[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1975 Enrolled Bill (ENR)]

        H.R.1975

                       One Hundred Fourth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

         Begun and held at the City of Washington on Wednesday,
   the third day of January, one thousand nine hundred and ninety-six


                                 An Act


 
     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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996''.

SEC. 2. DEFINITIONS.

    Section 3 of the Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.) is amended--
        (1) by amending paragraph (7) to read as follows:
        ``(7) `lessee' means any person to whom the United States 
    issues an oil and gas lease or any person to whom operating rights 
    in a lease have been assigned;''; and
        (2) by striking ``and'' at the end of paragraph (15), by 
    striking the period at the end of paragraph (16) and inserting a 
    semicolon, and by adding at the end the following:
        ``(17) `adjustment' means an amendment to a previously filed 
    report on an obligation, and any additional payment or credit, if 
    any, applicable thereto, to rectify an underpayment or overpayment 
    on an obligation;
        ``(18) `administrative proceeding' means any Department of the 
    Interior agency process in which a demand, decision or order issued 
    by the Secretary or a delegated State is subject to appeal or has 
    been appealed;
        ``(19) `assessment' means any fee or charge levied or imposed 
    by the Secretary or a delegated State other than--
            ``(A) the principal amount of any royalty, minimum royalty, 
        rental bonus, net profit share or proceed of sale;
            ``(B) any interest; or
            ``(C) any civil or criminal penalty;
        ``(20) `commence' means--
            ``(A) with respect to a judicial proceeding, the service of 
        a complaint, petition, counterclaim, cross claim, or other 
        pleading seeking affirmative relief or seeking credit or 
        recoupment: Provided, That if the Secretary commences a 
        judicial proceeding against a designee, the Secretary shall 
        give notice of that commencement to the lessee who designated 
        the designee, but the Secretary is not required to give notice 
        to other lessees who may be liable pursuant to section 102(a) 
        of this Act, for the obligation that is the subject of the 
        judicial proceeding; or
            ``(B) with respect to a demand, the receipt by the 
        Secretary or a delegated State or a lessee or its designee 
        (with written notice to the lessee who designated the designee) 
        of the demand;
        ``(21) `credit' means the application of an overpayment (in 
    whole or in part) against an obligation which has become due to 
    discharge, cancel or reduce the obligation;
        ``(22) `delegated State' means a State which, pursuant to an 
    agreement or agreements under section 205 of this Act, performs 
    authorities, duties, responsibilities, or activities of the 
    Secretary;
        ``(23) `demand' means--
            ``(A) an order to pay issued by the Secretary or the 
        applicable delegated State to a lessee or its designee (with 
        written notice to the lessee who designated the designee) that 
        has a reasonable basis to conclude that the obligation in the 
        amount of the demand is due and owing; or
            ``(B) a separate written request by a lessee or its 
        designee which asserts an obligation due the lessee or its 
        designee that provides a reasonable basis to conclude that the 
        obligation in the amount of the demand is due and owing, but 
        does not mean any royalty or production report, or any 
        information contained therein, required by the Secretary or a 
        delegated State;
        ``(24) `designee' means the person designated by a lessee 
    pursuant to section 102(a) of this Act, with such written 
    designation effective on the date such designation is received by 
    the Secretary and remaining in effect until the Secretary receives 
    notice in writing that the designation is modifiedor terminated;
        ``(25) `obligation' means--
            ``(A) any duty of the Secretary or, if applicable, a 
        delegated State--
                ``(i) to take oil or gas royalty in kind; or
                ``(ii) to pay, refund, offset, or credit monies 
            including (but not limited to)--

                    ``(I) the principal amount of any royalty, minimum 
                royalty, rental, bonus, net profit share or proceed of 
                sale; or
                    ``(II) any interest; and

            ``(B) any duty of a lessee or its designee (subject to the 
        provision of section 102(a) of this Act)--
                ``(i) to deliver oil or gas royalty in kind; or
                ``(ii) to pay, offset or credit monies including (but 
            not limited to)--

                    ``(I) the principal amount of any royalty, minimum 
                royalty, rental, bonus, net profit share or proceed of 
                sale;
                    ``(II) any interest;
                    ``(III) any penalty; or
                    ``(IV) any assessment,

            which arises from or relates to any lease administered by 
            the Secretary for, or any mineral leasing law related to, 
            the exploration, production and development of oil or gas 
            on Federal lands or the Outer Continental Shelf;
        ``(26) `order to pay' means a written order issued by the 
    Secretary or the applicable delegated State to a lessee or its 
    designee (with notice to the lessee who designated the designee) 
    which--
            ``(A) asserts a specific, definite, and quantified 
        obligation claimed to be due, and
            ``(B) specifically identifies the obligation by lease, 
        production month and monetary amount of such obligation claimed 
        to be due and ordered to be paid, as well as the reason or 
        reasons such obligation is claimed to be due, but such term 
        does not include any other communication or action by or on 
        behalf of the Secretary or a delegated State;
        ``(27) `overpayment' means any payment by a lessee or its 
    designee in excess of an amount legally required to be paid on an 
    obligation and includes the portion of any estimated payment for a 
    production month that is in excess of the royalties due for that 
    month;
        ``(28) `payment' means satisfaction, in whole or in part, of an 
    obligation;
        ``(29) `penalty' means a statutorily authorized civil fine 
    levied or imposed for a violation of this Act, any mineral leasing 
    law, or a term or provision of a lease administered by the 
    Secretary;
        ``(30) `refund' means the return of an overpayment;
        ``(31) `State concerned' means, with respect to a lease, a 
    State which receives a portion of royalties or other payments under 
    the mineral leasing laws from such lease;
        ``(32) `underpayment' means any payment or nonpayment by a 
    lessee or its designee that is less than the amount legally 
    required to be paid on an obligation; and
        ``(33) `United States' means the United States Government and 
    any department, agency, or instrumentality thereof, the several 
    States, the District of Columbia, and the territories of the United 
    States.''.

