[104th Congress Public Law 185]
[From the U.S. Government Printing Office]
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[DOCID: f:publ185.104]
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FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1996
[[Page 110 STAT. 1700]]
Public Law 104-185
104th Congress
An Act
To improve the management of royalties from Federal and Outer
Continental Shelf oil and gas leases, and for other
purposes. <<NOTE: Aug. 13, 1996 - [H.R. 1975]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress <<NOTE: Federal Oil and Gas Royalty
Simplification and Fairness Act of 1996.>> assembled,
SECTION 1. SHORT <<NOTE: 30 USC 1701 note.>> TITLE.
This Act may be cited as the ``Federal Oil and Gas Royalty
Simplification and Fairness Act of 1996''.
SEC. 2. <<NOTE: 30 USC 1702.>> DEFINITIONS.
Section 3 of the Federal Oil and Gas Royalty Management Act of 1982
(30 U.S.C. 1701 et seq.) is amended--
(1) by amending paragraph (7) to read as follows:
``(7) `lessee' means any person to whom the United States
issues an oil and gas lease or any person to whom operating
rights in a lease have been assigned;''; and
(2) by striking ``and'' at the end of paragraph (15), by
striking the period at the end of paragraph (16) and inserting a
semicolon, and by adding at the end the following:
``(17) `adjustment' means an amendment to a previously filed
report on an obligation, and any additional payment or credit,
if any, applicable thereto, to rectify an underpayment or
overpayment on an obligation;
``(18) `administrative proceeding' means any Department of
the Interior agency process in which a demand, decision or order
issued by the Secretary or a delegated State is subject to
appeal or has been appealed;
``(19) `assessment' means any fee or charge levied or
imposed by the Secretary or a delegated State other than--
``(A) the principal amount of any royalty, minimum
royalty, rental bonus, net profit share or proceed of
sale;
``(B) any interest; or
``(C) any civil or criminal penalty;
``(20) `commence' means--
``(A) with respect to a judicial proceeding, the
service of a complaint, petition, counterclaim, cross
claim, or other pleading seeking affirmative relief or
seeking credit or recoupment: Provided, That if the
Secretary commences a judicial proceeding against a
designee, the Secretary shall give notice of that
commencement to the lessee who designated the designee,
but the Secretary is not required to give notice to
other lessees who may be liable pursuant to section
102(a) of this Act, for the obligation that is the
subject of the judicial proceeding; or
[[Page 110 STAT. 1701]]
``(B) with respect to a demand, the receipt by the
Secretary or a delegated State or a lessee or its
designee (with written notice to the lessee who
designated the designee) of the demand;
``(21) `credit' means the application of an overpayment (in
whole or in part) against an obligation which has become due to
discharge, cancel or reduce the obligation;
``(22) `delegated State' means a State which, pursuant to an
agreement or agreements under section 205 of this Act, performs
authorities, duties, responsibilities, or activities of the
Secretary;
``(23) `demand' means--
``(A) an order to pay issued by the Secretary or the
applicable delegated State to a lessee or its designee
(with written notice to the lessee who designated the
designee) that has a reasonable basis to conclude that
the obligation in the amount of the demand is due and
owing; or
``(B) a separate written request by a lessee or its
designee which asserts an obligation due the lessee or
its designee that provides a reasonable basis to
conclude that the obligation in the amount of the demand
is due and owing, but does not mean any royalty or
production report, or any information contained therein,
required by the Secretary or a delegated State;
``(24) `designee' means the person designated by a lessee
pursuant to section 102(a) of this Act, with such written
designation effective on the date such designation is received
by the Secretary and remaining in effect until the Secretary
receives notice in writing that the designation is modified
or terminated;
``(25) `obligation' means--
``(A) any duty of the Secretary or, if applicable, a
delegated State--
``(i) to take oil or gas royalty in kind; or
``(ii) to pay, refund, offset, or credit
monies including (but not limited to)--
``(I) the principal amount of any
royalty, minimum royalty, rental, bonus,
net profit share or proceed of sale; or
``(II) any interest; and
``(B) any duty of a lessee or its designee (subject
to the 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
[[Page 110 STAT. 1702]]
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.''.
SEC. 3. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.
