[Senate Report 104-260]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 394
104th Congress                                                   Report
                                 SENATE

 2d Session                                                     104-260
_______________________________________________________________________


 
  FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1995

                                _______


                  May 9, 1996.--Ordered to be printed

_______________________________________________________________________


  Mr. Murkowski, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1014]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 1014) to improve the management of 
royalties from Federal and Outer Continental Shelf oil and gas 
leases, and for other purposes, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill, as amended, do pass.
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996''.

SEC. 2. DEFINITIONS.

    Section 3 of the Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.) is amended--
          (1) by amending paragraph (7) to read as follows:
          ``(7) `lessee' means any person to whom the United States 
        issues an oil and gas lease or any person to whom operating 
        rights in a lease have been assigned;''; and
          (2) by striking ``and'' at the end of paragraph (15), by 
        striking the period at the end of paragraph (16) and inserting 
        a semicolon, and by adding at the end the following:
          ``(17) `adjustment' means an amendment to a previously filed 
        report on an obligation, and any additional payment or credit, 
        if any, applicable thereto, to rectify an underpayment or 
        overpayment on an obligation;
          ``(18) `administrative proceeding' means any Department of 
        the Interior agency process in which a demand, decision or 
        order issued by the Secretary or a delegated State is subject 
        to appeal or has been appealed;
          ``(19) `assessment' means any fee or charge levied or imposed 
        by the Secretary or a delegated State other than--
                  ``(A) the principal amount of any royalty, minimum 
                royalty, rental, bonus, net profit share or proceed of 
                sale;
                  ``(B) any interest; or
                  ``(C) any civil or criminal penalty;
          ``(20) `commence' means--
                  ``(A) with respect to a judicial proceeding, the 
                service of a complaint, petition, counterclaim, cross 
                claim, or other pleading seeking affirmative relief or 
                seeking credit or recoupment: Provided, That if the 
                Secretary commences a judicial proceeding against a 
                designee, the Secretary shall give notice of that 
                commencement to the lessee who designated the designee, 
                but the Secretary is not required to give notice to 
                other lessees who may be liable pursuant to section 
                102(a) of this Act, for the obligation that is the 
                subject of the judicial proceeding; or
                  ``(B) with respect to a demand, the receipt by the 
                Secretary or a delegated State or a lessee or its 
                designee (with written notice to the lessee who 
                designated the designee) of the demand;
          ``(21) `credit' means the application of an overpayment (in 
        whole or in part) against an obligation which has become due to 
        discharge, cancel or reduce the obligation;
          ``(22) `delegated State' means a State which, pursuant to an 
        agreement or agreements under section 205 of this Act, performs 
        authorities, duties, responsibilities, or activities of the 
        Secretary;
          ``(23) `demand' means--
                  ``(A) an order to pay issued by the Secretary or the 
                applicable delegated State to a lessee or its designee 
                (with written notice to the lessee who designated the 
                designee) that has a reasonable basis to conclude that 
                the obligation in the amount of the demand is due and 
                owing; or
                  ``(B) a separate written request by a lessee or its 
                designee which asserts an obligation due the lessee or 
                its designee that provides a reasonable basis to 
                conclude that the obligation in the amount of the 
                demand is due and owing, but does not mean any royalty 
                or production report, or any information contained 
                therein, required by the Secretary or a delegated 
                State;
          ``(24) `designee' means the person designated by a lessee 
        pursuant to section 102(a) of this Act, with such written 
        designation effective on the date such designation is received 
        by the Secretary and remaining in effect until the Secretary 
        receives notice in writing that the designation is modified or 
        terminated;
          ``(25) `obligation' means--
                  ``(A) any duty of the Secretary or, if applicable, a 
                delegated State--
                          ``(i) to take oil or gas royalty in kind; or
                          ``(ii) to pay, refund, offset, or credit 
                        monies including (but not limited to)--
                                  ``(I) the principal amount of any 
                                royalty, minimum royalty, rental, 
                                bonus, net profit share or proceed of 
                                sale; or
                                  ``(II) any interest; and
                  ``(B) any duty of a lessee or its designee (subject 
                to the provisions of section 102(a) of this Act)--
                          ``(i) to deliver oil or gas royalty in kind; 
                        or
                          ``(ii) to pay, offset or credit monies 
                        including (but not limited to)--
                                  ``(I) the principal amount of any 
                                royalty, minimum royalty, rental, 
                                bonus, net profit share or proceed of 
                                sale;
                                  ``(II) any interest;
                                  ``(III) any penalty; or
                                  ``(IV) any assessment,
                        which arises from or relates to any lease 
                        administered by the Secretary for, or any 
                        mineral leasing law related to, the 
                        exploration, production and development of oil 
                        or gas on Federal lands or the Outer 
                        Continental Shelf;
          ``(26) `order to pay' means a written order issued by the 
        Secretary or the applicable delegated State to lessee or its 
        designee (with notice to the lessee who designated the 
        designee) which--
                  ``(A) asserts a specific, definite, and quantified 
                obligation claimed to be due, and
                  ``(B) specifically identifies the obligation by 
                lease, production month and monetary amount of such 
                obligation claimed to be due and ordered to be paid, as 
                well as the reason or reasons such obligation is 
                claimed to be due, but such term does not include any 
                other communication or action by or on behalf of the 
                Secretary or a delegated State;
          ``(27) `overpayment' means any payment by a lessee or its 
        designee in excess of an amount legally required to be paid on 
        an obligation and includes the portion of any estimated payment 
        for a production month that is in excess of the royalties due 
        for that month;
          ``(28) `payment' means satisfaction, in whole or in part, of 
        an obligation;
          ``(29) `penalty' means a statutorily authorized civil fine 
        levied or imposed for a violation of this Act, any mineral 
        leasing law, or a term or provisions of a lease administered by 
        the Secretary;
          ``(30) `refund' means the return of an overpayment;
          ``(31) `State concerned' means, with respect to a lease, a 
        State which receives a portion of royalties or other payments 
        under the mineral leasing laws from such lease;
          ``(32) `underpayment' means any payment or nonpayment by a 
        lessee or its designee that is less than the amount legally 
        required to be paid on an obligation; and
          ``(33) `United States' means the United States Government and 
        any department, agency, or instrumentality thereof, the several 
        States, the District of Columbia, and the territories of the 
        United States.''.

SEC. 3. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.

    (a) General Authority.--Section 205 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1735) is amended to read as 
follows:

``SEC. 205. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.

    ``(a) Upon written request of any State, the Secretary is 
authorized to delegate, in accordance with the provisions of this 
section, all or part of the authorities and responsibilities of the 
Secretary under this Act to:
          ``(1) conduct inspections, audits, and investigations;
          ``(2) receive and process production and financial reports;
          ``(3) correct erroneous report data;
          ``(4) perform automated verification; and
          ``(5) issue demands, subpoenas, and orders to perform 
        restructured accounting, for royalty management enforcement 
        purposes,
to any State with respect to all Federal land within the State.
    ``(b) After notice and opportunity for a hearing, the Secretary is 
authorized to delegate such authorities and responsibilities granted 
under this section as the State has requested, if the Secretary finds 
that--
          ``(1) it is likely that the State will provide adequate 
        resources to achieve the purposes of this Act;
          ``(2) the State has demonstrated that it will effectively and 
        faithfully administer the rules and regulations of the 
        Secretary under this Act in accordance with the requirements of 
        subsections (c) and (d) of this section;
          ``(3) such delegation will not create an unreasonable burden 
        on any lessee;
          ``(4) the State agrees to adopt standardized reporting 
        procedures prescribed by the Secretary for royalty and 
        production accounting purposes, unless the State and all 
        affected parties (including the Secretary) otherwise agree;
          ``(5) the State agrees to follow and adhere to regulations 
        and guidelines issued by the Secretary pursuant to the mineral 
        leasing laws regarding valuation of production; and
          ``(6) where necessary for a State to have authority to carry 
        out and enforce a delegated activity, the State agrees to enact 
        such laws and promulgate such regulations as are consistent 
        with relevant Federal laws and regulations
with respect to the Federal lands within the State.
    ``(c) After notice and opportunity for hearing, the Secretary shall 
issue a ruling as to the consistency of a State's proposal with the 
provisions of this section and regulations under subsection (d) within 
90 days after submission of such proposal. In any unfavorable ruling, 
the Secretary shall set forth the reasons therefor and state whether 
the Secretary will agree to delegate to the State if the State meets 
the conditions set forth in such ruling.
    ``(d) After consultation with State authorities, the Secretary 
shall by rule promulgate, within 12 months after the date of enactment 
of this section, standards and regulations pertaining to the 
authorities and responsibilities to be delegated under subsection (a), 
including standards and regulations pertaining to:
          ``(1) audits to be performed;
          ``(2) records and accounts to be maintained;
          ``(3) reporting procedures to be required by States under 
        this section;
          ``(4) receipt and processing of production and financial 
        reports;
          ``(5) correction of erroneous report data;
          ``(6) performance of automated verification;
          ``(7) issuance of standards and guidelines in order to avoid 
        duplication of effort;
          ``(8) transmission of report data to the Secretary; and
          ``(9) issuance of demands, subpoenas, and orders to perform 
        restructured accounting, for royalty management enforcement 
        purposes.
Such standards and regulations shall be designed to provide reasonable 
assurance that a uniform and effective royalty management system will 
prevail among the States. The records and accounts under paragraph (2) 
shall be sufficient to allow the Secretary to monitor the performance 
of any State under this section.
    ``(e) If, after notice and opportunity for a hearing, the Secretary 
finds that any State to which any authority or responsibility of the 
Secretary has been delegated under this section is in violation of any 
requirement of this section or any rule thereunder, or that an 
affirmative finding by the Secretary under subsection (b) can no longer 
be made, the Secretary may revoke such delegation. If, after providing 
written notice to a delegated State and a reasonable opportunity to 
take corrective action requested by the Secretary, the Secretary 
determines that the State has failed to issue a demand or order to a 
Federal lessee within the State, that such failure may result in an 
underpayment of an obligation due to the United States by such lessee, 
and that such underpayment may be uncollected without Secretarial 
intervention, the Secretary may issue such demand or order in 
accordance with the provisions of this Act prior to or absent the 
withdrawal of delegated authority.
    ``(f) Subject to appropriations, the Secretary shall compensate any 
State for those costs which may be necessary to carry out the delegated 
activities under this section. Payment shall be made no less than every 
quarter during the fiscal year. Compensation to a State may not exceed 
the Secretary's reasonably anticipated expenditure for performance of 
such delegated activities by the Secretary. Such costs shall be 
allocable for the purposes of section 35(b) of the Act entitled `An act 
to promote the mining of coal, phosphate, oil, oil shale, gas and 
sodium on the public domain', approved February 25, 1920 (commonly 
known as the Mineral Leasing Act) (30 U.S.C. 191 (b)) to the 
administration and enforcement of laws providing for the leasing of any 
onshore lands or interest in land owned by the United States. Any 
further allocation of costs under section 35(b) made by the Secretary 
for oil and gas activities, other than those costs to compensate States 
for delegated activities under this Act, shall be only those costs 
associated with onshore oil and gas activities and may not include any 
duplication of costs allocated pursuant to the previous sentence. 
Nothing in this section affects the Secretary's authority to make 
allocations under section 35(b) for non-oil and gas mineral activities. 
All moneys received from sales, bonuses, rentals, royalties, 
assessments and interest, including money claimed to be due and owing 
pursuant to a delegation under this section, shall be payable and paid 
to the Treasury of the United States.
    ``(g) Any action of the Secretary to approve or disapprove a 
proposal submitted by a State under this section shall be subject to 
judicial review in the United States district court which includes the 
capitol of the State submitting the proposal.
    ``(h) Any State operating pursuant to a delegation existing on the 
date of enactment of this Act may continue to operate under the terms 
and conditions of the delegation, except to the extent that a revision 
of the existing agreement is adopted pursuant to this section.''.
    (b) Clerical Amendment.--The item relating to section 205 in the 
table of contents in section 1 of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1701) is amended to read as follows:

``Sec. 205. Delegation of royalty collections and related 
activities.''.

SEC. 4. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION 
                    PERIODS.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.) is amended by adding after section 114 
the following new section:

SEC. 115. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION 
                    PERIODS.

