[House Report 114-713]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-713
======================================================================
INNOVATION IN OFFSHORE LEASING ACT
_______
September 6, 2016.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Bishop of Utah, from the Committee on Natural Resources, submitted
the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 5577]
[Including cost estimate of the Congressional Budget Office]
The Committee on Natural Resources, to whom was referred
the bill (H.R. 5577) to amend the Outer Continental Shelf Lands
Act to authorize the Secretary of the Interior to conduct
offshore oil and gas lease sales through Internet-based live
lease sales, and for other purposes, 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 all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Innovation in Offshore Leasing Act''.
SEC. 2. INTERNET-BASED OFFSHORE OIL AND GAS LEASE SALES.
(a) Authorization.--Section 8 of the Outer Continental Shelf Leasing
Act (43 U.S.C. 1337) is amended by adding at the end the following:
``(q) Internet-Based Oil and Gas Lease Sales.--
``(1) In general.--In order to modernize the Nation's
offshore leasing program to ensure the best return to the
Federal taxpayer, reduce fraud, and ensure a fair and
competitive leasing process, the Secretary may conduct lease
sales under this section through Internet-based, sealed-bidding
methods.
``(2) Sale requirements.--Sales conducted under paragraph (1)
shall ensure--
``(A) a publicly and freely accessible digital
delivery of the bid reading process, such as live
Internet streaming, and an option for bidders to submit
bids electronically;
``(B) a bidder verification process that discloses to
bidders, by no later than 5 p.m. Central Time of the
day before each sale, a list of all bids submitted
(including the person submitting each bid) on each
lease tract without disclosing bid amounts;
``(C) the ability for a bidder to correct a possible
misreading of a submitted bid;
``(D) a designee from within the Office of the
Solicitor of the Department of the Interior to act as
an independent, third-party observer who will be
present during the bid reading process to prevent
wrongdoing, independently certify the bidding process,
and maintain transparency;
``(E) data security measures to ensure bidder data is
kept secure; and
``(F) a participant survey soliciting voluntary
feedback from bidders on the bidding process.
``(3) Transparency in sale-day statistics.--
``(A) Requirement.--The Secretary shall publicly
disclose statistical data regarding each lease sale
under this subsection, on the day the sale is executed.
``(B) Included data.--Among data disclosed, the
Secretary shall include--
``(i) the total value of high bids;
``(ii) the number of tracts offered;
``(iii) the number of acres offered;
``(iv) the number of tracts receiving bids;
``(v) the number of acres receiving bids;
``(vi) the total number of bids;
``(vii) the average number of bids per tract;
``(viii) the total number of bidders
participating;
``(ix) bidding statistics by water depth;
``(x) the name of the entity that submitted
each bid, the amount of the bid, and the tract
for which the bid was submitted;
``(xi) of tracts receiving bids, the number
of bids per tract by water depth;
``(xii) the tract receiving the greatest
number of bids;
``(xiii) the tract receiving the highest bid;
and
``(xiv) any other statistical data that may
be disclosed in accordance with this Act.
``(C) Data transparency.--The Secretary shall ensure
all data regarding lease sales under this subsection is
publicly available and easily accessible, free of
charge, on the Internet, including for download and
aggregation in machine-readable format.''.
(b) Modernizing Leasing Through Collaboration.--
(1) In general.--Before conducting the first Internet-based
lease sale under the amendment made by this section, the
Secretary of the Interior shall issue a request for information
from each company present for bidding at the ten most recent
oil and gas lease sales conducted by the Secretary under the
Outer Continental Shelf Lands Act, in order to provide the
bidding public sufficient opportunity to share innovative
ideas, methods, and concerns regarding Internet-based leasing.
(2) Integration of information.--The Secretary shall review,
evaluate, and integrate suggestions and concerns collected
under paragraph (1) as the Secretary works to modernize the
offshore leasing process through Internet-based leasing
options.
(3) User workshop.--The Secretary shall conduct not less than
one user workshop with viable bidders prior to conducting an
Internet-based lease sale to provide the bidding public with an
opportunity to beta test any prototype of an Internet-based
leasing platform.
(c) Deadline for Gulf of Mexico Lease Sale.--Not later than 18 months
after the date of the enactment of this Act, the Secretary of the
Interior shall conduct at least one Internet-based lease sale under the
amendment made by subsection (a) for leasable acreage in the Gulf of
Mexico.
(d) Evaluating Internet-Based Offshore Leasing.--Not later than 90
days after the third Internet-based lease sale conducted under the
amendment made by subsection (a), the Secretary of the Interior shall
analyze all such Internet-based lease sales and transmit to Congress a
thorough analysis of the sales. The analysis shall include--
(1) estimates of increases or decreases in such lease sales,
compared to sales conducted by non-Internet-based bidding, in--
(A) the number of bidders;
(B) the average amount of bids;
(C) the highest bid; and
(D) the lowest bid;
(2) an estimate of the total cost or savings to the
Department of the Interior as a result of such sales, compared
to sales conducted by non-Internet-based bidding;
(3) voluntary and anonymous feedback from persons
participating in such sales, on the Internet-based leasing
process and potential areas for improvement in such sales; and
(4) an evaluation of the demonstrated or expected
effectiveness of different structures for lease sales that may
provide an opportunity to better maximize bidder participation,
ensure the highest return to the Federal taxpayers, minimize
opportunities for fraud or collusion, and ensure the security
and integrity of the leasing process.
Purpose of the Bill
The purpose of H.R. 5577 is to amend the Outer Continental
Shelf Lands Act to authorize the Secretary of the Interior to
conduct offshore oil and gas lease sales through Internet-based
live lease sales.
Background and Need for Legislation
Under the Outer Continental Shelf Lands Act (OCSLA), the
Secretary of the Interior is authorized to conduct sealed-bid
lease sales for oil and natural gas leasing on the 1.7 billion
acres of U.S. outer Continental Shelf lands. The Secretary
conducts these lease sales in accordance with the lease sale
schedule presented every five years in the Outer Continental
Shelf oil and natural gas leasing program, also known as the
Five-Year Plan. A lease sale cannot be held unless it has been
included in the Five-Year Plan. Lease sales are currently
conducted in a sealed-bid format, with bids opened and read
aloud at the Superdome in New Orleans, Louisiana. As of the
July 2016 Combined Leasing Report, of the 1.7 billion offshore
acres, only 21 million or 1.2% are currently under lease--for a
total of 3,948 active leases held offshore.
To qualify to bid on an OCS lease, you must be a U.S.
citizen, an alien lawfully admitted for permanent residence, a
private, public or municipal corporation, or an association of
such aforementioned qualifying candidates. To participate in a
lease sale, a bidder must submit qualifying documents and be
certified by the Bureau of Ocean Energy Management (BOEM),
which includes meeting specific bonding requirements to make
sure the bidder is able to meet all potential present and
future lease obligations, including costs to plug abandoned
wells, remove platforms and other facilities, and restore the
lease to its original condition.
