[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1975 Reported in House (RH)]
Union Calendar No. 341
104th CONGRESS
2d Session
H. R. 1975
[Report No. 104-667]
_______________________________________________________________________
A BILL
To improve the management of royalties from Federal and Outer
Continental Shelf oil and gas leases, and for other purposes.
_______________________________________________________________________
July 11, 1996
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
Union Calendar No. 341
104th CONGRESS
2d Session
H. R. 1975
[Report No. 104-667]
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
Committee on Resources
July 11, 1996
Additional sponsors: Mr. Cremeans, Mr. Thornberry, Mr. Ortiz, Mr.
Radanovich, Mr. Hayes, and Mr. Ehrlich
July 11, 1996
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on June
30, 1995]
_______________________________________________________________________
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 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,
crossclaim, 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) `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;
``(23) `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 modified or
terminated;
``(24) `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 provisions 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;
``(25) `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;
``(26) `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;
``(27) `payment' means satisfaction, in whole or in part,
of an obligation;
``(28) `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;
``(29) `refund' means the return of an overpayment by the
drawing of funds from the United States Treasury;
``(30) `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;
``(31) `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
``(32) `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) State Proposal.--A State may submit to the Secretary a
proposal to perform and enforce all or part of the authorities and
responsibilities of the Secretary under this Act to conduct and enforce
royalty collections and related activities, including audits,
inspections, investigations, production and financial reports,
correction of erroneous report data, automated verification, demands,
subpoenas, orders to perform restructured accounting (as defined in
this Act), production accountability, with respect to all Federal
leases within that State.
``(b) Demonstration of State Ability.--In the proposal under
subsection (a), the State shall demonstrate the following:
``(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 or
subsection (c).
``(3) Such delegation will not create an unreasonable
burden on the lessees within the State.
``(4) The State agrees to adopt standardized reporting
procedures prescribed by the Secretary, unless the State and
all affected parties otherwise agree.
``(5) The State agrees to follow and adhere to regulations
issued pursuant to the mineral leasing laws regarding valuation
of production.
``(6) The State has enacted laws and promulgated
regulations consistent with relevant Federal laws and
regulations.
``(7) The State has shown that delegation of the
authorities and responsibilities under this Act will result in
a cost-savings to the United States.
``(c) Regulations.--After consultation with the States concerned,
the Secretary shall by rule promulgate standards within 18 months after
the date of enactment of this section pertaining to authorities and
responsibilities under subsection (a), including standards pertaining
to the royalty collections and related activities enumerated in
subsection (a). Such standards shall be designed to provide reasonable
assurance that uniformity and effectiveness will prevail among the
States, that State participation will ensue in the development of
procedures and policies affecting the delegated activity, and that
reasonable flexibility will be provided to a State to perform any
delegated authority or responsibility in a more efficient and cost-
effective manner. The records and accounts maintained pursuant to such
regulations shall be sufficient to allow the Secretary to monitor the
performance of any State under this section. Such standards shall, to
the maximum extent possible, prevent duplication by the Secretary of
any activity delegated to a State for all Federal land within a State.
``(d) Delegation.--
``(1) Preliminary approval or disapproval by secretary.--
``(A) Review.--The Secretary shall review a State's
proposal as to the consistency of such proposal with
subsections (b) and (c) and regulations under
subsection (c).
``(B) Decision.--The Secretary shall issue a
preliminary approval or disapproval as to the
consistency of a State's proposal with subsections (b)
and (c) and regulations under subsection (c) within six
months after submission of such proposal. If the
Secretary disapproves any State proposal in whole or in
part, he shall notify the State in writing of his
decision and set forth in detail the reasons therefore
and state whether he will agree to delegate to the
State if the State meets the conditions set forth in
the disapproval.
``(C) Resubmission.--The State shall have 60 days
in which to resubmit a revised State proposal or
portion thereof. The Secretary shall approve or
disapprove the resubmitted State proposal or portion
thereof within 60 days from the date of resubmission.
``(2) Delegation.--After notice and opportunity for a
public hearing, if the Secretary determines that a State has
satisfied the conditions contained in a preliminary ruling and
approves the State's proposal, the State shall assume and
perform such activities and responsibilities pursuant to such
approval. The provisions for delegation shall be set forth in a
delegation agreement between the Secretary and the State within
90 days after the notice and hearing. The agreement may be
amended from time to time to take into account new standards
and procedures affecting the delegated activity. Under any such
agreement, the Secretary and the State shall share oil or gas
information.
``(3) Federal intervention; withdrawal of authority.--
``(A) Secretarial intervention.--If after providing
written notice to a delegated State (with a copy to the
lessee or its designee) 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 will result in an underpayment of an
obligation due the United States by such lessee, and
that such underpayment will 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 the
delegated activity.
``(B) Withdrawal of delegated activity.--Whenever
the Secretary determines after public hearing that a
State is not performing the delegated activity
authorized under this section in accordance with
requirements of this section, the Secretary shall
provide written notice, together with the reasons
therefor, to the State and, if corrective action is not
taken within a reasonable time, not to exceed 90 days,
the Secretary shall withdraw authorization of such
delegated activity and take the necessary actions to
administer and enforce such withdrawn activity.
``(4) Court action.--The State may bring an action in the
Federal district court in a judicial district in which a
portion of the State is located if--
``(A) the Secretary does not agree to delegate the
requested activities, or
``(B) the Secretary withdraws an activity under
paragraph (3)(B).
``(e) Savings Provision.--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, subject to
the requirements of subsection (i), except to the extent that a
revision of the existing agreement is adopted pursuant to this section.
``(f) State Action.--With respect to enforcement of an obligation
under this Act, a State bringing an action under this section shall
enjoy no greater rights than the Secretary enjoys under this Act.
``(g) Receipts.--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 shall 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. The Secretary shall
compensate any State in the next succeeding fiscal year for the
aggregate amount of such costs incurred but not compensated due to such
allocation for the current fiscal year. 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. If a State's cost for actions taken under a delegated activity
is subject to such section 35(b), the Secretary shall not charge the
State under such section 35(b) for the Secretary's costs for taking the
same actions under such activity.''.
(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 amended to 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, 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 elected State official having
ultimate 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 such 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 a 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 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 restructured accounting';
``(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 communication or
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 elected
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 may not perform or require
accounting, reporting, or audit activities if the Secretary and the
State concerned determines 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. 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, whichever is 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 so 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.--
``(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 principal 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 an audit, 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 an overpayment may be applied to reduce an underpayment
(including any interest thereon). 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 not be paid on the excessive amount of such
overpayment. For purposes of this Act, an `excessive overpayment' shall
be the amount that any overpayment a lessee 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 Act of 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
date 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
owed on the underpaid amount. If the estimated payment exceeds the
actual royalties due, interest is owed 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 due or overpaid royalties and associated interest shall be
paid, refunded, or credited within six months after the end of each
calendar year in which 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 expeditiously issue all determinations of
allocations of production for units and communitization agreements of a
request for determination. If the Secretary or the delegated State
fails to issue a determination within a reasonable period, the
Secretary shall waive interest due on obligations subject to the
determination from the date the request was received 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.
``Upon 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 is 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 its 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 from the lease or leases or well or wells is
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. REPEALS.
(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. Such inapplicability shall not
affect cooperative agreements involving Indian tribes or Indian lands.
(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 and repeals 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(f), 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.