    ``(a) In General.--The respective duties, responsibilities, and 
activities with respect to a lease shall be performed by the Secretary, 
delegated States, and lessees or their designees in a timely manner.
    ``(b) Limitation Period.--
          ``(1) In general.--A judicial proceeding or demand which 
        arises from, or relates to an obligation, shall be commenced 
        within seven years from the date on which the obligation 
        becomes due and if not so commenced shall be barred. If 
        commencement of a judicial proceeding or demand for an 
        obligation is barred by this section, the Secretary, a 
        delegated State, or a lessee or its designee (A) shall not take 
        any other or further action regarding that obligation, 
        including (but not limited to) the issuance of any order, 
        request, demand or other communication seeking any document, 
        accounting, determination, calculation, recalculation, payment, 
        principal, interest, assessment, or penalty or the initiation, 
        pursuit or completion of an audit with respect to that 
        obligation; and (B) shall not pursue any other equitable or 
        legal remedy, whether under statute or common law, with respect 
        to an action on or an enforcement of said obligation.
          ``(2) Rule of construction.--A judicial proceeding or demand 
        that is timely commenced under paragraph (1) against a designee 
        shall be considered timely commenced as to any lessee who is 
        liable pursuant to section 102(a) of this Act for the 
        obligation that is the subject of the judicial proceeding or 
        demand.
          ``(3) Application of certain limitations.--The limitations 
        set forth in sections 2401, 2415, 2416, and 2462 of title 28, 
        United States Code, and section 42 of the Mineral Leasing Act 
        (30 U.S.C. 226-2) shall not apply to any obligation to which 
        this Act applies. Section 3716 of title 31, United States Code, 
        may be applied to an obligation the enforcement of which is not 
        barred by this Act, but may not be applied to any obligation 
        the enforcement of which is barred by this Act.
    ``(c) Obligation Becomes Due.--
          ``(1) In general.--For purposes of this Act, an obligation 
        becomes due when the right to enforce the obligation is fixed.
          ``(2) Royalty obligations.--The right to enforce any royalty 
        obligation for any given production month for a lease is fixed 
        for purposes of this Act on the last day of the calendar month 
        following the month in which oil or gas is produced.
    ``(d) Tolling of Limitation Period.--The running of the limitation 
period under subsection (b) shall not be suspended, tolled, extended, 
or enlarged for any obligation for any reason by any action, including 
an action by the Secretary or a delegated State, other than the 
following:
          ``(1) Tolling agreement.--A written agreement executed during 
        the limitation period between the Secretary or a delegated 
        State and a lessee or its designee (with notice to the lessee 
        who designated the designee) shall toll the limitation period 
        for the amount of time during which the agreement is in effect.
          ``(2) Subpoena.--
                  ``(A) The issuance of a subpoena to a lessee or its 
                designee (with notice to the lessee who designated the 
                designee, which notice shall not constitute a subpoena 
                to the lessee) in accordance with the provisions of 
                subparagraph (B)(i) shall toll the limitation period 
                with respect to the obligation which is the subject of 
                a subpoena only for the period beginning on the date 
                the lessee or its designee receives the subpoena and 
                ending on the date on which (i) the lessee or its 
                designee has produced such subpoenaed records for the 
                subject obligation, (ii) the Secretary or a delegated 
                State receives written notice that the subpoenaed 
                records for the subject of obligation are not in 
                existence or are not in the lessee's or its designee's 
                possession or control, or (iii) a court has determined 
                in a final decision that such records are not required 
                to be produced, whichever occurs first.
                  ``(B)(i) A subpoena for the purposes of this section 
                which requires a lessee or its designee to produce 
                records necessary to determine the proper reporting and 
                payment of an obligation due the Secretary may be 
                issued only by an Assistant Secretary of the Interior 
                or an Acting Assistant Secretary of the Interior who is 
                a schedule C employee (as defined by section 213.3301 
                of title 5, Code of Federal Regulations), or the 
                Director or Acting Director of the respective bureau or 
                agency, and may not be delegated to any other person. 
                If a State has been delegated authority pursuant to 
                section 205, the State, acting through the highest 
                State official having ultimate authority over the 
                collection of royalties from leases on Federal lands 
                within the State, may issue such subpoena, but may not 
                delegate such authority to any other person.
                  ``(ii) A subpoena described in clause (i) may only be 
                issued against a lessee or its designee during the 
                limitation period provided in this section and only 
                after the Secretary or a delegated State has in writing 
                requested the records from the lessee or its designee 
                related to the obligation which is the subject of the 
                subpoena and has determined that--
                          ``(I) the lessee or its designee has failed 
                        to respond within a reasonable period of time 
                        to the Secretary's or the applicable delegated 
                        State's written request for such records 
                        necessary for an audit, investigation or other 
                        inquiry made in accordance with the Secretary's 
                        or such delegated State's responsibilities 
                        under this Act; or
                          ``(II) the lessee or its designee has in 
                        writing denied the Secretary's or the 
                        applicable delegated State's written request to 
                        produce such records in the lessee's or its 
                        designee's possession or control necessary for 
                        an audit, investigation or other inquiry made 
                        in accordance with the Secretary's or such 
                        delegated State's responsibilities under this 
                        Act; or
                          ``(III) the lessee or its designee has 
                        unreasonably delayed in producing records 
                        necessary for an audit, investigation or other 
                        inquiry made in accordance with the Secretary's 
                        or the applicable delegated State's 
                        responsibilities under this Act after the 
                        Secretary's or delegated State's written 
                        request.
                  ``(C) In seeking records, the Secretary or the 
                applicable delegated State shall afford the lessee or 
                its designee a reasonable period of time after a 
                written request by the Secretary or such delegated 
                State in which to provide such records prior to the 
                issuance of any subpoena.
          ``(3) Misrepresentation or concealment.--The intentional 
        misrepresentation or concealment of a material fact for the 
        purpose of evading the payment of an obligation in which case 
        the limitation period shall be tolled for the period of such 
        misrepresentation or such concealment.
          ``(4) Order of perform restructured accounting.--(A)(i) The 
        issuance of a notice under subparagraph (D) that the lessee or 
        its designee has not substantially complied with the 
        requirement to perform a restructured accounting shall toll the 
        limitation period with respect to the obligation which is the 
        subject of the notice only for the period beginning on the date 
        the lessee or its designee receives the notice and ending 120 
        days after the date on which (I) the Secretary or the 
        applicable delegated State receives written notice that the 
        accounting or other requirement has been performed, or (II) a 
        court has determined in a final decision that the lessee is not 
        required to perform the accounting, whichever occurs first.
          ``(ii) If the lessee or its designee initiates an 
        administrative appeal or judicial proceeding to contest an 
        order to perform a restructured accounting issued under 
        subparagraph (B)(i), the limitation period in subsection (b) 
        shall be tolled from the date the lessee or its designee 
        received the order until a final, nonappealable decision is 
        issued in any such proceeding.
          ``(B)(i) The Secretary or the applicable delegated State may 
        issue an order to perform a restructured accounting to a lessee 
        or its designee when the Secretary or such delegated State 
        determines during an audit of a lessee or its designee that the 
        lessee or its designee should recalculate royalty due on an 
        obligation based upon the Secretary's or the delegated State's 
        finding that the lessee or its designee has made identified 
        underpayments or overpayments which are demonstrated by the 
        Secretary or the delegated State to be based upon repeated, 
        systemic reporting errors for a significant number of leases or 
        a single lease for a significant number of reporting months 
        with the same type of error which constitutes a pattern of 
        violations and which are likely to result in either significant 
        underpayments or overpayments.
          ``(ii) The power of the Secretary to issue an order to 
        perform a restructured accounting may not be delegated below 
        the most senior career professional position having 
        responsibility for the royalty management program, which 
        position is currently designated as the `Associate Director for 
        Royalty Management', and may not be delegated to any other 
        person. If a State has been delegated authority pursuant to 
        section 205 of this Act, the State, acting through the highest 
        ranking State official having ultimate authority over the 
        collection of royalties from leases on Federal lands within the 
        State, may issue such order to perform, which may not be 
        delegated to any other person. An order to perform a 
        restructured accounting shall--
                  ``(I) be issued within a reasonable period of time 
                from when the audit identifies the systemic, reporting 
                errors;
                  ``(II) specify the reasons and factual bases for such 
                order;
                  ``(III) be specifically identified as an `order to 
                perform a restructured accounting';
                  ``(IV) provide the lessee or its designee a 
                reasonable period of time (but not less than 60 days) 
                within which to perform the restructured accounting; 
                and
                  ``(V) provide the lessee or its designee 60 days 
                within which to file an administrative appeal of the 
                order to perform a restructured accounting.
          ``(C) An order to perform a restructured accounting shall not 
        mean or be construed to include any other action by or on 
        behalf of the Secretary or a delegated State.
          ``(D) If a lessee or its designee fails to substantially 
        comply with the requirement to perform a restructured 
        accounting pursuant to this subsection, a notice shall be 
        issued to the lessee or its designee that the lessee or its 
        designee has not substantially complied with the requirements 
        to perform a restructured accounting. A lessee or its designee 
        shall be given a reasonable time within which to perform the 
        restructured accounting. Such notice may be issued under this 
        section only by an Assistant Secretary of the Interior or an 
        acting Assistant Secretary of the Interior who is a schedule C 
        employee (as defined by section 213.3301 of title 5, Code of 
        Federal Regulations) and may not be delegated to any other 
        person. If a State has been delegated authority pursuant to 
        section 205, the State, acting through the highest State 
        official having ultimate authority over the collection of 
        royalties from leases on Federal lands within the State, may 
        issue such notice, which may not be delegated to any other 
        person.
    ``(e) Termination of Limitations Period.--An action or an 
enforcement of an obligation by the Secretary or delegated State or a 
lessee or its designee shall be barred under this section prior to the 
running of the seven-year period provided in subsection (b) in the 
event--
          ``(1) the Secretary or a delegated State has notified the 
        lessee or its designee in writing that a time period is closed 
        to further audit; or
          ``(2) the Secretary or a delegated State and a lessee or its 
        designee have so agreed in writing.
For purposes of this subsection, notice to, or an agreement by, the 
designee shall be binding on any lessee who is liable pursuant to 
section 102(a) for obligations that are the subject of the notice or 
agreement.
    ``(f) Records Required for Determining Collections.--Records 
required pursuant to section 103 of this Act by the Secretary or any 
delegated State for the purpose of determining obligations due and 
compliance with any applicable mineral leasing law, lease provision, 
regulation or order with respect to oil and gas leases from Federal 
lands or the Outer Continental Shelf shall be maintained for the same 
period of time during which a judicial proceeding or demand may be 
commenced under subsection (b). If a judicial proceeding or demand is 
timely commenced, the record holder shall maintain such records until 
the final nonappealable decision in such judicial proceeding is made, 
or with respect to that demand is rendered, unless the Secretary or the 
applicable delegated State authorizes in writing an earlier release of 
the requirement to maintain such records. Notwithstanding anything 
herein to the contrary, under no circumstances shall a record holder be 
required to maintain or produce any record relating to an obligation 
for any time period which is barred by the applicable limitation in 
this section. In connection with any hearing, administrative 
proceeding, inquiry, investigation, or audit by the Secretary or a 
delegated State under this Act, the Secretary or the delegated State 
shall minimize the submission of multiple or redundant information and 
make a good faith effort to locate records submitted by a lessee or a 
designee to the Secretary or the delegated State, prior to requiring 
the lessee or the designee to provide such records.
    ``(g) Timely Collections.--In order to most effectively utilize 
resources available to the Secretary to maximize the collection of oil 
and gas receipts from lease obligations to the Treasury within the 
seven-year period of limitations, and consequently to maximize the 
State share of such receipts, the Secretary should not perform or 
require accounting, reporting, or audit activities if the Secretary and 
the State concerned determine that the cost of conducting or requiring 
the activity exceeds the expected amount to be collected by the 
activity, based on the most current 12 months of activity. This 
subsection shall not provide a defense to a demand or an order to 
perform a restructured accounting. To the maximum extent possible, the 
Secretary and delegated States shall reduce costs to the United States 
Treasury and the States by discontinuing requirements for unnecessary 
or duplicative data and other information, such as separate allowances 
and payor information, relating to obligations due. If the Secretary 
and the State concerned determine that collection will result sooner, 
the Secretary or the applicable delegated State may waive or forego 
interest in whole or in part.
    ``(h) Appeals and Final Agency Action.--
          ``(1) 33-month period.--Demands or orders issued by the 
        Secretary or a delegated State are subject to administrative 
        appeal in accordance with the regulations of the Secretary. No 
        State shall impose any conditions which would hinder a lessee's 
        or its designee's immediate appeal of an order to the Secretary 
        or the Secretary's designee. The Secretary shall issue a final 
        decision in any administrative proceeding, including any 
        administrative proceedings pending on the date of enactment of 
        this section, within 33 months from the date such proceeding 
        was commenced or 33 months from the date of such enactment, 
        whichever is later. The 33-month period may be extended by any 
        period agreed upon in writing by the Secretary and the 
        appellant.
          ``(2) Effect of failure to issue decision.--If no such 
        decision has been issued by the Secretary within the 33-month 
        period referred to in paragraph (1)--
                  ``(A) the Secretary shall be deemed to have issued 
                and granted a decision in favor of the appellant as to 
                any nonmonetary obligation and any monetary obligation 
                the principal amount of which is less than $10,000; and
                  ``(B) the Secretary shall be deemed to have issued a 
                final decision in favor of the Secretary, which 
                decision shall be deemed to affirm those issues for 
                which the agency rendered a decision prior to the end 
                of such period, as to any monetary obligation the 
                principal amount of which is $10,000 or more, and the 
                appellant shall have a right to judicial review of such 
                deemed final decision in accordance with title 5 of the 
                United States Code.
    ``(i) Collections of Disputed Amounts Due.--To expedite collections 
relating to disputed obligations due within the seven-year period 
beginning on the date the obligation became due, the parties shall hold 
not less than one settlement consultation and the Secretary and the 
State concerned may take such action as is appropriate to compromise 
and settle a disputed obligation, including waiving or reducing 
interest and allowing offsetting of obligations among leases.
    ``(j) Enforcement of a Claim for Judicial Review.--In the event a 
demand subject to this section is properly and timely commenced, the 
obligation which is the subject of the demand may be enforced beyond 
the seven-year limitations period without being barred by this statute 
of limitations. In the event a demand subject to this section is 
properly and timely commenced, a judicial proceeding challenging the 
final agency action with respect to such demand shall be deemed timely 
so long as such judicial proceeding is commenced within 180 days from 
receipt of notice by the lessee or its designee of the final agency 
action.
    ``(k) Implementation of Final Decision.--In the event a judicial 
proceeding or demand subject to this section is timely commenced and 
thereafter the limitation period in this section lapses during the 
pendency of such proceeding, any party to such proceeding shall not be 
barred from taking such action as is required or necessary to implement 
a final unappealable judicial or administrative decision, including any 
action required or necessary to implement such decision by the recovery 
or recoupment of an underpayment or overpayment by means of refund or 
credit.
    ``(l) Stay of Payment Obligation Pending Review.--Any person 
ordered by the Secretary or a delegated State to pay any obligation 
(other than an assessment) shall be entitled to a stay of such payment 
without bond or other surety instrument pending an administrative or 
judicial proceeding if the person periodically demonstrates to the 
satisfaction of the Secretary that such person is financially solvent 
or otherwise able to pay the obligation. In the event the person is not 
able to so demonstrate, the Secretary may require a bond or other 
surety instrument satisfactory to cover the obligation. Any person 
ordered by the Secretary or a delegated State to pay an assessment 
shall be entitled to a stay without bond or other surety instrument''.
    ``(b) Clerical Amendment.--The table of contents in section 1 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) 
is amended by inserting after the item relating to section 114 the 
following new item:

``Sec 115. Secretarial and delegated States' actions and limitation 
periods.''.

SEC. 5. ADJUSTMENT AND REFUNDS.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.) is amended by inserting after section 111 
the following.

``SEC. 111A. ADJUSTMENTS AND REFUNDS.

    ``(a) Adjustmenmts to Royalties Paid to the Secretary or a 
Delegated State.--
          ``(1) If, during the adjustment period, a lessee or its 
        designee determines that an adjustment or refund request is 
        necessary to correct an underpayment or overpayment of an 
        obligation, the lessee or its designee shall make such 
        adjustment or request a refund within a reasonable period of 
        time and only during the adjustment period. The filing of a 
        royalty report which reflects the underpayment or overpayment 
        of an obligation shall constitute prior written notice to the 
        Secretary or the applicable delegated State of an adjustment.
          ``(2)(A) For any adjustment, the lessee or its designee shall 
        calculate and report the interest due attributable to such 
        adjustment at the same time the lesser or its designee adjusts 
        the principal amount of the subject obligation, except as 
        provided by subparagraph (B).
          ``(B) In the case of a lessee or its designee who determines 
        that subparagraph (A) would impose a hardship, the Secretary or 
        such delegated State shall calculate the interest due and 
        notify the lessee or its designee within a reasonable time of 
        the amount of interest due, unless such lessee or its designee 
        elects to calculate and report interest in accordance with 
        subparagraph (A).
          ``(3) An adjustment or a request for a refund for an 
        obligation may be made after the adjustment period only upon 
        written notice to and approval by the Secretary or the 
        applicable delegated State, as appropriate, during an audit of 
        the period which includes the production month for which the 
        adjustment is being made. If an overpayment is identified 
        during an audit, then the Secretary or the applicable delegated 
        State, as appropriate, shall allow a credit or refund in the 
        amount of the overpayment.
          ``(4) For purposes of this section, the adjustment period for 
        any obligation shall be the six-year period following the date 
        on which an obligation became due. The adjustment period shall 
        be suspended, tolled, extended, enlarged, or terminated by the 
        same actions as the limitation period in section 115.
    ``(b) Refunds.--
          ``(1) In general.--A request for refund is sufficient if it--
                  ``(A) is made in writing to the Secretary and, for 
                purposes of section 115, is specifically identified as 
                a demand;
                  ``(B) identifies the person entitled to such refund;
                  ``(C) provides the Secretary information that 
                reasonably enables the Secretary to identify the 
                overpayment for which such refund is sought; and
                  ``(D) provides the reasons why the payment was an 
                overpayment.
          ``(2) Payment by secretary of the treasury.--The Secretary 
        shall certify the amount of the refund to be paid under 
        paragraph (1) to the Secretary of the Treasury who shall make 
        such refund. Such refund shall be paid from amounts received as 
        current receipts from sales, bonuses, royalties (including 
        interest charges collected under this section) and rentals of 
        the public lands and the Outer Continental Shelf under the 
        provisions of the Mineral Leasing Act and the Outer Continental 
        Shelf Lands Act, which are not payable to a State or the 
        Reclamation Fund. The portion of any such refund attributable 
        to any amounts previously disbursed to a State, the Reclamation 
        Fund, or any recipient prescribed by law shall be deducted from 
        the next disbursements to that recipient made under the 
        applicable law. Such amounts deducted from subsequent 
        disbursements shall be credited to miscellaneous receipts in 
        the Treasury.
          ``(3) Payment period.--A refund under this subsection shall 
        be paid or denied (with an explanation of the reasons for the 
        denial) within 120 days of the date on which the request for 
        refund is received by the Secretary. Such refund shall be 
        subject to later audit by the Secretary or the applicable 
        delegated State and subject to the provisions of this Act.
          ``(4) Prohibition against reduction of refunds or credits.--
        In no event shall the Secretary or any delegated State directly 
        or indirectly claim or offset any amount or amounts against, or 
        reduce any refund or credit (or interest accrued thereon) by 
        the amount of any obligation the enforcement of which is barred 
        by section 115 of this Act.''.
    ``(b) Clerical Amendment.--The table of contents in section 1 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) 
is amended by inserting after the item relating to section 111 the 
following new item:

``Sec. 111A. Adjustments and refunds.''.

