FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1996; Congressional Record Vol. 142, No. 104
(House of Representatives - July 16, 1996)

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[Pages H7597-H7607]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1996

  Mr. CALVERT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 1975) to improve the management of royalties from Federal 
and Outer Continental Shelf oil and gas leases, and for other purposes, 
as amended.
  The Clerk read as follows:

                               H.R. 1975

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

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

     SEC. 2. 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
       ``(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--

[[Page H7598]]

       ``(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.''.

     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 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 
     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:

     ``SEC. 115. SECRETARIAL AND DELEGATED STATES' ACTIONS AND 
                   LIMITATION PERIODS.

       ``(a) In General.--The respective duties, responsibilities, 
     and activities with respect

[[Page H7599]]

     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 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 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 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 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

[[Page H7600]]

     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, 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 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.
       ``(1) 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:

     ``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 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

[[Page H7601]]

     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.''.

     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 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 base 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

[[Page H7602]]

     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. 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.''.

     SEC. 8. APPLICABILITY.

       (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.

     SEC. 9. INDIAN 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. PRIVATE LANDS.

       This Act shall not apply to any privately owned minerals.

     SEC. 11. 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 CLAUSE.

       Nothing in this Act shall be construed to give a State a 
     property right or interest in any Federal lease or land.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California [Mr. Calvert] and the gentleman from Hawaii [Mr. 
Abercrombie] will each be recognized for 20 minutes.
  The Chair recognizes the gentleman from California [Mr. Calvert].
  (Mr. CALVERT asked and was given permission to revise and extend his 
remarks.)
  Mr. CALVERT. Mr. Speaker, I yield myself such time as I may consume. 
Mr. Speaker, I rise in strong support of H.R. 1975, the Federal Oil and 
Gas Royalty Simplification and Fairness Act of 1996. The purpose of 
this bill is to improve the management of royalties from Federal oil 
and gas leases onshore and on the Outer Continental Shelf, as well. 
H.R. 1975 does this by establishing clear an equitable provisions for 
the effective and efficient administration of leases by the Secretary 
of the Interior to further exploration and development of oil and gas 
resources.
  Mr. Speaker, our existing laws, regulations, policies, and procedures 
related to oil and gas leasing lack clarity and consistency and impose 
unnecessary and unreasonable costs and burdens on lessees and the 
Government alike. Because the Federal Royalty Program is so complex and 
unfair a damper is placed upon competition for these leases--especially 
among the smaller independent producers.
  This complexity is an outgrowth of reforms mandated by conditions in 
the late 1970's when States and Indian tribes which share in these 
leasing receipts charged that the Federal agency then responsible for 
collecting royalties could not adequately track payments against 
obligations. The Commission on Fiscal Accountability of the Nation's 
energy resources was chartered to study possible reforms, and made 60 
recommendations for improvements. Nearly 14 years ago, Congress passed 
the Federal Oil and Gas Royalty Management Act to implement many of the 
panel suggestions, which, indeed, has clearly improved Federal royalty 
management with increased revenues to the U.S. Treasury, and to the 
States via the net receipts sharing formula for onshore leases and 
certain OCS leases.

  However, further improvements are necessary. For example, multiple 
conflicting laws and recent lower court decisions holding that no 
statute of limitations applies for royalty purposes have created 
uncertainty and unfairness for lessees subject to indefinite audit 
exposure.
  Mr. Speaker, unlike the situation for taxpayers and the IRS, the 
royalty books are never closed for a lessee of the Interior 
Department--and because of this the Government doesn't act timely to 
make payment demands of lessees. It simply is not a priority of the 
Feds because the Department of the Interior can go back decades later

[[Page H7603]]

