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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
terminate—
(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—
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(i) partially in water less than 200
meters deep; and
(ii) to which no royalty relief provi-
sions in law or lease terms apply.
(2) SIDETRACK.—
(A) IN
GENERAL.—The term ‘‘sidetrack’’
means a well resulting from drilling an addi-
tional hole to a new objective bottom-hole loca-
tion by leaving a previously drilled hole.
(B) 
INCLUSION.—The 
term 
‘‘sidetrack’’
includes—
(i) drilling a well from a platform slot
reclaimed from a previously drilled well;
(ii) re-entering and deepening a pre-
viously drilled well; and
(iii) a bypass from a sidetrack, includ-
ing drilling around material blocking a hole
or drilling to straighten a crooked hole.
(3) ULTRA DEEP WELL.—The term ‘‘ultra deep
well’’ means a well drilled with a perforated interval,
the top of which is at least 20,000 feet true vertical
depth below the datum at mean sea level.
(b) REGULATIONS.—
(1) IN GENERAL.—Not later than 180 days after
the effective date of this section, in addition to any