Pub.L. 104-186 To provide for a representational allowance for Members of the House of ...

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   FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1996

[[Page 110 STAT. 1700]]

Public Law 104-185
104th Congress

                                 An Act


 
     To improve the management of royalties from Federal and Outer 
          Continental Shelf oil and gas leases, and for other 
            purposes. <<NOTE: Aug. 13, 1996 -  [H.R. 1975]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Federal Oil and Gas Royalty 
Simplification and Fairness Act of 1996.>> assembled,

SECTION 1. SHORT <<NOTE: 30 USC 1701 note.>>  TITLE.

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

SEC. 2. <<NOTE: 30 USC 1702.>> DEFINITIONS.

    Section 3 of the Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.) is amended--
            (1) by amending paragraph (7) to read as follows:
            ``(7) `lessee' means any person to whom the United States 
        issues an oil and gas lease or any person to whom operating 
        rights in a lease have been assigned;''; and
            (2) by striking ``and'' at the end of paragraph (15), by 
        striking the period at the end of paragraph (16) and inserting a 
        semicolon, and by adding at the end the following:
            ``(17) `adjustment' means an amendment to a previously filed 
        report on an obligation, and any additional payment or credit, 
        if any, applicable thereto, to rectify an underpayment or 
        overpayment on an obligation;
            ``(18) `administrative proceeding' means any Department of 
        the Interior agency process in which a demand, decision or order 
        issued by the Secretary or a delegated State is subject to 
        appeal or has been appealed;
            ``(19) `assessment' means any fee or charge levied or 
        imposed by the Secretary or a delegated State other than--
                    ``(A) the principal amount of any royalty, minimum 
                royalty, rental bonus, net profit share or proceed of 
                sale;
                    ``(B) any interest; or
                    ``(C) any civil or criminal penalty;
            ``(20) `commence' means--
                    ``(A) with respect to a judicial proceeding, the 
                service of a complaint, petition, counterclaim, cross 
                claim, or other pleading seeking affirmative relief or 
                seeking credit or recoupment: Provided, That if the 
                Secretary commences a judicial proceeding against a 
                designee, the Secretary shall give notice of that 
                commencement to the lessee who designated the designee, 
                but the Secretary is not required to give notice to 
                other lessees who may be liable pursuant to section 
                102(a) of this Act, for the obligation that is the 
                subject of the judicial proceeding; or

[[Page 110 STAT. 1701]]

                    ``(B) with respect to a demand, the receipt by the 
                Secretary or a delegated State or a lessee or its 
                designee (with written notice to the lessee who 
                designated the designee) of the demand;
            ``(21) `credit' means the application of an overpayment (in 
        whole or in part) against an obligation which has become due to 
        discharge, cancel or reduce the obligation;
            ``(22) `delegated State' means a State which, pursuant to an 
        agreement or agreements under section 205 of this Act, performs 
        authorities, duties, responsibilities, or activities of the 
        Secretary;
            ``(23) `demand' means--
                    ``(A) an order to pay issued by the Secretary or the 
                applicable delegated State to a lessee or its designee 
                (with written notice to the lessee who designated the 
                designee) that has a reasonable basis to conclude that 
                the obligation in the amount of the demand is due and 
                owing; or
                    ``(B) a separate written request by a lessee or its 
                designee which asserts an obligation due the lessee or 
                its designee that provides a reasonable basis to 
                conclude that the obligation in the amount of the demand 
                is due and owing, but does not mean any royalty or 
                production report, or any information contained therein, 
                required by the Secretary or a delegated State;
            ``(24) `designee' means the person designated by a lessee 
        pursuant to section 102(a) of this Act, with such written 
        designation effective on the date such designation is received 
        by the Secretary and remaining in effect until the Secretary 
        receives notice in writing that the designation is modified
or terminated;
            ``(25) `obligation' means--
                    ``(A) any duty of the Secretary or, if applicable, a 
                delegated State--
                          ``(i) to take oil or gas royalty in kind; or
                          ``(ii) to pay, refund, offset, or credit 
                      monies including (but not limited to)--
                                    ``(I) the principal amount of any 
                                royalty, minimum royalty, rental, bonus, 
                                net profit share or proceed of sale; or
                                    ``(II) any interest; and
                    ``(B) any duty of a lessee or its designee (subject 
                to the provision of section 102(a) of this Act)--
                          ``(i) to deliver oil or gas royalty in kind; 
                      or
                          ``(ii) to pay, offset or credit monies 
                      including (but not limited to)--
                                    ``(I) the principal amount of any 
                                royalty, minimum royalty, rental, bonus, 
                                net profit share or proceed of sale;
                                    ``(II) any interest;
                                    ``(III) any penalty; or
                                    ``(IV) any assessment,
                      which arises from or relates to any lease 
                      administered by the Secretary for, or any mineral 
                      leasing law related to, the exploration, 
                      production and development of oil or gas on 
                      Federal lands or the Outer Continental Shelf;
            ``(26) `order to pay' means a written order issued by the 
        Secretary or the applicable delegated State to a lessee or its

