[House Report 105-770]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     105-770
_______________________________________________________________________


 
            OIL AND GAS WELLS IN WAYNE NATIONAL FOREST, OHIO

                                _______
                                

October 5, 1998.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Young of Alaska, from the Committee on Resources, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1467]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Resources, to whom was referred the bill 
(H.R. 1467) to provide for the continuance of oil and gas 
operations pursuant to certain existing leases in the Wayne 
National Forest, having considered the same, report favorably 
thereon with an amendment and recommend 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. OIL AND GAS WELLS IN WAYNE NATIONAL FOREST, OHIO.

  (a) Authority.--The Secretary of the Interior may enter into 
noncompetitive oil and gas production and reclamation contracts in 
accordance with this section with operators of wells in the Wayne 
National Forest in the State of Ohio who meet the criteria of section 
17(b)(3)(A) of the Act of February 25, 1920 (30 U.S.C. 226(b)(3)(A)) 
pursuant to private land mineral leases which were in effect on and 
after the date of the enactment of this section, subject to the same 
laws and regulations that applied to those private land mineral leases.
  (b) Additional Drilling.--No contract under this section may 
authorize deeper completions or additional drilling.
  (c) Bonding.--
          (1) Waiver of Federal bonding.--Each contract under this 
        section shall require the contractor to provide a Federal oil 
        and gas bond to ensure complete and timely reclamation of the 
        former lease tract in accordance with the regulations of the 
        Bureau of Land Management and the Forest Service, unless the 
        Secretary of the Interior accepts in lieu thereof assurances 
        from the Ohio Department of Natural Resources, Division of Oil 
        and Gas, that--
                  (A) the contractor has duly satisfied the bonding 
                requirements of the State of Ohio; and following 
                inspection of operator performance, the Ohio Department 
                of Natural Resources is not opposed to such waiver of 
                Federal bonding requirements;
                  (B) the United States of America is entitled to apply 
                for and receive funding under the provision of section 
                1509.071 of the Ohio Revised Code so as to properly 
                plug and restore oil and gas sites and lease tracts; 
                and
                  (C) during the 2 years prior to the date on which the 
                contract is entered into no less than 20 percent of 
                Ohio State severance tax revenues has been allocated to 
                the State of Ohio Orphan Well Fund.
          (2) Continued compliance with 20 percent requirement.--In 
        entering into any contract under this section, the Secretary of 
        the Interior shall reserve the right to require the contractor 
        to comply with all Federal oil and gas bonding requirements 
        applicable to Federal oil and gas leases under the regulations 
        of the Bureau of Land Management and the Forest Service 
        whenever the Secretary finds that less than 20 percent of Ohio 
        State severance tax revenues has been allocated to the State of 
        Ohio Orphan Well Fund.

                          purpose of the bill

    The purpose of H.R. 1467 is to provide for the continuance 
of oil and gas operations pursuant to certain existing leases 
in the Wayne National Forest.