SEC. 6. ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES.

    (a) Lessee or Designee Interest.--Section 111 of the Federal Oil 
and Gas Royalty Management Act of 1982 (30 U.S.C. 1721) is amended by 
adding after subsection (g) the following:
    ``(h) Interest shall be allowed and paid or credited on any 
overpayment, with such interest to accrue from the date such 
overpayment was made, at the rate obtained by applying the provisions 
of subparagraphs (A) and (B) of section 6621(a)(1) of the Internal 
Revenue Code of 1986, but determined without regard to the sentence 
following subparagraph (B) of section 6621(a)(1). Interest which has 
accrued on any overpayment may be applied to reduce an underpayment. 
This subsection applies to overpayments made later than six months 
after the date of enactment of this subsection or September 1, 1996, 
whichever is later. Such interest shall be paid from amounts received 
as current receipts from sales, bonuses, royalties (including interest 
charges collected under this section) and rentals of the public lands 
and the Outer Continental Shelf under the provisions of the Mineral 
Leasing Act, and the Outer Continental Shelf Lands Act, which are not 
payable to a State or the Reclamation Fund. The portion of any such 
interest payment attributable to any amounts previously disbursed to a 
State, the Reclamation Fund, or any other recipient designated by law 
shall be deducted from the next disbursements to that recipient made 
under the applicable law. Such amounts deducted from subsequent 
disbursements shall be credited to miscellaneous receipts in the 
Treasury.''.
    (b) Limitation on Interest.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982, as amended by subsection (a), is 
further amended by adding at the end the following:
    ``(i) Upon a determination by the Secretary that an excessive 
overpayment (based upon all obligations of a lessee or its designee for 
a given reporting month) was made for the sole purpose of receiving 
interest, interest shall not be paid on the excessive amount of such 
overpayment. For purposes of this Act, an `excessive overpayment' shall 
be the amount that any overpayment a lessee or its designee pays for a 
given reporting month (excluding payments for demands for obligations 
determined to be due as a result of judicial or administrative 
proceedings or agreed to be paid pursuant to settlement agreements) for 
the aggregate of all of its Federal leases exceeds 10 percent of the 
total royalties paid that month for those leases.''.
    (c) Estimated Payment.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721), as amended by 
subsections (a) and (b), is further amended by adding at the end the 
following:
    ``(j) A lessee or its designee may make a payment for the 
approximate amount of royalties (hereinafter in this subsection 
`estimated payment') that would otherwise be due for such lease by the 
date royalties are due for that lease. When an estimated payment is 
made, actual royalties are payable at the end of the month following 
the month in which the estimated payment is made. If the estimated 
payment was less than the amount of actual royalties due, interest is 
owed on the underpaid amount. If the estimated payment exceeds the 
actual royalties due, interest is owed on the overpayment. If the 
lessee or its designee makes a payment for such actual royalties, the 
lessee or its designee may apply the estimated payment to future 
royalties. Any estimated payment may be adjusted, recouped, or 
reinstated at any time by the lessee or its designee.''.
    (d) Volume Allocations of Oil and Gas Production.--Section 111 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
1721), as amended by subsections (a) through (c), is amended by adding 
at the end the following:
    ``(k)(1) Except as otherwise provided by this subsection--
          ``(A) a lessee or its designee of a lease in a unit or 
        communitization agreement which contains only Federal leases 
        with the same royalty rate and funds distribution shall report 
        and pay royalties on oil and gas production for each production 
        month based on the actual volume of production sold by or on 
        behalf of that lessee;
          ``(B) a lessee or its designee of a lease in any other unit 
        or communitization agreement shall report and pay royalties on 
        oil and gas production for each production month based on the 
        volume of oil and gas produced from such agreement and 
        allocated to the lease in accordance with the terms of the 
        agreement; and
          ``(C) a lessee or its designee of a lease that is not 
        contained in a unit or communitization agreement shall report 
        and pay royalties on oil and gas production for each production 
        month based on the actual volume of production sold by or on 
        behalf of that lessee.
    ``(2) This subsection applies only to requirements for reporting 
and paying royalties. Nothing in this subsection is intended to alter a 
lessee's liability for royalties on oil or gas production based on the 
share of production allocated to the lease in accordance with the terms 
of the lease, a unit or communitization agreement, or any other 
agreement.
     ``(3) For any unit or communitization agreement, if all lessees 
contractually agree to an alternative method of royalty reporting and 
payment, the lessees may submit such alternative method to the 
Secretary or the delegated State for approval and make payments in 
accordance with such approved alternative method so long as such 
alternative method does not reduce the amount of the royalty 
obligation.
    ``(4) The Secretary or the delegated State shall grant an exception 
from the reporting and payment requirements for marginal properties by 
allowing for any calendar year or portion thereof royalties to be paid 
each month based on the volume of production sold. Interest shall not 
accrue on the difference for the entire calendar year or portion 
thereof between the amount of oil and gas actually sold and the share 
of production allocated to the lease until the beginning of the month 
following such calendar year or portion thereof. Any additional 
royalties due or overpaid royalties and associated interest shall be 
paid, refunded, or credited within six months after the end of each 
calendar year in which royalties are paid based on volumes of 
production sold. For the purpose of this subsection, the term `marginal 
property' means a lease that produces on average the combined 
equivalent of less than 15 barrels of oil per well per day or 90 
thousand cubic feet of gas per well per day, or a combination thereof, 
determined by dividing the average daily production of crude oil and 
natural gas from producing wells on such lease by the number of such 
wells, unless the Secretary, together with the State concerned, 
determines that a different production is more appropriate.
    ``(5) Not later than two years after the date of the enactment of 
this subsection, the Secretary shall issue any appropriate demand for 
all outstanding royalty payment disputes regarding who is required to 
report and pay royalties on production from units and communitization 
agreements outstanding on the date of the enactment of this subsection, 
and collect royalty amounts owed on such production.''.
    (e) Production Allocation.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721), as amended by 
subsections (a) through (d), is amended by adding at the end the 
following:
    ``(1) The Secretary shall issue all determinations of allocations 
of production for units and communitization agreements within 120 days 
of a request for determination. If the Secretary fails to issue a 
determination within such 120-day period, the Secretary shall waive 
interest due on obligations subject to the determination until the end 
of the month following the month in which the determination is made.''.
    (f) New Assessment To Encourage Proper Royalty Payments.--
          (1) In general.--The Federal Oil and Gas Royalty Management 
        Act of 1982 (30 U.S.C. 1721), as amended by section 4(a), is 
        further amended by adding at the end the following:

``SEC. 116. ASSESSMENTS.

    ``Beginning eighteen months after the date of enactment of this 
section, to encourage proper royalty payment the Secretary or the 
delegated State shall impose assessments on a person who chronically 
submits erroneous reports under this Act. Assessments under this Act 
may only be issued as provided for in this section.''.
          (2) Clerical amendment.--The table of contents in section 1 
        of such Act (30 U.S.C. 1701) is amended by adding after the 
        item relating to section 115 the following new item:

``Sec. 116. Assessments.''.

    (g) Liability for Royalty Payments.--Section 102(a) of the Federal 
Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1712(a)) is 
amended to read as follows:
    ``(a) In order to increase receipts and achieve effective 
collections of royalty and other payments, a lessee who is required to 
make any royalty or other payment under a lease or under the mineral 
leasing laws, shall make such payments in the time and manner as may be 
specified by the Secretary or the applicable delegated State. A lessee 
may designate a person to make all or part of the payments due under a 
lease on the lessee's behalf and shall notify the Secretary or the 
applicable delegated State in writing of such designation, in which 
event said designated person may, in its own name, pay, offset or 
credit monies, make adjustments, request and receive refunds and submit 
reports with respect to payments required by the lessee. 
Notwithstanding any other provision of this Act to the contrary, a 
designee shall not be liable for any payment obligation under the 
lease. The person owning operating rights in a lease shall be primarily 
liable for its pro rata share of payment obligations under the lease. 
If the person owning the legal record title in a lease is other than 
the operating rights owner, the person owning the legal record title 
shall be secondarily liable for its pro rata share of such payment 
obligations under the lease.''.
    (h) Clerical Amendments.--(1) The heading of section 111 of the 
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1721) is 
amended to read as follows:
       ``royalty terms and conditions, interest, and penalties''.
    (2) The item relating to section 111 in the table of contents in 
section 1 of such Act (30 U.S.C. 1701) is amended to read as follows:

``Sec. 111. Royalty terms and conditions, interest, and penalties.''.

SEC. 7 ALTERNATIVES FOR MARGINAL PROPERTIES.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.), as amended by section 6 of this Act, is 
further amended by adding at the end the following:

``SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.

    ``(a) Determination of Best Interests of State Concerned and the 
United States.--The Secretary and the State concerned, acting in the 
best interests of the United States and the State concerned to promote 
production, reduce administrative costs, and increase net receipts to 
the United States and the States, shall jointly determine, on a case by 
case basis, the amount of what marginal production from a lease or 
leases or well or wells, or parts thereof, shall be subject to a 
prepayment under subsection (b) or regulatory relief under subsection 
(c). If the State concerned does not consent, such prepayments or 
regulatory relief shall not be made available under this section for 
such marginal production: Provided, That if royalty payments from a 
lease or leases, or well or wells are not shared with any State, such 
determination shall be made solely by the Secretary.
    ``(b) Prepayment of Royalty.--
          ``(1) In general.--Notwithstanding the provisions of any 
        lease to the contrary, for any lease or leases or well or wells 
        identified by the Secretary and the State concerned pursuant to 
        subsection (a), the Secretary is authorized to accept a 
        prepayment for royalties in lieu of monthly royalty payments 
        under the lease for the remainder of the lease term if the 
        affected lessee so agrees. Any prepayment agreed to by the 
        Secretary, State concerned and lessee which is less than an 
        average $500 per month in total royalties shall be effectuated 
        under this section not earlier than two years after the date of 
        enactment of this section and, any prepayment which is greater 
        than an average $500 per month in total royalties shall be 
        effectuated under this section not earlier than three years 
        after the date of enactment of this section. The Secretary and 
        the State concerned may condition their acceptance of the 
        prepayment authorized under this section on the lessee's 
        agreeing to such terms and conditions as the Secretary and the 
        State concerned deem appropriate and consistent with the 
        purposes of this Act. Such terms may--
                  ``(A) provide for prepayment that does not result in 
                a loss of revenue to the United States in present value 
                terms;
                  ``(B) include provisions for receiving additional 
                prepayments or royalties for developments in the lease 
                or leases or well or wells that deviate significantly 
                from the assumptions and facts on which the valuation 
                is determined; and
                  ``(C) require the lessee or its designee to provide 
                such periodic production reports as may be necessary to 
                allow the Secretary and the State concerned to monitor 
                production for the purposes of subparagraph (B).
          ``(2) State share.--A prepayment under this section shall be 
        shared by the Secretary with any State or other recipient to 
        the same extent as any royalty payment for such lease.
          ``(3) Satisfaction of obligation.--Except as may be provided 
        in the terms and conditions established by the Secretary under 
        subsection (b), a lessee or its designee who makes a prepayment 
        under this section shall have satisfied in full the lessee's 
        obligation to pay royalty on the production stream sold from 
        the lease or leases or well or wells.
    ``(c) Alternative Accounting and Auditing Requirements.--Within one 
year after the date of the enactment of this section, the Secretary or 
the delegated State shall provide accounting, reporting, and auditing 
relief that will encourage lessees to continue to produce and develop 
properties subject to subsection (a): Provided, That such relief will 
only be available to lessees in a State that concurs, which concurrence 
is not required if royalty payments from the lease or leases or well or 
wells are not shared with any State. Prior to granting such relief, the 
Secretary and, if appropriate, the State concerned shall agree that the 
type of marginal wells and relief provided under this paragraph is in 
the best interest of the United States and, if appropriate, the State 
concerned.''.
    (b) Clerical Amendment.--The table of contents in section 1 of such 
Act (30 U.S.C. 1701) is amended by adding after the item relating to 
section 116 the following new item:

``Sec. 117. Alternatives for marginal properties.''.

SEC. 8. APPLICABILITY.

    (a) FOGRMA.--With respect to Federal lands, sections 202 and 307 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1732 
and 1755), are no longer applicable. The applicability of those 
sections to Indian leases is not affected.
    (b) OCSLA.--Effective on the date of the enactment of this Act, 
section 10 of the Outer Continental Shelf Lands Act (43 U.S.C. 1339) is 
repealed.

SEC. 9. INDIAN LANDS.

    The amendments made by this Act shall not apply with respect to 
Indian lands, and the provision of the Federal Oil and Gas Royalty 
Management Act of 1982 as in effect on the day before the date of 
enactment of this Act shall continue to apply after such date with 
respect to Indian lands.

SEC. 10. PRIVATE LANDS.

    This Act shall not apply to any privately owned minerals.

SEC. 11. EFFECTIVE DATE.

    Except as provided by section 115(f), section 111(h), section 
111(k)(5), and section 117 of the Federal Oil and Gas Royalty 
Management Act of 1982 (as added by this Act), this Act and the 
amendments made by this Act, shall apply with respect to the production 
of oil and gas after the first day of the month following the date of 
the enactment of this Act.

SEC. 12. SAVINGS CLAUSE.

    Nothing in this Act shall be construed to give a State a property 
right or interest in any federal lease or land.

