[Congressional Record Volume 142, Number 117 (Friday, August 2, 1996)]
[Senate]
[Pages S9675-S9678]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
FEDERAL OIL AND GAS ROYALTY SIMPLIFICATION AND FAIRNESS ACT OF 1995
Mr. STEVENS. I ask unanimous consent that the Senate proceed to the
immediate consideration of Calendar No. 500, which is House bill H.R.
1975.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
A bill (H.R. 1975) to improve the management of royalties
from Federal and Outer Continental Shelf oil and gas leases,
and for other purposes.
The PRESIDING OFFICER. Is there objection to the immediate
consideration of the bill?
There being no objection, the Senate proceeded to consider the bill.
Mr. MURKOWSKI. Mr. President, I rise to urge my Senate colleagues to
support H.R. 1975, the Federal Oil and Gas Royalty Fairness and
Simplification Act, also known as the ``royalty fairness'' bill, which
passed the House of Representatives on July 16, 1996. H.R. 1975 is
identical in every respect to S. 1014, reported to the Senate by the
Committee on Energy and Natural Resources on May 1 by a unanimous voice
vote, with one exception: It makes a technical amendment in the
effective date section that was not made in S. 1014. The technical
amendment was included at the urging of the administration and, as a
result, the Clinton administration strongly supports H.R. 1975. The
bill also is supported by the governors of fourteen States.
This is historic legislation, Mr. President. It is the only
legislative initiative taken in the last 14 years to cost effectively
increase the Nation's third largest source of revenue--mineral
royalties from Federal lands, more specifically, oil and gas royalties.
This legislation would establish a comprehensive statutory plan to
increase the collection of royalty receipts due the United States.
Those receipts will help reduce our budget deficit. Without this
legislation, an ineffective and costly royalty collection system will
continue, perpetuating long delays and uncollected royalties.
Let me make clear, Mr. President: This legislation does not apply to
Indian lands. It applies only to royalties from oil and gas production
on Federal lands.
Let me also make absolutely clear that this bill does not--repeat,
does not--provide royalty relief or lower royalty rates for oil and gas
producers who operate on Federal onshore lands or the Outer Continental
Shelf. H.R. 1975 is about royalty collection, not royalty rates. This
bill is about improving government efficiency, not about increasing
government bureaucracy. And this bill is about increasing
[[Page S9676]]
revenues to the Federal Treasury, not about giving money away.
This legislation is historic for another reason, Mr. President: It
would empower States to perform oil and gas royalty management
functions, such as auditing and collecting, that are essential to
bringing additional receipts to the Treasury and the States within a 7-
year limitation period established by this legislation. By expanding
the States' role in performing Federal oil and gas royalty management
and collection functions consistent with Federal law and regulation,
States will be given a great economic incentive that will benefit the
Federal Treasury. The more aggressive States are in performing
delegated functions, the greater their share of net receipts under the
Mineral Leasing Act. That act requires 50 percent of all royalties from
Federal onshore oil and gas production to be shared with the States
from which that production comes.
H.R. 1975 establishes a framework for the federal oil and gas royalty
collection program that will accelerate the collection of offsetting
receipts to the Treasury by $80 million in the 1997-2002 period, half
of which moneys would be shared with the States. These receipts result
primarily from: (1) requiring the Secretary of the Interior and
delegated States to timely collect all claims within 7 years rather
than allow the claims to become stale and uncollectible; (2) requiring
early resolution and collection of disputed claims before their value
diminishes; (3) requiring federal and State resources to be used in a
manner that maximizes receipts through more aggressive collection
activities; and (4) increasing production on federal lands by creating
economic and regulatory incentives. Without the statutory framework of
this legislation, the Nation's third largest revenue source (the
Interior Department's Minerals Management Service is the third largest
source of revenue behind the IRS and Customs Service) will continue to
be subject to greatly delayed collections and the risk of reduced
receipts due to non-collection over time.
To achieve the goal of maximizing collections through more timely and
aggressive collection efforts, this legislation would do the following
specific things. It would require the Secretary, delegated States, and
lessees to take action respecting a royalty obligation within seven
years from the date that obligation became due. The provisions require
that judicial proceedings or demands (e.g., orders to pay) be commenced
or issued within seven years of the date when the obligation became due
or be barred. Lessees would be required to maintain their records
during the 7-year period in order to verify production volumes.