to audit and if necessary demand further payment. But, what kind of way 
is this to run a multibillion dollar program? Money has a time value 
and the Secretary's levy of interest on royalty underpayments does not 
fully offset the many years delay in collecting what may be owed.
  Furthermore, current law severely restricts Outer Continental Shelf 
Lands Act lessees access to overpayments made to the Federal 
Government, and does not provide for the time value of lessees' 
overpayments, while at the same time underpayors definitely owe 
interest. In other words, the playing field is so far tilted it's a 
wonder anybody plays the game.
  But, Mr. Speaker, the most overlooked reform recommended by the 
Commission was to further involve the States in Federal royalty 
collections. We must not forget that many States have auditors who are 
ready, willing, and able to do the job, as well as the motivation to go 
after each and every penny or royalty owed. Because for every dollar 
collected from an onshore Federal lessee 50 cents will come back to the 
State's treasury. For most of the States where the Federal acreage is 
concentrated this revenue stream is a significant part of their 
operating budgets for schools, roads, or other programs. For such 
States, the lack of aggressive efforts by the Feds to collect these 
moneys to be shared is very frustrating. And to top it all off, since 
fiscal year 1991 the States have had to pay one-fourth of the Feds 
costs to manage the mineral leasing program--from the land-use planning 
stage through leasing, permitting, and, if the leases are productive, 
the collection of royalties.
  Mr. Speaker, in truth, this is why we are here today. Our States are 
demanding a larger role in policing what they are owed from lessees and 
H.R. 1975 will provide them such opportunity. The Vice President 
proposed 1 year ago to totally devolve the royalty program to the 
States. Although that proposal was pulled back after a few months, the 
administration fully supports the State delegation language we are 
voting upon today, indeed, the entire bill has the President's backing. 
Quite frankly, I would have liked a stronger delegation provision 
requiring the Secretary of the Interior to give primacy for royalty 
collection to those States which are able to demonstrate an efficient 
program, but that was not achievable this year. Instead, the Secretary 
will have discretion to hand down these duties to States or maintain 
the current Federal role. Given the realities of the Federal budget, I 
believe enactment of H.R. 1975 will ultimately lead to expanded 
delegation to the States simply because staffing in the Interior 
Department will for all practical purposes dictate this result.
  In conclusion, Mr. Speaker, the Congressional Budget Office estimates 
this bill would increase revenues to the U.S. Treasury by $36 million 
over 6 years, and cumulatively to the States by $9 million during the 
same interval. This bill is good Government, pure and simple, and I ask 
my colleagues for their support.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ABERCROMBIE. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of the manager's amendment to H.R. 
1975, the Federal Oil and Gas Royalty Fairness and Simplification Act. 
May I say in that regard that I want to thank my colleague and friend, 
the gentleman from California, Chairman Ken Calvert, and the staff on 
his side for their fairness in helping to make this as simple a process 
as possible.
  As he has indicated in his remarks, this is an issue with which not 
everyone may be familiar but which is fundamental to the sound fiscal 
policy with respect to Federal oil and gas royalty fees.
  I also note the presence on the floor of the chairman of our 
Committee on Resources, Mr. Young, and I am very pleased to see him 
here and I appreciate his kindness and fairness. I can no doubt add a 
few other adjectives, depending on how much I sense from him that he 
appreciates the same in me. I can see from his body language that he 
understand the full import of my remarks.
  Mr. Speaker, the manager's amendment will substitute the language 
written by the Senate Committee on Energy and Natural Resources for the 
language reported by the House Committee on Resources. The primary 
difference between the House and Senate language is that the Senate 
language authorizes but does not mandate the Secretary of the Interior 
to delegate certain royalty management functions to willing and 
qualified States.
  This issue has been gone over in detail by the gentleman from 
California [Mr. Calvert], so I will not repeat it.
  This would resolve my major problem with the bill and removes the 
President's veto threat on the bill. I would note that during committee 
consideration of H.R. 1975 I offered an amendment which the majority 
did not accept at that time that would have made this very change. I am 
pleased to see that they now concur with me and that there is no reason 
to require the Secretary of the Interior to transfer the royalty 
functions to the States.
  But while there are many positive features in the manager's 
amendment, it still contains, in my estimation, some flaws. For 
example, I continue to believe that is no reason to require the Federal 
Government to pay interest on oil companies' overpayments to the 
Federal Treasury, especially when these mistakes occur as a result of 
sloppy accounting or possible sloppy accounting by oil and gas 
companies. This new benefit for oil and gas corporations will create, 
again in my estimation, a new Federal debt and possibly cost taxpayers 
an estimated $44 million between 1997 and 2002 and possibly an 
additional $10 million in direct spending each year thereafter.

  However, in the interest of comity, I am willing to take the majority 
at its word, particularly that of the gentleman from California, 
Chairman Calvert, and the gentleman from Alaska, Chairman Young, and 
accept the administration's assurance that this provision will not be 
allowed to be abused by the oil and gas lessees. Knowing the gentleman 
from Alaska [Mr. Young] as I do, I doubt that anybody can get away with 
anything.
  Improvement is always in order, and the majority has worked 
diligently with the Clinton administration to effect this compromise 
and, I would like to reiterate, has worked diligently with the minority 
on the committee as well. If we are to govern, then we must be willing 
to accept compromises. I do so with this bill, and in this context and 
in this spirit of comity, we do not object to the passage of H.R. 1975, 
as amended by the bill's manager, and recommend its acceptance.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1600