SEC. 3. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.

    (a) General Authority.--Section 205 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1735) is amended to read as 
follows:

``SEC. 205. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.

        ``(a) Upon written request of any State, the Secretary is 
    authorized to delegate, in accordance with the provisions of this 
    section, all or part of the authorities and responsibilities of the 
    Secretary under this Act to:
        ``(1) conduct inspections, audits, and investigations;
        ``(2) receive and process production and financial reports;
        ``(3) correct erroneous report data;
        ``(4) perform automated verification; and
        ``(5) issue demands, subpoenas, and orders to perform 
    restructured accounting, for royalty management enforcement 
    purposes,
to any State with respect to all Federal land within the State.
    ``(b) After notice and opportunity for a hearing, the Secretary is 
authorized to delegate such authorities and responsibilities granted 
under this section as the State has requested, if the Secretary finds 
that--
        ``(1) it is likely that the State will provide adequate 
    resources to achieve the purposes of this Act;
        ``(2) the State has demonstrated that it will effectively and 
    faithfully administer the rules and regulations of the Secretary 
    under this Act in accordance with the requirements of subsections 
    (c) and (d) of this section;
        ``(3) such delegation will not create an unreasonable burden on 
    any lessee;
        ``(4) the State agrees to adopt standardized reporting 
    procedures prescribed by the Secretary for royalty and production 
    accounting purposes, unless the State and all affected parties 
    (including the Secretary) otherwise agree;
        ``(5) the State agrees to follow and adhere to regulations and 
    guidelines issued by the Secretary pursuant to the mineral leasing 
    laws regarding valuation of production; and
        ``(6) where necessary for a State to have authority to carry 
    out and enforce a delegated activity, the State agrees to enact 
    such laws and promulgate such regulations as are consistent with 
    relevant Federal laws and regulations
with respect to the Federal lands within the State.
    ``(c) After notice and opportunity for hearing, the Secretary shall 
issue a ruling as to the consistency of a State's proposal with the 
provisions of this section and regulations under subsection (d) within 
90 days after submission of such proposal. In any unfavorable ruling, 
the Secretary shall set forth the reasons therefor and state whether 
the Secretary will agree to delegate to the State if the State meets 
the conditions set forth in such ruling.
    ``(d) After consultation with State authorities, the Secretary 
shall by rule promulgate, within 12 months after the date of enactment 
of this section, standards and regulations pertaining to the 
authorities and responsibilities to be delegated under subsection (a), 
including standards and regulations pertaining to--
        ``(1) audits to be performed;
        ``(2) records and accounts to be maintained;
        ``(3) reporting procedures to be required by States under this 
    section;
        ``(4) receipt and processing of production and financial 
    reports;
        ``(5) correction of erroneous report data;
        ``(6) performance of automated verification;
        ``(7) issuance of standards and guidelines in order to avoid 
    duplication of effort;
        ``(8) transmission of report data to the Secretary; and
        ``(9) issuance of demands, subpoenas, and orders to perform 
    restructured accounting, for royalty management enforcement 
    purposes.
Such standards and regulations shall be designed to provide reasonable 
assurance that a uniform and effective royalty management system will 
prevail among the States. The records and accounts under paragraph (2) 
shall be sufficient to allow the Secretary to monitor the performance 
of any State under this section.
    ``(e) If, after notice and opportunity for a hearing, the Secretary 
finds that any State to which any authority or responsibility of the 
Secretary has been delegated under this section is in violation of any 
requirement of this section or any rule thereunder, or that an 
affirmative finding by the Secretary under subsection (b) can no longer 
be made, the Secretary may revoke such delegation. If, after providing 
written notice to a delegated State and a reasonable opportunity to 
take corrective action requested by the Secretary, the Secretary 
determines that the State has failed to issue a demand or order to a 
Federal lessee within the State, that such failure may result in an 
underpayment of an obligation due the United States by such lessee, and 
that such underpayment may be uncollected without Secretarial 
intervention, the Secretary may issue such demand or order in 
accordance with the provisions of this Act prior to or absent the 
withdrawal of delegated authority.
    ``(f) Subject to appropriations, the Secretary shall compensate any 
State for those costs which may be necessary to carry out the delegated 
activities under this Section. Payment shall be made no less than every 
quarter during the fiscal year. Compensation to a State may not exceed 
the Secretary's reasonably anticipated expenditure for performance of 
such delegated activities by the Secretary. Such costs shall be 
allocable for the purposes of section 35(b) of the Act entitled `An act 
to promote the mining of coal, phosphate, oil, oil shale, gas and 
sodium on the public domain', approved February 25, 1920 (commonly 
known as the Mineral Leasing Act) (30 U.S.C. 191 (b)) to the 
administration and enforcement of laws providing for the leasing of any 
onshore lands or interests in land owned by the United States. Any 
further allocation of costs under section 35(b) made by the Secretary 
for oil and gas activities, other than those costs to compensate States 
for delegated activities under this Act, shall be only those costs 
associated with onshore oil and gas activities and may not include any 
duplication of costs allocated pursuant to the previous sentence. 
Nothing in this section affects the Secretary's authority to make 
allocations under section 35(b) for non-oil and gas mineral activities. 
All moneys received from sales, bonuses, rentals, royalties, 
assessments and interest, including money claimed to be due and owing 
pursuant to a delegation under this section, shall be payable and paid 
to the Treasury of the United States.
    ``(g) Any action of the Secretary to approve or disapprove a 
proposal submitted by a State under this section shall be subject to 
judicial review in the United States district court which includes the 
capital of the State submitting the proposal.
    ``(h) Any State operating pursuant to a delegation existing on the 
date of enactment of this Act may continue to operate under the terms 
and conditions of the delegation, except to the extent that a revision 
of the existing agreement is adopted pursuant to this section.''.
    (b) Clerical Amendment.--The item relating to section 205 in the 
table of contents in section 1 of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1701) is amendedto read as follows:
``Sec. 205. Delegation of royalty collections and related activities.''.

