[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1975 Enrolled Bill (ENR)]
H.R.1975
One Hundred Fourth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Wednesday,
the third day of January, one thousand nine hundred and ninety-six
An Act
To improve the management of royalties from Federal and Outer
Continental Shelf oil and gas leases, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

1743965a9d5b456402583ee003b3bcbb676ec549881096fdc8c233b4dccc79fc

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

c4c2956bfb2f4886280f2479a3cc132e4d50a1a40dfeba4627e24d63bc15b79e

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

d88d86b5ab964d8e221cacc56b93111a967924a6de703fd1da82e3e6a7f676a3

(a) General Authority.--Section 205 of the Federal Oil and Gas
Royalty Management Act of 1982 (30 U.S.C. 1735) is amended to read as
follows:
``SEC. 205. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.
``(a) Upon written request of any State, the Secretary is
authorized to delegate, in accordance with the provisions of this
section, all or part of the authorities and responsibilities of the
Secretary under this Act to:
``(1) conduct inspections, audits, and investigations;
``(2) receive and process production and financial reports;
``(3) correct erroneous report data;
``(4) perform automated verification; and
``(5) issue demands, subpoenas, and orders to perform
restructured accounting, for royalty management enforcement
purposes,
to any State with respect to all Federal land within the State.
``(b) After notice and opportunity for a hearing, the Secretary is
authorized to delegate such authorities and responsibilities granted
under this section as the State has requested, if the Secretary finds
that--
``(1) it is likely that the State will provide adequate
resources to achieve the purposes of this Act;
``(2) the State has demonstrated that it will effectively and
faithfully administer the rules and regulations of the Secretary
under this Act in accordance with the requirements of subsections
(c) and (d) of this section;
``(3) such delegation will not create an unreasonable burden on
any lessee;
``(4) the State agrees to adopt standardized reporting
procedures prescribed by the Secretary for royalty and production
accounting purposes, unless the State and all affected parties
(including the Secretary) otherwise agree;
``(5) the State agrees to follow and adhere to regulations and
guidelines issued by the Secretary pursuant to the mineral leasing
laws regarding valuation of production; and
``(6) where necessary for a State to have authority to carry
out and enforce a delegated activity, the State agrees to enact
such laws and promulgate such regulations as are consistent with
relevant Federal laws and regulations
with respect to the Federal lands within the State.
``(c) After notice and opportunity for hearing, the Secretary shall
issue a ruling as to the consistency of a State's proposal with the
provisions of this section and regulations under subsection (d) within
90 days after submission of such proposal. In any unfavorable ruling,
the Secretary shall set forth the reasons therefor and state whether
the Secretary will agree to delegate to the State if the State meets
the conditions set forth in such ruling.
``(d) After consultation with State authorities, the Secretary
shall by rule promulgate, within 12 months after the date of enactment
of this section, standards and regulations pertaining to the
authorities and responsibilities to be delegated under subsection (a),
including standards and regulations pertaining to--
``(1) audits to be performed;
``(2) records and accounts to be maintained;
``(3) reporting procedures to be required by States under this
section;
``(4) receipt and processing of production and financial
reports;
``(5) correction of erroneous report data;
``(6) performance of automated verification;
``(7) issuance of standards and guidelines in order to avoid
duplication of effort;
``(8) transmission of report data to the Secretary; and
``(9) issuance of demands, subpoenas, and orders to perform
restructured accounting, for royalty management enforcement
purposes.
Such standards and regulations shall be designed to provide reasonable
assurance that a uniform and effective royalty management system will
prevail among the States. The records and accounts under paragraph (2)
shall be sufficient to allow the Secretary to monitor the performance
of any State under this section.
``(e) If, after notice and opportunity for a hearing, the Secretary
finds that any State to which any authority or responsibility of the
Secretary has been delegated under this section is in violation of any
requirement of this section or any rule thereunder, or that an
affirmative finding by the Secretary under subsection (b) can no longer
be made, the Secretary may revoke such delegation. If, after providing
written notice to a delegated State and a reasonable opportunity to
take corrective action requested by the Secretary, the Secretary
determines that the State has failed to issue a demand or order to a
Federal lessee within the State, that such failure may result in an
underpayment of an obligation due the United States by such lessee, and
that such underpayment may be uncollected without Secretarial
intervention, the Secretary may issue such demand or order in
accordance with the provisions of this Act prior to or absent the
withdrawal of delegated authority.
``(f) Subject to appropriations, the Secretary shall compensate any
State for those costs which may be necessary to carry out the delegated
activities under this Section. Payment shall be made no less than every
quarter during the fiscal year. Compensation to a State may not exceed
the Secretary's reasonably anticipated expenditure for performance of
such delegated activities by the Secretary. Such costs shall be
allocable for the purposes of section 35(b) of the Act entitled `An act
to promote the mining of coal, phosphate, oil, oil shale, gas and
sodium on the public domain', approved February 25, 1920 (commonly
known as the Mineral Leasing Act) (30 U.S.C. 191 (b)) to the
administration and enforcement of laws providing for the leasing of any
onshore lands or interests in land owned by the United States. Any
further allocation of costs under section 35(b) made by the Secretary
for oil and gas activities, other than those costs to compensate States
for delegated activities under this Act, shall be only those costs
associated with onshore oil and gas activities and may not include any
duplication of costs allocated pursuant to the previous sentence.
Nothing in this section affects the Secretary's authority to make
allocations under section 35(b) for non-oil and gas mineral activities.
All moneys received from sales, bonuses, rentals, royalties,
assessments and interest, including money claimed to be due and owing
pursuant to a delegation under this section, shall be payable and paid
to the Treasury of the United States.
``(g) Any action of the Secretary to approve or disapprove a
proposal submitted by a State under this section shall be subject to
judicial review in the United States district court which includes the
capital of the State submitting the proposal.
``(h) Any State operating pursuant to a delegation existing on the
date of enactment of this Act may continue to operate under the terms
and conditions of the delegation, except to the extent that a revision
of the existing agreement is adopted pursuant to this section.''.
(b) Clerical Amendment.--The item relating to section 205 in the
table of contents in section 1 of the Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1701) is amendedto read as follows:
``Sec. 205. Delegation of royalty collections and related activities.''.

