sales of natural gas. 
(10) Prohibiting the construction of bypass 
pipes that go around the natural gas meter, and im-
posing criminal penalties for any such construction 
or subsequent removal including, but not limited to, 
automatic cancellation of the lease. 
(11) Requiring that all natural gas sold to con-
sumers have a minimum BTU content of 960 at an 
atmospheric pressure of 14.73 PSI and be at a tem-
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perature of 60 degrees Fahrenheit, as required by 
the State of Wyoming Public Utilities Commission. 
(12) Requiring that all natural gas sold in the 
USA will be on a MMBTU basis with the BTU con-
tent adjusted for elevation above sea level in higher 
altitudes. Thus all natural gas meters must correct 
for BTU content in higher elevations (altitudes). 
(13) Issuance by the Secretary of rules for the 
measurement at the wellhead of the standard volume 
of natural gas produced, based on independent in-
dustry standards such as those suggested by the 
American Society of Testing Materials (ASTM). 
(14) Requiring use of the fundamental orifice 
meter mass flow equation, as revised in 1990, for 
calculating the standard volume of natural gas pro-
duced. 
(15) Requiring the use of Fpv in standard vol-
ume measurement computations as described in the 
1992 American Gas Association Report No. 8 enti-
tled Compressibility Factor of Natural Gas and 
Other Related Hydrocarbon Gases. 
(16) Requiring that gathering lines must be 
constructed so as to have as few angles and turns 
as possible, with a maximum of three angles, before 
they connect with the natural gas meter. 
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(17) Requiring that for purposes of reporting 
the royalty value of natural gas, condensate, oil, and 
associated natural gases, such royalty value must be 
based upon the natural gas’ condensate’s, oil’s, and 
associated natural gases’ arm’s length, independent 
market value, as reported in independent, respected 
market reports such as Platts or Bloombergs, and 
not based upon industry controlled posted prices, 
such as Koch’s. 
(18) Requiring that royalties be paid on all the 
condensate recovered through purging gathering 
lines and pipelines with a cone-shaped device to push 
out condensate (popularly referred to as a pig) and 
on 
condensate 
recovered 
from 
separators, 
dehydrators, and processing plants. 
(19) Requiring that all royalty deductions for 
dehydration, treating, natural gas gathering, com-
pression, transportation, marketing, removal of im-
purities such as carbon dioxide (CO2), nitrogen (N2), 
hydrogen sulphide (H2S), mercaptain (HS), helium 
(He), and other similar charges on natural gas, con-
densate, and oil produced under such leases that are 
now in existence be eliminated. 
(20) Requiring that at all times— 
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(A) the quantity, quality, and value ob-
tained for natural gas liquids (condensate) be 
reported to the Secretary; and 
(B) such reported value be based on fair 
independent arm’s length market value. 
(21) Issuance by the Secretary of regulations 
that prohibit venting or flaring (or both) of natural 
gas in cases for which technology exists to reason-
ably prevent it, strict enforcement of such prohibi-
tions, and cancellation of leases for violations. 
(22) Requiring lessees to pay full royalties on 
any natural gas that is vented, flared, or otherwise 
avoidably lost. 
(23)(A) Requiring payment of royalties on car-
bon dioxide at the wellhead used for tertiary oil re-
covery from depleted oil fields on the basis of 5 per-
cent of the West Texas Intermediate crude oil fair 
market price to be used for one MCF (1,000 cubic 
feet) of carbon dioxide gas. 
(B) Requiring that— 
(i) carbon dioxide used for edible purposes 
should be subjected to a royalty per thousand 
cubic feet (MCF) on the basis of the sales price 
at the downstream delivery point without de-
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ducting for removal of impurities, processing, 
transportation, and marketing costs; 
(ii) such price to apply with respect to gas-
eous forms, liquid forms, and solid (dry ice) 
forms of carbon dioxide converted to equivalent 
MCF; and 
(iii) such royalty to apply with respect to 
both a direct producer of carbon dioxide and 
purchases of carbon dioxide from another per-
son that is either affiliated or not affiliated with 
the purchaser. 
(24) Requiring that— 
(A) royalties be paid on the fair market 
value of nitrogen extracted from such leases 
that is used industrially for well stimulation, 
helium recovery, or other uses; and 
(B) royalties be paid on the fair market 
value of ultimately processed helium recovered 
from such leases. 
(25) Allowing only 5 percent of the value of the 
elemental sulfur recovered during processing of hy-
drogen sulfide gas from such leases to be deducted 
for processing costs in determining royalty pay-
ments. 
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(26) Requiring that all heating content analysis 
of natural gas be conducted to a minimum level of 
C15. 
(27) Eliminating artificial conversion from dry 
BTU to wet BTU, and requiring that natural gas be 
analyzed and royalties paid for at all times on the 
basis of dry BTU only. 
(28) Requiring that natural gas sampling be 
performed at all times with a floating piston cylinder 
container at the same pressure intake as the pres-
sure of the natural gas gathering line. 
(29) Requiring use of natural gas filters with a 
minimum of 10 microns, and preferably 15 microns, 
both in the intake to natural gas sampling con-
tainers and in the exit from the natural gas sam-
pling containers into the chromatograph. 
(30) Mandate the use of a Quad Unit for both 
portable and stationary chromatographs in order to 
correct for the presence of nitrogen and oxygen, if 
any, in certain natural gas streams. 
(31) Require the calibration of all chro-
matograph equipment every three months and the 
use of only American Gas Association-approved 
standard comparison containers for such calibration. 
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(32) Requiring payment of royalties on any 
such natural gas stored on Federal or Indian lands 
on the basis of corresponding storage charges for the 
use of Federal or Indian lands, respectively, for such 
storage service. 
(33) Imposing penalties for the intentional non-
payment of royalties for natural gas liquids recov-
ered— 
(A) from purging of natural gas gathering 
lines and natural gas pipelines; or 
(B) from field separators, dehydrators, and 
processing plants, 
including cancellation of oil and natural gas leases 
and criminal penalties. 
(34) Requiring that the separator, dehydrator, 
and natural gas meter be located within 100 feet of 
each natural gas wellhead. 
(35) Requiring that BTU heating content anal-
ysis be performed when the natural gas is at a tem-
perature of 140 to 150 degrees Fahrenheit at all 
times, as required by the American Gas Association 
(AGA) regulations. 
(36) Requiring that heating content analysis 
and volume measurements are identical at the sales 
point to what they are at the purchase point, after 
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allowing for a small volume for leakage in old pipes, 
but with no allowance for heating content discrep-
ancy. 
(37) Verification by the Secretary that the spe-
cific gravity of natural gas produced under such 
leases, as measured at the meter run, corresponds to 
the heating content analysis data for such natural 
gas, in accordance with the Natural Gas Processors 
Association Publication 2145–71(1), entitled ‘‘Phys-
ical Constants Of Paraffin Hydrocarbons And Other 
Components Of Natural Gas’’, and reporting of all 
discrepancies immediately. 
(38) Prohibiting all deductions on royalty pay-
ments for marketing of natural gas, condensate, and 
oil by an affiliate or agent. 
(39) Requiring that all standards of the Amer-
ican Petroleum Institute, the American Gas Associa-
tion, the Gas Processors Association, and the Amer-
ican Society of Testing Materials, Minerals Manage-
ment Service Order No. 5, and all other Minerals 
Management Service orders be faithfully observed 
and applied, and willful misconduct of such stand-
ards and orders be subject to oil and gas lease can-
cellation. 
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