  Mr. CALVERT. Mr. Speaker, I yield 2 minutes to the gentleman from 
Alaska [Mr. Young], chairman of the committee.
  Mr. YOUNG of Alaska. Mr. Speaker, I thank the gentleman for yielding 
me this time, and I thank the gentleman from Hawaii [Mr. Abercrombie] 
for his kind words.
  This is an ability here to work together, and I can assure the 
gentleman we will be watching this very closely to make sure what we 
have stated on the floor today. The gentleman from California [Mr. 
Calvert] has done an excellent job, and of course the ranking member 
has also done the job.
  I would suggest respectfully that this is long overdue in the energy 
field. It does in fact, as has been mentioned before, create $36 or $37 
million for the Federal Government and $9 million for the State. And 
may I suggest one thing. It is a level playing field with the IRS.
  I want to suggest one thing I do agree with. If there is bad 
accounting on the oil company's side, we will be watching this very 
closely. But equally if there is bad accounting on the Interior side, 
we will be watching that very closely. So no one should be to blame. We 
should solve this problem, and that is what we are trying to do with 
this legislation.
  I would suggest though, Mr. Speaker, that we have a letter from a 
bipartisan group of Governors, including my Governor, Tony Knowles, and 
Gov. Pete Wilson, Gov. Philip Batt, Gov. Bill Graves, Gov. Marc Raciot, 
Gov. Benjamin Nelson, Gov. Gary Johnson, Gov. Edward Schafer, Gov. 
Frank Keating, Gov. George Bush, Gov. Michael Leavitt, and Gov. Jim 
Geringer supporting this.

[[Page H7604]]

  And, by the way, it says: ``This legislation provides the best 
opportunities for Federal and State cooperation and partnerships in 
natural resources policy that has ever emerged from this Congress.'' So 
I want to suggest this is strongly supported by Governors and should be 
supported, and I do welcome the support from the gentleman from Hawaii.
  This ability, as he mentioned, to govern, is by doing the art of 
possible, by coming to a solution, and I do support this legislation.
  Mr. ABERCROMBIE. Mr. Speaker, could you kindly inform me of the time 
remaining?
  The SPEAKER pro tempore (Mr. Gutknecht). The gentleman from Hawaii 
[Mr. Abercrombie] has 16 minutes remaining, and the gentleman from 
California [Mr. Calvert] has 13 minutes remaining.
  Mr. ABERCROMBIE. Mr. Speaker, I yield 5 minutes to the gentleman from 
New Mexico [Mr. Richardson].
  (Mr. RICHARDSON asked and was given permission to revise and extend 
his remarks.)
  Mr. RICHARDSON. Mr. Speaker, let me just say that this is a good 
bipartisan bill, and there are five fundamental reasons why this is a 
good bill.
  First, it clarifies a collection time frame by establishing a 7-year 
statute of limitations allowing for certain extensions by the 
Secretary.
  Second, it levels the playing field, provides for interest at 
equivalent IRS rates to be paid on royalty overpayments and continues 
interest payments on underpayments.
  Third, it empowers the States. This gives the States a more rightful 
role in the delegation of royalty functions that choose to perform the 
duties. It gives the States, many oil and gas States, many in the West, 
more involvement in collection, and that is critically important.
  It scores positive. What we have is CBO estimating $36 million to the 
Federal Government and an additional $9 million to the States over 6 
years.
  Last, the administration supports the bill. And because of the 
changes coming from the Senate, I am informed that the ranking member 
of our committee, the distinguished Member from California, George 
Miller, is in support of the bill.
  What we have is a piece of legislation that will allow individual 
States to take over the responsibility of collecting royalty payments 
for oil, gas and coal leases on Federal lands.
  Needless to say, in my State of New Mexico this is critically 
important. This is not, and I repeat ``not'' an environmentally 
controversial bill, rather it corrects and updates accounting practices 
for Federal oil and gas royalty collections. Current laws and rules 
protecting land, air and water resources are not changed in any way by 
this measure. The only thing green about H.R. 1975 is the color of the 
money that will be going to Federal and State governments. This is 
important.
  As I mentioned before, the White House supports this measure, but 
also the Department of the Interior, the Department of Energy, and a 
bipartisan coalition of 14 Governors, including my own in New Mexico. 
And, incidentally, 100 percent of Federal onshore royalties are 
collected from the States of these 14 Governors.
  As many know, my congressional district includes some of the highest 
oil and natural gas production in the United States. Because my State 
of New Mexico is the fourth largest natural gas producer and the 
seventh largest oil producer, it is directly affected by how the 
Federal Government collects royalty on that production. This will have 
a positive impact.
  Let me just relate an incident, a little story on why we need this 
legislation. Several years ago a New Mexico independent producer was 
wrongly and unfairly assessed $7,650 by the Minerals Management 
Service, MMS.
  This assessment related to the company's September 1991 royalty 
report. The report was due by 4 p.m. on October 31, 1991. Due to a 
crippling snow storm in Denver that day, Federal Express could not 
deliver the report until November 1 at 10:05 a.m. More than 100 other 
companies experienced this same problem. Unbelievably, all were 
penalized with similar assessments.
  Even though the New Mexico producer appealed his case to MMS, 
Minerals Management Service, and argued that the snow storm was out of 
control, he was still assessed $7,650. Unfortunately, a lot of time and 
money was wasted in an effort to rectify the situation, but this 
agency, Minerals Management Service, would not change its decision.
  What this bill does, H.R. 1975, is that it addresses the problem by 
implementing a more reasonable system for the imposition of agency 
assessment. This is a reform bill. It is long overdue. We need to 
govern the laws that govern the collection of oil and gas royalties.