d8c79bd49f44421791460e500034b6fe7806b12fc2df60d26a6474fb40a32916

PERIODS.
(a) In General.--The Federal Oil and Gas Royalty Management Act of
1982 (30 U.S.C. 1701 et seq.) is amended by adding after section 114
the following new section:
``SEC. 115. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION
PERIODS.
``(a) In General.--The respective duties, responsibilities, and
activities with respect to a lease shall be performed by the Secretary,
delegated States, and lessees or their designees in a timely manner.
``(b) Limitation Period.--
``(1) In general.--A judicial proceeding or demand which arises
from, or relates to an obligation, shall be commenced within seven
years from the date on which the obligation becomes due and if not
so commenced shall be barred. If commencement of a judicial
proceeding or demand for an obligation is barred by this section,
the Secretary, a delegated State, or a lessee or its designee (A)
shall not take any other or further action regarding that
obligation, including (but not limited to) the issuance of any
order, request, demand or other communication seeking any document,
accounting, determination, calculation, recalculation, payment,
principal, interest, assessment, or penalty or the initiation,
pursuit or completion of an audit with respect to that obligation;
and (B) shall not pursue any other equitable or legal remedy,
whether under statute or common law, with respect to an action on
or an enforcement of said obligation.
``(2) Rule of construction.--A judicial proceeding or demand
that is timely commenced under paragraph (1) against a designee
shall be considered timely commenced as to any lessee who is liable
pursuant to section 102(a) of this Act for the obligation that is
the subject of the judicial proceeding or demand.
``(3) Application of certain limitations.--The limitations set
forth in sections 2401, 2415, 2416, and 2462 of title 28, United
States Code, and section 42 of the Mineral Leasing Act (30 U.S.C.
226-2) shall not apply to any obligation to which this Act applies.
Section 3716 of title 31, United States Code, may be applied to an
obligation the enforcement of which is not barred by this Act, but
may not be applied to any obligation the enforcement of which is
barred by this Act.
``(c) Obligation Becomes Due.--
``(1) In general.--For purposes of this Act, an obligation
becomes due when the right to enforce the obligation is fixed.
``(2) Royalty obligations.--The right to enforce any royalty
obligation for any given production month for a lease is fixed for
purposes of this Act on the last day of the calendar month
following the month in which oil or gas is produced.
``(d) Tolling of Limitation Period.--The running of the limitation
period under subsection (b) shall not be suspended, tolled, extended,
or enlarged for any obligation for any reason by any action, including
an action by the Secretary or a delegated State, other than the
following:
``(1) Tolling agreement.--A written agreement executed during
the limitation period between the Secretary or a delegated State
and a lessee or its designee (with notice to the lessee who
designated the designee) shall toll the limitation period for the
amount of time during which the agreement is in effect.
``(2) Subpoena.--
``(A) The issuance of a subpoena to a lessee or its
designee (with notice to the lessee who designated the
designee, which notice shall not constitute a subpoena to the
lessee) in accordance with the provisions of subparagraph
(B)(i) shall toll the limitation period with respect to the
obligation which is the subject of a subpoena only for the
period beginning on the date the lessee or its designee
receives the subpoena and ending on the date on which (i) the
lessee or its designee has produced such subpoenaed records for
the subject obligation, (ii) the Secretary or a delegated State
receives written notice that the subpoenaed records for the
subject obligation are not in existence or are not in the
lessee's or its designee's possession or control, or (iii) a
court has determined in a final decision that such records are
not required to be produced, whichever occurs first.
``(B)(i) A subpoena for the purposes of this section which
requires a lessee or its designee to produce records necessary
to determine the proper reporting and payment of an obligation
due the Secretary may be issued only by an Assistant Secretary
of the Interior or an Acting Assistant Secretary of the
Interior who is a schedule C employee (as defined by section
213.3301 of title 5, Code of Federal Regulations), or the
Director or Acting Director of the respective bureau or agency,
and may not be delegated to any other person. If a State has
been delegated authority pursuant to section 205, the State,