(a) General Authority.--Section 205 of the Federal Oil and Gas
Royalty Management Act of 1982 (30 U.S.C. 1735) is amended to read as
follows:
``SEC. 205. DELEGATION OF ROYALTY <<NOTE: 30 USC 1735.>> 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--
[[Page 110 STAT. 1703]]
``(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 <<NOTE: Regulations.>>
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.
[[Page 110 STAT. 1704]]
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 amended
to read as follows:
``Sec. 205. Delegation of royalty collections and related activities.''.
SEC. 4. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION
PERIODS.
(a) In General.--The Federal Oil and Gas Royalty Management Act of
1982 (30 U.S.C. 1701 et seq.) is amended by adding after section 114 the
following new section:
[[Page 110 STAT. 1705]]
``SEC. 115. SECRETARIAL AND DELEGATED <<NOTE: 30 USC 1724.>> 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.--
[[Page 110 STAT. 1706]]
``(A) The issuance of a subpoena to a lessee or its
designee (with notice to the lessee who designated the
designee, which notice shall not constitute a subpoena
to the lessee) in accordance with the provisions of
subparagraph (B)(i) shall toll the limitation period
with respect to the obligation which is the subject of a
subpoena only for the period beginning on the date the
lessee or its designee receives the subpoena and ending
on the date on which (i) the lessee or its designee has
produced such subpoenaed records for the subject
obligation, (ii) the Secretary or a delegated State
receives written notice that the subpoenaed records for
the subject obligation are not in existence or are not
in the lessee's or its designee's possession or control,
or (iii) a court has determined in a final decision that
such records are not required to be produced, whichever
occurs first.
``(B)(i) A subpoena for the purposes of this section
which requires a lessee or its designee to produce
records necessary to determine the proper reporting and
payment of an obligation due the Secretary may be issued
only by an Assistant Secretary of the Interior or an
Acting Assistant Secretary of the Interior who is a
schedule C employee (as defined by section 213.3301 of
title 5, Code of Federal Regulations), or the Director
or Acting Director of the respective bureau or agency,
and may not be delegated to any other person. If a State
has been delegated authority pursuant to section 205,
the State, acting through the highest State official
having
ultimate authority over the collection of royalties from leases on
Federal lands within the State, may issue such subpoena, but may not
delegate such authority to any other person.
``(ii) A subpoena described in clause (i) may only
be issued against a lessee or its designee during the
limitation period provided in this section and only
after the Secretary or a delegated State has in writing
requested the records from the lessee or its designee
related to the obligation which is the subject of the
subpoena and has determined that--
``(I) the lessee or 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
[[Page 110 STAT. 1707]]
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--
[[Page 110 STAT. 1708]]
``(I) be issued within a reasonable period of time
from when the audit identifies the systemic, reporting
errors;
``(II) specify the reasons and factual bases for
such order;
``(III) be specifically identified as an `order to
perform a restructured
accounting';
``(IV) provide the lessee or its designee a
reasonable period of time (but not less than 60 days)
within which to perform the restructured accounting; and
``(V) provide the lessee or its designee 60 days
within which to file an administrative appeal of the
order to perform a restructured accounting.
``(C) An order to perform a restructured accounting shall
not mean or be construed to include any other action by or on
behalf of the Secretary or a delegated State.
``(D) If a lessee <<NOTE: Notice.>> 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
[[Page 110 STAT. 1709]]
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,
whichever
is later. The 33-month period may be extended by any period of time
agreed upon in writing by the Secretary and the appellant.
``(2) Effect of failure to issue decision.--If no such
decision has been issued by the Secretary within the 33-month
period referred to in paragraph (1)--
``(A) the Secretary shall be deemed to have issued
and granted a decision in favor of the appellant as to
any nonmonetary obligation and any monetary obligation
the principal amount of which is less than $10,000; and
``(B) the Secretary shall be deemed to have issued a
final decision in favor of the Secretary, which decision
shall be deemed to affirm those issues for which the
agency
[[Page 110 STAT. 1710]]
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.''.
SEC. 5. ADJUSTMENT AND REFUNDS.
(a) In General.--The Federal Oil and Gas Royalty Management Act of
1982 (30 U.S.C. 1701 et seq.) is amended by inserting after section 111
the following:
[[Page 110 STAT. 1711]]
``SEC. 111A. <<NOTE: 30 USC 1721a.>> 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
an
audit, then the Secretary or the applicable delegated State, as
appropriate, shall allow a credit or refund in the amount of the
overpayment.