  This is not just an oil and gas giveaway or a giveaway to western 
States. We make money. It is a bill that also makes the collection more 
efficient. It is reform. It improves the bureaucracy.
  If there are oil and gas producers in States, many of them are 
hurting, they are talking about production problems and the price of 
oil. They are not doing well. They are not those big oil and gas guys 
that we think of in Cadillacs running around spending money. They are 
men and women that are trying to make a living. And in my State, I can 
tell my colleagues, it has been tough lately. This will be a slight 
improvement. In passing this bill we will keep them from getting 
snowballed like this constituent of mine in 1991.
  In summary, this is a good bill. This is a bill that make sense. 
First, the administration supports the bill, it is a good piece of 
legislation and I urge its passage.
  Mr. CALVERT. Mr. Speaker, I yield 3 minutes to the gentleman from 
Texas [Mr. Thornberry].
  Mr. THORNBERRY. Mr. Speaker, I thank the gentleman for yielding me 
this time and I rise in support of this legislation.
  Mr. Speaker, my constituents believe we need to be trying to move the 
Federal Government in two directions; one to make the Federal 
Government smaller, get it out of many of the aspects of our lives 
where it has placed itself; and the second is to try to make the 
Federal Government work smarter, to put a little dose of common sense 
into many of the things that the Federal Government does.
  That is exactly where this piece of legislation fits in because it 
will simplify and streamline, and make more certain royalty collections 
off of Federal lands and lands off the outer Continental Shelf. That 
process today is an endless morass that I find very few people 
completely understand and it costs an enormous amount of money to 
comply with, both from the taxpayers' standpoint and from small 
independent oil and gas companies.
  As a result of simplifying and streamlining these procedures, we can 
actually save the Federal Government a little money as well as the 
States which are involved. We are not talking about a tremendous amount 
of money, it is several million dollars, but it is a step in the right 
direction and it seems to me we should do it. It gets the States more 
involved in royalty collection, and I think that is a step in the right 
direction.
  Personally, I would like to go further in that respect. I would be 
very interested in exploring a royalty in-kind program where the States 
could actually get the crude oil or the gas as it is produced, but at 
least this moves in the direction of having more State participation 
and I think that is good.
  The other thing this bill does is it provides opportunity to diminish 
some of the regulatory burdens which are such a problem with oil and 
gas business across the country at this point. We are in a situation 
where the price of oil or gas is not terribly high and yet the cost of 
production is terribly high. And the Federal Government adds to that 
cost of production through taxes and regulations and paperwork such as 
are involved in this bill. If we can reduce the cost of production, we 
can prevent the thousands of wells from being shut in and that is 
happening today.
  The United States continues to grow more dependent upon foreign 
sources of oil because we cannot economically produce oil in this 
country. To the extent this bill takes a small but significant step 
towards reducing the regulatory burdens that drive up the costs, we can 
encourage exploration and hopefully encourage the production of 
domestic oil and gas upon which our security is based.
  Mr. Speaker, I think we need to do that not just on Federal lands but

[[Page H7605]]