SEC. 4. SECRETARIAL AND DELEGATED STATES' ACTIONS AND 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. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION 
              PERIODS.

    ``(a) In General.--The respective duties, responsibilities, and 
activities with respect to a lease shall be performed by the Secretary, 
delegated States, and lessees or their designees in a timely manner.
    ``(b) Limitation Period.--
        ``(1) In general.--A judicial proceeding or demand which arises 
    from, or relates to an obligation, shall be commenced within seven 
    years from the date on which the obligation becomes due and if not 
    so commenced shall be barred. If commencement of a judicial 
    proceeding or demand for an obligation is barred by this section, 
    the Secretary, a delegated State, or a lessee or its designee (A) 
    shall not take any other or further action regarding that 
    obligation, including (but not limited to) the issuance of any 
    order, request, demand or other communication seeking any document, 
    accounting, determination, calculation, recalculation, payment, 
    principal, interest, assessment, or penalty or the initiation, 
    pursuit or completion of an audit with respect to that obligation; 
    and (B) shall not pursue any other equitable or legal remedy, 
    whether under statute or common law, with respect to an action on 
    or an enforcement of said obligation.
        ``(2) Rule of construction.--A judicial proceeding or demand 
    that is timely commenced under paragraph (1) against a designee 
    shall be considered timely commenced as to any lessee who is liable 
    pursuant to section 102(a) of this Act for the obligation that is 
    the subject of the judicial proceeding or demand.
        ``(3) Application of certain limitations.--The limitations set 
    forth in sections 2401, 2415, 2416, and 2462 of title 28, United 
    States Code, and section 42 of the Mineral Leasing Act (30 U.S.C. 
    226-2) shall not apply to any obligation to which this Act applies. 
    Section 3716 of title 31, United States Code, may be applied to an 
    obligation the enforcement of which is not barred by this Act, but 
    may not be applied to any obligation the enforcement of which is 
    barred by this Act.
    ``(c) Obligation Becomes Due.--
        ``(1) In general.--For purposes of this Act, an obligation 
    becomes due when the right to enforce the obligation is fixed.
        ``(2) Royalty obligations.--The right to enforce any royalty 
    obligation for any given production month for a lease is fixed for 
    purposes of this Act on the last day of the calendar month 
    following the month in which oil or gas is produced.
    ``(d) Tolling of Limitation Period.--The running of the limitation 
period under subsection (b) shall not be suspended, tolled, extended, 
or enlarged for any obligation for any reason by any action, including 
an action by the Secretary or a delegated State, other than the 
following:
        ``(1) Tolling agreement.--A written agreement executed during 
    the limitation period between the Secretary or a delegated State 
    and a lessee or its designee (with notice to the lessee who 
    designated the designee) shall toll the limitation period for the 
    amount of time during which the agreement is in effect.
        ``(2) Subpoena.--
            ``(A) The issuance of a subpoena to a lessee or its 
        designee (with notice to the lessee who designated the 
        designee, which notice shall not constitute a subpoena to the 
        lessee) in accordance with the provisions of subparagraph 
        (B)(i) shall toll the limitation period with respect to the 
        obligation which is the subject of a subpoena only for the 
        period beginning on the date the lessee or its designee 
        receives the subpoena and ending on the date on which (i) the 
        lessee or its designee has produced such subpoenaed records for 
        the subject obligation, (ii) the Secretary or a delegated State 
        receives written notice that the subpoenaed records for the 
        subject obligation are not in existence or are not in the 
        lessee's or its designee's possession or control, or (iii) a 
        court has determined in a final decision that such records are 
        not required to be produced, whichever occurs first.
            ``(B)(i) A subpoena for the purposes of this section which 
        requires a lessee or its designee to produce records necessary 
        to determine the proper reporting and payment of an obligation 
        due the Secretary may be issued only by an Assistant Secretary 
        of the Interior 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), or the 
        Director or Acting Director of the respective bureau or agency, 
        and may not be delegated to any other person. If a State has 
        been delegated authority pursuant to section 205, the State, 
        acting through the highest State official havingultimate 
authority over the collection of royalties from leases on Federal lands 
within the State, may issue such subpoena, but may not delegate such 
authority to any other person.
            ``(ii) A subpoena described in clause (i) may only be 
        issued against a lessee or its designee during the limitation 
        period provided in this section and only after the Secretary or 
        a delegated State has in writing requested the records from the 
        lessee or its designee related to the obligation which is the 
        subject of the subpoena and has determined that--
                ``(I) the lessee or its designee has failed to respond 
            within a reasonable period of time to the Secretary's or 
            the applicable delegated State's written request for such 
            records necessary for an audit, investigation or other 
            inquiry made in accordance with the Secretary's or such 
            delegated State's responsibilities under this Act; or
                ``(II) the lessee or its designee has in writing denied 
            the Secretary's or the applicable delegated State's written 
            request to produce such records in the lessee's or its 
            designee's possession or control necessary for an audit, 
            investigation or other inquiry made in accordance with the 
            Secretary's or such delegated State's responsibilities 
            under this Act; or
                ``(III) the lessee or its designee has unreasonably 
            delayed in producing records necessary for an audit, 