                  background and need for legislation

    An unusual situation occurs on certain acquired lands 
within the Wayne National Forest in southern Ohio. Formerly 
reserved private mineral interests valuable for oil and gas 
resources have become Federal mineral estate with the recent 
expiration of 50-year reservations of such rights. Time-limited 
reservations were at one time a standard condition of the 
Secretary of Agriculture in the agreements to purchase lands 
under the Weeks Act of 1911.
    In the Wayne National Forest, producing oil wells existed 
on these private leases at the time federal mineral ownership 
ripened. A strict reading of the Mineral Leasing Act for 
Acquired Lands [30 U.S.C. 351 et seq.] required competitive 
bidding for the new federal lease rights despite the obvious 
investment operators had in down-hole equipment and surface 
pumps, etc. Section 2507 of the Energy Policy Act of 1992 
[Public Law 102-486] addressed this problem by allowing the 
Secretary of the Interior to lease the tracts to the existing 
well-owner without competition, but otherwise made no provision 
for special treatment of such operators.
    On June 20, 1997, the Subcommittee on Energy and Mineral 
Resources held an oversight hearing on the issue of States' 
ability to properly inspect and enforce oil and gas regulations 
on federal leases instead of the Bureau of Land Management 
(BLM). (Vice President Gore had broadly proposed such an idea 
as part of the second iteration of his reinventing government 
initiative.) At that hearing, Mr. Danny Thompson testified on 
behalf of the Southern Ohio Oil & Gas Association, as did Mr. 
Don Mason for the Ohio Department of Natural Resources (DNR), 
describing the continuing problems of small oil operators on 
the Wayne National Forest. Specifically, small operators found 
themselves unable to afford the financial guarantees or 
collateral requirements of the standard BLM oil and gas bonding 
rules which were applicable to their new federal leases. In 
addition, these operators were already bonded with the State of 
Ohio agency (DNR) charged with plugging and abandoning orphan 
oil and gas wells. The wells owned by these operators are 
generally known as ``stripper wells'' capable of producing less 
than 15 barrels of crude oil per day, and thus providing only 
minimal cash flows, even in a favorable oil price environment.
    Representative Ney introduced H.R. 1467 to amend the 
Mineral Leasing Act with respect to these small operators on 
the Wayne National Forest to treat them in the same manner as 
they were by the pertinent authorities when the mineral estate 
was privately owned. Such an approach was deemed unacceptable 
by the Department of the Interior. At the request of Energy and 
Mineral Resources Subcommittee Chairman Barbara Cubin, 
Representatives of the Southern Ohio Oil and Gas Association, 
the Ohio Oil & Gas Association, and the Ohio DNR negotiated 
with the BLM and the Interior Department's Office of the 
Solicitor to find a mutually acceptable solution to allow the 
continuation of production from wells existing at the time of 
mineral reversion, with the understanding that such an 
agreement form the basis of an amendment to H.R. 1467. The 
amendment adopted by the Committee reflects the concerns of the 
BLM that the State of Ohio orphan well program be sufficiently 
funded to provide adequate guarantee of proper plugging and 
abandonment procedures in the unlikely event of operator 
forfeiture. Importantly, should the affected lessees decide 
they wish to drill additional wells on their leaseholds (or 
deepen the existing wells) the BLM oil and gas regulations in 
force at that time will apply to the new work.

                            committee action

    H.R. 1467 was introduced on April 28, 1997, by Congressman 
Robert Ney (R-OH). The bill as referred to the Committee on 
Resources, and within the Committee to the Subcommittee on 
Energy and Mineral Resources. On July 21, 1998, the 
Subcommittee held a hearing on H.R. 1467, as described above. 
On August 5, 1998, the full Committee on Resources met to 
consider H.R. 1467. The Subcommittee on Energy and Mineral 
Resources was discharged from further consideration of the bill 
by unanimous consent. Committee Chairman Don Young offered an 
amendment in the nature of a substitute described above. It was 
adopted by voice vote. The bill, as amended, was then ordered 
favorably reported to the House of Representatives by voice 
vote.

                      section-by-section analysis

Section 1. Oil and gas wells in Wayne National Forest, Ohio

    Section 1 of the bill provides the Secretary of the 
Interior the discretion to waive requirements for federal bonds 
by operators of oil wells in the Wayne National Forest who meet 
the criteria established in section 2507 of the Energy Policy 
Act of 1992 [30 U.S.C. 226(b)(3)], and who have duly satisfied 
State of Ohio bonding requirements. Furthermore, in the event 
of a forfeiture by such an operator the United States is 
entitled to apply for and receive funding from the State of 
Ohio orphan well program to properly plug and reclaim oil and 
gas lease sites. Lastly, the Secretary has the right to review 
the continuing adequacy of the State of Ohio's commitment of 
state severance taxes to the program and to require operators 
to comply with federal requirements if the State's program is 
deemed underfunded.

            committee oversight findings and recommendations

    With respect to the requirements of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives, and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee on Resources' oversight findings and 
recommendations are reflected in the body of this report.

                   constitutional authority statement

    Article I, section 8, and Article IV, section 3 of the 
Constitution of the United States grant Congress the authority 
to enact H.R. 1467.

