[Congressional Record (Bound Edition), Volume 145 (1999), Part 4]
[Extensions of Remarks]
[Pages 5657-5658]
[From the U.S. Government Publishing Office, www.gpo.gov]




 INTRODUCTION OF LEGISLATION TO INCREASE PENALTIES FOR FALSE REPORTING 
     AND INACCURATE ROYALTY PAYMENTS ON FEDERAL OIL AND GAS LEASES

                                 ______
                                 

                           HON. GEORGE MILLER

                             of california

                    in the house of representatives

                       Wednesday, March 24, 1999

  Mr. GEORGE MILLER of California. Mr. Speaker, American taxpayers are 
being systematically cheated out of hundreds of millions of dollars by 
oil companies that do not pay the correct amount of royalties on the 
oil and gas they produce from public lands.
  We can see evidence of this fraudulent behavior in several 
Congressional investigations, the Department of Justice litigation and 
a Clinton Administration Interagency Task Force report. Additionally, 
the Justice Department intervened in 8 of 19 qui tam cases filed by 
private individuals alleging hundreds of millions of dollars underpaid 
to the federal government. One company (Mobil) has settled with the 
federal government for $45 million. In addition, States (including 
Alaska, California, Alabama, Louisiana and Texas) have brought similar 
lawsuits that have been settled for almost $3 billion. The Interior 
Department is collecting more than $275 million on underpayments.
  To correct the underlying problem, the Department of the Interior has 
tried--unsuccessfully--for the past three years to revise its rules to 
make it more difficult for oil producers to avoid paying accurate 
royalties. The proposed regulations would clarify long standing legal 
requirements requiring the industry's responsibility to pay the cost of 
marketing the public's oil and gas. But some oil producers have been 
systematically deducting those costs from the amounts they owe 
taxpayers. Under the new rules, these producers would be required to 
pay the correct amount--based on real-market sales--to the American 
people who own the oil and gas.
  Instead of supporting this necessary corrective action, however, 
Congress has enacted legislative riders preventing the implementation 
of the new rules at a cost of more than $60 million a year, most of 
which would go to fund public education. The Senate is poised to extend 
this travesty on the Emergency Supplemental Appropriations bill, and 
the House is expected to go along in Conference Committee. Taxpayers 
should be distressed that Congress would rather side with industry 
rather than assure fair market value on the public's natural resources.

[[Page 5658]]

  This larceny has gone on too long. It is time for the Congress to 
consider legislation that will assure prompt and accurate payment of 
royalties instead of providing cover to that portion of the industry 
that wants to shortchange taxpayers on their resources we all own.
  That is why I am introducing legislation today that will impose a 
penalty of treble damages on any producer who chronically undervalues 
royalty payments. If industry will not pay the correct amount 
voluntarily and fights efforts to issue legitimate rules to safeguard 
the public, then industry must know that abusers, when caught, will be 
punished.
  For those in the industry who abide by the rules and pay the correct 
amount, this legislation has no effect. But on those who deceive and 
delay, this legislation will mean serious punishment.
  This bill will require under payors to pay three times the amount 
they should have paid plus a $25,000 civil penalty for each violation. 
In addition, lessees found guilty of chronic repeated failure to pay 
correctly would be subject to an additional civil penalty three times 
the amount owed for a single violation. Finally, the bill would require 
the federal government to share such sums collected under the penalty 
provisions with the State in which the violation occurred, as happens 
with royalty payments overall.
  This bill will not affect responsible companies in the oil and gas 
sector. Nevertheless, we must draw a bright line for companies that 
deliberately and repeatedly withhold revenues to the taxpaying public. 
Unfortunately, there is a history of underpayments in this field that 
requires a strong legislative response. I would hope the Congress ends 
its practice of ignoring these underpayments and instead takes actions 
on this legislation to assure that taxpayers receive the royalties they 
are due.

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