Leading up to a lease sale, BOEM will issue a Proposed
Notice of Sale roughly four months prior to the sale date as
well as a Final Notice of Sale no less than 30 days before the
date of the lease sale. Lease sale notices are published in the
Federal Register, allowing yet another opportunity after the
multiple public comment periods for the Five-Year Plan for
public comment on the specific lease sale. These sale notices
contain details regarding the date, time, and location of the
lease sale, as well as bidding instructions, maps of the lease
blocks that will be available during the sale, lease terms
(length of lease, rental fees and royalty rates) and other
conditions or stipulations. A lease block is a three-mile by
three-mile block, totaling 5,760 acres.
The sale notice also includes details of any site-specific
stipulations for eligible lease blocks. For instance, in the
most recent Central Gulf Lease Sale (#241) on March 23, 2016,
the Final Notice of Sale makes note of the National Oceanic and
Atmospheric Administration's proposal to expand the boundaries
of the Flower Garden Banks National Marine Sanctuary (FGBNMS),
advising bidders that ``. . . certain activities related to oil
and gas exploration and development are already prohibited
within a significant portion of each of the banks recommended
for expansion . . .''. While the expansion of the FGBNMS is not
even through the Environmental Impact Statement phase, BOEM
notified bidders of potential future limitations on oil and gas
activities in lease blocks that are impacted by this proposed
expansion.
When an eligible company determines that it would like to
bid on a lease block, it fills out a bidder form which fully
describes the block and area number, the area name and/or map
number, the company's name, its BOEM-assigned company number,
and the amount of the bid stated in whole dollars.
Additionally, companies are required to make a bid deposit in
accordance with requirements published in the Final Notice of
Sale--generally 20 percent of the bid amount. A successful
bidder must transfer 20 percent of the successful bid amount by
electronic funds transfer (EFT) to BOEM in one lump sum to the
New York Federal Reserve Bank no later than 2:00 p.m. Eastern
Standard Time on the day following the bid opening. Because
BOEM must ensure that each successful bid meets fair return
thresholds to be leased, the funds are deposited into an
interest-bearing account and if the bid is rejected, the funds
plus interest earned are transferred back to the bid submitter
by EFT the next business day after rejection.
The sealed bid (bid form in a sealed envelope) is received
by the BOEM Regional Director in the Gulf of Mexico within the
time limits published in the Final Notice of Sale, generally
closing at 10:00 a.m. the day before the sale. Sealed bids are
opened and read aloud in a public place (the Superdome) on the
date and time specified in the Final Notice of Sale.
Once BOEM deems a high bid to be acceptable and concurrence
is achieved with the Department of Justice and the Federal
Trade Commission, a lease package is delivered to the
successful company with all necessary information, including
copies of the lease. A company then must go through the
permitting process with both BOEM and Bureau of Safety and
Environmental Enforcement to obtain exploration plan approvals
and applications for permits to drill a well on the lease block
that has been acquired. The company must pay rental fees to
BOEM for the duration of the lease if or until the company is
able to reach commercial production, at which point the company
then must pay a royalty to the federal government for all oil
and natural gas developed from the lease. If a company does not
conduct exploration or development activities on a lease within
a specific period of time in accordance with the lease
agreement, the lease could face cancellation.
SALE STATISTICS
BOEM publishes sale statistics after each sale. Sale
statistics include total acreage and number of lease blocks
offered for sale, how many bids were received, how many
companies were present for bidding, which lease blocks received
the highest number of competitive bids, the highest bid
amounts, and other information. For example, the Arctic Lease
Sale #193 that took place in the Chukchi Sea in 2008 received
four bids from different companies for Lease Block #6762. Given
that the bids were sealed and each competing company could not
see the each other's bid, the bid amounts varied greatly. The
bids on this lease block range from the highest, at $94
million, to the lowest, at $104,000. Again, the bid amounts
received is just one portion of the revenues generated from
offshore leasing, as the company with the highest bid then must
pay rental fees and royalties for eventual development on that
block.
CHANGES ADOPTED BY AMENDMENT
An amendment was offered by the bill sponsor, Congressman
Garret Graves (R-LA), at the markup on July 13, 2016. This
amendment reflected several changes requested by the Department
of the Interior through BOEM as well as recommendations offered
by witnesses at the hearing on the bill held on July 6, 2016.
BOEM wanted the option to move forward with new Internet-ready
capabilities that will allow bidders to submit sealed bids
electronically rather than delivering the envelope in person,
so text was included to reflect this addition. Furthermore,
underlying bill language required a bidder verification process
that discloses to bidders at least 24 hours before the bid
reading process a list of bids submitted by all persons on each
lease tract without disclosing bid amounts. While this is
currently done for all lease sales, the Natural Resources
Committee included this as a requirement to ensure this
important data would continue to be disclosed in the future.
However, BOEM noted that bids may still be coming in 24 hours
prior to the sale, and therefore requested that the language be
amended to require that this information be disclosed by 5:00
p.m. Central Time on the day before the sale.
Offshore energy experts testifying at the hearing applauded
the inclusion of an independent observer to be present for the
Internet lease sale, but noted that ``. . . by placing the
Inspector General in an operational role, the legislation may
inadvertently frustrate the Inspector General's office's
ability to be independent should they need to investigate an
irregularity in a future sale.''\1\ For this reason, the
amendment directs the independent observer to come from the
Office of the Solicitor of the Department of the Interior.
---------------------------------------------------------------------------
\1\See Subcommittee hearing at http://naturalresources.house.gov/
calendar/eventsingle.aspx?EventID=400874.
---------------------------------------------------------------------------
Finally, BOEM requested more time, specifically 18 months,
to be able to conduct an Internet lease sale that meets all of
the criteria in the legislation, so the amendment changed the
deadline to conduct an Internet lease sale from one year to 18
months. Given that the amendment was adopted by unanimous
consent and accommodated BOEM's request to further extend this
deadline, it is the Committee's expectation that BOEM shall
meet this deadline set by law.
GOVERNMENT TRANSPARENCY ENHANCED
Nothing in the underlying legislation in any way prevents
any public entity or person from voicing their support or
opposition to any leasing activity on the United States Outer
Continental Shelf. In fact, as a result of this legislative
effort, BOEM announced nine days after H.R. 5577 was ordered
reported to the House of Representatives by the House Natural
Resources Committee by unanimous consent on Friday, July 22,
2016, that the Western Gulf of Mexico Lease Sale 248, to be
held on August 24, 2016, in New Orleans, Louisiana, would be
the first federal offshore oil and gas auction broadcast live
on the Internet. The Committee points out that leading up to
Lease Sale 248, 18 public meetings were held related to the
sale and five separate 45-day comment periods were provided to
allow for public comment and input on this lease sale and
offshore leasing in general. The Committee commends the August
24, 2016, lease sale not only because it was conducted as
planned (unlike other lease sales that were originally included
in the 2012-2017 Five-Year plan and later canceled for no
reason), but also because it was the first opportunity where
the public was able to watch the live-stream of the lease sale
over the Internet on www.boem.gov. The Committee also looks
forward to future efforts by the Department of the Interior to
further integrate innovative solutions that both enhance
efficiency and foster transparency in the development of our
Nation's oil and gas resources.