``(4) For purposes of this section, the adjustment period
for any obligation shall be the six-year period following the
date on which an obligation became due. The adjustment period
shall be suspended, tolled, extended, enlarged, or terminated by
the same actions as the limitation period in section 115.
``(b) Refunds.--
``(1) In general.--A request for refund is sufficient if
it--
``(A) is made in writing to the Secretary and, for
purposes of section 115, is specifically identified as a
demand;
``(B) identifies the person entitled to such refund;
``(C) provides the Secretary information that
reasonably enables the Secretary to identify the
overpayment for which such refund is sought; and
``(D) provides the reasons why the payment was an
overpayment.
``(2) Payment by secretary of the treasury.--The Secretary
shall certify the amount of the refund to be paid under
paragraph (1) to the Secretary of the Treasury who shall make
such refund. Such refund shall be paid from amounts received as
current receipts from sales, bonuses, royalties (including
interest charges collected under this section) and rentals of
the public lands and the Outer Continental Shelf under the
provisions of the Mineral Leasing Act and the Outer Continental
Shelf Lands Act, which are not payable to a State or
[[Page 110 STAT. 1712]]
the Reclamation Fund. The portion of any such refund
attributable to any amounts previously disbursed to a State, the
Reclamation Fund, or any recipient prescribed by law shall be
deducted from the next disbursements to that recipient made
under the applicable law. Such amounts deducted from subsequent
disbursements shall be credited to miscellaneous receipts in the
Treasury.
``(3) Payment period.--A refund under this subsection shall
be paid or denied (with an explanation of the reasons for the
denial) within 120 days of the date on which the request for
refund is received by the Secretary. Such refund shall be
subject to later audit by the Secretary or the applicable
delegated State and subject to the provisions of this Act.
``(4) Prohibition against reduction of refunds or credits.--
In no event shall the Secretary or any delegated State directly
or indirectly claim or offset any amount or amounts against, or
reduce any refund or credit (or interest accrued thereon) by the
amount of any obligation the enforcement of which is barred by
section 115 of this Act.''.
(b) Clerical Amendment.--The table of contents in section 1 of the
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) is
amended by inserting after the item relating to section 111 the
following new item:
``Sec. 111A. Adjustments and refunds.''.
SEC. 6. ROYALTY TERMS AND CONDITIONS, INTEREST, AND
PENALTIES.
(a) Lessee or Designee Interest.--Section 111 of the Federal Oil and
Gas Royalty Management Act of 1982 (30 U.S.C. 1721) is amended by adding
after subsection (g) the following:
``(h) Interest shall be allowed and paid or credited on any
overpayment, with such interest to accrue from the date such overpayment
was made, at the rate obtained by applying the provisions of
subparagraphs (A) and (B) of section 6621(a)(1) of the Internal Revenue
Code of 1986, but determined without regard to the sentence following
subparagraph (B) of section 6621(a)(1). Interest which has accrued on
any overpayment may be applied to reduce an underpayment. This
subsection applies to overpayments made later than six months after the
date of enactment of this subsection or September 1, 1996, whichever is
later. Such interest shall be paid from amounts received as current
receipts from sales, bonuses, royalties (including interest charges
collected under this section) and rentals of the public lands and the
Outer Continental Shelf under the provisions of the Mineral Leasing Act,
and the Outer Continental Shelf Lands Act, which are not payable to a
State or the Reclamation Fund. The portion of any such interest payment
attributable to any amounts previously disbursed to a State, the
Reclamation Fund, or any other recipient designated by law shall be
deducted from the next disbursements to that recipient made under the
applicable law. Such amounts deducted from subsequent disbursements
shall be credited to miscellaneous receipts in the Treasury.''.
(b) Limitation on Interest.--Section 111 of the Federal Oil and Gas
Royalty Management Act of 1982, as amended by subsection (a), is further
amended by adding at the end the following:
``(i) Upon a determination by the Secretary that an excessive
overpayment (based upon all obligations of a lessee or its designee
[[Page 110 STAT. 1713]]
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 Act
of 1982 (30 U.S.C. 1721), as amended by subsections (a) and (b), is
further amended by adding at the end the following:
``(j) A lessee or its designee may make a payment for the
approximate amount of royalties (hereinafter in this subsection
`estimated payment') that would otherwise be due for such lease by the
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.