throughout all of the private sector in oil and gas production to 
increase our energy independence, but, again, this bill takes a step in 
the right direction and, therefore, I urge its adoption.
  Mr. ABERCROMBIE. Mr. Speaker, I yield 3 minutes to the gentleman from 
California [Mr. Dooley], and in the process thank him for his 
assistance with this bill. Without his cooperation, insight and input, 
I do not think we would have reached such as successful conclusion.
  (Mr. DOOLEY of California asked and was given permission to revise 
and extend his remarks.)
  Mr. DOOLEY of California. Mr. Speaker, first off, I would like to 
thank both the gentleman from Hawaii [Mr. Abercrombie] and the 
gentleman from California [Mr. Calvert] for their hard work. Certainly 
I think it was their dedication to trying to move forward in a 
responsible manner on this issue that has allowed us to end at this 
point, where we have such strong bipartisan support for this 
legislation, where we have the President and the administration in 
support of this legislation, and where we have 14 Governors, bipartisan 
in their composition, representing 99 percent of the oil which is 
produced onshore which will be subject to these regulations, that are 
also supporting it.
  The reasons for their support, I think, are very clear and they have 
been enunciated by I think all the speakers that have spoken up to this 
time. This bill obviously is a good bill for producers and provides 
greater certainty. It is a good bill for taxpayers and will generate 
additional revenues. It is a good bill for both the State and the 
Federal Government because with delegating some of this authority to 
the States we have then an entity which has a vested interest and an 
incentive to move forward in a very expedited fashion to collect the 
royalties which are due both to them and to the Federal Government.
  Now, there might be some criticism that might be voiced, and it will 
be very limited in nature, where some people will be concerned that 
this measure is going to have the impact of perhaps limiting the 
ability of the Federal Government to collect on past royalties. That is 
not the case. This bill will only apply to royalties collected in the 
future.
  There is also perhaps going to be some reservations expressed with 
the statute of limitations, that this will impede the ability of the 
State and the Federal Government to collect those royalties. That is 
not true either. We are placing a 7-year time limit. There is 
absolutely no reason why the State or the Federal Government and those 
officials which are responsible for collecting those royalties cannot 
do so within 7 years.
  In those instances where a company might be guilty of fraud, that 
exemption in that statute of limitations of 7 years does not apply. 
Furthermore, if the State or the Federal Government or those officials 
assess a royalty and make a claim, that also then is not subject to 
that 7-year statute of limitations from that time forward.
  I think we have a bill which again provides protections to the 
taxpayers. It is a responsible bill. It is in the best interest of all 
parties involved.
  Once again I want to commend the bipartisan effort on behalf of the 
two subcommittee chairmen that really led to the development of this 
legislation.
  Mr. CALVERT. Mr. Speaker, I yield 5 minutes to the gentleman from 
Texas [Mr. Laughlin].
  (Mr. LAUGHLIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LAUGHLIN. Mr. Speaker, this bill should be noncontroversial. It 
corrects and updates accounting practices for Federal oil and gas 
royalty collections. After more than 1 year of intense detailed 
negotiations we have an agreement on the legislative language before us 
today.
  Many Republicans and many democrats, in fact, 50 House Democrats, 
have signed a letter of support. The President of the United States, 
the Department of the Interior, the Department of Energy and 14 
Governors, as the gentleman from Alaska [Mr. Young] read to us.
  This is a bill that has national impact because when we look at the 
map to my immediate left we can see all but about 10 of our States 
colored in red.

                              {time}  1615

  Those States colored in red are those States with Federal oil and gas 
leases. I heard the gentleman from New Mexico speak about the State of 
New Mexico. I just wish some of that or more of that were in my 
district in the Gulf Coast of Texas.
  The President of the United States has sent a letter stating strong 
support for enactment of H.R. 1975. In fact the Clinton Gore campaign 
has sent a letter signed by Ann Lewis, Deputy Campaign Manager, stating 
the legislation simplifies the royalty collection process for onshore 
and offshore natural gas and oil production.
  She says in her letter: The President supports it because he believes 
that it provides fairer rules governing the relationship between the 
Federal Government and leaseholders on Federal lands. Getting all these 
people to agree was not easy. But we have an agreement, and now is the 
time to support the agreement.
  Pass it today.
  Members should not be confused or misinformed by rhetoric about the 
environment. Our friend, the gentleman from new Mexico, spoke about why 
this is not harmful to the environment. He had some phrase about green. 
The only thing I can see green about this is the eyeshades of the 
Government accountants who are cutting checks payable to the Federal 
Government. That is the accountants from the oil companies.