H.R. 1975 would expedite the administrative appeals process at the
Interior Department by establishing a 33-month limitation on appeals.
Presently, over $450 million in disputed claims languish in a
bureaucratic appeals process and continue to lose value. By speeding up
the appeals process, the Secretary would increase the value of those
obligations and collections to the Treasury.
The legislation also would level the playing field for royalty payors
by authorizing the payment of interest on overpayments. Present law
requires lessees to pay interest on late payments and underpayments as
a disincentive for being tardy or underpaying royalties, but does not
compensate lessees who overpay royalties and who lose the time value of
that money through some legitimate error.
And finally, Mr. President, the legislation would authorize the
Secretary to allow prepayment of royalties and to provide other
regulatory relief for ``marginal properties,'' and require that
adjustments or requests for refunds for underpayments or overpayments
be pursued within a 6-year window coinciding with the 7-year limitation
period.
Mr. President, I want to thank my colleague, Senator Nickles, for
introducing the Senate companion to H.R. 1975, S. 1014, last June.
Senator Domenici and I joined Senator Nickles as sponsors of this
historic bill, and Senator Thomas has been deeply involved as well. I
want to thank Senators Nickles, Domenici, and Thomas for their efforts
in regard to the royalty fairness legislation.
Mr. President, the fact that S. 1014 was reported from the Committee
on Energy and Natural Resources on May 1 by a unanimous voice vote and
subsequently drew the support of the Clinton administration, and the
fact that the House swiftly passed H.R. 1975, speaks to the merits of
this legislation, the lengths to which we have gone to resolve
differences with the administration over the language of the bill, and
the fact that this legislation is not partisan legislation.
This is good-government legislation, and no mater what criticism we
may hear of it, it will be good for the taxpayers, good for the States,
and good for the energy producing sector of our economy.
Importantly, Mr. President, H.R. 1975 will empower States to join in
partnership with the Federal Government in assuming certain royalty
management functions pursuant to a delegation of authority. By
providing States with a role in performing oil and gas royalty
management functions, we will be giving States the economic incentive
to perform those functions in a more cost effective manner. Aggressive
pursuit of royalty obligations by States will be rewarded by higher net
receipts shares for the States, because 50 percent of oil and gas
receipts are shared with the States, and it will result in higher
receipts to the federal treasury.
This is a fiscal ``win-win'' no matter how you view it. This is good
public policy. I urge my colleagues to join me in supporting the
Federal Oil and Gas Royalty Simplification and Fairness Act.
Mr. President, I ask unanimous consent that a letter dated June 6,
1996, from the Department of the Interior; a statement of
administration policy, dated July 16, 1996, from OMB; a letter dated
May 30, 1996, from Leon Panetta; and a DOE news release dated July 16,
1996, be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Department of the Interior, Office of the Secretary,
Washington, DC, June 6, 1996.
Hon. Frank Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: I am writing to express the views of the
Department of the Interior on S. 1014, the ``Federal Oil and
Gas Royalty Simplification and Fairness Act of 1996.'' As you
are aware, we have conducted extensive discussions with the
staff of the Senate Energy and Natural Resources Committee in
an effort to address concerns and resolve differences raised
by both parties.
S. 1014, as marked up and passed by the full Committee on
May 1, incorporated negotiated language that is acceptable to
the Department. After marking up the bill, the Committee
staff and the Minerals Management Service identified a
technical error, and the Committee has developed an amendment
for Senate floor consideration. The amendment would correct
an error in section 11, so that the effective date exception
will apply to the appeals provision in section 115(h) and not
to the records retention provision in section 115(f). The
Department supports S. 1014 as reported out of the Committee,
with the adoption of the pending technical amendment.