            investigation or other inquiry made in accordance with the 
            Secretary's or the applicable delegated State's 
            responsibilities under this Act after the Secretary's or 
            delegated State's written request.
            ``(C) In seeking records, the Secretary or the applicable 
        delegated State shall afford the lessee or its designee a 
        reasonable period of time after a written request by the 
        Secretary or such delegated State in which to provide such 
        records prior to the issuance of any subpoena.
        ``(3) Misrepresentation or concealment.--The intentional 
    misrepresentation or concealment of a material fact for the purpose 
    of evading the payment of an obligation in which case the 
    limitation period shall be tolled for the period of such 
    misrepresentation or such concealment.
        ``(4) Order to perform restructured accounting.--A)(i) The 
    issuance of a notice under subparagraph (D) that the lessee or its 
    designee has not substantially complied with the requirement to 
    perform a restructured accounting shall toll the limitation period 
    with respect to the obligation which is the subject of the notice 
    only for the period beginning on the date the lessee or its 
    designee receives the notice and ending 120 days after the date on 
    which (I) the Secretary or the applicable delegated State receives 
    written notice that the accounting or other requirement has been 
    performed, or (II) a court has determined in a final decision that 
    the lessee is not required to perform the accounting, whichever 
    occurs first.
        ``(ii) If the lessee or its designee initiates an 
    administrative appeal or judicial proceeding to contest an order to 
    perform a restructured accounting issued under subparagraph (B)(i), 
    the limitation period in subsection (b) shall be tolled from the 
    date the lessee or its designee received the order until a final, 
    nonappealable decision is issued in any such proceeding.
        ``(B)(i) The Secretary or the applicable delegated State may 
    issue an order to perform a restructured accounting to a lessee or 
    its designee when the Secretary or such delegated State determines 
    during an audit of a lessee or its designee that the lessee or its 
    designee should recalculate royalty due on an obligation based upon 
    the Secretary's or the delegated State's finding that the lessee or 
    its designee has made identified underpayments or overpayments 
    which are demonstrated by the Secretary or the delegated State to 
    be based upon repeated, systemic reporting errors for a significant 
    number of leases or a single lease for a significant number of 
    reporting months with the same type of error which constitutes a 
    pattern of violations and which are likely to result in either 
    significant underpayments or overpayments.
        ``(ii) The power of the Secretary to issue an order to perform 
    a restructured accounting may not be delegated below the most 
    senior career professional position having responsibility for the 
    royalty management program, which position is currently designated 
    as the `Associate Director for Royalty Management', and may not be 
    delegated to any other person. If a State has been delegated 
    authority pursuant to section 205 of this Act, the State, acting 
    through the highest ranking State official having ultimate 
    authority over the collection of royalties from leases on Federal 
    lands within the State, may issue such order to perform, which may 
    not be delegated to any other person. An order to perform a 
    restructured accounting shall--
            ``(I) be issued within a reasonable period of time from 
        when the audit identifies the systemic, reporting errors;
            ``(II) specify the reasons and factual bases for such 
        order;
            ``(III) be specifically identified as an `order to perform 
        a restructuredaccounting';
            ``(IV) provide the lessee or its designee a reasonable 
        period of time (but not less than 60 days) within which to 
        perform the restructured accounting; and
            ``(V) provide the lessee or its designee 60 days within 
        which to file an administrative appeal of the order to perform 
        a restructured accounting.
        ``(C) An order to perform a restructured accounting shall not 
    mean or be construed to include any other action by or on behalf of 
    the Secretary or a delegated State.
        ``(D) If a lessee or its designee fails to substantially comply 
    with the requirement to perform a restructured accounting pursuant 
    to this subsection, a notice shall be issued to the lessee or its 
    designee that the lessee or its designee has not substantially 
    complied with the requirements to perform a restructured 
    accounting. A lessee or its designee shall be given a reasonable 
    time within which to perform the restructured accounting. Such 
    notice may be issued under this section only by an Assistant 
    Secretary of the Interior 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 to any other person. If a State has been delegated 
    authority pursuant to section 205, the State, acting through the 
    highest State official having ultimate authority over the 
    collection of royalties from leases on Federal lands within the 
    State, may issue such notice, which may not be delegated to any 
    other person.
    ``(e) Termination of Limitations Period.--An action or an 
enforcement of an obligation by the Secretary or delegated State or a 
lessee or its designee shall be barred under this section prior to the 
running of the seven-year period provided in subsection (b) in the 
event--
        ``(1) the Secretary or a delegated State has notified the 
    lessee or its designee in writing that a time period is closed to 
    further audit; or
        ``(2) the Secretary or a delegated State and a lessee or its 
    designee have so agreed in writing.
For purposes of this subsection, notice to, or an agreement by, the 
designee shall be binding on any lessee who is liable pursuant to 
section 102(a) for obligations that are the subject of the notice or 
agreement.
    ``(f) Records Required for Determining Collections.--Records 
required pursuant to section 103 of this Act by the Secretary or any 
delegated State for the purpose of determining obligations due and 