  This cannot be confused with the rhetoric we sometimes hear on the 
House floor about corporate welfare. The most important part of this is 
being fair to the corporate citizens just like individuals citizens of 
our country.
  An important part of the bill new to royalty policy is the 
requirement that the Federal Government pay interest on royalty 
overpayments.
  There are two reasons to put this requirement into law. First, our 
royalty reporting deadline requires companies to pay royalties within 
30 days of production. In today's natural gas marketplace, a producer 
frequently will not have the data he or she needs to accurately report 
royalties.
  That is just a function of the marketplace. Gas has moved to hub 
centers where marketeers, usually third parties, sell the gas and 
report back the precise sales price and volumes to the producer. This 
can take months, but producers facing the 30-day deadline have to make 
payments on the production. So they estimate price and volumes and make 
payments on those estimates, usually adding additional funds to avoid 
making underpayments, which are subject to automatic penalty and 
interest payments. Unfortunately, producers have been discouraged from 
this practice because the bureaucracy does not promptly process their 
refunds, even though the Government is earning interest from day one on 
their overpayments.
  It is not a case of producers making mistakes or overpayment of 
royalties. It is, rather, a case where the regulatory deadlines do not 
give producers enough time to gather the accurate data they need to 
make correct payments at the outset.
  Now, the gentleman from Hawaii raised a valid point that this could 
be misused. For that reason, the interest rate is fair to everyone 
involved. In fact, there is a cap on the interest rate that was 
designed to prevent companies from gaming the system. That cap provides 
that in this bill no more payment could be paid on overpayment in 
excess of 10 percent of the overpayment by the company. This is really 
not any different than we do citizens of this country when they overpay 
the IRS.
  I well remember the days when the IRS charged penalty and interest 
but, if you overpaid them and they owed you money, they did not pay you 
any interest. Thank God that has been changed, and that is what we are 
trying to do here.
  Finally, Mr. Speaker, the interest provisions coupled with the 
statute of limitations and litigation reform contribute to the 
Congressional Budget Office determination that the Federal Treasury 
will receive an additional $51 million and States will receive an 
additional $33 million over 7 years. That indicates many reasons, Mr. 
Speaker, why this bill should receive the strong support of Members of 
the House. I urge its passage. I thank the gentleman very much for 
yielding time to me.

[[Page H7606]]

  Mr. ABERCROMBIE. Mr. Speaker, I yield 5 minutes and 15 seconds to the 
gentlewoman from New York [Mrs. Maloney].
  Mrs. MALONEY. Mr. Speaker, I rise in opposition to H.R. 1975, the 
Federal Oil and Gas Royalty Simplification and Fairness Act.
  I do so reluctantly because there is much to be said for many parts 
of this measure.
  The States have demonstrated that they are committed to collecting 
the full and fair value of Federal royalty producting revenues which by 
Federal law they share.
  Unfortunately, while the Minerals Management Service has made several 
cosmetic improvements to their program, my information suggests that 
they are not as avid in assuring that the public receives its fair due 
from the oil and gas industry's privilege of exploitation of public 
resources.
  The only reform enacted by this bill is a stranglehold on the Federal 
Government's ability to collect money owed on oil and gas royalties. 
H.R. 1975 would impose a 7-year statute of limitations on the Federal 
Government and the States for all judicial proceedings and audits 
regarding oil and gas royalties.
  So, if we uncover evidence of money owed the Federal Government from 
undervalued oil and gas in the future, our hands our tied--we would not 
be able to collect money owed the American taxpayer.
  This bill will enhance the oil industry's position at the public 
cost.
  My opposition is directed at those portions of the bill which 
establish new provisions on a statute of limitations and the ability of 
the Government to obtain needed records for the conduct of audits.
  These provisions may preclude the Federal Government from collecting 
millions of dollars in past due royalties owed.
  The Subcommittee on Government Management, Information and Technology 
of the House Government Reform and Oversight Committee recently 
concluded hearings that showed that $856 million is owed in past due 
royalties in the State of California alone.
  I would like to be able to say that such uncollected debt will not 
happen again.
  Disregarding warnings that these royalties were outstanding, the 
Minerals Management Service entered into agreements with several of the 
companies that may preclude and will at least complicate any full 
collection.
  Only after I released a report with the project on Government 
oversight pointing out the problem and after an Interior interagency 
task force issued a detailed study did the department reluctantly 
acknowledge the underpayment in California.
  Without an adequate understanding of how the department has managed 
the royalty program under present law and a complete explanation of how 
it managed to overlook hundreds of millions of dollars,
  I believe it reckless to change the law.
  The hearings also indicated that the problem of undervaluation is not 
confined to California alone and that there is good cause to believe 
that even more money is owed from Federal public leases throughout and 
offshore the Nation.
  It is important to understand that half of the royalties collected by 
the department from onshore oil production go to the States.
  In California this revenue is used only for education.
  Chairman Calvert of the Subcommittee on Energy and Mineral Resources 
of the House Resources Committee has taken some laudatory steps to 
resolve some ambiguous language in the bill through technical 
amendments to the effective date provisions of H.R. 1975, and has 
assured me that it is the intent of the drafters to apply only the 
provisions specified in the effective date provision retroactively.

  I remain concerned, however, that language in the bill may still 
provide fodder for creative lawyers to delay collection of the 
royalties owed because the industry's undervaluation even further.
  One source of my concern is in section 115(f) of the bill which 
states:

       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.