Committee Action
H.R. 5577 was introduced on June 24, 2016, by Congressman
Garret Graves (R-LA). The bill was referred to the Committee on
Natural Resources, and within the Committee to the Subcommittee
on Energy and Mineral Resources. On July 6, 2016, the
Subcommittee held a hearing on the bill. On July 12, 2016, the
Natural Resources Committee met to consider the bill. The
Subcommittee was discharged by unanimous consent. Congressman
Garret Graves (R-LA) offered an amendment designated 001; it
was adopted by unanimous consent. No further amendments were
offered and the bill, as amended, was ordered favorably
reported to the House of Representatives by unanimous consent
on July 13, 2016.
Committee Oversight Findings and Recommendations
Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of
rule XIII of the Rules of the House of Representatives, the
Committee on Natural Resources' oversight findings and
recommendations are reflected in the body of this report.
Compliance With House Rule XIII
1. Cost of Legislation and Section 308(a) of the
Congressional Budget Act. With respect to the requirements of
clause 3(c)(2) and (3) of rule XIII of the Rules of the House
of Representatives and sections 308(a) and 402 of the
Congressional Budget Act of 1974, the Committee has received
the enclosed cost estimate for the bill from the Director of
the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 1, 2016.
Hon. Rob Bishop,
Chairman, Committee on Natural Resources,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 5577, the
Innovation in Offshore Leasing Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Keith Hall.
Enclosure.
H.R. 5577--Innovation in Offshore Leasing Act
H.R. 5577 would authorize the Bureau of Ocean Energy
Management (BOEM) to use Internet-based bidding methods for
auctions of federal oil and gas leases in the Outer Continental
Shelf (OCS). Such Internet-based auctions would have to provide
bidders the option of submitting bids electronically and make
the agency's reading of the scaled bids available in digital
formats, such as live Internet streaming. Under this bill, BOEM
would be required to conduct at least one Internet-based
auction in the Gulf of Mexico within 18 months after enactment.
Finally, the bill would direct BOEM to collect, analyze, and
publish certain information about these auctions.
Using information provided by the Department of the
Interior and other agencies, CBO estimates that implementing
the bill would cost about $2 million over the 2017-2021 period,
assuming appropriation of the necessary amounts. Firms
participating in OCS auctions submit sealed bids at rates
ranging from 300 to 3,000 bids a year, using standardized short
forms developed by BOEM. CBO expects that the cost of
developing and operating online systems to process such bids
would be similar to the costs of other energy data collection
and bidding systems, such as those used by the Energy
Information Administration and for OCS auctions of renewable
energy leases.
H.R. 5577 could affect offsetting receipts from bonus
payments, which are treated as reductions in direct spending;
therefore, pay-as-you-go procedures apply. CBO estimates,
however, that the net effect on direct spending would be
negligible because the cost to firms of participating in OCS
auctions is small relative to the amounts paid for the leases,
which can range from a few hundred million dollars to more than
$1 billion a year. Enacting the bill would not affect revenues.
CBO estimates that enacting the legislation would not
increase net direct spending or on-budget deficits by more than
$5 billion in one or more of the four consecutive 10-year
periods beginning in 2027.
H.R. 5577 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Kathleen Gramp.
The estimate was approved by Theresa Gullo, Assistant Direct
for Budget Analysis.
2. General Performance Goals and Objectives. As required by
clause 3(c)(4) of rule XIII, the general performance goal or
objective of this bill is to amend the Outer Continental Shelf
Lands Act to authorize the Secretary of the Interior to conduct
offshore oil and gas lease sales through Internet-based live
lease sales.
Earmark Statement
This bill does not contain any Congressional earmarks,
limited tax benefits, or limited tariff benefits as defined
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of
the House of Representatives.
Compliance With Public Law 104-4
This bill contains no unfunded mandates.
Compliance With H. Res. 5
Directed Rule Making. The Chairman does not believe that
this bill directs any executive branch official to conduct any
specific rule-making proceedings.
Duplication of Existing Programs. This bill does not
establish or reauthorize a program of the federal government
known to be duplicative of another program. Such program was
not included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-139
or identified in the most recent Catalog of Federal Domestic
Assistance published pursuant to the Federal Program
Information Act (Public Law 95-220, as amended by Public Law
98-169) as relating to other programs.
Preemption of State, Local or Tribal Law
This bill is not intended to preempt any State, local or
tribal law.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
OUTER CONTINENTAL SHELF LANDS ACT
* * * * * * *
Sec. 8. Leases, Easements, and Rights-of-way on the Outer
Continental Shelf.--(a)(1) The Secretary is authorized to grant
to the highest responsible qualified bidder or bidders by
competitive bidding, under regulations promulgated in advance,
any oil and gas lease on submerged lands of the outer
Continental Shelf which are not covered by leases meeting the
requirements of subsection (a) of section 6 of this Act. Such
regulations may provide for the deposit of cash bids in an
interest-bearing account until the Secretary announces his
decision on whether to accept the bids, with the interest
earned thereon to be paid to the Treasury as to bids that are
accepted and to the unsuccessful bidders as to bids that are
rejected. The bidding shall be by sealed bid and, at the
discretion of the Secretary, on the basis of--
(A) cash bonus bid with a royalty at not less than
12\1/2\ per centum fixed by the Secretary in amount or
value of the production saved, removed, or sold;
(B) variable royalty bid based on a per centum in
amount or value of the production saved, removed, or
sold, with either a fixed work commitment based on
dollar amount for exploration or a fixed cash bonus as
determined by the Secretary, or both;
(C) cash bonus bid, or work commitment bid based on a
dollar amount for exploration with a fixed cash bonus,
and a diminishing or sliding royalty based on such
formulae as the Secretary shall determine as equitable
to encourage continued production from the lease area
as resources diminish, but not less than 12\1/2\ per
centum at the beginning of the lease period in amount
or value of the production saved, removed, or sold;
(D) cash bonus bid with a fixed share of the net
profits of no less than 30 per centum to be derived
from the production of oil and gas from the lease area;
(E) fixed cash bonus with the net profit share
reserved as the bid variable;
(F) cash bonus bid with a royalty at no less than
12\1/2\ per centum fixed by the Secretary in amount or
value of the production saved, removed, or sold and a
fixed per centum share of net profits of no less than
30 per centum to be derived from the production of oil
and gas from the lease area;
(G) work commitment bid based on a dollar amount for
exploration with a fixed cash bonus and a fixed royalty
in amount or value of the production saved, removed, or
sold;
(H) cash bonus bid with royalty at no less than 12
and \1/2\ per centum fixed by the Secretary in amount
or value of production saved, removed, or sold, and
with suspension of royalties for a period, volume, or
value of production determined by the Secretary, which
suspensions may vary based on the price of production
from the lease; or
(I) subject to the requirements of paragraph (4) of
this subsection, any modification of bidding systems
authorized in subparagraphs (A) through (G), or any
other systems of bid variables, terms, and conditions
which the Secretary determines to be useful to
accomplish the purposes and policies of this Act,
except that no such bidding system or modification
shall have more than one bid variable.