                        cost of the legislation

    Clause 7(a) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the cost which would be incurred in carrying out 
H.R. 1467. However, clause 7(d) of that rule provides that this 
requirement does not apply when the Committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974.

                     compliance with house rule xi

    1. With respect to the requirement of clause 2(l)(3)(B) of 
rule XI of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, H.R. 
1467 does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
expenditures. According to the Congressional Budget Office, 
enactment of this bill could affect offsetting receipts, but 
any effect would not be significant.
    2. With respect to the requirement of clause 2(l)(3)(D) of 
rule XI of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 1467.
    3. With respect to the requirement of clause 2(l)(3)(C) of 
rule XI of the Rules of the House of Representatives and 
section 403 of the Congressional Budget Act of 1974, the 
Committee has received the following cost estimate for H.R. 
1467 from the Director of the Congressional Budget Office.

               congressional budget office cost estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 20, 1998.
Hon. Don Young,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1467, a bill to 
provide for the continuance of oil and gas operations pursuant 
to certain existing leases in the Wayne National Forest.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Victoria V. 
Heid (for federal costs), and Marjorie Miller (for the state 
and local impact).
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).
    Enclosure.

H.R. 1467--A bill to provide for the continuance of oil and gas 
        operations pursuant to certain existing leases in the Wayne 
        National Forest

    Summary: H.R. 1467 would authorize the Secretary of the 
Interior to waive federal bonding requirements for contractors 
operating oil and gas wells in the Wayne National Forest in the 
state of Ohio under certain circumstances.
    CBO estimates that enacting H.R. 1467 would have no 
significant impact on the federal budget. Because enacting the 
bill could affect offsetting receipts (a form of direct 
spending), pay-as-you-go procedures would apply; however, we 
estimate that any such effect on direct spending would not be 
significant.
    H.R. 1467 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not have a significant effect on the budgets of 
state, local, or tribal governments.
    Estimated cost to the Federal Government: Under current 
law, contractors operating oil and gas wells in the Wayne 
National Forest must meet bonding requirements for both the 
state of Ohio and the federal government. H.R. 1467 would 
authorize the Secretary of the Interior to waive the federal 
bonding requirements for certain contractors. Such waivers 
would be contingent on several factors, including the 
willingness of the Ohio Department of Natural Resources to 
accept the federal waiver.

Direct spending (including offsetting receipts)

    Federal performance bonds for contractors operating oil and 
gas wells are used to assure site restoration as well as the 
full payment of all obligations such as royalties. On one hand, 
if the Secretary waived the federal bonding requirement and the 
operator failed to pay royalties, the waiver could result in a 
loss of offsetting receipts to the Treasury. On the other hand, 
waiving the federal bonding requirement might increase 
offsetting receipts from wells that would otherwise cease 
operations without the waiver. However, CBO estimates that in 
either case enacting H.R. 1467 would affect direct spending by 
less than $25,000 each year.
    H.R. 1467 also would allow the federal government to apply 
for and receive funding from Ohio under section 1509.071 of the 
Ohio Revised Code to plug and restore oil and gas sites and 
lease tracts. CBO estimates that it is unlikely that the 
federal government would receive such funds from the state over 
the next five years, but in any case the government would spend 
any such funds on site restoration, resulting in no net effect 
on the federal budget.

Spending subject to appropriation

    If the Secretary waived the federal bonding requirement for 
the operator of a well, the operator failed to plug and restore 
the well properly, and state coverage proved insufficient to 
cover the plugging and restoration costs, the federal 
government could be left responsible for covering those costs, 
subject to appropriation of the necessary amounts. However, CBO 
estimates that it is unlikely that there would be any 
significant costs for these purposes over the 1999-2003 period.
    Estimated impact on State, local, and tribal governments: 
H.R. 1467 contains no intergovernmental mandates as defined in 
UMRA and would not have a significant effect on the budgets of 
state, local, or tribal governments. Should the state of Ohio 
agree to the waiver of federal bonding requirements for the 
affected wells, this could have a small impact on the state 
budget. Such a waiver would shift to the state the cost to plug 
and restore these wells should they be abandoned. If these 
waivers allow marginal wells to continue operations, however, 
the state would benefit.
    Estimated impact on the private sector: This bill would 
impose no new private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal costs: Victoria V. Heid. 
Impact on State, local, and tribal governments: Marjorie 
Miller.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                    Compliance with public law 104-4

    H.R. 1467 contains no unfunded mandates.

                        changes in existing law

    If enacted, H.R. 1467 would make no changes in existing 
law.

                                
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