[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2260 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 2260

To provide for a study by the National Academy of Engineering regarding 
improving the accuracy of collection of royalties on production of oil, 
 condensate, and natural gas under leases of Federal lands and Indian 
                     lands, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 21, 2011

 Mrs. Maloney (for herself, Mr. Hinchey, and Mr. Grijalva) introduced 
  the following bill; which was referred to the Committee on Natural 
                               Resources

_______________________________________________________________________

                                 A BILL


 
To provide for a study by the National Academy of Engineering regarding 
improving the accuracy of collection of royalties on production of oil, 
 condensate, and natural gas under leases of Federal lands and Indian 
                     lands, 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 ``Study of Ways to Improve the 
Accuracy of the Collection of Federal Oil, Condensate, and Natural Gas 
Royalties Act of 2011''.

SEC. 2. STUDY OF ACTIONS TO IMPROVE THE ACCURACY OF COLLECTION OF 
              FEDERAL OIL, CONDENSATE, AND NATURAL GAS ROYALTIES.

    The Secretary of the Interior shall seek to enter into an 
arrangement with the National Academy of Engineering under which the 
Academy, by not later than six months after the date of the enactment 
of this Act, shall study and report to the Secretary regarding whether 
the accuracy of collection of royalties on production of oil, 
condensate, and natural gas under leases of Federal lands (in eluding 
submerged and deep water lands) and Indian lands would be improved by 
any of the following:
            (1) Requiring the installation of digital meters, 
        calibrated at least monthly to an absolute zero value, for all 
        lands from which natural gas (including condensate) is produced 
        under such leases.
            (2) Requiring that--
                    (A) the size of every orifice plate on each natural 
                gas well operated under such leases be inspected at 
                least quarterly by the Secretary; and
                    (B) chipped orifice plates and wrong-sized orifice 
                plates be replaced immediately after those inspections 
                and reported to the Secretary for retroactive volume 
                measurement corrections and royalty payments with 
                interest of 8 percent compounded monthly.
            (3) Requiring that any plug valves that are in natural gas 
        gathering lines be removed and replaced with ball valves.
            (4) Requiring that--
                    (A) all meter runs should be opened for inspection 
                by the Secretary and the producer at all times; and
                    (B) any welding or closing of the meter runs 
                leading to the orifice plates should be prohibited 
                unless authorized by the Secretary.
            (5) Requiring the installation of straightening vanes 
        approximately 10 feet before natural gas enters each orifice 
        meter, including each master meter and each sales meter.
            (6) Requiring that all master meters be inspected and the 
        results of such inspections be made available to the Secretary 
        and the producers immediately.
            (7) Requiring that--
                    (A) all sampling of natural gas for heating content 
                analysis be performed monthly upstream of each natural 
                gas meter, including upstream of each master meter;
                    (B) records of such sampling and heating content 
                analysis be maintained by the purchaser and made 
                available to the Secretary and to the producer monthly;
                    (C) probes for such upstream sampling be installed 
                upstream within three feet of each natural gas meter;
                    (D) any oil and natural gas lease for which heat 
                content analysis is falsified shall be subject to 
                cancellation;
                    (E) natural gas sampling probes be located--
                            (i) upstream of the natural gas meter at 
                        all times;
                            (ii) within a few feet of the natural gas 
                        meter; and
                            (iii) after the natural gas goes through a 
                        Welker or Y-Z vanishing chamber; and
                    (F) temperature probes and testing probes be 
                located between the natural gas sampling probe and the 
                orifice of the natural gas meter.
            (8)(A) Reinstating the requirement to file Federal Energy 
        Regulatory Commission (FERC) Form 16 in April and September of 
        each year for every natural gas pipeline, including each 
        intrastate pipelines, in addition to the filing of FERC Form 2.
            (B) Requiring--
                    (i) use of such FERC Form 2 to create FERC Form 16 
                data for the years beginning April and September, 
                respectively, 1992, and for each year thereafter; and
                    (ii) filing with the Federal Energy Regulatory 
                Commission a FERC Form 16 for April and September that 
                is completed with such data back to April 1992.
            (9) Requiring that administrative jurisdiction over all 
        natural gas gathering lines, interstate pipelines, and 
        intrastate piplines revert immediately to the Federal Energy 
        Regulatory Commission.
            (10) Prohibiting the dilution of natural gas with inert 
        nitrogen or inert carbon dioxide gas for royalty determination, 
        sale, or resale at any point.
            (11) Requiring that both the measurement of the volume of 
        natural gas and the heating content analyses be reported only 
        on the basis of 14.73 PSI and 60 degrees Fahrenheit, regardless 
        of the elevation above sea level of such volume measurement and 
        heating content analysis, for both purchases and sales of 
        natural gas.