(2) The Secretary may, in his discretion, defer any part of
the payment of the cash bonus, as authorized in paragraph (1)
of this subsection, according to a schedule announced at the
time of the announcement of the lease sale, but such payment
shall be made in total no later than five years after the date
of the lease sale.
(3)(A) The Secretary may, in order to promote increased
production on the lease area, through direct, secondary, or
tertiary recovery means, reduce or eliminate any royalty or net
profit share set forth in the lease for such area.
(B) In the Western and Central Planning Areas of the Gulf of
Mexico and the portion of the Eastern Planning Area of the Gulf
of Mexico encompassing whole lease blocks lying west of 87
degrees, 30 minutes West longitude and in the Planning Areas
offshore Alaska, the Secretary may, in order to--
(i) promote development or increased production on
producing or non-producing leases; or
(ii) encourage production of marginal resources on
producing or non-producing leases;
through primary, secondary, or tertiary recovery means,
reduce or eliminate any royalty or net profit share set
forth in the lease(s). With the lessee's consent, the
Secretary may make other modifications to the royalty
or net profit share terms of the lease in order to
achieve these purposes.
(C)(i) Notwithstanding the provisions of this Act other than
this subparagraph, with respect to any lease or unit in
existence on the date of enactment of the Outer Continental
Shelf Deep Water Royalty Relief Act meeting the requirements of
this subparagraph, no royalty payments shall be due on new
production, as defined in clause (iv) of this subparagraph,
from any lease or unit located in water depths of 200 meters or
greater in the Western and Central Planning Areas of the Gulf
of Mexico, including that portion of the Eastern Planning Area
of the Gulf of Mexico encompassing whole lease blocks lying
west of 87 degrees, 30 minutes West longitude, until such
volume of production as determined pursuant to clause (ii) has
been produced by the lessee.
(ii) Upon submission of a complete application by the lessee,
the Secretary shall determine within 180 days of such
application whether new production from such lease or unit
would be economic in the absence of the relief from the
requirement to pay royalties provided for by clause (i) of this
subparagraph. In making such determination, the Secretary shall
consider the increased technological and financial risk of deep
water development and all costs associated with exploring,
developing, and producing from the lease. The lessee shall
provide information required for a complete application to the
Secretary prior to such determination. The Secretary shall
clearly define the information required for a complete
application under this section. Such application may be made on
the basis of an individual lease or unit. If the Secretary
determines that such new production would be economic in the
absence of the relief from the requirement to pay royalties
provided for by clause (i) of this subparagraph, the provisions
of clause (i) shall not apply to such production. If the
Secretary determines that such new production would not be
economic in the absence of the relief from the requirement to
pay royalties provided for by clause (i), the Secretary must
determine the volume of production from the lease or unit on
which no royalties would be due in order to make such new
production economically viable; except that for new production
as defined in clause (iv)(I), in no case will that volume be
less than 17.5 million barrels of oil equivalent in water
depths of 200 to 400 meters, 52.5 million barrels of oil
equivalent in 400-800 meters of water, and 87.5 million barrels
of oil equivalent in water depths greater than 800 meters.
Redetermination of the applicability of clause (i) shall be
undertaken by the Secretary when requested by the lessee prior
to the commencement of the new production and upon significant
change in the factors upon which the original determination was
made. The Secretary shall make such redetermination within 120
days of submission of a complete application. The Secretary may
extend the time period for making any determination or
redetermination under this clause for 30 days, or longer if
agreed to by the applicant, if circumstances so warrant. The
lessee shall be notified in writing of any determination or
redetermination and the reasons for and assumptions used for
such determination. Any determination or redetermination under
this clause shall be a final agency action. The Secretary's
determination or redetermination shall be judicially reviewable
under section 10(a) of the Administrative Procedures Act (5
U.S.C. 702), only for actions filed within 30 days of the
Secretary's determination or redetermination.
(iii) In the event that the Secretary fails to make the
determination or redetermination called for in clause (ii) upon
application by the lessee within the time period, together with
any extension thereof, provided for by clause (ii), no royalty
payments shall be due on new production as follows:
(I) For new production, as defined in clause (iv)(I)
of this subparagraph, no royalty shall be due on such
production according to the schedule of minimum volumes
specified in clause (ii) of this subparagraph.
(II) For new production, as defined in clause
(iv)(II) of this subparagraph, no royalty shall be due
on such production for one year following the start of
such production.
(iv) For purposes of this subparagraph, the term ``new
production'' is--
(I) any production from a lease from which no
royalties are due on production, other than test
production, prior to the date of enactment of the Outer
Continental Shelf Deep Water Royalty Relief Act; or
(II) any production resulting from lease development
activities pursuant to a Development Operations
Coordination Document, or supplement thereto that would
expand production significantly beyond the level
anticipated in the Development Operations Coordination
Document, approved by the Secretary after the date of
enactment of the Outer Continental Shelf Deep Water
Royalty Relief Act.
(v) During the production of volumes determined pursuant to
clauses (ii) or (iii) of this subparagraph, in any year during
which the arithmetic average of the closing prices on the New
York Mercantile Exchange for light sweet crude oil exceeds
$28.00 per barrel, any production of oil will be subject to
royalties at the lease stipulated royalty rate. Any production
subject to this clause shall be counted toward the production
volume determined pursuant to clause (ii) or (iii). Estimated
royalty payments will be made if such average of the closing
prices for the previous year exceeds $28.00. After the end of
the calendar year, when the new average price can be
calculated, lessees will pay any royalties due, with interest
but without penalty, or can apply for a refund, with interest,
of any overpayment.
(vi) During the production of volumes determined pursuant to
clause (ii) or (iii) of this subparagraph, in any year during
which the arithmetic average of the closing prices on the New
York Mercantile Exchange for natural gas exceeds $3.50 per
million British thermal units, any production of natural gas
will be subject to royalties at the lease stipulated royalty
rate. Any production subject to this clause shall be counted
toward the production volume determined pursuant to clauses
(ii) or (iii). Estimated royalty payments will be made if such
average of the closing prices for the previous year exceeds
$3.50. After the end of the calendar year, when the new average
price can be calculated, lessees will pay any royalties due,
with interest but without penalty, or can apply for a refund,
with interest, of any overpayment.
(vii) The prices referred to in clauses (v) and (vi) of this
subparagraph shall be changed during any calendar year after
1994 by the percentage, if any, by which the implicit price
deflator for the gross domestic product changed during the
preceding calendar year.
(4)(A) The Secretary of Energy shall submit any bidding
system authorized in subparagraph (H) of paragraph (1) to the
Senate and House of Respresentatives. The Secretary may
institute such bidding system unless either the Senate or the
House of Representatives passes a resolution of disapproval
within thirty days after receipt of the bidding system.