acting through the highest State official havingultimate
authority over the collection of royalties from leases on Federal lands
within the State, may issue such subpoena, but may not delegate such
authority to any other person.
``(ii) A subpoena described in clause (i) may only be
issued against a lessee or its designee during the limitation
period provided in this section and only after the Secretary or
a delegated State has in writing requested the records from the
lessee or its designee related to the obligation which is the
subject of the subpoena and has determined that--
``(I) the lessee or its designee has failed to respond
within a reasonable period of time to the Secretary's or
the applicable delegated State's written request for such
records necessary for an audit, investigation or other
inquiry made in accordance with the Secretary's or such
delegated State's responsibilities under this Act; or
``(II) the lessee or its designee has in writing denied
the Secretary's or the applicable delegated State's written
request to produce such records in the lessee's or its
designee's possession or control necessary for an audit,
investigation or other inquiry made in accordance with the
Secretary's or such delegated State's responsibilities
under this Act; or
``(III) the lessee or its designee has unreasonably
delayed in producing records necessary for an audit,
investigation or other inquiry made in accordance with the
Secretary's or the applicable delegated State's
responsibilities under this Act after the Secretary's or
delegated State's written request.
``(C) In seeking records, the Secretary or the applicable
delegated State shall afford the lessee or its designee a
reasonable period of time after a written request by the
Secretary or such delegated State in which to provide such
records prior to the issuance of any subpoena.
``(3) Misrepresentation or concealment.--The intentional
misrepresentation or concealment of a material fact for the purpose
of evading the payment of an obligation in which case the
limitation period shall be tolled for the period of such
misrepresentation or such concealment.
``(4) Order to perform restructured accounting.--A)(i) The
issuance of a notice under subparagraph (D) that the lessee or its
designee has not substantially complied with the requirement to
perform a restructured accounting shall toll the limitation period
with respect to the obligation which is the subject of the notice
only for the period beginning on the date the lessee or its
designee receives the notice and ending 120 days after the date on
which (I) the Secretary or the applicable delegated State receives
written notice that the accounting or other requirement has been
performed, or (II) a court has determined in a final decision that
the lessee is not required to perform the accounting, whichever
occurs first.
``(ii) If the lessee or its designee initiates an
administrative appeal or judicial proceeding to contest an order to
perform a restructured accounting issued under subparagraph (B)(i),
the limitation period in subsection (b) shall be tolled from the
date the lessee or its designee received the order until a final,
nonappealable decision is issued in any such proceeding.
``(B)(i) The Secretary or the applicable delegated State may
issue an order to perform a restructured accounting to a lessee or
its designee when the Secretary or such delegated State determines
during an audit of a lessee or its designee that the lessee or its
designee should recalculate royalty due on an obligation based upon
the Secretary's or the delegated State's finding that the lessee or
its designee has made identified underpayments or overpayments
which are demonstrated by the Secretary or the delegated State to
be based upon repeated, systemic reporting errors for a significant
number of leases or a single lease for a significant number of
reporting months with the same type of error which constitutes a
pattern of violations and which are likely to result in either
significant underpayments or overpayments.
``(ii) The power of the Secretary to issue an order to perform
a restructured accounting may not be delegated below the most
senior career professional position having responsibility for the
royalty management program, which position is currently designated
as the `Associate Director for Royalty Management', and may not be
delegated to any other person. If a State has been delegated
authority pursuant to section 205 of this Act, the State, acting
through the highest ranking State official having ultimate
authority over the collection of royalties from leases on Federal
lands within the State, may issue such order to perform, which may
not be delegated to any other person. An order to perform a