            (12) Prohibiting the construction of bypass pipes that go 
        around the natural gas meter, and imposing criminal penalties 
        for any such construction or subsequent removal including, but 
        not limited to, automatic cancellation of the lease.
            (13) Requiring that all natural gas sold to consumers have 
        a minimum BTU content of 960 at an atmospheric pressure of 
        14.73 PSI and be at a temperature of 60 degrees Fahrenheit, as 
        required by the State of Wyoming Public Utilities Commission.
            (14) Requiring that all natural gas sold in the USA will be 
        on a MMBTU basis with the BTU content adjusted for elevation 
        above sea level in higher altitudes. Thus all natural gas 
        meters must correct for BTU content in higher elevations 
        (altitudes).
            (15) Issuance by the Secretary of rules for the measurement 
        at the wellhead of the standard volume of natural gas produced, 
        based on independent industry standards such as those suggested 
        by the American Society of Testing Materials (ASTM).
            (16) Requiring use of the fundamental orifice meter mass 
        flow equation, as revised in 1990, for calculating the standard 
        volume of natural gas produced.
            (17) Requiring the use of Fpv in standard volume 
        measurement computations as described in the 1992 American Gas 
        Association Report No. 8 entitled Compressibility Factor of 
        Natural Gas and Other Related Hydrocarbon Gases.
            (18) Requiring that gathering lines must be constructed so 
        as to have as few angles and turns as possible, with a maximum 
        of three angles, before they connect with the natural gas 
        meter.
            (19) Requiring that for purposes of reporting the royalty 
        value of natural gas, condensate, oil, and associated natural 
        gases, such royalty value must be based upon the natural gas's, 
        condensate's, oil's, and associated natural gases' arm's 
        length, independent market value, as reported in independent, 
        respected market reports such as Platts or Bloombergs, and not 
        based upon industry-controlled posted prices.
            (20) Requiring that royalties be paid on all the condensate 
        recovered through purging gathering lines and pipelines with a 
        cone-shaped device to push out condensate (popularly referred 
        to as a pig) and on condensate recovered from separators, 
        dehydrators, and processing plants.
            (21) Requiring that all royalty deductions for dehydration, 
        treating, natural gas gathering, compression, transportation, 
        marketing, removal of impurities such as carbon dioxide 
        (CO<INF>2</INF>), nitrogen (N<INF>2</INF>), hydrogen sulphide 
        (H<INF>2</INF>S), mercaptain (HS), helium (He), and other 
        similar charges on natural gas, condensate, and oil produced 
        under such leases that are now in existence be eliminated.
            (22) Requiring that at all times--
                    (A) the quantity, quality, and value obtained for 
                natural gas liquids (condensate) be reported to the 
                Secretary; and
                    (B) such reported value be based on fair 
                independent arm's length market value.
            (23) Issuance by the Secretary of regulations that prohibit 
        venting or flaring (or both) of natural gas in cases for which 
        technology exists to reasonably prevent it, strict enforcement 
        of such prohibitions, and cancellation of leases for 
        violations.
            (24) Requiring lessees to pay full royalties on any natural 
        gas that is vented, flared, or otherwise avoidably lost.
            (25)(A) Requiring payment of royalties on carbon dioxide at 
        the wellhead used for tertiary oil recovery from depleted oil 
        fields on the basis of 5 percent of the West Texas Intermediate 
        crude oil fair market price to be used for one MCF (1,000 cubic 
        feet) of carbon dioxide gas.
            (B) Requiring that--
                    (i) carbon dioxide used for edible purposes should 
                be subjected to a royalty per thousand cubic feet (MCF) 
                on the basis of the sales price at the downstream 
                delivery point without deducting for removal of 
                impurities, processing, transportation, and marketing 
                costs;
                    (ii) such price to apply with respect to gaseous 
                forms, liquid forms, and solid (dry ice) forms of 
                carbon dioxide converted to equivalent MCF; and
                    (iii) such royalty to apply with respect to both a 
                direct producer of carbon dioxide and purchases of 
                carbon dioxide from another person that is either 
                affiliated or not affiliated with the purchaser.
            (26) Requiring that--
                    (A) all carbon dioxide produced from Federal and 
                Indian leases be analyzed for carcinogenic benzene; and
                    (B) benzene produced with such carbon dioxide must 
                be filtered out and removed safely as necessary to 
                prevent harm to the environment subjected to such 
                benzene content, in order to create a maximum 
                permissible level (MPL) of 5 parts per billion.
            (27) Requiring that--
                    (A) royalties be paid on the fair market value of 
                nitrogen extracted from such leases that is used 
                industrially for well stimulation, helium recovery, or 
                other uses; and
                    (B) royalties be paid on the fair market value of 
                ultimately processed helium recovered from such leases.
            (28) Allowing only 5 percent of the value of the elemental 
        sulfur recovered during processing of hydrogen sulfide gas from 
        such leases to be deducted for processing costs in determining 
        royalty payments.
            (29) Requiring that all heating content analysis of natural 
        gas be conducted to a minimum level of C<INF>15</INF>.