[[Page 110 STAT. 1714]]
``(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. <<NOTE: 30 USC 1725.>> 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.''.
[[Page 110 STAT. 1715]]
(2) Clerical amendment.--The table of contents in section 1
of such Act (30 U.S.C. 1701) is amended by adding after the item
relating to section 115 the following new item:
``Sec. 116. Assessments.''.
(g) Liability for Royalty Payments.--Section 102(a) of the Federal
Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1712(a)) is
amended to read as follows:
``(a) In order to increase receipts and achieve effective
collections of royalty and other payments, a lessee who is required to
make any royalty or other payment under a lease or under the mineral
leasing laws, shall make such payments in the time and manner as may be
specified by the Secretary or the applicable delegated State. A lessee
may designate a person to make all or part of the payments due under a
lease on the lessee's behalf and shall notify the Secretary or the
applicable delegated State in writing of such designation, in which
event said designated person may, in its own name, pay, offset or credit
monies, make adjustments, request and receive refunds and submit reports
with respect to payments required by the lessee. Notwithstanding any
other provision of this Act to the contrary, a designee shall not be
liable for any payment obligation under the lease. The person owning
operating rights in a lease shall be primarily liable for its pro rata
share of payment obligations under the lease. If the person owning the
legal record title in a lease is other than the operating rights owner,
the person owning the legal record title shall be secondarily liable for
its pro rata share of such payment obligations under the lease.''.
(h) Clerical Amendments.--(1) The heading of section 111 of the
Federal Oil and Gas Royalty management Act of 1982 (30 U.S.C. 1721) is
amended to read as follows:
``royalty terms and conditions, interest, and penalties''.
(2) The item relating to section 111 in the table of contents in
section 1 of such Act (30 U.S.C. 1701) is amended to read as follows:
``Sec. 111. Royalty terms and conditions, interest, and penalties.''.
SEC. 7. ALTERNATIVES FOR MARGINAL PROPERTIES.
(a) In General.--The Federal Oil and Gas Royalty Management Act of
1982 (30 U.S.C. 1701 et seq.), as amended by section 6 of this Act, is
further amended by adding at the end the following:
``SEC. 117. <<NOTE: 30 USC 1726.>> 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.
[[Page 110 STAT. 1716]]
``(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.''.
[[Page 110 STAT. 1717]]
(b) Clerical Amendment.--The table of contents in section 1 of such
Act (30 U.S.C. 1701) is amended by adding after the item relating to
section 116 the following new item:
``Sec. 117. Alternatives for marginal properties.''.
SEC. 8. APPLICABILITY.
(a) FOGRMA <<NOTE: 30 USC 1732 note.>> .--With respect to Federal
lands, sections 202 and 307 of the Federal Oil and Gas Royalty
Management Act of 1982 (30 U.S.C. 1732 and 1755), are no longer
applicable. The applicability of those sections to Indian leases is not
affected.
(b) OCSLA.--Effective on the date of the enactment of this Act,
section 10 of the Outer Continental Shelf Lands Act (43 U.S.C. 1339) is
repealed.
SEC. 9. INDIAN <<NOTE: 30 USC 1701 note.>> LANDS.
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.
SEC. 10. <<NOTE: 30 USC 1701 note.>> PRIVATE LANDS.
This Act shall not apply to any privately owned minerals.
SEC. 11. <<NOTE: 30 USC 1701 note.>> EFFECTIVE DATE.
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.
SEC. 12. SAVINGS <<NOTE: 30 USC 1701 note.>> CLAUSE.
Nothing in this Act shall be construed to give a State a property
right or interest in any Federal lease or land.
Approved August 13, 1996.
LEGISLATIVE HISTORY--H.R. 1975:
---------------------------------------------------------------------------
HOUSE REPORTS: No. 104-667 (Comm. on Resources).
CONGRESSIONAL RECORD, Vol. 142 (1996):
July 16, considered and passed House.
Aug. 2, considered and passed Senate.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 32 (1996):
Aug. 13, Presidential remarks and statement.
<all>