(B) Subparagraphs (C) through (J) of this paragraph are
enacted by Congress--
(i) as an exercise of the rulemaking power of the
Senate and the House of Representatives, respectively,
and as such they are deemed a part of the rules of each
House, respectively, but they are applicable only with
respect to the procedures to be followed in that House
in the case of resolutions described by this paragraph,
and they supersede other rules only to the extent that
they are inconsistent therewith; and
(ii) with full recognition of the constitutional
right of either House to change the rules (so far as
relating to the procedure of that House) at any time,
in the same manner, and to the same extent as in the
case of any other rule of that House.
(C) A resolution disapproving a bidding system submitted
pursuant to this paragraph shall immediately be referred to a
committee (and all resolutions with respect to the same request
shall be referred to the same committee) by the President of
the Senate or the Speaker of the House of Representative, as
the case may be.
(D) If the committee to which has been referred any
resolution disapproving the bidding system of the Secretary has
not reported the resolution at the end of ten calendar days
after its referral, it shall be in order to move either to
discharge the committee from further consideration of the
resolution or to discharge the committee from further
consideration of any other resolution with respect to the same
bidding system which has been referred to the committee.
(E) A motion to discharge may be made only by an individual
favoring the resolution, shall be highly privileged (except
that it may not be made after the committee has reported a
resolution with respect to the same recommendation), and debate
thereon shall be limited to not more than one hour, to be
divided equally between those favoring and those opposing the
resolution. An amendment to the motion shall not be in order,
and it shall not be in order to move to reconsider the vote by
which the motion is agreed to or disagreed to.
(F) If the motion to discharge is agreed to or disagreed to,
the motion may not be renewed, nor may another motion to
discharge the committee be made with respect to any other
resolution with respect to the same bidding system.
(G) When the committee has reported, or has been discharged
from further consideration of, a resolution as provided in this
paragraph, it shall be at any time thereafter in order (even
though a previous motion to the same effect has been disagreed
to) to move to proceed to the consideration of the resolution.
The motion shall be highly privileged and shall not be
debatable. An amendment to the motion shall not be in order,
and it shall not be in order to move to reconsider the vote by
which the motion is agreed to or disagreed to.
(H) Debate on the resolution is limited to not more than two
hours, to be divided equally between those favoring and those
opposing the resolution. A motion further to limit debate is
not debatable. An amendment to, or motion to recommit, the
resolution is not in order, and it is not in order to move to
reconsider the vote by which the resolution is agreed to or
disagreed to.
(I) Motions to postpone, made with respect to the discharge
from the committee, or the consideration of a resolution with
respect to a bidding system, and motions to proceed to the
consideration of other business, shall be decided without
debate.
(J) Appeals from the decisions of the Chair relating to the
application of the rules of the Senate or the House of
Representatives, as the case may be, to the procedure relating
to a resolution with respect to a bidding system shall be
decided without debate.
(5)(A) During the five-year period commencing on the date of
enactment of this subsection, the Secretary may, in order to
obtain statistical information to determine which bidding
alternatives will best accomplish the purposes and policies of
this Act, require, as to no more than 10 per centum of the
tracts offered each year, each bidder to submit bids for any
area of the outer Continental Shelf in accordance with more
than one of the bidding systems set forth in paragraph (1) of
this subsection. For such statistical purposes, leases may be
awarded using a bidding alternative selected at random for the
acquisition of valid statistical data if such bidding
alternative is otherwise consistent with the provisions of this
Act.
(B) The bidding systems authorized by paragraph (1) of this
subsection, other than the system authorized by subparagraph
(A), shall be applied to not less than 20 per centum and not
more than 60 per centum of the total area offered for leasing
each year during the five-year period beginning on the date of
enactment of this subsection, unless the Secretary determines
that the requirements set forth in this subparagraph are
inconsistent with the purposes and policies of this Act.
(6) At least ninety days prior to notice of any lease sale
under subparagraph (D), (E), (F), or, if appropriate, (H) of
paragraph (1), the Secretary shall by regulation establish
rules to govern the calculation of net profits. In the event of
any dispute between the United States and a lessee concerning
the calculation of the net profits under the regulation issued
pursuant to this paragraph, the burden of proof shall be on the
lessee.
(7) After an oil and gas lease is granted pursuant to any of
the work commitment options of paragraph (1) of this
subsection--
(A) the lessee, at its option, shall deliver to the
Secretary upon issuance of the lease either (i) a cash
deposit for the full amount of the exploration work
commitment, or (ii) a performance bond in form and
substance and with a surety satisfactory to the
Secretary, in the principal amount of such exploration
work commitment assuring the Secretary that such
commitment shall be faithfully discharged in accordance
with this section, regulations, and the lease; and for
purposes of this subparagraph, the principal amount of
such cash deposit or bond may, in accordance with
regulations, be periodically reduced upon proof,
satisfactory to the Secretary, that a portion of the
exploration work commitment has been satisfied;
(B) 50 per centum of all exploration expenditures on,
or directly related to, the lease, including, but not
limited to (i) geological investigations and related
activities, (ii) geophysical investigations including
seismic, geomagnetic, and gravity surveys, data
processing and interpretation, and (iii) exploratory
drilling, core drilling, redrilling, and well
completion or abandonment, including the drilling of
wells sufficient to determine the size and area extent
of any newly discovered field, and including the cost
of mobilization and demobilization of drilling
equipment, shall be included in satisfaction of the
commitment, except that the lessee's general overhead
cost shall not be so included against the work
commitment, but its cost (including employee benefits)
of employees directly assigned to such exploration work
shall be so included; and
(C) if at the end of the primary term of the lease,
including any extension thereof, the full dollar amount
of the exploration work commitment has not been
satisfied, the balance shall then be paid in cash to
the Secretary.
(8) Not later than thirty days before any lease sale, the
Secretary shall submit to the Congress and publish in the
Federal Register a notice--
(A) identifying any bidding system which will be
utilized for such lease sale and the reasons for the
utilization of such bidding system; and
(B) designating the lease tracts selected which are
to be offered in such sale under the bidding system
authorized by subparagraph (A) of paragraph (1) and the
lease tracts selected which are to be offered under any
one or more of the bidding systems authorized by
subparagraphs (B) through (H) of paragraph (1), and the
reasons such lease tracts are to be offered under a
particular bidding system.
(b) An oil and gas lease issued pursuant to this section
shall--
(1) be for a tract consisting of a compact area not
exceeding five thousand seven hundred and sixty acres,
as the Secretary may determine, unless the Secretary
finds that a larger area is necessary to comprise a
reasonable economic production unit;
(2) be for an initial period of--
(A) five years; or
(B) not to exceed ten years where the
Secretary finds that such longer period is
necessary to encourage exploration and
development in areas because of unusually deep
water or other unusually adverse conditions,
and as long after such initial period as oil or gas is
produced from the area in paying quantities, or
drilling or well reworking operations as approved by
the Secretary are conducted thereon;
(3) require the payment of amount or value as
determined by one of the bidding systems set forth in
subsection (a) of this section;
(4) entitle the lessee to explore, develop, and
produce the oil and gas contained within the lease
area, conditioned upon due diligence requirements and
the approval of the development and production plan
required by this Act;
(5) provide for suspension or cancellation of the
lease during the initial lease term or thereafter
pursuant to section 5 of this Act;
(6) contain such rental and other provisions as the
Secretary may prescribe at the time of offering the
area for lease; and
(7) provide a requirement that the lessee offer 20
per centum of the crude oil, condensate, and natural
gas liquids produced on such lease, at the market value
and point of delivery applicable to Federal royalty
oil, to small or independent refiners as defined in the
Emergency Petroleum Allocation Act of 1973.