compliance with any applicable mineral 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 demand may be 
commenced under subsection (b). If a judicial proceeding or demand is 
timely commenced, the 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 or the 
applicable delegated State authorizes in writing an earlier release of 
the requirement to maintain such records. Notwithstanding anything 
herein to the contrary, under no circumstance 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 
this section. In connection with any hearing, administrative 
proceeding, inquiry, investigation, or audit by the Secretary or a 
delegated State under this Act, the Secretary or the delegated State 
shall minimize the submission of multiple or redundant information and 
make a good faith effort to locate records previously submitted by a 
lessee or a designee to the Secretary or the delegated State, prior to 
requiring the lessee or the designee to provide such records.
    ``(g) Timely Collections.--In order to most effectively utilize 
resources available to the Secretary to maximize the collection of oil 
and gas receipts from lease obligations to the Treasury within the 
seven-year period of limitations, and consequently to maximize the 
State share of such receipts, the Secretary should not perform or 
require accounting, reporting, or audit activities if the Secretary and 
the State concerned determine that the cost of conducting or requiring 
the activity exceeds the expected amount to be collected by the 
activity, based on the most current 12 months of activity. This 
subsection shall not provide a defense to a demand or an order to 
perform a restructured accounting. To the maximum extent possible, the 
Secretary and delegated States shall reduce costs to the United States 
Treasury and the States by discontinuing requirements for unnecessary 
or duplicative data and other information, such as separate allowances 
and payor information, relating to obligations due. If the Secretary 
and the State concerned determine that collection will result sooner, 
the Secretary or the applicable delegated State may waive or forego 
interest in whole or in part.
    ``(h) Appeals and Final Agency Action.--
        ``(1) 33-month period.--Demands or orders issued by the 
    Secretary or a delegated State are subject to administrative appeal 
    in accordance with the regulations of the Secretary. No State shall 
    impose any conditions which would hinder a lessee's or its 
    designee's immediate appeal of an order to the Secretary or the 
    Secretary's designee. The Secretary shall issue a final decision in 
    any administrative proceeding, including any administrative 
    proceedings pending on the date of enactment of this section, 
    within 33 months from the date such proceeding was commenced or 33 
    months from the date of such enactment, whicheveris later. The 33-
month period may be extended by any period of time agreed upon in 
writing by the Secretary and the appellant.
        ``(2) Effect of failure to issue decision.--If no such decision 
    has been issued by the Secretary within the 33-month period 
    referred to in paragraph (1)--
            ``(A) the Secretary shall be deemed to have issued and 
        granted a decision in favor of the appellant as to any 
        nonmonetary obligation and any monetary obligation the 
        principal amount of which is less than $10,000; and
            ``(B) the Secretary shall be deemed to have issued a final 
        decision in favor of the Secretary, which decision shall be 
        deemed to affirm those issues for which the agency rendered a 
        decision prior to the end of such period, as to any monetary 
        obligation the principal amount of which is $10,000 or more, 
        and the appellant shall have a right to judicial review of such 
        deemed final decision in accordance with title 5 of the United 
        States Code.
    ``(i) Collections of Disputed Amounts Due.--To expedite collections 
relating to disputed obligations due within the seven-year period 
beginning on the date the obligation became due, the parties shall hold 
not less than one settlement consultation and the Secretary and the 
State concerned may take such action as is appropriate to compromise 
and settle a disputed obligation, including waiving or reducing 
interest and allowing offsetting of obligations among leases.
    ``(j) Enforcement of a Claim for Judicial Review.--In the event a 
demand subject to this section is properly and timely commenced, the 
obligation which is the subject of the demand may be enforced beyond 
the seven-year limitations period without being barred by this statute 
of limitations. In the event a demand subject to this section is 
properly and timely commenced, a judicial proceeding challenging the 
final agency action with respect to such demand shall be deemed timely 
so long as such judicial proceeding is commenced within 180 days from 
receipt of notice by the lessee or its designee of the final agency 
action.
    ``(k) Implementation of Final Decision.--In the event a judicial 
proceeding or demand subject to this section is timely commenced and 
thereafter the limitation period in this section lapses during the 
pendency of such proceeding, any party to such proceeding shall not be 
barred from taking such action as is required or necessary to implement 
a final unappealable judicial or administrative decision, including any 
action required or necessary to implement such decision by the recovery 
or recoupment of an underpayment or overpayment by means of refund or 
credit.
    ``(l) Stay of Payment Obligation Pending Review.--Any person 
ordered by the Secretary or a delegated State to pay any obligation 
(other than an assessment) shall be entitled to a stay of such payment 
without bond or other surety instrument pending an administrative or 
judicial proceeding if the person periodically demonstrates to the 
satisfaction of the Secretary that such person is financially solvent 
or otherwise able to pay the obligation. In the event the person is not 
able to demonstrate, the Secretary may require a bond or other surety 
instrument satisfactory to cover the obligation. Any person ordered by 
the Secretary or a delegated State to pay an assessment shall be 
entitled to a stay without bond or other surety instrument.''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) is 
amended by inserting after the item relating to section 114 the 
following new item:
``Sec.  115.  Secretarial and delegated States' actions and limitation 
          periods.''.