restructured accounting shall--
``(I) be issued within a reasonable period of time from
when the audit identifies the systemic, reporting errors;
``(II) specify the reasons and factual bases for such
order;
``(III) be specifically identified as an `order to perform
a restructuredaccounting';
``(IV) provide the lessee or its designee a reasonable
period of time (but not less than 60 days) within which to
perform the restructured accounting; and
``(V) provide the lessee or its designee 60 days within
which to file an administrative appeal of the order to perform
a restructured accounting.
``(C) An order to perform a restructured accounting shall not
mean or be construed to include any other action by or on behalf of
the Secretary or a delegated State.
``(D) If a lessee or its designee fails to substantially comply
with the requirement to perform a restructured accounting pursuant
to this subsection, a notice shall be issued to the lessee or its
designee that the lessee or its designee has not substantially
complied with the requirements to perform a restructured
accounting. A lessee or its designee shall be given a reasonable
time within which to perform the restructured accounting. Such
notice may be issued under this section only by an Assistant
Secretary of the Interior or an acting Assistant Secretary of the
Interior who is a schedule C employee (as defined by section
213.3301 of title 5, Code of Federal Regulations) and may not be
delegated to any other person. If a State has been delegated
authority pursuant to section 205, the State, acting through the
highest State official having ultimate authority over the
collection of royalties from leases on Federal lands within the
State, may issue such notice, which may not be delegated to any
other person.
``(e) Termination of Limitations Period.--An action or an
enforcement of an obligation by the Secretary or delegated State or a
lessee or its designee shall be barred under this section prior to the
running of the seven-year period provided in subsection (b) in the
event--
``(1) the Secretary or a delegated State has notified the
lessee or its designee in writing that a time period is closed to
further audit; or
``(2) the Secretary or a delegated State and a lessee or its
designee have so agreed in writing.
For purposes of this subsection, notice to, or an agreement by, the
designee shall be binding on any lessee who is liable pursuant to
section 102(a) for obligations that are the subject of the notice or
agreement.
``(f) Records Required for Determining Collections.--Records
required pursuant to section 103 of this Act by the Secretary or any
delegated State for the purpose of determining obligations due and
compliance with any applicable mineral leasing law, lease provision,
regulation or order with respect to oil and gas leases from Federal
lands or the Outer Continental Shelf shall be maintained for the same
period of time during which a judicial proceeding or demand may be
commenced under subsection (b). If a judicial proceeding or demand is
timely commenced, the record holder shall maintain such records until
the final nonappealable decision in such judicial proceeding is made,
or with respect to that demand is rendered, unless the Secretary or the
applicable delegated State authorizes in writing an earlier release of
the requirement to maintain such records. Notwithstanding anything
herein to the contrary, under no circumstance shall a record holder be
required to maintain or produce any record relating to an obligation
for any time period which is barred by the applicable limitation in
this section. In connection with any hearing, administrative
proceeding, inquiry, investigation, or audit by the Secretary or a
delegated State under this Act, the Secretary or the delegated State
shall minimize the submission of multiple or redundant information and
make a good faith effort to locate records previously submitted by a
lessee or a designee to the Secretary or the delegated State, prior to
requiring the lessee or the designee to provide such records.
``(g) Timely Collections.--In order to most effectively utilize
resources available to the Secretary to maximize the collection of oil
and gas receipts from lease obligations to the Treasury within the
seven-year period of limitations, and consequently to maximize the
State share of such receipts, the Secretary should not perform or
require accounting, reporting, or audit activities if the Secretary and
the State concerned determine that the cost of conducting or requiring
the activity exceeds the expected amount to be collected by the
activity, based on the most current 12 months of activity. This
subsection shall not provide a defense to a demand or an order to
perform a restructured accounting. To the maximum extent possible, the