[[Page 110 STAT. 1702]]

        designee (with notice to the lessee who designated the designee) 
        which--
                    ``(A) asserts a specific, definite, and quantified 
                obligation claimed to be due, and
                    ``(B) specifically identifies the obligation by 
                lease, production month and monetary amount of such 
                obligation claimed to be due and ordered to be paid, as 
                well as the reason or reasons such obligation is claimed 
                to be due, but such term does not include any other 
                communication or action by or on behalf of the Secretary 
                or a delegated State;
            ``(27) `overpayment' means any payment by a lessee or its 
        designee in excess of an amount legally required to be paid on 
        an obligation and includes the portion of any estimated payment 
        for a production month that is in excess of the royalties due 
        for that month;
            ``(28) `payment' means satisfaction, in whole or in part, of 
        an obligation;
            ``(29) `penalty' means a statutorily authorized civil fine 
        levied or imposed for a violation of this Act, any mineral 
        leasing law, or a term or provision of a lease administered by 
        the Secretary;
            ``(30) `refund' means the return of an overpayment;
            ``(31) `State concerned' means, with respect to a lease, a 
        State which receives a portion of royalties or other payments 
        under the mineral leasing laws from such lease;
            ``(32) `underpayment' means any payment or nonpayment by a 
        lessee or its designee that is less than the amount legally 
        required to be paid on an obligation; and
            ``(33) `United States' means the United States Government 
        and any department, agency, or instrumentality thereof, the 
        several States, the District of Columbia, and the territories of 
        the United States.''.

SEC. 3. DELEGATION OF ROYALTY COLLECTIONS AND RELATED ACTIVITIES.

    (a) General Authority.--Section 205 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1735) is amended to read as 
follows:

``SEC. 205. DELEGATION OF ROYALTY <<NOTE: 30 USC 1735.>>  COLLECTIONS 
            AND RELATED ACTIVITIES.
            ``(a) Upon written request of any State, the Secretary is 
        authorized to delegate, in accordance with the provisions of 
        this section, all or part of the authorities and 
        responsibilities of the Secretary under this Act to:
            ``(1) conduct inspections, audits, and investigations;
            ``(2) receive and process production and financial reports;
            ``(3) correct erroneous report data;
            ``(4) perform automated verification; and
            ``(5) issue demands, subpoenas, and orders to perform 
        restructured accounting, for royalty management enforcement 
        purposes,

to any State with respect to all Federal land within the State.
    ``(b) After notice and opportunity for a hearing, the Secretary is 
authorized to delegate such authorities and responsibilities granted 
under this section as the State has requested, if the Secretary finds 
that--

[[Page 110 STAT. 1703]]

            ``(1) it is likely that the State will provide adequate 
        resources to achieve the purposes of this Act;
            ``(2) the State has demonstrated that it will effectively 
        and faithfully administer the rules and regulations of the 
        Secretary under this Act in accordance with the requirements of 
        subsections (c) and (d) of this section;
            ``(3) such delegation will not create an unreasonable burden 
        on any lessee;
            ``(4) the State agrees to adopt standardized reporting 
        procedures prescribed by the Secretary for royalty and 
        production accounting purposes, unless the State and all 
        affected parties (including the Secretary) otherwise agree;
            ``(5) the State agrees to follow and adhere to regulations 
        and guidelines issued by the Secretary pursuant to the mineral 
        leasing laws regarding valuation of production; and
            ``(6) where necessary for a State to have authority to carry 
        out and enforce a delegated activity, the State agrees to enact 
        such laws and promulgate such regulations as are consistent with 
        relevant Federal laws and regulations