                         Purpose of the Measure

    S. 1014, as reported by the Committee, would improve the 
management of royalties from Federal land and Outer Continental 
Shelf oil and gas leases. Among other things, S. 1014 would 
provide: faster audit, royalty collection and appeals 
processes, resulting in collection of moneys owed to the United 
States in a shorter period of time; shorter records retention 
requirements for industry, resulting in less burdensome and 
costly recordkeeping; a faster appeals process at the 
Department of the Interior, resulting in quicker resolution of 
money disputes between the United States and royalty payors; 
reciprocal interest requirements to be applicable to the United 
States and industry, resulting in the Federal Government 
getting interest in late payments and underpayments and 
industry getting interest on overpayments; quicker correction 
of underpayment/overpayment problems by limiting the period 
within which lessees can make adjustments or request refunds; 
pre-payment of royalties on ``marginal properties'' by small 
operators, thereby alleviating reporting requirements; and a 
more cost-effective approach to royalty management by 
streamlining and simplifying certain royalty requirements and 
practices.

                          Background and Need

    Oil and gas royalties from Federal onshore and Outer 
Continental Shelf (OCS) leases are accounted for, collected, 
distributed, and audited by the Minerals Management Service 
(MMS) of the Department of the Interior. The Federal Oil and 
Gas Royalty Management Act of 1982 FOGRMA) directs Interior to 
establish ``a comprehensive inspection, collection and fiscal 
and production accounting and auditing system to provide the 
capability to accurately determine the oil and gas royalties, 
interest, fines, penalties, fees, deposits, and other payments 
owed, and to collect and account for such amounts in a timely 
manner.''
    In the 14 years since enactment of FOGRMA, serious problems 
have arisen with the way courts and consequently the MMS have 
interpreted the period of time within which collection of 
amounts due under oil and gas leases can be undertaken. At 
least one Federal court has ruled that MMS has six years to 
commence an audit of production royalties and still another six 
years to complete such an audit. This means that MMS could take 
up to 12 years to verify that an obligation had been underpaid. 
During this protracted audit process, interest would accrue on 
the underpaid amount and the royalty payor owing the amount 
would be required to maintain its production records, both of 
which could be very costly. Conversely, if the United States is 
overpaid, the payor loses the time value of the money it 
mistakenly pays and is not able to recover interest on the 
overpayment.

                      Summary of Major Provisions

    S. 1014 addresses these problems by providing the United 
States and companies reciprocal rights to interest on 
underpayments and overpayments. And, while courts differ as to 
how long MMS has to begin and complete an audit, S. 1014 would 
provide certainty by establishing a 7-year period of limitation 
within which administrative or judicial actions relating to an 
obligation must be brought or be barred. Certain enumerated 
exceptions would toll the running of the period. In addition, 
the bill would establish a records retention period of seven 
years to coincide with the period of limitation.
    Another issue addressed in S. 1014 is the lengthy 
administrative appeals process and the time within which it 
takes to get a final agency determination on a royalty matter 
in dispute. Royalty disputes presently are taken to the 
Director of MMS, whose decision can then be appealed to the 
Interior Board of Land Appeals (IBLA). In addition, the 
Secretary can take jurisdiction of a matter, after which time 
an appellant can further pursue relief in U.S. district court. 
All of the administrative appeals can be quite time consuming, 
particularly in light of a backlog of cases pending before IBLA 
that runs two years or more. Presently, more than $450 million 
in disputed claims languish in a bureaucratic appeals process 
at the Interior Department and continue to lose value. S. 1014 
would simply this process by requiring MMS to issue a final 
Director's decision within one year and the Secretary to issue 
a final agency decision in any administrative proceeding within 
33 months of commencement. As a result, significant cost 
savings are expected to be realized.
    S. 1014 would simply the royalty collections process by 
allowing the offsetting of underpayments and overpayments 
against each other to determine a net amount owed or overpaid. 
This would help eliminate the burdensome process of handling 
refund requests on overpayments and the pursuit of interest on 
underpayments.
    One problem recognized by MMS and industry alike is the 
provision in section 10 of the Outer Continental Shelf Lands 
Act (OCSLA) requiring OCS lessees to file requests for refunds 
of overpayments within two years of the date of which such 
overpayments were made. Under the OCSLA, interest is not paid 
on overpayments. S. 1014 would correct these problems by 
extending the period within which to request refunds from two 
to six years and by authorizing the payment of interest on such 
amounts.
    Other provisions in S. 1014 would: simply audit and royalty 
collection requirements, allow waiver of obligations that would 
not be cost-effective to account for and collect; and eliminate 
formal notice requirements before seeking to enforce the OCSLA.
    Because of its potential to raise $52 million in new 
revenues over seven years, a version of S.1014 as introduced 
was incorporated in the Balanced Budget Act of 1995, which was 
vetoed by the President on December 6, 1995. Following the 
President's veto, Committee staff met with representatives of 
the Administration to resolve differences over the text of the 
legislation. As reported by the Committee, S. 1014 reflects 
agreements reached in that process.

                          Legislative History

    S. 1014 was introduced on June 30, 1995 by Senator Nickles. 
Senators Murkowski and Domenici joined as cosponsors on July 24 
and August 10, respectively. Chairman Nickles held a hearing on 
the Subcommittee on Energy Production and Regulation on S. 1014 
on September 14, 1995.
    In the House an identical companion, H.R. 1975, was 
introduced on June 30 by Reps. Calvert, Brewster, Dooley, 
Tauzin and Lucas. A hearing was held by the Subcommittee on 
Energy and Mineral Resources on July 18, 1995. H.R. 1975 was 
reported from the House Committee on Resources on March 28, 
1996.
    At the business meeting on May 1, 1996, an amendment to S. 
1014 in the nature of a substitute was offered by Senator 
Murkowski and Senator Johnston, and the Committee ordered the 
bill favorably reported, as amended.

            Committee Recommendations and Tabulation of Vote

    The Senate Committee on Energy and Natural Resources, in 
open business session on Wednesday, May 1, 1996, by a unanimous 
voice vote of a quorum present, recommended that the Senate 
pass S. 1014 as described herein.

                      Section-by-Section Analysis

                         Section 1--Short Title

    The title of the Act is the ``Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996.''

                         Section 2--Definitions

    This section adds several new definitions to section 3 of 
the Federal Oil and Gas Royalty Management Act (FOGRMA) of 
1982. The definitions are self-explanatory.

  Section 3--Delegation of Royalty Collections and Related Activities

    Section 3(a) amends section 205 of FOGRMA as follows:
    Subsection 205(a) authorizes the Secretary to delegate, for 
royalty management enforcement purposes, all or part of the 
authorities and responsibilities of the Secretary to: conduct 
audits, inspections and investigations; receive and process 
production and financial reports; correct erroneous report 
data; perform automated verification; and issue demands, 
subpoenas, and orders to perform restructured accounting to any 
State with respect to all Federal land within that State.
    Subsection 205(b) authorizes the Secretary to delegate the 
authorities and responsibilities requested by a State, if the 
Secretary finds that: (1) it is likely the State will provide 
adequate resources to perform delegated functions; (2) the 
State has demonstrated that it will effectively administer 
rules and regulations promulgated by the Secretary under the 
Act; (3) the delegation of functions will not create an 
unreasonable burden on the lessees within the State; (4) the 
State will adopt standardized reporting procedures for royalty 
and production accounting purposes; (5) the State agrees to 
follow regulations issued by the Secretary regarding valuation 
of production; and (6) the State will enact laws and 
regulations to have authority to carry out and enforce 
delegated functions.
    Subsection 205(c) requires the Secretary to issue a ruling 
as to the consistency of a State's proposal within 90 days 
after submission, after notice and opportunity for a hearing. 
The Secretary must set forth the reasons for any unfavorable 
ruling and state whether the Secretary will agree to delegate 
to the State if the State meets the conditions set forth in the 
ruling.
    Subsection 205(d) requires the Secretary to promulgate 
standards and regulations within 12 months of enactment 
pertaining to the authorities and responsibilities to be 
delegated to States for royalty management enforcement 
purposes, including standards and regulations pertaining to: 
audits to be performed; records and accounts to be maintained; 
reporting procedures to be required by States; receipt and 
processing of production and financial reports; correction of 
erroneous report data; performance of automated verification; 
issuance of standards and guidelines in order to avoid 
duplication of effort; transmission of report data to the 
Secretary; and issuance of demands, subpoenas, and orders to 
perform restructured accounting. In carrying out this section, 
the Secretary is to assure that such standards and regulations 
will result in a uniform and effective royalty management 
system among the States. State records and accounts must be 
sufficient enough to allow the Secretary to monitor performance 
of a State in performing delegated functions.
    Subsection 205(e) authorizes the Secretary to revoke any 
delegation, after notice and opportunity for a hearing, if the 
Secretary finds that any State is in violation of any 
requirement or any rule. The Secretary is required to provide 
written notice to the delegated State and a reasonable 
opportunity to take corrective action, and if the Secretary 
determines that the State has failed to issue a demand or order 
to a Federal lessee within the State, that such failure may 
result in an underpayment of an obligation due the United 
States by such lessee, and that such underpayment may be 
uncollected without Secretarial intervention, the Secretary is 
authorized to issue a demand or order prior to or absent the 
withdrawal of delegated authority.
    Subsection 205(f) requires the Secretary to compensate any 
State for those costs necessary to carry out delegated 
activities. Payment is to be made no less than every quarter 
during the fiscal year, and compensation to a State is not to 
exceed the Secretary's reasonably anticipated expenditure for 
performance of the delegated activities by the Secretary. Such 
costs are allocable for the purposes of section 35(b) of the 
Mineral Leasing Act to the administration and enforcement of 
laws providing for the leasing of any onshore lands or 
interests in land owned by the United States. Any further 
allocation of costs under section 35(b) made by the Secretary 
for oil and gas activities, other than those costs to 
compensate States for delegated activities under this Act, 
shall be only those costs associated with onshore oil and gas 
activities and may not include any duplication of costs 
allocated pursuant to the previous sentence. Nothing in this 
section affects the Secretary's authority to make allocations 
under section 35(b) for non-oil and gas mineral activities. All 
moneys received from sales, bonuses, rentals, royalties, 
assessments and interest, including money claimed to be due and 
owing pursuant to a delegation under this section, shall be 
payable and paid to the Treasury of the United States.
    Section 3(b) makes a clerical amendment.

  Section 4--Secretarial and Delegated States' Actions and Limitation 
                                Periods

    Section 4(a) amends section 115 of FOGRMA as follows:
    Subsection 115(a) requires that the respective duties of 
the Secretary, States and lessees be performed in a timely 
manner.
    Subsection 115(b) requires that judicial proceedings or 
demands relating to an obligation be commenced within seven 
years of the time an obligation becomes due or be time barred. 
If a judicial proceeding or demand is barred, the Secretary, a 
State, or a lessee cannot take any other further action 
regarding an obligation and cannot pursue any other equitable 
or legal remedy respecting an action on or enforcement of the 
obligation.
    Subsection 115(c) provides that an obligation becomes due 
when the right to enforce it is fixed, which occurs on the last 
day of the calendar month following the month in which oil or 
gas is produced.
    Subsection 115(d) provides that the seven-year limitation 
period can be tolled only by: a written tolling agreement; a 
subpoena seeking records relating to the obligation; 
misrepresentation or concealment; or an order to perform a 
restructured accounting.
    Subsection 115(e) provides that the limitation period can 
be terminated by notification of the lessee by the Secretary or 
a State that a time period is closed to further audit or by 
agreement among the lessee, the Secretary and a State.
    Subsection 115(f) establishes a records retention 
requirement coinciding with the seven-year limitation period.
    Subsection 115(g) bars the Secretary from performing or 
requiring accounting, reporting, or audit activities if the 
cost of performing such activity exceeds the expected amount to 
be collected.
    Subsection 115(h) establishes a 33-month limitation on 
administrative appeals at the Department of the Interior and a 
process for determining final agency action for failure to act 
within that period.
    Subsection 115(i) calls for at least one settlement 
conference relating to disputed obligations in order to 
expedite collections.
    Subsection 115(j) provides for enforcement of demands 
properly and timely issued during the six-year period beyond 
the seven-year limitation period.
    Subsection 115(k) saves judicial proceedings or demands 
timely commenced from lapse of the limitation period.
    Subsection 115(l) stays payment of an obligation pending 
administrative or judicial proceedings, so long as financial 
assurance requirements can be met.
    Section 4(b) makes a clerical amendment.

                   section 5--adjustments and refunds

    Section 5(a) amends FOGRMA section 111 by adding a new 
section 111A as follows:
    Subsection (a) allows lessees to make adjustments or refund 
requests to correct underpayments or overpayments of 
obligations if made within a reasonable period of time within 
the adjustment period which is the six-year period following 
the date when an obligation becomes due. Lessees are required 
to calculate and report the interest due that is attributable 
to adjustments, unless a hardship.
    Subsection (b) requires that refund requests meet certain 
requirements, and the Secretary is required to promptly notify 
States of refund requests. Following certification of the 
refund amount by the Secretary of the Interior, the Secretary 
of the Treasury is required to make the refund out of amounts 
received as current receipts from lease sales, bonus bids, 
royalties, interest, and rentals of public lands and Outer 
Continental Shelf lands. Refunds are required to be paid within 
120 days of the date requested. The Secretary or a State cannot 
claim or offset any amount by the amount of any obligation the 
enforcement of which is barred by the seven-year limitation 
period.
    Section 5(b) makes a clerical amendment.

    section 6--royalty terms and conditions, interest, and penalties

    Section 6(a) amends section 111 of FOGRMA by adding a new 
subsection (h), which authorizes the payment of interest to 
lessees who make overpayments from amounts received as current 
receipts from lease sales, bonus bids, royalties, interest, and 
rentals of public lands and Outer Continental Shelf lands. 
Accrued interest on an overpayment may be applied to reduce an 
underpayment.
    Section 6(b) adds a new subsection (i), which provides that 
interest is not allowed for ``excessive overpayments,'' defined 
as the amount that any overpayment for a reporting month for 
the aggregate of all Federal leases exceeds 10 percent of total 
royalties paid for those leases that month.
    Section 6(c) adds a new subsection (j), which authorizes 
lessees to make estimated payments. When estimated payments are 
used, actual royalties are due and payable at the end of the 
month following the month in which the estimated payment is 
made. Once actual royalties are paid, estimated payments can be 
applied to future royalties, and estimated payments can be 
adjusted, recouped or reinstated at any time.
    Section 6(d) adds a new subsection (k), which requires 
lessees with leases in unit or communitization agreements 
containing only Federal leases with the same royalty rates and 
funds distribution to report and pay oil and gas royalties for 
each production month based on actual volume of production sold 
by the lessee. Lessees with leases in any other unit or 
communitization agreement must report and pay royalties for 
each production month based on the volume of oil and gas 
produced and allocated to the lease in accordance with the 
agreement. Lessees with leases that are not in a unit or 
communitization agreement must report and pay royalties for 
each production month based on the actual volume of production 
sold by the lessee. The subsection also authorizes lessees in 
unit or communitization agreements to contractually agree to an 
alternative method of royalty reporting and payment, and 
requires the Secretary or a State to except ``marginal 
properties'' from reporting and payment requirements by 
allowing for any calendar year or portion thereof royalties to 
be paid each month based on the volume of production sold. The 
term ``marginal property'' is defined as a lease that produces 
less than 15 barrels of oil per day or 90,000 cubic feet of gas 
per day or some combination thereof. And the subsection 
requires the Secretary to issue demands within two years for 
all outstanding royalty disputes as to who reports and pays 
royalties on production from units and communitization 
agreements outstanding on the date of enactment.
    Section 6(e) adds a new subsection (1), which requires the 
Secretary to issue a determination of allocation of production 
for units and communitization agreements within 120 days of a 
request for a determination. If no determination is issued 
within the 120-day period, interest must be waived until the 
end of the month following the month in which the determination 
is made.
    Section 6(f) adds a new section 116 to FOGRMA to require 
the Secretary or a delegated State to impose assessments on 
lessees who chronically submit erroneous reports.
    Section 6(g) amends FOGRMA section 102(a) to require 
lessees to make payments in the time and manner specified by 
the Secretary or a delegated State. The subsection authorizes 
the lessee to designate a person to make payments under a lease 
on the lessee's behalf. The person owning operating rights in a 
lease is primarily liable for its pro rata share of payment 
obligations under a lease. If the person owning the legal 
record title in a lease is other than the operating rights 
owner, the person owning the legal record title is secondarily 
liable for its pro rata share of payment obligations.
    Section 6(h) makes a clerical amendment.