(c)(1) Following each notice of a proposed lease sale and
before the acceptance of bids and the issuance of leases based
on such bids, the Secretary shall allow the Attorney General,
in consultation with the Federal Trade Commission, thirty days
to review the results of such lease sale, except that the
Attorney General, after consultation with the Federal Trade
Commission, may agree to a shorter review period.
(2) The Attorney General may, in consultation with the
Federal Trade Commission, conduct such antitrust review on the
likely effects the issuance of such leases would have on
competition as the Attorney General, after consultation with
the Federal Trade Commission, deems appropriate and shall
advise the Secretary with respect to such review. The Secretary
shall provide such information as the Attorney General, after
consultation with the Federal Trade Commission, may require in
order to conduct any antitrust review pursuant to this
paragraph and to make recommendations pursuant to paragraph (3)
of this subsection.
(3) The Attorney General, after consultation with the Federal
Trade Commission, may make such recommendations to the
Secretary, including the nonacceptance of any bid, as may be
appropriate to prevent any situation inconsistent with the
antitrust laws. If the Secretary determines, or if the Attorney
General advises the Secretary, after consultation with the
Federal Trade Commission and prior to the issuance of any
lease, that such lease may create or maintain a situation
inconsistent with the antitrust laws, the Secretary may--
(A) refuse (i) to accept an otherwise qualified bid
for such lease, or (ii) to issue such lease,
notwithstanding subsection (a) of this section; or
(B) issue such lease, and notify the lessee and the
Attorney General of the reason for such decision.
(4)(A) Nothing in this subsection shall restrict the power
under any other Act or the common law of the Attorney General,
the Federal Trade Commission, or any other Federal department
or agency to secure information, conduct reviews, make
recommendations, or seek appropriate relief.
(B) Neither the issuance of a lease nor anything in this
subsection shall modify or abridge any private right of action
under the antitrust laws.
(d) No bid for a lease may be submitted if the Secretary
finds, after notice and hearing, that the bidder is not meeting
due diligence requirements on other leases.
(e) No lease issued under this Act may be sold, exchanged,
assigned, or otherwise transferred except with the approval of
the Secretary. Prior to any such approval, the Secretary shall
consult with and give due consideration to the views of the
Attorney General.
(f) Nothing in this Act shall be deemed to convey to any
person, association, corporation, or other business
organization immunity from civil or criminal liability, or to
create defenses to actions, under any antitrust law.
(g)(1) At the time of soliciting nominations for the leasing
of lands containing tracts wholly or partially within three
nautical miles of the seaward boundary of any coastal State,
and subsequently as new information is obtained or developed by
the Secretary, the Secretary, in addition to the information
required by section 26 of this Act, shall provide the Governor
of such State--
(A) an identification and schedule of the areas and
regions proposed to be offered for leasing;
(B) at the request of the Governor of such State, all
information from all sources concerning the
geographical, geological, and ecological
characteristics of such tracts;
(C) an estimate of the oil and gas reserves in the
areas proposed for leasing; and
(D) at the request of the Governor of such State, an
identification of any field, geological structure, or
trap located wholly or partially within three nautical
miles of the seaward boundary of such coastal State,
including all information relating to the entire field,
geological structure, or trap.
The provisions of the first sentence of subsection (c) and the
provisions of subsections (e)-(h) of section 26 of this Act
shall be applicable to the release by the Secretary of any
information to any coastal State under this paragraph. In
addition, the provisions of subsections (c) and (e)-(h) of
section 26 of this Act shall apply in their entirety to the
release by the Secretary to any coastal State of any
information relating to Federal lands beyond three nautical
miles of the seaward boundary of such coastal State.
(2) Notwithstanding any other provision of this Act, the
Secretary shall deposit into a separate account in the Treasury
of the United States all bonuses, rents, and royalties, and
other revenues (derived from any bidding system authorized
under subsection (a)(1), excluding Federal income and windfall
profits taxes, and derived from any lease issued after
September 18, 1978 of any Federal tract which lies wholly (or,
in the case of Alaska, partially until seven years from the
date of settlement of any boundary dispute that is the subject
of an agreement under section 7 of this Act entered into prior
to January 1, 1986 or until April 15, 1993 with respect to any
other tract) within three nautical miles of the seaward
boundary of any coastal State, or, (except as provided above
for Alaska) in the case where a Federal tract lies partially
within three nautical miles of the seaward boundary, a
percentage of bonuses, rents, royalties, and other revenues
(derived from any bidding system authorized under subsection
(a)(1), excluding Federal income and windfall profits taxes,
and derived from any lease issued after September 18, 1978 of
such tract equal to the percentage of surface acreage of the
tract that lies within such three nautical miles. Except as
provided in paragraph (5) of this subsection, not later than
the last business day of the month following the month in which
those revenues are deposited in the Treasury, the Secretary
shall transmit to such coastal State 27 percent of those
revenues, together with all accrued interest thereon. The
remaining balance of such revenues shall be transmitted
simultaneously to the miscellaneous receipts account of the
Treasury of the United States.
(3) Whenever the Secretary or the Governor of a coastal State
determines that a common potentially hydrocarbon-bearing area
may underlie the Federal and State boundary, the Secretary or
the Governor shall notify the other party in writing of his
determination and the Secretary shall provide to the Governor
notice of the current and projected status of the tract or
tracts containing the common potentially hydrocarbon-bearing
area. If the Secretary has leased or intends to lease such
tract or tracts, the Secretary and the Governor of the coastal
State may enter into an agreement to divide the revenues from
production of any common potentially hydrocarbon-bearing area,
by unitization or other royalty sharing agreement, pursuant to
existing law. If the Secretary and the Governor do not enter
into an agreement, the Secretary may nevertheless proceed with
the leasing of the tract or tracts. Any revenue received by the
United States under such an agreement shall be subject to the
requirements of paragraph (2).
(4) The deposits in the Treasury account described in this
section shall be invested by the Secretary of the Treasury in
securities backed by the full faith and credit of the United
States having maturities suitable to the needs of the account
and yielding the highest reasonably available interest rates as
determined by the Secretary of the Treasury.
(5)(A) When there is a boundary dispute between the United
States and a State which is subject to an agreement under
section 7 of this Act, the Secretary shall credit to the
account established pursuant to such agreement all bonuses,
rents, and royalties, and other revenues (derived from any
bidding system authorized under subsection (a)(1)), excluding
Federal income and windfall profits taxes, and derived from any
lease issued after September 18, 1978 of any Federal tract
which lies wholly or partially within three nautical miles of
the seaward boundary asserted by the State, if that money has
not otherwise been deposited in such account. Proceeds of an
escrow account established pursuant to an agreement under
section 7 shall be distributed as follows:
(i) Twenty-seven percent of all bonuses, rents, and
royalties, and other revenues (derived from any bidding
system authorized under subsection (a)(1)), excluding
Federal income and windfall profits taxes, and derived
from any lease issued after September 18, 1978, of any
tract which lies wholly within three nautical miles of
the seaward boundary asserted by the Federal Government
in the boundary dispute, together with all accrued
interest thereon, shall be paid to the State either--
(I) within thirty days of December 1, 1987,
or
(II) by the last business day of the month
following the month in which those revenues are
deposited in the Treasury, whichever date is
later.