Secretary and delegated States shall reduce costs to the United States
Treasury and the States by discontinuing requirements for unnecessary
or duplicative data and other information, such as separate allowances
and payor information, relating to obligations due. If the Secretary
and the State concerned determine that collection will result sooner,
the Secretary or the applicable delegated State may waive or forego
interest in whole or in part.
``(h) Appeals and Final Agency Action.--
``(1) 33-month period.--Demands or orders issued by the
Secretary or a delegated State are subject to administrative appeal
in accordance with the regulations of the Secretary. No State shall
impose any conditions which would hinder a lessee's or its
designee's immediate appeal of an order to the Secretary or the
Secretary's designee. The Secretary shall issue a final decision in
any administrative proceeding, including any administrative
proceedings pending on the date of enactment of this section,
within 33 months from the date such proceeding was commenced or 33
months from the date of such enactment, whicheveris later. The 33-
month period may be extended by any period of time agreed upon in
writing by the Secretary and the appellant.
``(2) Effect of failure to issue decision.--If no such decision
has been issued by the Secretary within the 33-month period
referred to in paragraph (1)--
``(A) the Secretary shall be deemed to have issued and
granted a decision in favor of the appellant as to any
nonmonetary obligation and any monetary obligation the
principal amount of which is less than $10,000; and
``(B) the Secretary shall be deemed to have issued a final
decision in favor of the Secretary, which decision shall be
deemed to affirm those issues for which the agency rendered a
decision prior to the end of such period, as to any monetary
obligation the principal amount of which is $10,000 or more,
and the appellant shall have a right to judicial review of such
deemed final decision in accordance with title 5 of the United
States Code.
``(i) Collections of Disputed Amounts Due.--To expedite collections
relating to disputed obligations due within the seven-year period
beginning on the date the obligation became due, the parties shall hold
not less than one settlement consultation and the Secretary and the
State concerned may take such action as is appropriate to compromise
and settle a disputed obligation, including waiving or reducing
interest and allowing offsetting of obligations among leases.
``(j) Enforcement of a Claim for Judicial Review.--In the event a
demand subject to this section is properly and timely commenced, the
obligation which is the subject of the demand may be enforced beyond
the seven-year limitations period without being barred by this statute
of limitations. In the event a demand subject to this section is
properly and timely commenced, a judicial proceeding challenging the
final agency action with respect to such demand shall be deemed timely
so long as such judicial proceeding is commenced within 180 days from
receipt of notice by the lessee or its designee of the final agency
action.
``(k) Implementation of Final Decision.--In the event a judicial
proceeding or demand subject to this section is timely commenced and
thereafter the limitation period in this section lapses during the
pendency of such proceeding, any party to such proceeding shall not be
barred from taking such action as is required or necessary to implement
a final unappealable judicial or administrative decision, including any
action required or necessary to implement such decision by the recovery
or recoupment of an underpayment or overpayment by means of refund or
credit.
``(l) Stay of Payment Obligation Pending Review.--Any person
ordered by the Secretary or a delegated State to pay any obligation
(other than an assessment) shall be entitled to a stay of such payment
without bond or other surety instrument pending an administrative or
judicial proceeding if the person periodically demonstrates to the
satisfaction of the Secretary that such person is financially solvent
or otherwise able to pay the obligation. In the event the person is not
able to demonstrate, the Secretary may require a bond or other surety
instrument satisfactory to cover the obligation. Any person ordered by
the Secretary or a delegated State to pay an assessment shall be
entitled to a stay without bond or other surety instrument.''.
(b) Clerical Amendment.--The table of contents in section 1 of the
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) is
amended by inserting after the item relating to section 114 the
following new item:
``Sec.  115.  Secretarial and delegated States' actions and limitation
periods.''.