            section 7--alternatives for marginal properties

    Section 7(a) amends FOGRMA to add a new section 117 as 
follows:
    Subsection 117(a) requires the Secretary and the State 
concerned to determine the amount of marginal production from a 
lease or leases or well or wells subject to a prepayment or 
regulatory relief. If a State concerned does not consent, the 
prepayments or regulatory relief cannot be allowed. If royalty 
payments from leases or wells are not shared with a State, the 
determination must be made by the Secretary. The subsection 
authorizes the Secretary to accept a prepayment of royalties in 
lieu of monthly royalty payments under the lease for the 
remainder of the lease term, if the lessee agrees. Any 
prepayment that is less than an average $500 per month must be 
made within 2 years of enactment and any prepayment that is 
greater than an average of $500 per month must be made within 3 
years after the date of enactment. Acceptance of the prepayment 
by the Secretary and the State can be conditioned upon several 
factors: prepayments do not result in a loss of revenue to the 
United States in present value terms; additional royalties or 
prepayments can be received for developments in leases or wells 
that vary significantly from assumptions and facts used to make 
valuation determinations; and provision of periodic production 
reports by the lessee to allow the Secretary and the State to 
monitor production. Prepayments are to be shared with States 
the same way royalty are shared, and prepayments satisfy in 
full the lessee's obligation to pay royalty on the production 
stream from the lease or well. The subsection requires the 
Secretary or delegated State to provide accounting, reporting, 
and auditing relief that will encourage lessees to continue to 
produce and develop marginal properties, if the State concurs. 
Concurrence is not required if royalties are not shared with 
the State. Prior to providing such relief, the Secretary and 
the State must agree to the type of marginal wells and relief 
that would be in the best interests of the United States or the 
State.
    Section 7(b) makes a clerical amendment.

                        Section 8--Applicability

    Section (a) declares that FOGRMA sections 202 and 307 are 
no longer applicable to federal lands. The applicability of 
those to Indian leases is not affected.
    Subsection (b) repeals section 10 of the Outer Continental 
Shelf Lands Act.

                        Section 9--Indian Lands

    This section states that the amendments made by this Act do 
not apply to Indian lands, and the provisions of the Federal 
Oil and Gas Royalty Management Act of 1982 as in effect prior 
to enactment will continue to apply after enactment to Indian 
lands.

                       Section 10--Private Lands

    This section states that the Act does not apply to 
privately owned minerals.

                       Section 11--Effective Date

    This section states that, except as otherwise noted, the 
provisions of the Act apply to production of oil and gas after 
the first day of the month following enactment of the Act.

                       Section 12--Savings Clause

    This section states that nothing in the Act shall be 
construed to give a State a property right or interest in any 
federal lease or land.

                   Cost and Regulatory Considerations

    The Congressional Budget Office estimates that enactment of 
S. 1014 would result in a net decrease in direct spending of 
about $36 million over the 1997-2002 period. The full CBO cost 
estimate follows:
                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 8, 1996.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1014, the Federal 
Oil and Gas Royalty Simplification and Fairness Act of 1996.
    Enactment of S. 1014 would affect direct spending. 
Therefore, pay-as-you-go procedures would apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               Congressional budget office cost estimate

    1. Bill number: S. 1014.
    2. Bill title: Federal Oil and Gas Royalty Simplification 
and Fairness Act of 1996.
    3. Bill status: As ordered reported by the Senate Committee 
on Energy and Natural Resources on May 1, 1996.
    4. Bill purpose: S. 1014 would make a number of changes to 
procedures and obligations related to the collection of royalty 
payments on oil and gas extracted from federal lands, both 
onshore and offshore. The bill would:
          Expand the Secretary of the Interior's authority to 
        delegate to the states the collection of royalties and 
        related activities, and revise how the federal 
        government reimburses states for the costs of carrying 
        out royalty-related activities;
          Set a seven-year statute of limitations for 
        commencing a judicial proceeding or demand related to a 
        royalty obligations, starting from the date on which 
        the obligation become due;
          Require the Secretary to complete administrative 
        appeals, including those pending when the bill is 
        enacted, within 33 months, unless the Secretary and the 
        appellant agree to an extension;
          Establish a six-year adjustment period, beginning on 
        the date an obligation becomes due, within which 
        lessees may request correction of an overpayment or 
        underpayment, and require that refunds be paid or 
        denied within 120 days;
          Require the federal government to pay lessees 
        interest on royalty overpayments at the rate specified 
        in the Internal Revenue Code;
          For federal leases within unit or communization 
        agreements, revise the method of reporting the 
        royalties owed by each lessee; and
          For marginal properties, authorize the Secretary to 
        accept a prepayment for royalties instead of continued 
        monthly royalty payments on actual production.
    5. Estimated cost to the Federal Government: CBO estimates 
than enacting S. 1014 would result in a net decrease in direct 
spending of about $36 million over the 1997-2002 period. Most 
of that estimated change would result from accelerating 
payments to the government that would otherwise be made in 
later years. The following table summarizes the estimated 
budgetary impact of S. 1014.

----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
                                                 DIRECT SPENDING                                                
Spending under current law:                                                                                     
    Offsetting receipts:                                                                                        
        Estimated budget authority........    -3,758    -3,923    -3,665    -3,705    -3,556    -3,706    -3,934
        Estimated outlays.................    -3,758    -3,923    -3,665    -3,705    -3,556    -3,706    -3,934
    Spending: States' share of receipts:                                                                        
        Estimated budget authority........       508       515       499       506       520       535       551
        Estimated outlays.................       508       515       499       506       520       535       551
    Net direct spending:                                                                                        
        Estimated budget authority........    -3,250    -3,408    -3,166    -3,199    -3,036    -3,171    -3,383
        Estimated outlays.................    -3,250    -3,408    -3,166    -3,199    -3,036    -3,171    -3,383
Proposed changes:                                                                                               
    Offsetting receipts:                                                                                        
        Estimated budget authority........  ........        -2        -4       -10       -11       -10        -8
        Estimated outlays.................  ........        -2        -4       -10       -11       -10        -8
    Spending: States' share of receipts:                                                                        
        Estimated budget authority........  ........         1         3         2         2         1   ( \1\ )
        Estimated outlays.................  ........         1         3         2         2         1   ( \1\ )
    Net direct spending:                                                                                        
        Estimated budget authority........  ........        -1        -1        -8        -9        -9        -8
        Estimated outlays.................  ........        -1        -1        -8        -9        -9        -8
Spending under S. 1014:                                                                                         
    Offsetting receipts:                                                                                        
        Estimated budget authority........    -3,758    -3,925    -3,669    -3,715    -3,567    -3,716    -3,942
        Estimated outlays.................    -3,758    -3,925    -3,669    -3,715    -3,567    -3,716    -3,942
    Spending: States' share of receipts:                                                                        
        Estimated budget authority........       508       516       502       508       522       536       551
        Estimated outlays.................       508       516       502       508       522       536       551
    Net direct spending:                                                                                        
        Estimated budget authority........    -3,250    -3,409    -3,167    -3,207    -3,045    -3,180    -3,391
        Estimated outlays.................    -3,250    -3,409    -3,167    -3,207    -3,045    -3,180    -3,391
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.                                                                                         

    The effects of this bill fall within budget functions 300, 
800, and 950.
    6. Basis of estimate: CBO estimates that enacting S. 1014 
would accelerate the collection of offsetting receipts to the 
Treasury by $80 million over the 1997-2002 period, net of 
payments to states of 50 percent of additional onshore 
collections. Lessees' royalty obligations would generally 
remain the same under this bill, but some payments would be 
shifted forward in time.
    We estimate that provisions in the bill that fix the 
statute of limitations at seven years, require appeals to be 
completed within 33 months, establish a six-year adjustment 
period, clarify the policy on allocating volumes of production 
among certain lessees, and allow for royalty prepayments on 
marginal properties, would shift the collection of about $72 
million in offsetting receipts from years after 2002 into the 
1997-2002 period. These amounts are net of payments to states 
of their portion of onshore collections. The bill also would 
allow the federal government to retain more royalty receipts by 
modifying the calculation of administrative costs to be borne 
by states. CBO estimates this change would increase the federal 
government's share of offsetting receipts of about $8 million 
over the 1997-2002 period.
    Section 6 of the bill would expand the obligations of the 
federal government to lessees. Beginning September 1, 1996, or 
six months after enactment (whichever is later), the federal 
government would be required to pay for credit interest in 
lessees' overpayments at the rate specified in the Internal 
Revenue Code. The bill would disallow payment of interest if a 
lessee's overpayments for a given month exceed 10 percent of 
the total royalties due on all its federal leases. Such 
interest payments would be deducted from receipts from bonuses, 
rents, and royalties, including interest charges collected on 
underpayments. (The share borne by states would be deducted 
from their receipts.) According to data provided by the 
Minerals Management Service, overpayments average about 3 
percent of the royalties paid each year. For the purposes of 
this estimate, we assume that the amount of overpayments would 
increase slightly (to nearly 5 percent) because any excess 
payments would now earn interest at a rate 2 percent above the 
Treasury's rate for short-term (90-day) borrowing. CBO 
estimates that this provision would increase direct spending, 
net of reduced payments to states, by about $44 million over 
the 1997-2002 period.
    7. Pay-as-you-go considerations: Section 252 of the 
Balanced Budget and Emergency Deficit Control Act of 1985 sets 
up pay-as-you-go procedures for legislation affecting direct 
spending and receipts through 1998. CBO estimates that enacting 
S. 1014 would affect direct spending by changing the amount 
collected as offsetting receipts (which are recorded as 
negative outlays), and direct payments to states for their 
share of such collections. Therefore, pay-as-you-go procedures 
would apply to the bill. CBO estimates that enacting this bill 
would reduce direct spending by about $2 million over the 1996-
1998 period.

------------------------------------------------------------------------
                                       1996         1997         1998   
------------------------------------------------------------------------
Change in outlays................  ...........           -1           -1
Change in receipts...............        (\1\)        (\1\)        (\1\)
------------------------------------------------------------------------
\1\ Not applicable.                                                     

    8. Estimated impact on State, local, and tribal 
governments: S. 1014 contains no intergovernmental mandates as 
defined in Public Law 104-4 and would impose no direct costs on 
state, local, or tribal governments.
    CBO estimates that the net impact of this bill would be a 
$9 million increase in payments to state governments over the 
1997-2002 period, assuming appropriation of the amounts 
authorized for reimbursement of administrative costs. States 
share 50 percent of the royalties from oil and gas leases on 
federal lands within their borders. They would, therefore, 
benefit from provisions in this bill that shift the collection 
of federal oil and gas royalty receipts from years after 2002 
into the 1997-2002 period. At the same time, states would pay a 
larger portion of the administrative costs and would share in 
the federal government's expanded obligations to lessees as a 
result of the bill's provision requiring the payment of 
interest on lessees' overpayments.
    S. 1014 would expand the opportunities for states to seek 
delegation of responsibility for enforcing and collecting 
royalties. A state that seeks and accepts delegation would do 
so voluntarily. As under current law, the federal government 
would reimburse that state for the costs of carrying out these 
delegated responsibilities. By changing the procedure used to 
calculate states' share of royalty receipts, however, the bill 
would appear to shift some of these costs back to the states.
    9. Estimated impact on the private sector: The bill would 
impose no new private sector mandates, as defined in Public Law 
104-4.
    10. Previous CBO estimate: On April 30, 1996, CBO prepared 
a cost estimate for H.R. 1975, as ordered reported by the House 
Committee on Resources on March 28, 1996. Provisions affecting 
direct spending are nearly identical and, hence, CBO's 
estimates of changes in direct spending are the same for the 
two bills.
    H.R. 1975 and S. 1014 differ in how they would modify the 
method of calculating the share of administrative costs borne 
by states. Both bills would authorize federal reimbursement for 
costs incurred by states to carry out delegated royalty 
management responsibilities, as under current law. In addition, 
both bills would modify the current method of sharing receipts 
by directing that these federally-reimbursed state costs be 
deducted from gross receipts in the same manner as direct 
federal administrative costs before determining the states' 
share. The effect of this change would be to reduce the states' 
share of royalty receipts by a portion of the cost of delegated 
activities. H.R. 1975 would authorize appropriations to 
reimburse states one year later for receipts lost as a result 
of this change. S. 1014 would not authorize such reimbursement; 
therefore, we estimate no increased discretionary spending and 
a smaller increase in the share of receipts paid to states 
under S. 1014.
    11. Estimate prepared by: Federal Cost Estimate: Victoria 
V. Heid. State and Local Government Impact: Marjorie Miller. 
Private Sector Impact: Amy Downs.
    12. Estimate approved by: Robert A. Sunshine, for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                       Federal Mandate Evaluation

    The Congressional Budget Office federal mandate evaluation 
has been requested but was not received at the time the report 
filed. When the report is available, the Chairman will request 
that it be printed in the Congressional Record for the advice 
of the Senate.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
implementing S. 1014. The regulatory burden imposed by FOGRMA 
on the private sector would be reduced under S. 1014 by 
shortening the audit period, reducing records retention 
requirements, accelerating the administrative appeals process, 
and simplifying the royalty management program. To the extent 
the legislation would impose new regulatory requirements on the 
federal government, some of those requirements would be shifted 
to States requesting delegation of royalty management 
functions.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    There are likely to be significant paperwork requirements 
for the Department of the Interior.