SEC. 5. 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 inserting after section 111 
the following:

``SEC. 111A. ADJUSTMENTS AND REFUNDS.

    ``(a) Adjustments to Royalties Paid to the Secretary or a Delegated 
State.--
        ``(1) If, during the adjustment period, a lessee or its 
    designee determines that an adjustment or refund request is 
    necessary to correct an underpayment or overpayment of an 
    obligation, the lessee or its designee shall make such adjustment 
    or request a refund within a reasonable period 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 or the applicable 
    delegated State of an adjustment.
        ``(2)(A) For any adjustment, the lessee or its designee shall 
    calculate and report the interest due attributable to such 
    adjustment at the same time the lessee or its designee adjusts the 
    principle amount of the subject obligation, except as provided by 
    subparagraph (B).
        ``(B) In the case of a lessee or its designee who determines 
    that subparagraph (A) would impose a hardship, the Secretary or 
    such delegated State shall calculate the interest due and notify 
    the lessee or its designee within a reasonable time of the amount 
    of interest due, unless such lessee or its designee elects to 
    calculate and report interest in accordance 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 or the applicable delegated State, as 
    appropriate, during an audit of the period which includes the 
    production month for which the adjustment is being made. If an 
    overpayment is identified during anaudit, then the Secretary or the 
applicable delegated State, as appropriate, shall allow a credit or 
refund in the amount of the overpayment.
        ``(4) For purposes of this section, the adjustment period for 
    any obligation shall be the six-year period following the date on 
    which an obligation became due. The adjustment period shall be 
    suspended, 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 sufficient 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 identify the overpayment for which 
        such refund is sought; and
            ``(D) provides the reasons why the payment was an 
        overpayment.
        ``(2) Payment by secretary of the treasury.--The Secretary 
    shall certify the amount of the refund to be paid under paragraph 
    (1) to the Secretary of the Treasury who shall make such refund. 
    Such refund shall be paid from amounts received as current receipts 
    from sales, bonuses, royalties (including interest charges 
    collected under this section) and rentals 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 refund attributable to any amounts previously disbursed to a 
    State, the Reclamation Fund, or any recipient prescribed by law 
    shall be deducted from the next disbursements to that recipient 
    made under the applicable law. Such amounts deducted from 
    subsequent disbursements shall be credited to miscellaneous 
    receipts in the Treasury.
        ``(3) Payment period.--A refund under this subsection shall be 
    paid or denied (with an explanation of the reasons for the denial) 
    within 120 days of the date on which the request for refund is 
    received by the Secretary. Such refund shall be subject to later 
    audit by the Secretary or the applicable delegated State and 
    subject to the provisions of this Act.
        ``(4) Prohibition against reduction of refunds or credits.--In 
    no event shall the Secretary or any delegated State directly or 
    indirectly claim or offset any amount or amounts against, or reduce 
    any refund or credit (or interest accrued thereon) by the amount of 
    any obligation the enforcement of which is barred by section 115 of 
    this Act.''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) is 
amended by inserting after the item relating to section 111 the 
following new item:
``Sec. 111A. Adjustments and refunds.''.

SEC. 6. ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES.