(ii) Upon the settlement of a boundary dispute which
is subject to a section 7 agreement between the United
States and a State, the Secretary shall pay to such
State any additional moneys due such State from amounts
deposited in or credited to the escrow account. If
there is insufficient money deposited in the escrow
account, the Secretary shall transmit, from any
revenues derived from any lease of Federal lands under
this Act, the remaining balance due such State in
accordance with the formula set forth in section
8004(b)(1)(B) of the Outer Continental Shelf Lands Act
Amendments of 1985.
(B) This paragraph applies to all Federal oil and gas lease
sales, under this Act, including joint lease sales, occurring
after September 18, 1978.
(6) This section shall be deemed to take effect on October 1,
1985, for purposes of determining the amounts to be deposited
in the separate account and the States' shares described in
paragraph (2).
(7) When the Secretary leases any tract which lies wholly or
partially within three miles of the seaward boundary of two or
more States, the revenues from such tract shall be distributed
as otherwise provided by this section, except that the State's
share of such revenues that would otherwise result under this
section shall be divided equally among such States.
(h) Nothing contained in this section shall be construed to
alter, limit, or modify any claim of any State to any
jurisdiction over, or any right, title or interest in, any
submerged lands.
(i) In order to meet the urgent need for further exploration
and development of the sulphur deposits in the submerged lands
of the outer Continental Shelf, the Secretary is authorized to
grant to the qualified persons offering the highest cash
bonuses on a basis of competitive bidding sulphur leases on
submerged lands of the outer Continental Shelf, which are not
covered by leases which include sulphur and meet the
requirements of subsection (a) of section 6 of this Act, and
which sulphur leases shall be offered for bid by sealed bids
and granted on separate leases from oil and gas leases, and for
a separate consideration, and without priority or preference
accorded to oil and gas lessees on the same area.
(j) A sulphur lease issued by the Secretary pursuant to this
section shall (1) cover an area of such size and dimensions as
the Secretary may determine, (2) be for a period of not more
than ten years and so long thereafter as sulphur may be
produced from the area in paying quantities or drilling, well
reworking, plant construction, or other operations for the
production of sulphur, as approved by the Secretary, are
conducted thereon, (3) require the payment to the United States
of such royalty as may be specified in the lease but not less
than 5 per centum of the gross production of value of the
sulphur at the wellhead, and (4) contained such rental
provisions and such other terms and provisions as the Secretary
may by regulation prescribe at the time of offering the area
for lease.
(k)(1) The Secretary is authorized to grant to the qualified
persons offering the highest cash bonuses on a basis of
competitive bidding leases of any mineral other than oil, gas,
and sulphur in any area of the outer Continental Shelf not then
under lease for such mineral upon such royalty, rental, and
other terms and conditions as the Secretary may prescribe at
the time of offering the area for lease.
(2)(A) Notwithstanding paragraph (1), the Secretary may
negotiate with any person an agreement for the use of Outer
Continental Shelf sand, gravel and shell resources--
(i) for use in a program of, or project for, shore
protection, beach restoration, or coastal wetlands
restoration undertaken by a Federal, State, or local
government agency; or
(ii) for use in a construction project, other than a
project described in clause (i), that is funded in
whole or in part by or authorized by the Federal
Government.
(B) In carrying out a negotiation under this paragraph, the
Secretary may assess a fee based on an assessment of the value
of the resources and the public interest served by promoting
development of the resources. No fee shall be assessed directly
or indirectly under this subparagraph against a Federal, State,
or local government agency.
(C) The Secretary may, through this paragraph and in
consultation with the Secretary of Commerce, seek to facilitate
projects in the coastal zone, as such term is defined in
section 304 of the Coastal Zone Management Act of 1972 (16
U.S.C. 1453), that promote the policy set forth in section 303
of that Act (16 U.S.C. 1452).
(D) Any Federal agency which proposes to make use of sand,
gravel and shell resources subject to the provisions of this
Act shall enter into a Memorandum of Agreement with the
Secretary concerning the potential use of those resources. The
Secretary shall notify the Committee on Merchant Marine and
Fisheries and the Committee on Natural Resources of the House
of Representatives and the Committee on Energy and Natural
Resources of the Senate on any proposed project for the use of
those resources prior to the use of those resources.
(l) Notices of sale of leases, and the terms of bidding
authorized by this section shall be published at least thirty
days before the date of sale in accordance with rules and
regulations promulgated by the Secretary.
(m) All moneys paid to the Secretary for or under leases
granted pursuant to this section shall be deposited in the
Treasury in accordance with section 9 of this Act.
(n) The issuance of any lease by the Secretary pursuant to
this Act, or the making of any interim arrangements by the
Secretary pursuant to section 7 of this Act shall not prejudice
the ultimate settlement or adjudication of the question as to
whether or not the area involved is in the outer Continental
Shelf.
(o) The Secretary may cancel any lease obtained by fraud or
misrepresentation.
(p) Leases, Easements, or Rights-of-way for Energy and
Related Purposes.--
(1) In general.--The Secretary, in consultation with
the Secretary of the Department in which the Coast
Guard is operating and other relevant departments and
agencies of the Federal Government, may grant a lease,
easement, or right-of-way on the outer Continental
Shelf for activities not otherwise authorized in this
Act, the Deepwater Port Act of 1974 (33 U.S.C. 1501 et
seq.), the Ocean Thermal Energy Conversion Act of 1980
(42 U.S.C. 9101 et seq.), or other applicable law, if
those activities--
(A) support exploration, development,
production, or storage of oil or natural gas,
except that a lease, easement, or right-of-way
shall not be granted in an area in which oil
and gas preleasing, leasing, and related
activities are prohibited by a moratorium;
(B) support transportation of oil or natural
gas, excluding shipping activities;
(C) produce or support production,
transportation, or transmission of energy from
sources other than oil and gas; or
(D) use, for energy-related purposes or for
other authorized marine-related purposes,
facilities currently or previously used for
activities authorized under this Act, except
that any oil and gas energy-related uses shall
not be authorized in areas in which oil and gas
preleasing, leasing, and related activities are
prohibited by a moratorium.
(2) Payments and revenues.--(A) The Secretary shall
establish royalties, fees, rentals, bonuses, or other
payments to ensure a fair return to the United States
for any lease, easement, or right-of-way granted under
this subsection.