                        Executive Communications

    A Statement of Administration Position has not been 
submitted as of the date this report was filed. When the SAP is 
available, the Chairman will request that it be printed in the 
Congressional Record for the advice of the Senate.
                            ADDITIONAL VIEWS

    I am pleased the Senate Energy and Natural Resources 
Committee has taken action on S. 1014, the ``Federal Oil and 
Gas Royalty Simplification and Fairness Act of 1996.'' This 
legislation is a good step forward which will create greater 
efficiency for federal mineral royalty collections on public 
lands. The bill will simplify the royalty collection process 
and create a level playing field for the federal government, 
the states, and oil and gas lessees on federal lands.
    However, I am disappointed the Committee did not include 
language that would strengthen the states' ability to assume 
many of the royalty collection and enforcement functions. 
Although there is language in S. 1014 authorizing the Secretary 
of Interior to delegate royalty collection functions to the 
states, it is too broad and gives the Department of Interior 
too much discretion. Unless Congress is willing to push the 
Department of Interior to allow the states to assume the 
royalty collection functions, it will never happen.
    Giving the states the opportunity to conduct and enforce 
royalty collection activities for minerals on federal lands is 
something we have been working on for a long time. The State of 
Wyoming has done a number of studies evaluating the royalty 
collection program at the Minerals Management Service (MMS) and 
believes it can do the same job more cheaply and effectively. 
In 1993, then Governor Mike Sullivan testified before the House 
natural Resources Committee that Wyoming performs a nearly 
identical process of collecting auditing royalties on state 
lands for roughly 10 percent of what it costs the MMS.
    The time has come for Congress to make some fundamental 
changes in the way government operates. Delegating royalty 
collection functions to the states is a true power transfer 
that will streamline the royalty collection process, reduce 
costs and make the government more efficient to operate. In our 
discussions regarding this bill, a number of proposals have 
been considered to resolve this issue, including establishing a 
pilot program to allow the State of Wyoming to assume the 
royalty collection functions. As this bill moves forward, I am 
interested in working with the committee to try and develop a 
workable solution that will address the concerns of the State 
of Wyoming, the federal government and the lessees operating on 
federal lands.

                                                      Craig Thomas.
                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 1014, as ordered reported, as shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

 Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. et seq.)

                            Table of Contents

     * * * * * *
Sec. 111. Royalty terms and conditions, interest, and penalties [and 
          payments].
Sec. 111A. Adjustments and Refunds.
     * * * * * *
Sec. 115. Secretarial and delegated States' actions and limitation 
          periods.
Sec. 116. Assessments.
Sec. 117. Alternatives for marginal properties.
     * * * * * *
Sec. 205. Delegation of royalty collections and related activities [to 
          States].
     * * * * * *

                              Definitions

    Sec. 3. For the purposes of this Act, the term--
          * * * * * * *
          [(7) ``lessee'' means any person to whom the United 
        States, an Indian tribe, or an Indian allottee, issues 
        a lease, or any person who has been assigned an 
        obligation to make royalty or other payments required 
        by the lease;]
          (7) ``lessee'' means any person to whom the United 
        States issues an oil and gas lease or any person to 
        whom operating rights in a lease have been assigned;
          * * * * * * *
          (15) ``Secretary'' means the Secretary of the 
        Interior or his designee; [and]
          (16) ``State'' means the several States of the Union, 
        the District of Columbia, Puerto Rico, the territories 
        and possessions of the United States, and the Trust 
        Territory of the Pacific Islands[.];
          (17) ``adjustment'' means an amendment to a 
        previously filed report on an obligation, and any 
        additional payment or credit, if any, applicable 
        thereto, to rectify and underpayment or overpayment on 
        an obligation;
          (18) ``administrative proceeding'' means any 
        Department of the Interior agency process in which a 
        demand, decision or order issued by the Secretary or a 
        delegated State is subject to appeal or has been 
        appealed;
          (19) ``assessment'' means any fee or charge levied or 
        imposed by the Secretary or a delegated State other 
        than--
                  (A) the principal amount of any royalty, 
                minimum royalty, rental, bonus, net profit 
                share or proceed of sale;
                  (B) any interest; or
                  (C) any civil or criminal penalty;
          (20) ``commence'' means--
                  (A) with respect to a judicial proceeding, 
                the service of a complaint, petition, 
                counterclaim, cross claim, or other pleading 
                seeking affirmative relief or seeking credit or 
                recoupment: Provided, That if the Secretary 
                commences a judicial proceeding against a 
                designee, the Secretary shall give notice of 
                that commencement to the lessee who designated 
                the designee, but the Secretary is not required 
                to give notice to other lessees who may be 
                liable pursuant to section 102(a) of this Act, 
                for the obligation that is the subject to the 
                judicial proceeding; or
                  (B) with respect to a demand, the receipt by 
                the Secretary or a delegated State or a lessee 
                or its designee (with written notice to the 
                lessee who designated the designee) of the 
                demand;
          (21) ``credit'' means the application of an 
        overpayment (in whole or in part) against on obligation 
        which has become due to discharge, cancel or reduce the 
        obligation;
          (22) ``delegated State'' means a State which, 
        pursuant to an agreement or agreements under section 
        205 of this Act, performs authorities, duties, 
        responsibilities, or activities of the Secretary;
          (23) ``demand means--
                  (A) ``an order to pay issued by the Secretary 
                or the applicable delegated State to a lessee 
                or its designee (with written notice to the 
                lessee who designated the designee) that has a 
                reasonable basis to conclude that the 
                obligation in the amount of the demand in due 
                and owing; or
                  (B) ``a separate written request by a lessee 
                or its designee which asserts an obligation due 
                the lessee or its designee that provides a 
                reasonable basis to conclude that the 
                obligation in the amount of the demand in due 
                and owing, but does not mean any royalty or 
                production report, or any information contained 
                therein, required by the Secretary or a 
                delegated State;
          (24) ``designee'' means the person designated by a 
        lessee pursuant to section 102(a) of this Act, with 
        such written designation effective on the date such 
        designation is received by the Secretary and remaining 
        in effect until the Secretary receives notice in 
        writing that the designation is modified or terminated;
          (25) ``obligation'' means--
                  (A) any duty of the Secretary or, if 
                applicable, a delegated State--
                          (i) to take oil or gas royalty in 
                        kind; or
                          (ii) to pay, refund, offset, or 
                        credit monies including (but not 
                        limited to)--
                                  (I) the principal amount of 
                                any royalty, minimum royalty, 
                                rental, bonus, net profit share 
                                or proceed of sale; or
                                  (II) any interest; and
                  (B) any duty of a lessee or its designee 
                (subject to the provisions of section 102(a) of 
                this Act)--
                          (i) to deliver oil or gas royalty in 
                        kind; or
                          (ii) to pay, offset or credit monies 
                        including (but not limited to)--
                                  (I) the principal amount of 
                                any royalty, minimum royalty, 
                                rental, bonus, net profit share 
                                or proceed of sale;
                                  (II) any interest;
                                  (III) any penalty; or
                                  (IV) any assessment,
                        which arises from or relates to any 
                        lease administered by the Secretary 
                        for, or any mineral leasing law related 
                        to, the exploration, production and 
                        development of oil or gas on Federal 
                        lands or the Outer Continental Shelf;
          (26) ``order to pay'' means a written order issued by 
        the Secretary or the applicable delegated State to a 
        lessee or its designee (with notice to the lessee who 
        designated the designee) which--
                  (A) asserts a specific, definite, and 
                quantified obligation claimed to be due, and
                  (B) specifically identifies the obligation by 
                lease, production month and monetary amount of 
                such obligation claimed to be due and ordered 
                to be paid, as well as the reason or reasons 
                such obligation is claimed to be due, but such 
                term does not include any other communication 
                or action by or on behalf of the Secretary or a 
                delegated State;
          (27) ``overpayment'' means any payment by a lessee or 
        its designee in excess of an amount legally required to 
        be paid on an obligation and includes the portion of 
        any estimated payment for a production month that is in 
        excess of the royalties due for that month;
          (28) ``payment'' means satisfaction, in whole or in 
        part, of an obligation;
          (29) ``penalty'' means a statutorily authorized civil 
        fine levied or imposed for a violation of this Act, any 
        mineral leasing law, or a term or provision of a lease 
        administered by the Secretary;
          (30) ``refund'' means the return of an overpayment;
          (31) ``State concerned'' means, with respect to a 
        lease, a State which receives a portion of royalties or 
        other payments under the mineral leasing laws from such 
        lease;
          (32) ``underpayment'' means any payment or nonpayment 
        by a lessee or its designee that is less than the 
        amount legally required to be paid on an obligation; 
        and
          (33) ``United States'' means the United States 
        Government and any department, agency, or 
        instrumentality thereof, the several States, the 
        District of Columbia, and the territories of the United 
        States.
          * * * * * * *

      duties of lessees, operators, and Motor Vehicle Transporters

    Sec. 102. (a) [A lessee]
          [(1)] In order to increase receipts and achieve 
        effective collections of royalty and other payments, a 
        lessee who is required to make any royalty or other 
        payment under a lease or under the mineral leasing laws 
        shall make such payments in the time and manner as may 
        be specified by the Secretary[; and] or the applicable 
        delegated State. [(2) shall notify the Secretary, in 
        the time and manner as may be specified by the 
        Secretary, of any assignment the lessee may have made 
        of the obligation to make any royalty or other payment 
        under a lease or under the mineral leasing laws.] A 
        lessee may designate a person to make all or part of 
        the payments due under a lease on the lessee's behalf 
        and shall notify the Secretary or the applicable 
        delegated State in writing of such designation, in 
        which event said designated person may, in its own 
        name, pay, offset or credit monies, make adjustments, 
        request and receive refunds and submit reports with 
        respect to payments required by the lessee. 
        Notwithstanding any other provision of this Act to the 
        contrary, a designee shall not be liable for any 
        payment obligation under the lease. The person owning 
        operating rights in a lease shall be primarily liable 
        for its pro rata share of payment obligations under the 
        lease. If the person owning the legal record title in a 
        lease is other than the operating rights owner, the 
        person owning the legal record title shall be 
        secondarily liable for its pro rata share of such 
        payment obligations under the lease.
          * * * * * * *

  royalty terms and conditions, interest, and penalties [and payments]

    Sec. 111. * * *
          * * * * * * *
    (h) Interest shall be allowed and paid or credited on any 
overpayment, with such interest to accrue from the date such 
overpayment was made, at the rate obtained by applying the 
provisions of subparagraphs (A) and (B) of section 6621(a)(1) 
of the Internal Revenue Code of 1986, but determined without 
regard to the sentence following subparagraph (B) of section 
6621(a)(1). Interest which has accrued on any overpayment may 
be applied to reduce an underpayment. This subsection applies 
to overpayments made later than six months after the date of 
enactment of this subsection or September 1, 1996, whichever is 
later. Such interest shall be paid from amounts received as 
current receipts from sales, bonuses, royalties (including 
interest charges collected under this section) and rentals of 
the public lands and the Outer Continental Shelf under the 
provisions of the Mineral Leasing Act, and the Outer 
Continental Shelf Lands Act, which are not payable to a State 
or the Reclamation Fund. The portion of any such interest 
payment attributable to any amounts previously disbursed to a 
State, the Reclamation Fund, or any other recipient designated 
by law shall be deducted from the next disbursements to that 
recipient made under the applicable law. Such amounts deducted 
from subsequent disbursements shall be credited to 
miscellaneous receipts in the Treasury.
    (i) Upon a determination by the Secretary that an excessive 
overpayment (based upon all obligations of a lessee or its 
designee for a given reporting month) was made for the sole 
purpose of receiving interest, interest shall not be paid on 
the excessive amount of such overpayment. For purposes of this 
Act, an ``excessive overpayment'' shall be the amount that any 
overpayment a lessee or its designee pays for a given reporting 
month (excluding payments for demands for obligations 
determined to be due as a result of judicial or administrative 
proceedings or agreed to be paid pursuant to settlement 
agreements) for the aggregate of all of its Federal leases 
exceeds 10 percent of the total royalties paid that month for 
those leases.
    (j) A lessee or its designee may make a payment for the 
approximate amount of royalties (hereinafter in this subsection 
``estimated payment'') that would otherwise be due for such 
lease by the date royalties are due for that lease. When an 
estimated payment is made, actual royalties are payable at the 
end of the month following the month in which the estimated 
payment is made. If the estimated payment was less than the 
amount of actual royalties due, interest is owed on the 
underpaid amount. If the estimated payment exceeds the actual 
royalties due, interest is owed on the overpayment. If the 
lessee or its designee makes a payment for such actual 
royalties, the lessee or its designee may apply the estimated 
payment to future royalties. Any estimated payment may be 
adjusted, recouped, or reinstated at any time by the lessee or 
its designee.
    (k)(1) Except as otherwise provided by this subsection--
          (A) a lessee or its designee of a lease in a unit or 
        communitization agreement which contains only Federal 
        leases with the same royalty rate and funds 
        distribution shall report and pay royalties on oil and 
        gas production for each production month based on the 
        actual volume of production sold by or on behalf of 
        that lessee;
          (B) a lessee or its designee of a lease in any other 
        unit or communitization agreement shall report and pay 
        royalties on oil and gas production for each production 
        month based on the volume of oil and gas produced from 
        such agreement and allocated to the lease in accordance 
        with the terms of the agreement; and
          (C) a lessee or its designee of a lease that is not 
        contained in a unit or communitization agreement shall 
        report and pay royalties on oil and gas production for 
        each production month based on the actual volume of 
        production sold by or on behalf of that lessee.
    (2) This subsection applies only to requirements for 
reporting and paying royalties. Nothing in this subsection is 
intended to alter a lessee's liability for royalties on oil or 
gas production based on the share of production allocated to 
the lease in accordance with the terms of the lease, a unit or 
communitization agreement, or any other agreement.
    (3) For any unit or communitization agreement, if all 
lessees contractually agree to an alternative method of royalty 
reporting and payment, the lessees may submit such alternative 
method to the Secretary or the delegated State for approval and 
make payments in accordance with such approved alternative 
method so long as such alternative method does not reduce the 
amount of the royalty obligations.
    (4) The Secretary or the delegated State shall grant an 
exception from the reporting and payment requirements for 
marginal properties by allowing for any calendar year or 
portion thereof royalties to be paid each month based on the 
volume of production sold. Interest shall not accrue on the 
difference for the entire calendar year or portion thereof 
between the amount of oil and gas actually sold and the share 
of production allocated to the lease until the beginning of the 
month following such calendar year or portion thereof. Any 
additional royalties due or overpaid royalties and associated 
interest shall be paid, refunded, or credited within six months 
after the end of each calendar year in which royalties are paid 
based on volumes of production sold. For the purpose of this 
subsection, the term ``marginal property'' means a lease that 
produces on average the combined equivalent of less than 15 
barrels of oil per well per day or 90 thousand cubic feet of 
gas per well per day, or a combination thereof, determined by 
dividing the average daily production of crude oil and natural 
gas from producing wells on such lease by the number of such 
wells, unless the Secretary, together with the State concerned, 
determines that a different production is more appropriate.
    (5) Not later than two years after the date of the 
enactment of this subsection, the Secretary shall issue any 
appropriate demand for all outstanding royalty payment disputes 
regarding who is required to report and pay royalties on 
production from units and communization agreements outstanding 
on the date of the enactment of this subsection, and collect 
royalty amounts owed on such production.
    (l) The Secretary shall issue all determinations of 
allocations of production for units and communization 
agreements within 120 days of a request for determination. If 
the Secretary fails to issue a determination within such 120-
day period, the Secretary shall waive interest due on 
obligations subject to the determination until the end of the 
month following the month in which the determination is made.
          * * * * * * *