    (a) Lessee or Designee 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 following:
    ``(h) Interest shall be allowed and paid or credited 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, but determined without regard to the sentence 
following subparagraph (B) of section 6621(a)(1). Interest which has 
accrued 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 (including interest 
charges collected under this section) and rentals 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 previously 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 subsequent 
disbursements shall be credited to miscellaneous receipts in the 
Treasury.''.
    (b) Limitation on Interest.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982, as amended by subsection (a), 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 lessee or its designee for 
a given reporting month) was made for the sole purpose of receiving 
interest, interest shall 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 or its designee pays for a 
given reporting month (excluding payments for demands for obligations 
determined to be due as a result of judicial or administrative 
proceedings or agreed to be paid pursuant to settlement agreements) for 
the aggregate of all of its Federal leases exceeds 10 percent of the 
total royalties paid that month for those leases.''.
    (c) Estimated Payment.--Section 111 of the Federal Oil and Gas 
Royalty Management Actof 1982 (30 U.S.C. 1721), as amended by 
subsections (a) and (b), is further amended by adding at the end the 
following:
    ``(j) A lessee or its designee may make a payment for the 
approximate amount of royalties (hereinafter in this subsection 
`estimated payment') that would otherwise be due for such lease by the 
rate royalties are due for that lease. When an estimated payment is 
made, actual royalties are payable at the end of the month following 
the month in which the estimated payment is made. If the estimated 
payment was less than the amount of actual royalties due, interest is 
owned on the underpaid amount. If the estimated payment exceeds the 
actual royalties due, interest is owned on the overpayment. If the 
lessee or its designee makes a payment for such actual royalties, the 
lessee or its designee may apply the estimated payment to future 
royalties. Any estimated payment may be adjusted, recouped, or 
reinstated at any time by the lessee or its designee.''.
    (d) Volume Allocation of Oil and Gas Production.--Section 111 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
1721), as amended by subsections (a) through (c), is amended by adding 
at the end the following:
    ``(k)(1) Except as otherwise provided by this subsection--
        ``(A) a lessee or its designee of a lease in a unit or 
    communitization agreement which contains only Federal leases with 
    the same royalty rate and funds distribution shall 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 or its designee of a lease in any other unit or 
    communitization agreement shall report and pay royalties on oil and 
    gas production for each production month based on the volume of oil 
    and gas produced from such agreement and allocated to the lease in 
    accordance with the terms of the agreement; and
        ``(C) a lessee or its designee of a lease that is not contained 
    in a unit or communitization agreement shall 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.
    ``(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 allocated 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 or the delegated State for approval and make payments in 
accordance with such approved alternative method so long as such 
alternative method does not reduce the amount of the royalty 
obligation.
    ``(4) The Secretary or the delegated State shall grant an exception 
from the reporting and payment requirements for marginal properties 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 amount of oil and gas actually sold and the share 
of production allocated to the lease until the beginning of the month 
following such calendar year or portion thereof. Any additional 
royalties dues or overpaid royalties and associated interest shall be 
paid, refunded, or credited within six months after the end of each 
calendar year in which royalties are paid based on volumes of 
production sold. For the purpose of this subsection, the term `marginal 
property' means a lease that produces on average the combined 
equivalent of less than 15 barrels of oil per well per day or 90 
thousand cubic feet of gas per well per day, or a combination thereof, 
determined by dividing the average daily production of crude oil and 
natural gas from producing wells on such lease by the number of such 
wells, unless the Secretary, together with the State concerned, 
determines 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 royalties 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.''.
    (e) Production Allocation.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721), as amended by 
subsections (a) through (d), 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 determination. 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 determination is made.''.
    (f) New Assessment To Encourage Proper Royalty Payments.--
        (1) In general.--The Federal Oil and Gas Royalty Management Act 
    of 1982 (30 U.S.C. 1721), as amended by section 4(a), is further 
    amended by adding at the end the following:

``SEC. 116. ASSESSMENTS.

    ``Beginning eighteen months after the date of enactment of this 
section, to encourage proper royalty payment the Secretary or the 
delegated State shall impose assessments on a person who chronically 
submits erroneous reports under this Act. Assessments under this Act 
may only be issued as provided for in this section.''.
        (2) 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 115 the following new item:
``Sec. 116. Assessments.''.

    (g) Liability for Royalty Payments.--Section 102(a) of the Federal 
Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1712(a)) is 
amended to read as follows:
    ``(a) In order to increase receipts and achieve effective 
collections of royalty and other payments, a lessee who is required to 
make any royalty or other payment under a lease or under the mineral 
leasing laws, shall make such payments in the time and manner as may be 
specified by the Secretary or the applicable delegated State. A lessee 
may designate a person to make all or part of the payments due under a 
lease on the lessee's behalf and shall notify the Secretary or the 
applicable delegated State in writing of such designation, in which 
event said designated person may, in its own name, pay, offset or 
credit monies, make adjustments, request and receive refunds and submit 
reports with respect to payments required by the lessee. 
Notwithstanding any other provision of this Act to the contrary, a 
designee shall not be liable for any payment obligation under the 
lease. The person owning operating rights in a lease shall be primarily 
liable for its pro rata share of payment obligations under the lease. 
If the person owning the legal record title in a lease is other than 
the operating rights owner, the person owning the legal record title 
shall be secondarily liable for its pro rata share of such payment 
obligations under the lease.''.
    (h) Clerical Amendments.--(1) The heading of section 111 of the 
Federal Oil and Gas Royalty management Act of 1982 (30 U.S.C. 1721) is 
amended to read as follows:


        ``ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES''.

