[Congressional Record Volume 141, Number 109 (Friday, June 30, 1995)]
[Extensions of Remarks]
[Page E1385]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


   FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1995

                                 ______


                            HON. KEN CALVERT

                             of california

                    in the house of representatives

                          Friday, June 30, 1995
  Mr. CALVERT. Mr. Speaker, today I am introducing the Federal Oil and 
Gas Royalty Simplification and Fairness Act of 1995. This bill amends 
the Federal Oil and Gas Royalty Management Act with respect to leases 
of Federal lands and the Outer Continental Shelf [OCS], but does not 
affect leases on Indian lands. the goal of my legislation is to 
establish certainty in procedural matters for royalty payors in their 
dealings with the Department of the Interior, eliminate certain 
burdensome reporting requirements and simplify others so as to 
streamline the royalty management program and provide for the equitable 
collection of royalties.
  Approximately 80 percent of the nearly $1 billion annual Federal 
onshore mineral revenues are generated from oil and gas royalties, as 
is nearly all of the $3 billion collected annually from OCS lessees. 
Obviously, the Nation benefits from this revenue stream and it's in our 
best interest to maintain a royalty system that encourages private 
industry to participate in onshore and offshore oil and gas 
development, where appropriate.
  But, Mr. Speaker, a serious shortcoming for the industry today is 
that effectively there is no statute of limitations concerning the 
Federal Government's auditing of royalty payments. This means that an 
oil and gas producer's books are never closed out and the Department of 
the Interior may inquire into royalties owed on production from many 
decades ago. While the DOI agency charged with such auditing, the 
Minerals Management Service [MMS], has worked toward a policy of 
closing out audits within a 6-year period, the Government is not now 
statutorily required to meet that goal. The Fairness Act would do so 
prospectively, that is, for production from the date of enactment 
forward the Secretary of the Interior would be barred from bringing 
actions against lessees 6 years after the obligation to pay royalty 
accrues. Of course, the time limitation does not run where fraud is 
alleged, nor when tolling agreements are reached by the parties.
  Another inequitable provision of current law which the Simplification 
and Fairness Act addresses is the requirement that interest be paid by 
lessees who have underpaid their royalties, yet the Government does not 
pay interest on overpayments. My bill establishes reciprocity with 
respect to interest payments, but first requires a royalty payor--and 
the Secretary--to ``cross-net'' royalty overpayments against 
underpayments among all one's public domain or acquired lands leases 
within any State or collectively for OCS leases. This will effectively 
reduce interest obligations the Federal Government would owe on 
overpayments and provide the industry with a mechanism to simplify 
their procedures within each State in which they do business on Federal 
leases.
  Other provisions of the Simplification and Fairness Act grant relief 
for small producers who pay royalty out-of-pocket, provide enforcement 
and compliance relief for producers of de minimis amounts of oil and 
gas, streamline onerous and costly reporting requirements and thereby 
reduce the Federal Government's cost of royalty accounting without loss 
of revenue to the U.S. Treasury nor to the States which share in the 
onshore mineral leasing revenues.
  Mr. Speaker, I urge my colleagues to cosponsor the Federal Oil and 
Gas Royalty Simplification and Fairness Act of 1995. Let's provide 
certainty for our domestic industry in its dealing with the Department 
of the Interior and establish an equitable royalty system for lessor 
and lessee alike.


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