                        adjustments and refunds


    Sec. 111A. Adjustments and Refunds.
    (a) Adjustments to Royalties Paid to the Secretary or a 
Delegated State.--
          (1) If, during the adjustment period, a lessee or its 
        designee determines that an adjustment or refund 
        request is necessary to correct an underpayment or 
        overpayment of an obligation, the lessee or its 
        designee shall make such adjustment or request a refund 
        within a reasonable period of time and only during the 
        adjustment period. The filing of a royalty report which 
        reflects the underpayment or overpayment of an 
        obligation shall constitute prior written notice to the 
        Secretary or the applicable delegated State of an 
        adjustment.
          (2)(A) For any adjustment, the lessee or its designee 
        shall calculate and report the interest due 
        attributable to such adjustment at the same time the 
        lessee or its designee adjusts the principal amount of 
        the subject obligation, except as provided by 
        subparagraph (B).
          (B) In the case of a lessee or its designee who 
        determines that subparagraph (A) would impose a 
        hardship, the Secretary or such delegated State shall 
        calculate the interest due and notify the lessee or its 
        designee within a reasonable time of the amount of 
        interest due, unless such lessee or its designee elects 
        to calculate and report interest in accordance with 
        subparagraph (A).
          (3) An adjustment or a request for a refund for an 
        obligation may be made after the adjustment period only 
        upon written notice to and approval by the Secretary or 
        the applicable delegated State, as appropriate, during 
        an audit of the period which includes the production 
        month for which the adjustment is being made. If an 
        overpayment is identified during an audit, then the 
        Secretary or the applicable delegated State, as 
        appropriate, shall allow a credit or refund in the 
        amount of the overpayment.
          (4) For purposes of this section, the adjustment 
        period for any obligation shall be the six-year period 
        following the date on which an obligation became due. 
        The adjustment period shall be suspended, tolled, 
        extended, enlarged, or terminated by the same actions 
        as the limitation period in section 115.
    (b) Refunds.--
          (1) In General.--A request for refund is sufficient 
        if it--
                  (A) is made in writing to the Secretary and, 
                for purposes of section 115, is specifically 
                identified as a demand;
                  (B) identifies the person entitled to such 
                refund;
                  (C) provides the Secretary information that 
                reasonably enables the Secretary to identify 
                the overpayment for which such refund is 
                sought; and
                  (D) provides the reasons why the payment was 
                an overpayment.
          (2) Payment by secretary of the treasury.--The 
        Secretary shall certify the amount of the refund to be 
        paid under paragraph (1) to the Secretary of the 
        Treasury who shall make such refund. Such refund shall 
        be paid from amounts received as current receipts from 
        sales, bonuses, royalties (including interest charges 
        collected under this section) and rentals of the public 
        lands and the Outer Continental Shelf under the 
        provisions of the Mineral Leasing Act and the Outer 
        Continental Shelf Lands Act, which are not payable to a 
        State or the Reclamation Fund. The portion of any such 
        refund attributable to any amounts previously disbursed 
        to a State, the Reclamation Fund, or any recipient 
        prescribed by law shall be deducted from the next 
        disbursements to that recipient made under the 
        applicable law. Such amounts deducted from subsequent 
        disbursements shall be credited to miscellaneous 
        receipts in the Treasury.
          (3) Payment period.--A refund under this subsection 
        shall be paid or denied (with an explanation of the 
        reason for the denial) within 120 days of the date on 
        which the request for refund is received by the 
        Secretary. Such refund shall be subject to later audit 
        by the Secretary or the applicable delegated State and 
        subject to the provisions of this Act.
          (4) Prohibition against reduction of refunds or 
        credits.--In no event shall the Secretary or any 
        delegated State directly or indirectly claim or offset 
        any amount or amounts against, or reduced any refund or 
        credit (or interest accrued thereon) by the amount of 
        any obligation the enforcement of which is barred by 
        section 115 of this Act.
          * * * * * * *


    secretarial and delegated states' actions and limitation periods


    Sec. 115. (a) In General.--The respective duties, 
responsibilities, and activities with respect to a lease shall 
be performed by the Secretary, delegated States, and lessees or 
their designees in a timely manner.
    (b) Limitation Period.--
          (1) In general.--A judicial proceeding or demand 
        which arises from, or relates to an obligation, shall 
        be commenced within seven years from the date on which 
        the obligation becomes due and if not so commenced 
        shall be barred. If commencement of a judicial 
        proceeding or demand for an obligation is barred by 
        this section, the Secretary, a delegated State, or a 
        lessee or its designee (A) shall not take any other or 
        further action regarding that obligation, including 
        (but not limited to) the issuance of any order, 
        request, demand or other communication seeking any 
        document, accounting, determination, calculation, 
        recalculation, payment, principal, interest, 
        assessment, or penalty or the initiation, pursuit or 
        completion of an audit with respect to that obligation; 
        and (B) shall not pursue any other equitable or legal 
        remedy, whether under statute or common law, with 
        respect to an action on or an enforcement of said 
        obligation.
          (2) Rule of construction.--A judicial proceeding or 
        demand that is timely commenced under paragraph (1) 
        against a designee shall be considered timely commenced 
        as to any lessee who is liable pursuant to section 
        102(a) of this Act for the obligation that is the 
        subject of the judicial proceeding or demand.
          (3) Application of certain limitations.--The 
        limitations set forth in sections 2401, 2415, 2416, and 
        2462 of title 28, United States Code, and section 42 of 
        the Mineral Leasing Act (30 U.S.C. 226-2) shall not 
        apply to any obligation to which this Act applies. 
        Section 3716 of title 31, United States Code, may be 
        applied to an obligation the enforcement of which is 
        not barred by this Act, but may not be applied to any 
        obligation the enforcement of which is barred by this 
        Act.
    (c) Obligation Becomes Due.--
          (1) In general.--For purposes of this Act, an 
        obligation becomes due when the right to enforce the 
        obligation is fixed.
          (2) Royalty obligations.--The right to enforce any 
        royalty obligation for any given production month for a 
        lease is fixed for purposes of this Act on the last day 
        of the calendar month following the month in which oil 
        or gas is produced.
    (d) Tolling of Limitation Period.--The running of the 
limitation period under subsection (b) shall not be suspended, 
tolled, extended, or enlarged for any obligation for any reason 
by any action, including an action by the Secretary or a 
delegated State, other than the following:
          (1) Tolling agreement.--A written agreement executed 
        during the limitation period between the Secretary or a 
        delegated State and a lessee or its designee (with 
        notice to the lessee who designated the designee) shall 
        toll the limitation period for the amount of time 
        during which the agreement is in effect.
          (2) Subpoena.--
                  (A) The issuance of a subpoena to a lessee or 
                its designee (with notice to the lessee who 
                designated the designee, which notice shall not 
                constitute a subpoena to the lessee) in 
                accordance with the provisions of subparagraph 
                (B)(i) shall toll the limitation period with 
                respect to the obligation which is the subject 
                of a subpoena only for the period beginning on 
                the date the lessee or its designee receives 
                the subpoena and ending on the date on which 
                (i) the lessee or its designee has produced 
                such subpoenaed records for the subject 
                obligation, (ii) the Secretary or a delegated 
                State receives written notice that the 
                subpoenaed records for the subject obligation 
                are not in existence or are not in the lessee's 
                or its designee's possession or control, or 
                (iii) a court has determined in a final 
                decision that such records are not required to 
                be produced, whichever occurs first.
                  (B)(i) A subpoena for the purposes of this 
                section which requires a lessee or its designee 
                to produce records necessary to determine the 
                proper reporting and payment of an obligation 
                due the Secretary may be issued only by an 
                Assistant Secretary of the Interior or an 
                Acting Assistant Secretary of the Interior who 
                is a schedule C employee (as defined by section 
                213.3301 of title 5, Code of Federal 
                Regulations), or the Director or Acting 
                Director of the respective bureau or agency, 
                and may not be delegated to any other person. 
                If a State has been delegated authority 
                pursuant to section 205, the State, acting 
                through the highest State official having 
                ultimate authority over the collection of 
                royalties from leases on Federal lands within 
                the State, may issue such subpoena, but may not 
                delegate such authority to any other person.
                  (ii) A subpoena described in clause (i) may 
                only be issued against a lessee or its designee 
                during the limitation period provided in this 
                section and only after the Secretary or a 
                delegated State has in writing requested the 
                records from the lessee or its designee related 
                to the obligation which is the subject of the 
                subpoena and has determined that--
                          (I) the lessee or it designee has 
                        failed to respond within a reasonable 
                        period of time to the Secretary's or 
                        the applicable delegated State's 
                        written request for such records 
                        necessary for an audit, investigation 
                        or other inquiry made in accordance 
                        with the Secretary's or such delegated 
                        State's responsibilities under this 
                        Act; or
                          (II) the lessee or its designee has 
                        in writing denied the Secretary's or 
                        the applicable delegated State's 
                        written request to produce such records 
                        in the lessee's or its designee's 
                        possession or control necessary for an 
                        audit, investigation or other inquiry 
                        made in accordance with the Secretary's 
                        or such delegated State's 
                        responsibilities under this Act; or
                          (III) the lessee or is designee has 
                        unreasonably delayed in producing 
                        records necessary with the Secretary's 
                        or the applicable delegated State's 
                        responsibilities under this Act after 
                        the Secretary's or delegated State's 
                        written request.
                  (C) In seeking records, the Secretary or the 
                applicable delegated State shall afford the 
                lessee or its designee a reasonable period of 
                time after a written request by the Secretary 
                or such delegated State in which to provide 
                such records prior to the issuance of any 
                subpoena.
          (3) Misrepresentation or concealment.--The 
        intentional misrepresentation or concealment of a 
        material fact for the purpose of evading the payment of 
        an obligation in which case the limitation period shall 
        be tolled for the period of such misrepresentation or 
        such concealment.
          (4) Order to perform restructured accounting.--(A)(i) 
        The issuance of a notice under subparagraph (D) that 
        the lessee or its designee has not substantially 
        complied with the requirement to perform a restructured 
        accounting shall toll the limitation period with 
        respect to the obligation which is the subject of the 
        notice only for the period beginning on the date the 
        lessee or its designee receives the notice and ending 
        120 days after the date on which (I) the Secretary or 
        the applicable delegated State receives written notice 
        that the accounting or other requirement has been 
        performed, or (II) a court has determined in a final 
        decision that the lessee is not required to perform the 
        accounting, whichever occurs first.
          (ii) If the lessee or its designee initiates an 
        administrative appeal or judicial proceeding to contest 
        an order to perform a restructured accounting issued 
        under subparagraph (b)(i), the limitation period in 
        subsection (b) shall be tolled from the date the lessee 
        or its designee received the order until a final, 
        nonappealable decision is issued in any such 
        proceeding.
          (B)(i) The Secretary or the applicable delegated 
        State may issue an order to perform a restructured 
        accounting to a lessee or its designee when the 
        Secretary or such delegated State determines during an 
        audit of a lessee or its designee that the lessee or 
        its designee should recalculate royalty due on an 
        obligation based upon the Secretary's or the delegated 
        State's finding that the lessee or its designee has 
        made identified underpayments or overpayments which are 
        demonstrated by the Secretary or the delegated State to 
        be based upon repeated, systemic reporting errors for a 
        significant number of leases or a single lease for a 
        significant number of reporting months with the same 
        type of error which constitutes a pattern of violations 
        and which are likely to result in either significant 
        underpayments or overpayments.
          (ii) The power of the Secretary to issue an order to 
        perform a restructured accounting may not be delegated 
        below the most senior career professional position 
        having responsibility for the royalty management 
        program, which position is currently designated as the 
        ``Associate Director for Royalty Management'', and may 
        not be delegated to any other person. If a State has 
        been delegated authority pursuant to section 205 of 
        this Act, the State, acting through the highest ranking 
        State official having ultimate authority over the 
        collection of royalties from leases on Federal lands 
        within the State, may issue such order to perform, 
        which may not be delegated to any other person. An 
        order to perform a restructured accounting shall--
                  (I) be issued within a reasonable period of 
                time from when the audit identifies the 
                systemic, reporting errors;
                  (II) specify the reasons and factual bases 
                for such order;
                  (III) be specifically identified as an 
                ``order to perform a restructured accounting'';
                  (IV) provide the lessee or its designee a 
                reasonable period of time (but not less than 60 
                days) within which to perform the restructured 
                accounting; and
                  (V) provide the lessee or its designee 60 
                days within which to file an administrative 
                appeal of the order to perform a restructured 
                accounting.
          (C) An order to perform a restructured accounting 
        shall not mean or be construed to include any other 
        action by or on behalf of the Secretary or a delegated 
        State.
          (D) If a lessee or its designee fails to 
        substantially comply with the requirement to perform a 
        restructured accounting pursuant to this subsection, a 
        notice shall be issued to the lessee or its designee 
        that the lessee or its designee has not substantially 
        complied with the requirements to perform a 
        restructured accounting. A lessee or its designee shall 
        be given a reasonable time within which to perform the 
        restructured accounting. Such notice may be issued 
        under this section only by an Assistant Secretary of 
        the Interior or an acting Assistant Secretary of the 
        Interior who is a scheduled C employee (as defined by 
        section 213.3301 of title 5, Code of Federal 
        Regulations) and may not be delegated to any other 
        person. If a State has been delegated authority 
        pursuant to section 205, the State, acting through the 
        highest State official having ultimate authority over 
        the collection of royalties from leases on Federal 
        lands within the State, may issue such notice, which 
        may not be delegated to any other person.
    (e) Termination of Limitations Period.--An action or an 
enforcement of an obligation by the Secretary or delegated 
State or a lessee or its designee shall be barred under this 
section prior to the running of the seven-year period provided 
in subsection (b) in the event--
          (1) the Secretary or a delegated State has notified 
        the lessee or its designee in writing that a time 
        period is closed to further audit; or
          (2) the Secretary or a delegated and a lessee or its 
        designee have so agreed in writing.
For purposes of this subsection, notice to, or an agreement by, 
the designee shall be binding on any lessee who is liable 
pursuant to section 102(a) for obligations that are the subject 
of the notice or agreement.
    (f) Records Required for Determining Collections.--Records 
required pursuant to section 103 of this Act by the Secretary 
or any delegated State for the purpose of determining 
obligations due and compliance with any applicable mineral 
leasing law, lease provision, Continental Shelf shall be 
maintained for the same period of time during which a judicial 
proceeding or demand may be commenced under subsection (b). If 
a judicial proceedings or demand is timely commenced, the 
record holder shall maintain such records until the final 
nonappealable decision in such judicial proceedings is made, or 
with respect to that demand is rendered, unless the Secretary 
or the applicable delegated State authorizes in writing an 
earlier release of the requirement to maintain such records. 
Notwithstanding anything herein to the contrary, under no 
circumstance shall a record holder be required to maintain or 
produce any record relating to any obligation for any time 
period which is barred by the applicable limitation in this 
section. In connection with any hearing, administrative 
proceeding, injury, investigation, or audit by the Secretary or 
a delegated State under this Act, the Secretary or the 
delegated State shall minimize the submission of multiple or 
redundant information and make a good faith effort to locate 
records previously submitted by a lessee or a designee to the 
Secretary or the delegated State, prior to requiring the lessee 
or the designee to provide such records.
    (g) Timely Collections.--In order to most effectively 
utilize resources available to the Secretary to maximize the 
collection of oil and gas receipts from lease obligations to 
the Treasury within the seven-year period of limitations, and 
consequently to maximize the State share of such receipts, the 
Secretary should not perform or require accounting, reporting, 
or audit activities if the Secretary and the State concerned 
determine that the cost of conducting or requiring the activity 
exceeds the expected amount to be collected by the activity, 
based on the most current 12 months of activity. This 
subsection shall not provide a defense to a demand or an order 
to perform a restructured accounting. The the maximum extent 
possible, the Secretary and delegated States shall reduce costs 
to the United States Treasury and the States by discontinuing 
requirements for unnecessary or duplicative data and other 
information, such as separate allowances and payor information, 
relating to obligations due. If the Secretary and the State 
concerned determine that collection will result sooner, the 
Secretary or the applicable delegated State may waive or forego 
interest in whole or in part.
    (h) Appeals and Final Agency Action.--
          (1) 33-month period.--Demands or orders issued by the 
        Secretary or a delegated State are subject to 
        administrative appeal in accordance with the 
        regulations of the Secretary. No State shall impose any 
        conditions which would hinder a lessee's or its 
        designee's immediate appeal of an order to the 
        Secretary or the Secretary's designee. The Secretary 
        shall issue a final decision in any administrative 
        proceeding, including any administrative proceedings 
        pending on the date of enactment of this section, 
        within 33 months form the date such proceeding was 
        commenced or 33 months from the date of such enactment, 
        whichever is later. The 33-month period may be extended 
        by any period of time agreed upon in writing by the 
        Secretary and the appellant.
          (2) Effect of failure to issue decision.--If no such 
        decision has been issued by the Secretary within the 
        33-month period referred to in paragraph (1)--
                  (A) the Secretary shall be deemed to have 
                issued and granted a decision in favor of the 
                appellant as to any nonmonetary obligation and 
                any monetary obligation the principal amount of 
                which is less than $10,000; and
                  (B) the Secretary shall be deemed to have 
                issued a final decision in favor of the 
                Secretary, which decision shall be deemed to 
                affirm those issues for which of the Secretary, 
                which decision shall be deemed to affirm those 
                issues for which the agency rendered a decision 
                prior to the end of such period, as to any 
                monetary obligation the principal amount of 
                which is $10,000 or more, and the appellant 
                shall have a right to judicial review of such 
                deemed final decision in accordance with title 
                5 of the United States Code.
    (i) Collections of Disputed Amounts Due.--To expedite 
collections relating to disputed obligations due within the 
seven-year period beginning on the date the obligation became 
due, the parties shall hold not less than one settlement 
consultation and the Secretary and the State concerned may take 
such action as is appropriate to compromise and settle a 
disputed obligation, including waiver or reducing interest and 
allowing offsetting of obligations among leases.
    (j) Enforcement of a Claim for Judicial Review.--In the 
event a demand subject to his section is properly and timely 
commenced, the obligation which is the subject of the demand 
may be enforced beyond the seven-year limitations period 
without being barred by this statute of limitations. In the 
event a demand subject to this section is properly and timely 
commenced, a judicial proceeding challenging the final agency 
action with respect to such demand shall be deemed timely so 
long as such judicial proceeding is commenced within 180 days 
from receipt of notice by the lessee or its designee of the 
final agency action.
    (k) Implementation of Final Decision.--In the event a 
judicial proceeding or demand subject to this section is timely 
commenced and thereafter the limitation period in this section 
lapses during the pendency of such proceeding, any party to 
such proceeding shall not be barred from taking such action as 
is required or necessary to implement a final unappealable 
judicial or administrative decision, including any action 
required or necessary to implement such decision by the 
recovery or recoupment of an underpayment or overpayment by 
means of refund or credit.
    (l) Stay of Payment Obligation Pending Review.--Any person 
ordered by the Secretary or a delegated State to pay any 
obligation (other than an assessment) shall be entitled to a 
stay of such payment without bond or other surety instrument 
pending an administrative or judicial proceeding if the person 
periodically demonstrates to the satisfaction of the Secretary 
that such person is financially solvent or otherwise able to 
pay the obligation. In the event the person is not able to so 
demonstrate, the Secretary may require a bond or other surety 
instrument satisfactory to cover the obligation. Any person 
ordered by the Secretary or a delegated State to pay an 
assessment shall be entitled to a stay without bond or other 
surety instrument.
          * * * * * * *


