[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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