[Congressional Record Volume 152, Number 86 (Wednesday, June 28, 2006)]
[House]
[Pages H4792-H4793]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PRIVATE SECTOR MANDATE ANALYSIS FOR H.R. 4761
The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from California (Mr. Pombo) is recognized for 5 minutes.
Mr. POMBO. Mr. Speaker, I am filing in the House a copy of the
private sector mandate analysis for H.R. 4761, the Deep Ocean Energy
Resources Act of 2006. This analysis was not included in the cost
estimate prepared for the Committee on Resources' report on the bill.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 28, 2006.
Hon. Richard W. Pombo,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed estimate of the impacts of private-
sector mandates in H.R. 4761, the Deep Ocean Energy Resources
Act of 2006. CBO's analysis of the federal costs and
intergovernmental impact of H.R. 4761 was transmitted on June
26, 2006.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Tyler
Kruzich.
Sincerely,
Donald B. Marron,
Acting Director.
H.R. 4761--Deep Ocean Energy Resources Act of 2006
Summary: H.R. 4761 would make several changes to programs
related to the development of federally-owned resources,
particularly oil and natural gas production on the Outer
Continental Shelf (OCS). The bill would impose new
``conservation of resources'' fees on oil and natural gas
production on certain deep-water acreage, as well as on all
deep-water acreage that is not in production. At the same
time, the bill would make additional areas of the OCS
available for lease for oil and natural gas production. It
also would change some of the terms of existing leases to the
benefit of the lessees.
CBO estimates that, if the bill were enacted, private
entities would make additional payments to the government
totaling about $12.5 billion over the 2007-2016 period. It is
unclear whether those payments would be the result of new
mandates as defined in the Unfunded Reform Mandates Act
(UMRA).
Private-sector mandates contained in the bill: H.R. 4761
would establish a set of ``conservation of resources'' fees
for certain leaseholders. Section 6 would amend the Outer
Continental Shelf Lands Act to require that the Department of
the Interior issue regulations establishing a ``conservation
of resources'' fee set at $9 per barrel for oil and $1.25 per
million Btu for natural gas on production from certain leased
acreage. This fee would effectively apply to certain deep-
water leases entered into in 1998 and 1999 that provided
royalty relief regardless of the market price of oil or gas.
Those leaseholders could avoid the fee, though, if they
request that the Secretary of the Interior renegotiate the
royalty relief provisions of their original leases so that
they would pay royalties on oil and gas production when
prices exceed $40.50 per barrel of oil and $6.75 per million
Btu of natural gas (both prices in 2006 dollars). The
Department of the Interior also would be required to issue
regulations establishing a ``conservation of resources''
fee on all acreage that is not in production for both new
and existing leases. The bill would direct the Secretary
to set that fee at no less than $1 per acre and no more
than $4 per acre. Both fees would apply retroactively to
volumes produced since October 1, 2005.
CBO estimates that leaseholders affected by the fee on
wells currently in production would pay an additional $11.4
billion over the next 10 years. assuming most leaseholders
opt to pay royalties under a renegotiated lease instead of
the proposed fee. The ``conservation of resources'' fee on
leased acreage that is not in production would cost the
private sector an estimated $1.1 billion over the
[[Page H4793]]
next 10 years. These costs to the private sector are equal to
the fees that would be collected by the federal government,
as reported in CBO's federal cost estimate of H.R. 4761
released on June 26, 2006.
It is, however, unclear whether these fees are mandates as
defined in UMRA. The fees would apply to existing deep-water
leases that include a standard provision providing that they
are subject to ``all regulations issued pursuant to [the
Outer Continental Shelf Lands Act] in the future which
provide for the prevention of waste and conservation of the
natural resources of the Outer Continental Shelf and the
protection of correlative rights therein.'' Excluded from
UMRA's definition of ``federal private-sector mandate'' are
duties ``arising from participation in a voluntary federal
program.'' Therefore, CBO considers any requirements that are
imposed pursuant to a voluntary contract with the federal
government, such as a deep-water lease, not to be private-
sector mandates. It is unclear whether the imposition of
``conservation of resources'' fees is so clearly contemplated
by the existing lease agreements that it can be said to have
been voluntarily accepted by the leaseholders and therefore
is not a mandate under UMRA. If the fees do not constitute
pre-existing duties under the leases, they would represent
new enforceable duties imposed by H.R. 4761 and would be
mandates under UMRA.
The bill contains other changes in the financial terms of
oil and gas leases that would benefit the private sector.
Under the bill, the Secretary of the Interior would offer
some OCS areas for leasing that otherwise may not be leased
over the next 10 years under current policies. Section 17
would direct the Secretary of the Interior to repurchase and
cancel certain federal leases and to compensate the lessee
for the amount that the lessee would receive in a restitution
case for material breach of contract. Also, some terms of
existing leases would be changed to the benefit of
leaseholders.
Previous CBO estimate: CBO's analysis of the federal costs
and intergovernmental impact of H.R. 4761 was transmitted on
June 26, 2006.
Estimate Prepared by: Tyler Kruzich.
Estimate approved by: Joseph Kile, Assistant Director for
Microeconomic Studies.
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