(B) The Secretary shall provide for the payment of 27
percent of the revenues received by the Federal
Government as a result of payments under this section
from projects that are located wholly or partially
within the area extending three nautical miles seaward
of State submerged lands. Payments shall be made based
on a formula established by the Secretary by rulemaking
no later than 180 days after the date of enactment of
this section that provides for equitable distribution,
based on proximity to the project, among coastal states
that have a coastline that is located within 15 miles
of the geographic center of the project.
(3) Competitive or noncompetitive basis.--Except with
respect to projects that meet the criteria established
under section 388(d) of the Energy Policy Act of 2005,
the Secretary shall issue a lease, easement, or right-
of-way under paragraph (1) on a competitive basis
unless the Secretary determines after public notice of
a proposed lease, easement, or right-of-way that there
is no competitive interest.
(4) Requirements.--The Secretary shall ensure that
any activity under this subsection is carried out in a
manner that provides for--
(A) safety;
(B) protection of the environment;
(C) prevention of waste;
(D) conservation of the natural resources of
the outer Continental Shelf;
(E) coordination with relevant Federal
agencies;
(F) protection of national security interests
of the United States;
(G) protection of correlative rights in the
outer Continental Shelf;
(H) a fair return to the United States for
any lease, easement, or right-of-way under this
subsection;
(I) prevention of interference with
reasonable uses (as determined by the
Secretary) of the exclusive economic zone, the
high seas, and the territorial seas;
(J) consideration of--
(i) the location of, and any schedule
relating to, a lease, easement, or
right-of-way for an area of the outer
Continental Shelf; and
(ii) any other use of the sea or
seabed, including use for a fishery, a
sealane, a potential site of a
deepwater port, or navigation;
(K) public notice and comment on any proposal
submitted for a lease, easement, or right-of-
way under this subsection; and
(L) oversight, inspection, research,
monitoring, and enforcement relating to a
lease, easement, or right-of-way under this
subsection.
(5) Lease duration, suspension, and cancellation.--
The Secretary shall provide for the duration, issuance,
transfer, renewal, suspension, and cancellation of a
lease, easement, or right-of-way under this subsection.
(6) Security.--The Secretary shall require the holder
of a lease, easement, or right-of-way granted under
this subsection to--
(A) furnish a surety bond or other form of
security, as prescribed by the Secretary;
(B) comply with such other requirements as
the Secretary considers necessary to protect
the interests of the public and the United
States; and
(C) provide for the restoration of the lease,
easement, or right-of-way.
(7) Coordination and consultation with affected state
and local governments.--The Secretary shall provide for
coordination and consultation with the Governor of any
State or the executive of any local government that may
be affected by a lease, easement, or right-of-way under
this subsection.
(8) Regulations.--Not later than 270 days after the
date of enactment of the Energy Policy Act of 2005, the
Secretary, in consultation with the Secretary of
Defense, the Secretary of the Department in which the
Coast Guard is operating, the Secretary of Commerce,
heads of other relevant departments and agencies of the
Federal Government, and the Governor of any affected
State, shall issue any necessary regulations to carry
out this subsection.
(9) Effect of subsection.--Nothing in this subsection
displaces, supersedes, limits, or modifies the
jurisdiction, responsibility, or authority of any
Federal or State agency under any other Federal law.
(10) Applicability.--This subsection does not apply
to any area on the outer Continental Shelf within the
exterior boundaries of any unit of the National Park
System, National Wildlife Refuge System, or National
Marine Sanctuary System, or any National Monument.
(q) Internet-Based Oil and Gas Lease Sales.--
(1) In general.--In order to modernize the Nation's
offshore leasing program to ensure the best return to
the Federal taxpayer, reduce fraud, and ensure a fair
and competitive leasing process, the Secretary may
conduct lease sales under this section through
Internet-based, sealed-bidding methods.
(2) Sale requirements.--Sales conducted under
paragraph (1) shall ensure--
(A) a publicly and freely accessible digital
delivery of the bid reading process, such as
live Internet streaming, and an option for
bidders to submit bids electronically;
(B) a bidder verification process that
discloses to bidders, by no later than 5 p.m.
Central Time of the day before each sale, a
list of all bids submitted (including the
person submitting each bid) on each lease tract
without disclosing bid amounts;
(C) the ability for a bidder to correct a
possible misreading of a submitted bid;
(D) a designee from within the Office of the
Solicitor of the Department of the Interior to
act as an independent, third-party observer who
will be present during the bid reading process
to prevent wrongdoing, independently certify
the bidding process, and maintain transparency;
(E) data security measures to ensure bidder
data is kept secure; and
(F) a participant survey soliciting voluntary
feedback from bidders on the bidding process.
(3) Transparency in sale-day statistics.--
(A) Requirement.--The Secretary shall
publicly disclose statistical data regarding
each lease sale under this subsection, on the
day the sale is executed.
(B) Included data.--Among data disclosed, the
Secretary shall include--
(i) the total value of high bids;
(ii) the number of tracts offered;
(iii) the number of acres offered;
(iv) the number of tracts receiving
bids;
(v) the number of acres receiving
bids;
(vi) the total number of bids;
(vii) the average number of bids per
tract;
(viii) the total number of bidders
participating;
(ix) bidding statistics by water
depth;
(x) the name of the entity that
submitted each bid, the amount of the
bid, and the tract for which the bid
was submitted;
(xi) of tracts receiving bids, the
number of bids per tract by water
depth;
(xii) the tract receiving the
greatest number of bids;
(xiii) the tract receiving the
highest bid; and
(xiv) any other statistical data that
may be disclosed in accordance with
this Act.
(C) Data transparency.--The Secretary shall
ensure all data regarding lease sales under
this subsection is publicly available and
easily accessible, free of charge, on the
Internet, including for download and
aggregation in machine-readable format.
* * * * * * *
ADDITIONAL VIEWS
While I respect the goals of openness, transparency, and
fair return for the taxpayer in offshore lease sales as laid
out by the sponsors of H.R. 5577, I fear that the impact of the
bill would be to actually reduce the levels of openness and
transparency in the offshore lease sale process, while
providing little additional benefit for taxpayers.
Moving offshore oil and gas lease sales online diminishes
the opportunities for public access and participation in the
process. Ever since the Deepwater Horizon tragedy, there has
been tremendous public interest in where offshore drilling
would be allowed to take place, if it should be allowed at all.
Over 300 people attended a recent offshore lease sale in order
to make their opposition to offshore drilling heard, and moving
lease sales online will only result in shutting those voices
out without addressing any of their concerns.
Furthermore, because of the sealed-bid nature of the
offshore leasing process, it isn't clear how having companies
submit those bids electronically would result in a better
return for the taxpayer. Instead of mailing a bid into the
Bureau of Ocean Energy Management, companies would instead
simply email the exact same bid. In fact, the expense of
setting up a new online system could actually result in a cost
to taxpayers, rather than a better return.
It is disappointing that the Administration has already
taken steps to limit public participation, such as shutting the
public out of the August 2016 Western Gulf of Mexico offshore
lease sale. This is an unfortunate trend that I believe H.R.
5577 will only exacerbate, and for that reason I cannot support
the bill.
Raul M. Grijalva,
Ranking Member,
Committee on Natural Resources.
[all]