438d8c01a4e2c53c6553ece3d62c22732999f07a056e5d42f5b647f842ac542b

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

22d91704fe6e39b33e00b3e5f29cdb0038ead3c5918b5c060f238278385999d0

(a) Lessee or Designee Interest.--Section 111 of the Federal Oil
and Gas Royalty Management Act of 1982 (30 U.S.C. 1721) is amended by
adding after subsection (g) the following:
``(h) Interest shall be allowed and paid or credited on any
overpayment, with such interest to accrue from the date such
overpayment was made, at the rate obtained by applying the provisions
of subparagraphs (A) and (B) of section 6621(a)(1) of the Internal
Revenue Code of 1986, but determined without regard to the sentence
following subparagraph (B) of section 6621(a)(1). Interest which has
accrued on any overpayment may be applied to reduce an underpayment.
This subsection applies to overpayments made later than six months
after the date of enactment of this subsection or September 1, 1996,
whichever is later. Such interest shall be paid from amounts received
as current receipts from sales, bonuses, royalties (including interest
charges collected under this section) and rentals of the public lands
and the Outer Continental Shelf under the provisions of the Mineral
Leasing Act, and the Outer Continental Shelf Lands Act, which are not
payable to a State or the Reclamation Fund. The portion of any such
interest payment attributable to any amounts previously disbursed to a
State, the Reclamation Fund, or any other recipient designated by law
shall be deducted from the next disbursements to that recipient made
under the applicable law. Such amounts deducted from subsequent
disbursements shall be credited to miscellaneous receipts in the
Treasury.''.
(b) Limitation on Interest.--Section 111 of the Federal Oil and Gas
Royalty Management Act of 1982, as amended by subsection (a), is
further amended by adding at the end the following:
``(i) Upon a determination by the Secretary that an excessive
overpayment (based upon all obligations of a lessee or its designee for
a given reporting month) was made for the sole purpose of receiving
interest, interest shall be paid on the excessive amount of such
overpayment. For purposes of this Act, an `excessive overpayment' shall
be the amount that any overpayment a lessee or its designee pays for a
given reporting month (excluding payments for demands for obligations
determined to be due as a result of judicial or administrative
proceedings or agreed to be paid pursuant to settlement agreements) for
the aggregate of all of its Federal leases exceeds 10 percent of the
total royalties paid that month for those leases.''.
(c) Estimated Payment.--Section 111 of the Federal Oil and Gas
Royalty Management Actof 1982 (30 U.S.C. 1721), as amended by
subsections (a) and (b), is further amended by adding at the end the
following:
``(j) A lessee or its designee may make a payment for the
approximate amount of royalties (hereinafter in this subsection
`estimated payment') that would otherwise be due for such lease by the
rate royalties are due for that lease. When an estimated payment is
made, actual royalties are payable at the end of the month following
the month in which the estimated payment is made. If the estimated
payment was less than the amount of actual royalties due, interest is
owned on the underpaid amount. If the estimated payment exceeds the
actual royalties due, interest is owned on the overpayment. If the
lessee or its designee makes a payment for such actual royalties, the
lessee or its designee may apply the estimated payment to future
royalties. Any estimated payment may be adjusted, recouped, or
reinstated at any time by the lessee or its designee.''.
(d) Volume Allocation of Oil and Gas Production.--Section 111 of
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C.
1721), as amended by subsections (a) through (c), is amended by adding
at the end the following:
``(k)(1) Except as otherwise provided by this subsection--
``(A) a lessee or its designee of a lease in a unit or
communitization agreement which contains only Federal leases with
the same royalty rate and funds distribution shall report and pay
royalties on oil and gas production for each production month based
on the actual volume of production sold by or on behalf of that
lessee;
``(B) a lessee or its designee of a lease in any other unit or
communitization agreement shall report and pay royalties on oil and
gas production for each production month based on the volume of oil
and gas produced from such agreement and allocated to the lease in
accordance with the terms of the agreement; and
``(C) a lessee or its designee of a lease that is not contained
in a unit or communitization agreement shall report and pay
royalties on oil and gas production for each production month based
on the actual volume of production sold by or on behalf of that
lessee.
``(2) This subsection applies only to requirements for reporting
and paying royalties. Nothing in this subsection is intended to alter a
lessee's liability for royalties on oil or gas production based on the
share of production allocated to the lease in accordance with the terms
of the lease, a unit or communitization agreement, or any other
agreement.
``(3) For any unit or communitization agreement if all lessees