In general, S. 1014 would amend the Federal Oil and Gas
Royalty Management Act, the Outer Continental Shelf Lands
Act, and the Mineral Leasing Act. The amendments change the
requirements that govern how the Secretary of the Interior
manages royalty payments from Federal oil and gas leases
onshore and on the OCS. The bill would limit the persons that
can be held liable for royalty payments; establish a 7-year
statute of limitations and detail the circumstances under
which the statute of limitations can be tolled; establish
time limits for administrative appeals decisions; require the
Secretary to pay interest on all overpayments; process OCS
refunds and credits in the same manner as onshore leases;
undertake measures to encourage efficiency and reduce
duplicate reporting; and relax reporting and payment
requirements on marginal producing leases, including
accepting prepayments of future royalties. Lastly, S. 1014
would change existing statutory authority for the Secretary
to delegate royalty management activities to States.
This delegation issue has been of particular interest to
the Department. Our priority has been to ensure that the
delegation provision does not contain unacceptable bars to
the exercise of Secretarial discretion. We believe that the
language contained in the current version of S. 1014 provides
new benefits for states by expanding the list of delegable
authorities which a state may seek and requiring the
Secretary, to make a decision regarding any pending state
application for delegation within 90 days of its submission.
At the same time, however, the bill preserves the Secretary's
discretion regarding important decisions affecting public
lands, unlike similar language in the companion House
[[Page S9677]]
bill (H.R. 1975) which unacceptably diminishes the
Secretary's discretionary authority. Certainly, we could not
accept any amendments that would weaken the Secretary's
authority as currently provided in S. 1014.
The Office of Management and Budget has advised that there
is no objection to the presentation of this report from the
standpoint of the Administration's program.
Sincerely,
Sylvia V. Baca,
Acting Assistant Secretary for
Land and Minerals Management.
____
Executive Office of the President, Office of Management
and Budget,
Washington, DC, July 16, 1996.
Statement of Administration Policy
(This statement has been coordinated by OMB with the concerned
agencies.)
h.r. 1975--Federal Oil and Gas Royalty Simplification/Fairness
(Calvert (R) CA) and 10 cosponsors)
The Administration is committed to ensuring the efficient
management of the Federal oil and gas program and to finding
new ways for the States to work cooperatively and creatively
with the Federal Government. Accordingly, the Administration
strongly supports enactment of H.R. 1975 if amended to adopt
the language of S. 1014, as reported by the Senate, with the
technical amendment agreed upon by the Administration and the
Senate Energy and Natural Resources Committee. The Senate
reported bill maintains Federal discretion in delegating
royalty collection and other duties to States while expanding
the list of delegable authorities that a State may seek.
____
The White House,
Washington, DC, May 30, 1996.
Hon. Frank H. Murkowski,
U.S. Senate,
Washington, DC.
Dear Mr. Murkowski: 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.
____
DOE News
statement of charles b. curtis, deputy secretary, u.s. department of
energy
On Royalty Fairness
``The Clinton Administration is extremely pleased by
passage in the House today of H.R. 1975, the Federal Oil and
Gas Royalty Simplification and Fairness Act. This legislation
will improve the competitiveness of America's natural gas and
oil industry by reducing red tape and making the federal
regulatory structure more efficient and responsive.
``The Administration has worked hard to advance this
legislation because we believe that simplifying royalty
collection procedures will make it less costly for domestic
energy producers to find and produce more natural gas and oil
on federal lands. That, in turn, will reduce America's
reliance on foreign oil. Furthermore, the Congressional
Budget Office estimates that enactment of this measure will
contribute an additional $51 million in federal revenues and
$33 million in state revenues over seven years.
``The bipartisan support in the House for this bill is a
major step forward in making government work for the American
people. If the Senate also approves this legislation, it will
be good news for American workers, good news for the U.S.
Treasury and, most important, good news for our Nation's
energy and National security.''
Mr. DOMENICI. Mr. President, I speak today about extremely important
legislation that we will pass in the Senate: The Federal Oil and Gas
Royalty Simplification and Fairness Act of 1996.
This bill is a win-win solution for our beleaguered domestic oil and
gas industry, oil and gas-producing States like my State of New Mexico,
and the Federal Treasury.
As one of the three cosponsors of this legislation, I wish to commend
Senator Nickles for introducing the bill, Senator Murkowski for joining
with me as a cosponsor, and Senator Thomas for fighting hard with us to
move this bill through committee and past initial administration
objections.