                              assessments


    Sec. 116. Beginning eighteen months after the date of 
enactment of this section, to encourage proper royalty payment 
the Secretary or the delegated State shall impose assessments 
on a person who chronically submits erroneous reports under 
this Act. Assessments under this Act may only be issued as 
provided for in this section.
          * * * * * * *


                  alternatives for marginal properties


    Sec. 117. (a) Determination of Best Interests of State 
Concerned and the United States.--The Secretary and the State 
concerned, acting in the best interests of the United States 
and the State concerned to promote production, reduce 
administrative costs, and increase net receipts to the United 
States and the States, shall jointly determine, on a case by 
case basis, the amount of what marginal production from a lease 
or leases or well or wells, or parts thereof, shall be subject 
to a prepayment under subsection (b) or regulatory relief under 
subsection (c). If the State concerned does not consent, such 
prepayments or regulatory relief shall not be made available 
under this section for such marginal production: Provide, That 
if royalty payments from a lease or leases, or well or wells 
are not shared with any State, such determination shall be made 
solely by the Secretary.
    (b) Prepayment of Royalty.--
          (1) In general.--Notwithstanding the provisions of 
        any lease to the contrary, for any lease or leases or 
        well or wells identified by the Secretary and the State 
        concerned pursuant to subsection (a), the Secretary is 
        authorized to accept a prepayment for royalties in lieu 
        of monthly royalty payments under the lease for the 
        remainder of the lease term if the affected lessee so 
        agrees. Any prepayment agreed to by the Secretary, 
        State concerned and lessee which is less than an 
        average $500 per month in total royalties shall be 
        effectuated under this section not earlier than two 
        years after the date of enactment of this section and, 
        any prepayment which is greater than an average $500 
        per month in total royalties shall be effectuated under 
        this section not earlier than three years after the 
        date of enactment of this section. The Secretary and 
        the State concerned may condition their acceptance of 
        the prepayment authorized under this section on the 
        lessee's agreeing to such terms and conditions as the 
        Secretary and the State concerned deem appropriate and 
        consistent with the purposes of this Act. Such terms 
        may--
                  (A) provide for prepayment that does not 
                result in a loss of revenue to the United 
                States in present value terms;
                  (B) include provisions for receiving 
                additional prepayments or royalties for 
                developments in the lease or leases or well or 
                wells that deviate significantly from the 
                assumptions and facts on which the valuation is 
                determined; and
                  (C) require the lessee or its designee to 
                provide such periodic production reports as may 
                be necessary to allow the Secretary and the 
                State concerned to monitor production for the 
                purposes of subparagraph (B).
          (2) State share.--A prepayment under this section 
        shall be shared by the Secretary with any State or 
        other recipient to the same extent as any royalty 
        payment for such lease.
          (3) Satisfaction of obligation.--Except as may be 
        provided in the terms and conditions established by the 
        Secretary under subsection (b) a lessee or its designee 
        who makes a prepayment under this section shall have 
        satisfied in full the lessee's obligation to pay 
        royalty on the production stream sold from the lease or 
        leases or well or wells.
    (c) Alternative Accounting and Auditing Requirements.--
Within one year after the date of the enactment of this 
section, the Secretary or the delegated State shall provide 
accounting, reporting, and auditing relief that will encourage 
lessees to continue to produce and develop properties subject 
to subsection (a): Provided, that such relief will only be 
available to lessees in a State that concurs, which concurrence 
is to required if royalty payments from the lease or leases or 
well or wells are not shared with any State. Prior to granting 
such relief, the Secretary and if appropriate, the State 
concerned shall agree that the type of marginal wells and 
relief provided under this paragraph is in the best interest of 
the United States and, if appropriate, the State concerned
          * * * * * * *

                          delegation to states

    [Sec. 205. (a) Upon written request of any State, the 
Secretary is authorized to delegate, in accordance with the 
provisions of this section, all or part of the authorities and 
responsibilities of the Secretary under this Act to conduct 
inspection, audits, and investigations to any State with 
respect to all Federal lands or Indian lands within the State; 
except that the Secretary may not undertake such a delegation 
with respect to any Indian lands, except with the permission of 
the Indian tribe allottee involved.
    [(b) After notice and opportunity for a hearing, the 
Secretary is authorized to delegate such authorities and 
responsibilities granted under this section as the State has 
requested, if the Secretary finds that--
          [(1) it is likely that the State will provide 
        adequate resources to achieve the purposes of this Act;
          [(2) the State has demonstrated that is will 
        effectively and faithfully administer the rules and 
        regulations of the Secretary under this Act in 
        accordance with the requirements of subsections (c) and 
        (d) of this section; and
          [(3) such delegation will not create an unreasonable 
        burden on any lessee,
with respect to the Federal lands and Indian lands within the 
State.
    [(c) The Secretary shall promulgate regulations which 
define those functions, if any, which must be carried out 
jointly in order to avoid duplication of effort, and any 
delegation to any State must be made in accordance with those 
requirements.
    [(d) The Secretary shall be rule promulgate standards and 
regulations, pertaining to the authorities and responsibilities 
under subsection (a), including standards and regulations 
pertaining to:
          [(1) audits performed;
          [(2) records and accounts to be maintained; and
          [(3) reporting procedures to be required by States 
        under this section.
Such standards and regulations shall be designed to provide 
reasonable assurance that a uniform and effective royalty 
management system will prevail among the States. The records 
and accounts under paragraph (2) shall be sufficient to allow 
the Secretary to monitor the performance of any State under 
this section.
    [(e) If, after notice and opportunity for a hearing, the 
Secretary finds that any State to which any authority or 
responsibility of the Secretary has been delegated under this 
section is in violation of any requirement of this section or 
any rule thereunder, or that an affirmative finding by the 
Secretary under subsection (b) can no longer be made, the 
Secretary may revoke such delegation.
    [(f) The Secretary shall compensate any State for those 
costs which may be necessary to carry out the delegated 
activities under this section. Payment shall be made no less 
than every quarter during the fiscal year.]
    Sec. 205. (a) Upon written request of any State, the 
Secretary is authorized to delegate in accordance with the 
provisions of this section, all or part of the authorities and 
responsibilities of the Secretary under this Act to:
          (1) conduct inspections, audits, and investigations;
          (2) receive and process production and financial 
        reports;
          (3) correct erroneous report data;
          (4) perform automated verification; and
          (5) issue demands, subpoenas, and orders to perform 
        restructured accounting, for royalty management 
        enforcement purposes,
to any State with respect to all Federal land within the State.
    (b) After notice and opportunity for a hearing, the 
Secretary is authorized to delegate such authorities and 
responsibilities granted under this section as the State has 
requested, if the Secretary finds that--
          (1) it is likely that the State will provide adequate 
        resources to achieve the purposes of this Act;
          (2) the State has demonstrated that it will 
        effectively and faithfully administer the rules and 
        regulations of the Secretary under this Act in 
        accordance with the requirements of subsections (c) and 
        (d) of this section;
          (3) such delegation will not create an unreasonable 
        burden on any lessee;
          (4) the State agrees to adopt standardized reporting 
        procedures prescribed by the Secretary for royalty and 
        production accounting purposes, unless the State and 
        all affected parties (including the Secretary) 
        otherwise agree;
          (5) the State agrees to follow and adhere to 
        regulations and guidelines issued by the Secretary 
        pursuant to the mineral leasing laws regarding 
        valuation of production; and
          (6) where necessary for a State to have authority to 
        carry out and enforce a delegated activity, the State 
        agrees to enact such laws and promulgate such 
        regulations as are consistent with relevant Federal 
        laws and regulations with respect to the Federal lands 
        within the State.
    (c) After notice and opportunity for hearing, the Secretary 
shall issue a ruling as to the consistency of a State's 
proposal with the provisions of this section and regulations 
under subsection (d) within 90 days after submission of such 
proposal. In any unfavorable ruling, the Secretary shall set 
forth the reasons therefor and state whether the Secretary will 
agree to delegate to the State if the State meets the 
conditions set forth in such ruling.
    (d) After consultation with State authorities, the 
Secretary shall by rule promulgate, within 12 months after the 
date of enactment of this section, standards and regulations 
pertaining to the authorities and responsibilities to be 
delegated under subsection (a), including standards and 
regulations pertaining to:
          (1) audits to be performed;
          (2) records and accounts to be maintained;
          (3) reporting procedures to be required by States 
        under this section;
          (4) receipt and processing of production and 
        financial reports;
          (5) correction of erroneous report data;
          (6) performance of automated verification;
          (7) issuance of standards and guidelines in order to 
        avoid duplication of effort;
          (8) transmission of report data to the Secretary; and
          (9) issuance of demands, subpoenas, and orders to 
        perform restructured accounting, for royalty management 
        enforcement purposes.
Such standards and regulations shall be designed to provide 
reasonable assurance that a uniform and effective royalty 
management system will prevail among the States. The records 
and accounts under paragraph (2) shall be sufficient to allow 
the Secretary to monitor the performance of any State under 
this section.
    (e) If, after notice and opportunity for a hearing, the 
Secretary finds that any State to which any authority or 
responsibility of the Secretary has been delegated under this 
section is in violation of any requirement of this section or 
any rule thereunder, or that an affirmative finding by the 
Secretary under subsection (b) can no longer be made, the 
Secretary may revoke such delegation. If, after providing 
written notice to a delegated State and a reasonable 
opportunity to take corrective action requested by the 
Secretary, the Secretary determines that the State has failed 
to issue a demand or order to a Federal lessee within the 
State, that such failure may result in an underpayment of an 
obligation due the United States by such lessee, and that such 
underpayment may be uncollected without Secretarial 
intervention, the Secretary may issue such demand or order in 
accordance with the provisions of this Act prior to or absent 
the withdrawal of delegated authority.
    (f) Subject to appropriations, the Secretary shall 
compensate any State for those costs which may be necessary to 
carry out the delegated activities under this section. Payment 
shall be made no less than every quarter during the fiscal 
year. Compensation to a State may not exceed the Secretary's 
reasonably anticipated expenditure for performance of such 
delegated activities by the Secretary. Such costs shall be 
allocable for the purposes of section 35(b) of the Act entitled 
``An act to promote the mining of coal, phosphate, oil, oil 
shale, gas and sodium on the public domain'', approved February 
25, 1920 (commonly known as the Mineral Leasing Act) (30 U.S.C. 
191(b)) to the administration and enforcement of laws providing 
for the leasing of any onshore lands or interests in land owned 
by the United States. Any further allocation of costs under 
section 35(b) made by the Secretary for oil and gas activities, 
other than those costs to compensate States for delegated 
activities under this Act, shall be only those costs associated 
with onshore oil and gas activities and may not include any 
duplication of costs allocated pursuant to the previous 
sentence. Nothing in this section affects the Secretary's 
authority to make allocations under section 35(b) for non-oil 
and gas mineral activities. All moneys received from sales, 
bonuses, rentals, royalties, assessments and interest, 
including money claimed to be due and owing pursuant to a 
delegation under this section, shall be payable and paid to the 
Treasury of the United States.
    (g) Any action of the Secretary to approve or disapprove a 
proposed submitted by a State under this section shall be 
subject to judicial review in the United States district court 
which includes the capitol of the State submitting the 
proposal.
    (h) Any State operating pursuant to a delegation existing 
on the date of enactment of this Act may continue to operate 
under the terms and conditions of the delegation, except to the 
extent that a revision of the existing agreement is adopted 
pursuant to this section.
          * * * * * * *

        Outer Continental Shelf Lands Act (43 U.S.C. 1301-1356)

    Sec. 10. [Repealed]