contractually agree to an alternative method of royalty reporting and
payment, the lessees may submit such alternative method to the
Secretary or the delegated State for approval and make payments in
accordance with such approved alternative method so long as such
alternative method does not reduce the amount of the royalty
obligation.
``(4) The Secretary or the delegated State shall grant an exception
from the reporting and payment requirements for marginal properties by
allowing for any calendar year or portion thereof royalties to be paid
each month based on the volume of production sold. Interest shall not
accrue on the difference for the entire calendar year or portion
thereof between the amount of oil and gas actually sold and the share
of production allocated to the lease until the beginning of the month
following such calendar year or portion thereof. Any additional
royalties dues or overpaid royalties and associated interest shall be
paid, refunded, or credited within six months after the end of each
calendar year in which royalties are paid based on volumes of
production sold. For the purpose of this subsection, the term `marginal
property' means a lease that produces on average the combined
equivalent of less than 15 barrels of oil per well per day or 90
thousand cubic feet of gas per well per day, or a combination thereof,
determined by dividing the average daily production of crude oil and
natural gas from producing wells on such lease by the number of such
wells, unless the Secretary, together with the State concerned,
determines that a different production is more appropriate.
``(5) Not later than two years after the date of the enactment of
this subsection, the Secretary shall issue any appropriate demand for
all outstanding royalty payment disputes regarding who is required to
report and pay royalties on production from units and communitization
agreements outstanding on the date of the enactment of this subsection,
and collect royalty amounts owed on such production.''.
(e) Production Allocation.--Section 111 of the Federal Oil and Gas
Royalty Management Act of 1982 (30 U.S.C. 1721), as amended by
subsections (a) through (d), is amended by adding at the end the
following:
``(l) The Secretary shall issue all determinations of allocations
of production for units and communitization agreements within 120 days
of a request for determination. If the Secretary fails to issue a
determination within such 120-day period, the Secretary shall waive
interest due on obligations subject to the determination until the end
of the month following the month in which the determination is made.''.
(f) New Assessment To Encourage Proper Royalty Payments.--
(1) In general.--The Federal Oil and Gas Royalty Management Act
of 1982 (30 U.S.C. 1721), as amended by section 4(a), is further
amended by adding at the end the following:
``SEC. 116. ASSESSMENTS.
``Beginning eighteen months after the date of enactment of this
section, to encourage proper royalty payment the Secretary or the
delegated State shall impose assessments on a person who chronically
submits erroneous reports under this Act. Assessments under this Act
may only be issued as provided for in this section.''.
(2) Clerical amendment.--The table of contents in section 1 of
such Act (30 U.S.C. 1701) is amended by adding after the item
relating to section 115 the following new item:
``Sec. 116. Assessments.''.
(g) Liability for Royalty Payments.--Section 102(a) of the Federal
Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1712(a)) is
amended to read as follows:
``(a) In order to increase receipts and achieve effective
collections of royalty and other payments, a lessee who is required to
make any royalty or other payment under a lease or under the mineral
leasing laws, shall make such payments in the time and manner as may be
specified by the Secretary or the applicable delegated State. A lessee
may designate a person to make all or part of the payments due under a
lease on the lessee's behalf and shall notify the Secretary or the
applicable delegated State in writing of such designation, in which
event said designated person may, in its own name, pay, offset or
credit monies, make adjustments, request and receive refunds and submit
reports with respect to payments required by the lessee.
Notwithstanding any other provision of this Act to the contrary, a
designee shall not be liable for any payment obligation under the
lease. The person owning operating rights in a lease shall be primarily
liable for its pro rata share of payment obligations under the lease.
If the person owning the legal record title in a lease is other than
the operating rights owner, the person owning the legal record title
shall be secondarily liable for its pro rata share of such payment
obligations under the lease.''.
(h) Clerical Amendments.--(1) The heading of section 111 of the
Federal Oil and Gas Royalty management Act of 1982 (30 U.S.C. 1721) is
amended to read as follows:
``ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES''.
(2) The item relating to section 111 in the table of contents in
section 1 of such Act (30 U.S.C. 1701) is amended to read as follows:
``Sec. 111. Royalty terms and conditions, interest, and penalties.''.