    (2) The item relating to section 111 in the table of contents in 
section 1 of such Act (30 U.S.C. 1701) is amended to read as follows:
``Sec. 111. Royalty terms and conditions, interest, and penalties.''.

SEC. 7. 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 6 of this Act, is 
further amended by adding at the end the following:

``SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.

    ``(a) Determination of Best Interests of State Concerned and the 
United States.--The Secretary and the State concerned, acting in the 
best interests of the United States and the State concerned to promote 
production, reduce administrative costs, and increase net receipts to 
the United States and the States, shall jointly determine, on a case by 
case basis, the amount of what marginal production from a lease or 
leases or well or wells, or parts thereof, shall be subject to a 
prepayment under subsection (b) or regulatory relief under subsection 
(c). If the State concerned does not consent, such prepayments or 
regulatory relief shall not be made available under this section for 
such marginal production: Provided, That if royalty payments from a 
lease or leases, or well or wells are not shared with any State, such 
determination shall be made solely by the Secretary.
    ``(b) Prepayment of Royalty.--
        ``(1) In general.--Notwithstanding the provisions of any lease 
    to the contrary, for any lease or leases or well or wells 
    identified by the Secretary and the State concerned pursuant to 
    subsection (a), the Secretary is authorized to accept a prepayment 
    for royalties in lieu of monthly royalty payments under the lease 
    for the remainder of the lease term if the affected lessee so 
    agrees. Any prepayment agreed to by the Secretary, State concerned 
    and lessee which is less than an average $500 per month in total 
    royalties shall be effectuated under this section not earlier than 
    two years after the date of enactment of this section and, any 
    prepayment which is greater than an average $500 per month in total 
    royalties shall be effectuated under this section not earlier than 
    three years after the date of enactment of this section. The 
    Secretary and the State concerned may condition their acceptance of 
    the prepayment authorized under this section on the lessee's 
    agreeing to such terms and conditions as the Secretary and the 
    State concerned deem appropriate and consistent with the purposes 
    of this Act. Such terms may--
            ``(A) provide for prepayment that does not result in a loss 
        of revenue to the United States in present value terms;
            ``(B) include provisions for receiving additional 
        prepayments or royalties for developments in the lease or 
        leases or well or wells that deviate significantly from the 
        assumptions and facts on which the valuation is determined; and
            ``(C) require the lessee or it designee to provide such 
        periodic production reports as may be necessary to allow the 
        Secretary and the State concerned to monitor production for the 
        purposes of subparagraph (B).
        ``(2) State share.--A prepayment under this section shall be 
    shared by the Secretary with any State or other recipient to the 
    same extent as any royalty payment for such lease.
        ``(3) Satisfaction of obligation.--Except as may be provided in 
    the terms and conditions established by the Secretary under 
    subsection (b), a lessee or its designee who makes a prepayment 
    under this section shall have satisfied in full the lessee's 
    obligation to pay royalty on the production stream sold from the 
    lease or leases or well or wells.
    ``(c) Alternative Accounting and Auditing Requirements.--Within one 
year after the date of the enactment of this section, the Secretary or 
the delegated State shall provide accounting, reporting, and auditing 
relief that will encourage lessees to continue to produce and develop 
properties subject to subsection (a): Provided, That such relief will 
only be available to lessees in a State that concurs, which concurrence 
is not required if royalty payments from the lease or leases or well or 
wells are not shared with any State. Prior to granting such relief, the 
Secretary and, if appropriate, the State concerned shall agree that the 
type of marginal wells and relief provided under this paragraph is in 
the best interest of the United States and, if appropriate, the State 
concerned.''.
    (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 116 the following new item:
``Sec. 117. Alternatives for marginal properties.''.

SEC. 8. APPLICABILITY.

    (a) FOGRMA.--With respect to Federal lands, sections 202 and 307 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1732 
and 1755), are no longer applicable. The applicability of those 
sections to Indian leases is not affected.
    (b) OCSLA.--Effective on the date of the enactment of this Act, 
section 10 of the Outer Continental Shelf Lands Act (43 U.S.C. 1339) is 
repealed.

SEC. 9. INDIAN LANDS.

    The amendments made by this Act shall not apply with respect to 
Indian lands, and the provisions of the Federal Oil and Gas Royalty 
Management Act of 1982 as in effect on the day before the date of 
enactment of this Act shall continue to apply after such date with 
respect to Indian lands.

SEC. 10. PRIVATE LANDS.

    This Act shall not apply to any privately owned minerals.

SEC. 11. EFFECTIVE DATE.

    Except as provided by section 115(h), section 111(h), section 
111(k)(5), and section 117 of the Federal Oil and Gas Royalty 
Management Act of 1982 (as added by this Act), this Act, and the 
amendments made by this Act, shall apply with respect to the production 
of oil and gas after the first day of the month following the date of 
the enactment of this Act.

SEC. 12. SAVINGS CLAUSE.

    Nothing in this Act shall be construed to give a State a property 
right or interest in any Federal lease or land.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.