[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.