5837d674c9f634b5472d40440f65b99652e6a819730316b050854bcc31514666

(a) In General.--The Federal Oil and Gas Royalty Management Act of
1982 (30 U.S.C. 1701 et seq.), as amended by section 6 of this Act, is
further amended by adding at the end the following:
``SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.
``(a) Determination of Best Interests of State Concerned and the
United States.--The Secretary and the State concerned, acting in the
best interests of the United States and the State concerned to promote
production, reduce administrative costs, and increase net receipts to
the United States and the States, shall jointly determine, on a case by
case basis, the amount of what marginal production from a lease or
leases or well or wells, or parts thereof, shall be subject to a
prepayment under subsection (b) or regulatory relief under subsection
(c). If the State concerned does not consent, such prepayments or
regulatory relief shall not be made available under this section for
such marginal production: Provided, That if royalty payments from a
lease or leases, or well or wells are not shared with any State, such
determination shall be made solely by the Secretary.
``(b) Prepayment of Royalty.--
``(1) In general.--Notwithstanding the provisions of any lease
to the contrary, for any lease or leases or well or wells
identified by the Secretary and the State concerned pursuant to
subsection (a), the Secretary is authorized to accept a prepayment
for royalties in lieu of monthly royalty payments under the lease
for the remainder of the lease term if the affected lessee so
agrees. Any prepayment agreed to by the Secretary, State concerned
and lessee which is less than an average $500 per month in total
royalties shall be effectuated under this section not earlier than
two years after the date of enactment of this section and, any
prepayment which is greater than an average $500 per month in total
royalties shall be effectuated under this section not earlier than
three years after the date of enactment of this section. The
Secretary and the State concerned may condition their acceptance of
the prepayment authorized under this section on the lessee's
agreeing to such terms and conditions as the Secretary and the
State concerned deem appropriate and consistent with the purposes
of this Act. Such terms may--
``(A) provide for prepayment that does not result in a loss
of revenue to the United States in present value terms;
``(B) include provisions for receiving additional
prepayments or royalties for developments in the lease or
leases or well or wells that deviate significantly from the
assumptions and facts on which the valuation is determined; and
``(C) require the lessee or it designee to provide such
periodic production reports as may be necessary to allow the
Secretary and the State concerned to monitor production for the
purposes of subparagraph (B).
``(2) State share.--A prepayment under this section shall be
shared by the Secretary with any State or other recipient to the
same extent as any royalty payment for such lease.
``(3) Satisfaction of obligation.--Except as may be provided in
the terms and conditions established by the Secretary under
subsection (b), a lessee or its designee who makes a prepayment
under this section shall have satisfied in full the lessee's
obligation to pay royalty on the production stream sold from the
lease or leases or well or wells.
``(c) Alternative Accounting and Auditing Requirements.--Within one
year after the date of the enactment of this section, the Secretary or
the delegated State shall provide accounting, reporting, and auditing
relief that will encourage lessees to continue to produce and develop
properties subject to subsection (a): Provided, That such relief will
only be available to lessees in a State that concurs, which concurrence
is not required if royalty payments from the lease or leases or well or
wells are not shared with any State. Prior to granting such relief, the
Secretary and, if appropriate, the State concerned shall agree that the
type of marginal wells and relief provided under this paragraph is in
the best interest of the United States and, if appropriate, the State
concerned.''.
(b) Clerical Amendment.--The table of contents in section 1 of such
Act (30 U.S.C. 1701) is amended by adding after the item relating to
section 116 the following new item:
``Sec. 117. Alternatives for marginal properties.''.

1355683a173f81f425cf669542aab8690e5e7cea2fff5ccd49e0af9235d8f2aa

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

ebd323a8a10db3ec5277470e84185c0372d28190693a3d0ac0c877ca2cf6f508

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

0ad417e20e58658a038736559a898e3ab1394e7362f882f7eaff37fddccf1f2b

This Act shall not apply to any privately owned minerals.

ca8d750eb97892cf690c7aaf1ad552487165e1b43b67da09975dfd0b374713a0

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

a76d87f8071a892d5e9ca3ffafac2fbbaf290977f416b5b52b52978d3383fe19

Nothing in this Act shall be construed to give a State a property
right or interest in any Federal lease or land.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.

d5762babcf3d5bbb031fbdd52525e536884f6c097d3e95072d31423154f4b65f

Federal Oil and Gas Royalty Simplification and Fairness Act of 1995 — HR. 1975

Other Sections

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