with respect to the Federal lands within the State.
    ``(c) After notice and opportunity for hearing, the Secretary shall 
issue a ruling as to the consistency of a State's proposal with the 
provisions of this section and regulations under subsection (d) within 
90 days after submission of such proposal. In any unfavorable ruling, 
the Secretary shall set forth the reasons therefor and state whether the 
Secretary will agree to delegate to the State if the State meets the 
conditions set forth in such ruling.
    ``(d) After consultation with State <<NOTE: Regulations.>>  
authorities, the Secretary shall by rule promulgate, within 12 months 
after the date of enactment of this section, standards and regulations 
pertaining to the authorities and responsibilities to be delegated under 
subsection (a), including standards and regulations pertaining to--
            ``(1) audits to be performed;
            ``(2) records and accounts to be maintained;
            ``(3) reporting procedures to be required by States under 
        this section;
            ``(4) receipt and processing of production and financial 
        reports;
            ``(5) correction of erroneous report data;
            ``(6) performance of automated verification;
            ``(7) issuance of standards and guidelines in order to avoid 
        duplication of effort;
            ``(8) transmission of report data to the Secretary; and
            ``(9) issuance of demands, subpoenas, and orders to perform 
        restructured accounting, for royalty management enforcement 
        purposes.

Such standards and regulations shall be designed to provide reasonable 
assurance that a uniform and effective royalty management system will 
prevail among the States. The records and accounts under paragraph (2) 
shall be sufficient to allow the Secretary to monitor the performance of 
any State under this section.
    ``(e) If, after notice and opportunity for a hearing, the Secretary 
finds that any State to which any authority or responsibility of the 
Secretary has been delegated under this section is in violation of any 
requirement of this section or any rule thereunder, or that an 
affirmative finding by the Secretary under subsection (b) can no longer 
be made, the Secretary may revoke such delegation.

[[Page 110 STAT. 1704]]

If, after providing written notice to a delegated State and a reasonable 
opportunity to take corrective action requested by the Secretary, the 
Secretary determines that the State has failed to issue a demand or 
order to a Federal lessee within the State, that such failure may result 
in an underpayment of an obligation due the United States by such 
lessee, and that such underpayment may be uncollected without 
Secretarial intervention, the Secretary may issue such demand or order 
in accordance with the provisions of this Act prior to or absent the 
withdrawal of delegated authority.
    ``(f) Subject to appropriations, the Secretary shall compensate any 
State for those costs which may be necessary to carry out the delegated 
activities under this Section. Payment shall be made no less than every 
quarter during the fiscal year. Compensation to a State may not exceed 
the Secretary's reasonably anticipated expenditure for performance of 
such delegated activities by the Secretary. Such costs shall be 
allocable for the purposes of section 35(b) of the Act entitled `An act 
to promote the mining of coal, phosphate, oil, oil shale, gas and sodium 
on the public domain', approved February 25, 1920 (commonly known as the 
Mineral Leasing Act) (30 U.S.C. 191 (b)) to the administration and 
enforcement of laws providing for the leasing of any onshore lands or 
interests in land owned by the United States. Any further allocation of 
costs under section 35(b) made by the Secretary for oil and gas 
activities, other than those costs to compensate States for delegated 
activities under this Act, shall be only those costs associated with 
onshore oil and gas activities and may not include any duplication of 
costs allocated pursuant to the previous sentence. Nothing in this 
section affects the Secretary's authority to make allocations under 
section 35(b) for non-oil and gas mineral activities. All moneys 
received from sales, bonuses, rentals, royalties, assessments and 
interest, including money claimed to be due and owing pursuant to a 
delegation under this section, shall be payable and paid to the Treasury 
of the United States.
    ``(g) Any action of the Secretary to approve or disapprove a 
proposal submitted by a State under this section shall be subject to 
judicial review in the United States district court which includes the 
capital of the State submitting the proposal.
    ``(h) Any State operating pursuant to a delegation existing on the 
date of enactment of this Act may continue to operate under the terms 
and conditions of the delegation, except to the extent that a revision 
of the existing agreement is adopted pursuant to this section.''.
    (b) Clerical Amendment.--The item relating to section 205 in the 
table of contents in section 1 of the Federal Oil and Gas Royalty 

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