  The reference to ``for any period'' is language reasonably construed 
to call for retroactivity and, if so construed, would disable the 
Department of the Interior from obtaining the information necessary to 
proceed on an undervaluation claim.
  At a minimum--to clearly avoid the retroactivity issue that Chairman 
Calvert has assured me was not intended--this language should be 
deleted.
  Its deletion would not undercut the bill's remaining objectives.
  In other words, this language is moving more toward proprietary 
protection of these records.
  More broadly, my investigation indicates that it is not the right 
time for us to be placing time and records limitations on the 
Department of the Interior.
  Indeed, industry's highly questionable claims of confidentiality and 
repeated litigation over document access has and will continue to 
unduly delay any efforts by Interior to collect on undervaluation 
claims.
  Provisions in this bill will only serve to strengthen industry's lack 
of cooperation.
  Finally, transfer of more authority to the States, while laudatory, 
will take its own toll on the timing and completion of the audits and 
investigations that are a prerequisite for bringing claims of underpaid 
royalties.
  Certainly the Federal Government and State delegates should be 
encouraged to conduct audits in a prompt manner.
  For the time being, however, I believe that this should be pursued 
administratively rather than legislatively.
  And, the Department has taken steps to increase the timeliness of the 
audit process.
  We should be encouraging the Department to keep abreast of changes in 
industry structure and operations that impact royalty collections in 
order to adequately respond.
  At this time, however, the Department is simply not capable of 
collecting the royalties actually owed on Federal production.
  It has not demonstrated an understanding of the very industry it 
regulates.
  And, it is forced to use after the fact audits to uncover basic 
structural data concerning the industry.
  Putting additional restraints on the Department, through time and 
record access limitations, will only bring more of the same losses in 
royalty revenues.
  We should be looking at whether there are obstacles under existing 
law that are hampering the Department's ability to do its job the right 
way.
  In sum, my investigations have shown that at this time we simply do 
not have sufficient information concerning the difficulties of 
collecting royalties faced by diligent auditors and administrators, and 
the problems the Department of the Interior faces that are hampering 
its ability to do what we instructed it to do--collect the full fair 
market value in royalties owed the public.
  We owe it to the public to conduct a more thorough inquiry into these 
matters before we leap to make changes which, in my view, will lead to 
further losses of needed revenues for the citizens and the States.
  I want to ask the chairman from California if he will hold to his 
testimony in front of my committee when he said,

       In no way is the Federal Government barred from pursuing 
     demands for payment of royalties owed on oil and gas produced 
     prior to the enactment of my bill. The seven-year statute of 
     limitations affects only production post-enactment.

  Mr. CALVERT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to reiterate, my bill expressly provides that the 
statute of limitations created herein is prospective only and, of 
course, in cases of fraud and concealment of records, it is void 
anyway. The leases at issue in the interagency task force report 
involved production from 1980 through 1993 or so. H.R. 1975 will in no 
way bar the Federal Government from pursuing the allegations of 
underpayment if that is what the Secretary of Interior decides to do.
  My bill says, act in a timely manner, Mr. Secretary, the taxpayers 
deserve no less or, alternatively, delegate your responsibility for 
royalty collection to those States that wish to do the job more 
efficiently and more timely.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ABERCROMBIE. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas [Mr. Bentsen].
  (Mr. BENTSEN asked and was given permission to revise and extend his 
remarks.)

[[Page H7607]]

  Mr. BENTSEN. Mr. Speaker, I strongly support H.R. 1975, the Federal 
Oil and Gas Royalty Simplification and Fairness Act. H.R. 1975 would 
streamline our Federal royalty collection system by improving the 
management of royalties from Federal and outer continental shelf oil 
and gas leases.
  Currently, about $4.2 billion is collected annually by the Federal 
Government in mineral receipts--our Nation's third largest revenue 
source. However, reform of our Nation's royalty collection system has 
been needed for some time. H.R. 1975 achieves the goals set out by the 
administration, the States, and industry to provide simplicity and 
fairness in the partnership between the Federal Government and the 
leaseholders of Federal lands.
  Specifically, this legislation would establish a clear statute of 
limitations on royalty collection, expand existing delegation to States 
provisions, and set time limits on administrative appeal decisions. 
This legislation also provides marginal well relief by reforming 
royalty collections for low-production wells--an issue of great 
importance to my home State of Texas.
  At a time when we continue to see increasing reliance on oil imports, 
this legislation provides the necessary relief to enhance domestic 
production in both an economically efficient and environmentally sound 
way. In addition, H.R. 1975 would help Congress in its efforts to 
balance the budget by providing an additional $51 million in royalties 
over the next 7 years.
  H.R. 1975 is supported by the administration, a bipartisan delegation 
of Members from Congress as well as 14 of our Nation's Governors who 
represent most of our Federal onshore production. It is also supported 
by the Interstate Oil and Gas Compact Commission and industry trade 
associations representing our Nation's Federal lessees. I urge my 
colleagues to support royalty simplification and fairness by voting in 
favor of H.R. 1975.
  Mr. CALVERT. Mr. Speaker, I reserve the balance of my time.
  Mr. ABERCROMBIE. Mr. Speaker, I have no further requests for time.
  I include for the Record a letter from the White House addressed to 
me and signed by the Chief of Staff, Mr. Leon Panetta, in support of 
the bill:

                                              The White House,

                                     Washington, DC, May 30, 1996.
     Hon. Neil Abercrombie,
     House of Representatives,
     Washington, DC.
       Dear Mr. Abercrombie: I am writing to inform you of the 
     Administration's position regarding the pending Oil and Gas 
     Royalty Simplification and Fairness legislation (S. 1014). 
     Let me assure you that the Administration remains committed 
     to ensuring the efficient management of Federal lands and 
     finding new ways for the States to work cooperatively and 
     creatively with the Federal Government. The President shares 
     your hope that an agreement can be reached on the State 
     delegation issue.
       In an effort to resolve this issue, Administration 
     representatives, working with the staff of the Senate Energy 
     Committee, were successful in reaching an agreement on 
     language that would expand the list of delegable royalty 
     management authorities, without reducing the Secretary of the 
     Interior's responsibility with respect to the management of 
     Federal lands. That language was included in S. 1014, which 
     was reported out of the Senate Energy Committee on May 1st. 
     The Administration supports S. 1014 as reported out of 
     committee, but will seek a minor technical amendment. The 
     Administration believes this bill's State delegation language 
     is acceptable, unlike the language included in H.R. 1975, the 
     House Resources Committee bill on Royalty Simplification.
       The Administration will continue to work with Congress as 
     the legislative process moves forward, and stands ready to 
     work in support of the language included in the Senate Energy 
     Committee bill. I appreciate your interest and support in 
     this important legislation.
           Sincerely,
                                                  Leon E. Panetta,
                                                   Chief of Staff.

                              {time}  1630

  Mr. Speaker, I yield back the balance of my time.
  Mr. CALVERT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, in closing I would like to first thank the gentleman 
from Hawaii [Mr. Abercrombie], my good friend. We worked through this 
bill over the last year and had many occasions to go back and forth, 
but in the end I think we ended up with a good piece of legislation 
which is supported by most everyone here, and I certainly am 
appreciative of the time and effort that both him and his staff have 
put into this, and I thank him and look forward to other legislation in 
the future; and also to the gentleman from California [Mr. Miller], the 
ranking member of the subcommittee, for all of his, and the overall 
committee, for all his help.
  Mr. Speaker, this bill, in closing, will raise money for the Feds and 
the States. It certainly has bipartisan support in the House, the 
Senate and 14 Governors. It has the administration support from the 
White House; the Secretary of Interior, Bruce Babbit. It enacts clear 
and equitable reform, gives more power to the States. It establishes a 
certain statute of limitation period.
  It is a good bill, and I urge its passage.
  Mr. MARKEY. Mr. Speaker, I rise in opposition to H.R. 1975. This ill-
named royalty fairness bill is yet another example of corporate welfare 
for well-heeled oil and gas producers operating on public lands.
  Just 2 months ago, press reports reveals that 10 oil companies may 
have underpaid royalties and interest to the Federal Government by as 
much as $856 million on land in California they lease from the Federal 
Government to drill for oil.
  What has the Republican-controlled Congress proposed in response to 
this royalty rip-off?
  First, the Republican majority in the House voted to repeal the gas 
tax, a move that most economists agree the oil companies will quickly 
pocket for themselves. Consumers are unlikely to actually see any of 
this cut reflected in lower prices at the pump, as the Republicans 
rejected all Democratic efforts to assure the savings would actually be 
rebated to consumers.
  And now today, with this bill, we will be providing the big oil and 
gas companies with yet another windfall. H.R. 1975 will:
  Result in more than $200 million being paid out to oil and gas 
companies over the next 20 years by requiring the taxpayers to pay 
interest payments to oil companies who--through their own stupidity, 
mismanagement, or incompetent accounting--have overpaid royalties to 
the Federal Government; and
  Establish a 7-year statute of limitations that will undermine the 
Federal Government's ability to collect moneys owed it by huge oil and 
gas companies.
  I think it's time we stopped providing Federal freebies to deadbeat 
drillers. We should defeat this bill. It is bad energy policy and bad 
fiscal policy. Thank you, and I yield back the balance of my time.
  Mr. CALVERT. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Gutknecht). The question is on the 
motion offered by the gentleman from California [Mr. Calvert] that the 
House suspend the rules and pass the bill, H.R. 1975, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

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