            (30) Eliminating artificial conversion from dry BTU to wet 
        BTU, and requiring that natural gas be analyzed and royalties 
        paid for at all times on the basis of dry BTU only.
            (31) Requiring that natural gas sampling be performed at 
        all times with a floating piston cylinder container at the same 
        pressure intake as the pressure of the natural gas gathering 
        line.
            (32) Requiring use of natural gas filters with a minimum of 
        10 microns, and preferably 15 microns, both in the intake to 
        natural gas sampling containers and in the exit from the 
        natural gas sampling containers into the chromatograph.
            (33) Mandate the use of a Quad Unit for both portable and 
        stationary chromatographs in order to correct for the presence 
        of nitrogen and oxygen, if any, in certain natural gas streams.
            (34) Require the calibration of all chromatograph equipment 
        every three months and the use of only American Gas 
        Association-approved standard comparison containers for such 
        calibration.
            (35) Requiring that natural gas stored during the summer 
        period and marketed during the winter period--
                    (A) be sold on the basis of the purchase price 
                minus a maximum of $0.50 per MMBTU storage charges; or
                    (B) be subject to payment of royalties on the basis 
                of winter sales price minus $0.50 per MMBTU.
            (36) Requiring payment of royalties on any such natural gas 
        stored on Federal or Indian lands on the basis of corresponding 
        storage charges for the use of Federal or Indian lands, 
        respectively, for such storage service.
            (37) Imposing penalties for the intentional nonpayment of 
        royalties for natural gas liquids recovered--
                    (A) from purging of natural gas gathering lines and 
                natural gas pipelines; or
                    (B) from field separators, dehydrators, and 
                processing plants,
        including cancellation of oil and natural gas leases and 
        criminal penalties.
            (38) Requiring that the separator, dehydrator, and natural 
        gas meter be located within 100 feet of each natural gas 
        wellhead.
            (39) Requiring that BTU heating content analysis be 
        performed when the natural gas is at a temperature of 140 to 
        150 degrees Fahrenheit at all times, as required by the 
        American Gas Association (AGA) regulations.
            (40) Requiring that heating content analysis and volume 
        measurements are identical at the sales point to what they are 
        at the purchase point, after allowing for a small volume for 
        leakage in old pipes, but with no allowance for heating content 
        discrepancy.
            (41) Requiring that all natural gas produced under such 
        leases be at all times sold to public, industrial, storage, and 
        private customers only on a MMBTU basis of MCF (1000 CF) x MBTU 
        (1000 BTU).
            (42) Verification by the Secretary that the specific 
        gravity of natural gas produced under such leases, as measured 
        at the meter run, corresponds to the heating content analysis 
        data for such natural gas, in accordance with the Natural Gas 
        Processors Association Publication 2145-71(1), entitled 
        ``Physical Constants Of Paraffin Hydrocarbons And Other 
        Components Of Natural Gas'', and reporting of all discrepancies 
        immediately.
            (43) Prohibiting all deductions on royalty payments for 
        marketing of natural gas, condensate, and oil by an affiliate 
        or agent.
            (44) Requiring that all standards of the American Petroleum 
        Institute, the American Gas Association, the Gas Processors 
        Association, and the American Society of Testing Materials, 
        Minerals Management Service Order No. 5, and all other Minerals 
        Management Service orders be faithfully observed and applied, 
        and willful misconduct of such standards and orders be subject 
        to oil and gas lease cancellation.
            (45) Requiring that all oil and condensate produced from 
        Federal and Indian lands must be stored and measured in 
        cylindrical tanks, and prohibiting any distortion, such as 
        squeezing or bending of a storage tank, that hinders the true 
        and honest measurement of volume of condensate and oil.

SEC. 3. REVIEW OF ROYALTY PAYMENTS.

    The Secretary of the Interior, subject to the availability of 
appropriations, shall award a contract under which the contractor 
shall--
            (1) compare royalty payments made under Federal oil and gas 
        lease provisions for covered lands against data supplied to the 
        Federal Energy Regulatory Commission;
            (2) make such comparison retroactive to June 1, 1974, by 
        integrating existing natural gas analog charts or digital meter 
        results (or both) for each natural gas meter and multiplying 
        the corresponding standard volume results by heating content 
        analysis obtained from corresponding specific gravity 
        measurement relationship;
            (3) determine whether the correct production standard 
        volume and total heating content analysis was used to calculate 
        such payments; and
            (4) determine whether such payments were adequate under the 
        terms of such oil and gas leases, by among other procedures 
        comparing the reported royalty values with respected published 
        market price reports, such as Platts or Bloombergs.

SEC. 4. DEFINITIONS.

    In this Act:
            (1) Covered lands.--The term ``covered lands'' means--
                    (A) all Federal onshore lands and offshore lands 
                that are under the administrative jurisdiction of the 
                Department of the Interior for purposes of oil and gas 
                leasing; and
                    (B) Indian onshore lands.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.
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