The bill before us reflects solid bipartisan support and the hard
work of the majority and the minority to narrow our differences and
reach a good compromise.
The Royalty Fairness bill will generate more revenue for the State
and Federal Government, which means more funding will be available for
New Mexico schools and for other vital State programs that depend on
revenues from oil and gas royalties.
According to CBO, the Royalty Fairness bill has the potential to save
taxpayers more than $50 million over 7 years. States keep half of the
oil and gas royalties, and because of our legislation will have the
potential to receive over $30 million of additional royalty revenue
into their State treasuries when this bill is enacted into law.
Let me remind my colleagues that the Federal royalty collection
system is our Nation's third largest source of revenue, and this bill
makes long-needed improvements to that system.
This bill will finally give the oil patch more consistency and less
uncertainty in the royalty collection process, which will, in turn,
give a much-needed boost to our domestic oil and gas industry and
lessen our dependence on foreign imports.
This is a good-government bill, a win-win bill, and I urge the
President to sign this bill into law as soon as possible.
Mr. NICKLES. Mr. President, today we have finally passed the Federal
Oil and Gas Royalty Simplification and Fairness Act of 1996. I
introduced this bill last year. It is a bipartisan bill that has the
support of the administration as well as 14 State Governors who
represent 99 percent of all Federal onshore production, the Interstate
Oil and Gas Compact Commission and industry trade associations who
represent virtually 100 percent of all Federal lessees.
This bill amends the Federal Oil and Gas Royalty Management Act of
1982 and applies to leases issued by the Secretary of the Interior on
Federal onshore lands and the Outer Continental Shelf. The bill's
objectives are to provide greater certainty, simplicity, fairness and
administrative efficiencies in the laws that govern Federal royalties.
Over time, serious problems have developed with the ways courts and
consequently the Minerals Management Service [MMS] have interpreted the
Federal statute of limitations governing royalty collection. Basically
the issue is: At what time does the statute of limitations begin to run
on the underpayment of royalties?
Some courts claim that the statute of limitations does not begin to
run until the MMS ``should have known about the deficiency'' in the
amount the producer has paid [Mesa versus U.S. (10th Cir. 1994)]. Other
courts have held that the current 6-year statute ``is tolled until such
time as the government could reasonably have known about a fact
material to its right of action.'' [Phillips versus Lujan (10th Cir.
1993)].
Either of the above interpretations subjects producers to unlimited
liability--a period that well exceeds the statute of limitations on
other agency actions regarding producers. This situation has created a
climate of deep uncertainty in the payment of royalties that was not
intended by Congress and that is not in the best interests of
consumers, producers, or ultimately the U.S. Government.
Oil and gas producers pay billions of dollars every year for the
opportunity to drill on Federal land. The payment of royalties is a
routine part of doing business with the Federal Government. There is no
attempt here to alter that obligation to pay.
However, as in all other businesses, oil and gas producers need
certainty in their business relationships and in their business
transactions with the Federal Government. That certainty is not now
present in the MMS's regulations or in numerous court decisions
interpreting the applicable statute of limitations. Certainty can be
achieved
[[Page S9678]]
only through legislation. For that reason, I introduced the Royalty
Fairness Act of 1995.
The main objective of this legislation is to establish a clear
statute of limitations and identify the time when the statute of
limitations begins to run on royalty payments. This bill establishes a
7-year statute of limitations and in most cases, the statute will begin
to run when the obligation to pay the royalty begins.
In addition, this bill permits the Secretary of the Interior to
delegate royalty collections and related activities to the States, it
provides for adjustments or refund requests to correct underpayments or
overpayments of obligations, it authorizes the payment of interest to
lessees who make overpayments, and it provides alternatives for
marginal properties including prepayment of royalties or regulatory
relief.
In conclusion, 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. I am confident that passage of this bill is much needed to
create a climate of certainty in the oil and gas industry as well as
being very much in the national economic interest.
Mr. STEVENS. Mr. President, I ask unanimous consent that the bill be
deemed read a third time and passed, the motion to reconsider be laid
upon the table, and that any statements relating to the bill be placed
at the appropriate place in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
The bill (H.R. 1975) was deemed read the third time and passed.
____________________