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H.R. 4364 (116th): Taxpayer Fairness for Resource Development Act of 2019


The text of the bill below is as of Sep 17, 2019 (Introduced). The bill was not enacted into law.


I

116th CONGRESS

1st Session

H. R. 4364

IN THE HOUSE OF REPRESENTATIVES

September 17, 2019

(for himself and Mr. Rooney of Florida) introduced the following bill; which was referred to the Committee on Natural Resources

A BILL

To amend the Mineral Leasing Act to make certain adjustments to the fiscal terms for fossil fuel development and to make other reforms to improve returns to taxpayers for the development of Federal energy resources, and for other purposes.

1.

Short title

This Act may be cited as the Taxpayer Fairness for Resource Development Act of 2019.

2.

Table of contents

The table of contents for this Act is the following:

Sec. 1. Short title.

Sec. 2. Table of contents.

Sec. 3. Onshore fossil fuel royalty rates.

Sec. 4. Minimum bid amount.

Sec. 5. Onshore oil and gas rental rates.

Sec. 6. Penalties.

Sec. 7. Royalty relief.

Sec. 8. Revision of Royalty Policy Committee charter.

Sec. 9. Royalty in kind.

Sec. 10. Amendments to definitions.

Sec. 11. Compliance reviews.

Sec. 12. Liability for royalty payments.

Sec. 13. Recordkeeping.

Sec. 14. Adjustments and refunds.

Sec. 15. Obligation period.

Sec. 16. Tolling agreements and subpoenas.

Sec. 17. Appeals.

Sec. 18. Assessments.

Sec. 19. Pilot project on automatic data transfer.

Sec. 20. Penalty for late or incorrect reporting of data.

Sec. 21. Required recordkeeping for natural gas plants.

Sec. 22. Shared penalties.

Sec. 23. Applicability to other minerals.

Sec. 24. Entitlements.

Sec. 25. Royalties on all extracted methane.

3.

Onshore fossil fuel royalty rates

The Mineral Leasing Act (30 U.S.C. 181 et seq.) is amended—

(1)

in section 7—

(A)

by striking 121/2 and inserting 18.75; and

(B)

by adding at the end the following:

(d)

Periodic evaluation of royalty rates

The Secretary shall establish a periodic process of evaluating increases in royalty rates to achieve a fair market value return for the public. The process should include:

(1)

publishing annually the average, weighted by relative production per State, of the top fossil fuel royalty rates charged by States for fossil fuels production on State-owned public lands;

(2)

evaluating triennially increases in the Federal fossil fuel royalty rates above the minimum rates required under this Act to match the production-weighted average of State royalty rates. The triennial review shall include and benefit from public participation through written comment, public hearings and other meetings open to all interested parties; and

(3)

submitting the triennial evaluation to Congress, including a summary of the views expressed in the public participation processes related to the evaluation.

.

(2)

in section 17, by—

(A)

striking 12.5 each place such term appears and inserting 18.75; and

(B)

striking 121/2 each place such term appears and inserting 18.75; and

(3)

in section 31(e), by striking 162/3 both places such term appears and inserting 25.

4.

Minimum bid amount

Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended—

(1)

in subsection (b)(1)(B)—

(A)

by striking $2 per acre and inserting $5 per acre, except as otherwise provided by this paragraph; and

(B)

by striking Federal Onshore Oil and Gas Leasing Reform Act of 1987 and inserting Taxpayer Fairness for Resource Development Act of 2019;

(2)

in subsection (b)(2)(C), by striking $2 per acre and inserting $5 per acre; and

(3)

by adding at the end the following:

(q)

Inflation adjustment

The Secretary shall—

(1)

by regulation, at least once every 4 years, adjust each of the dollar amounts that apply under subsections (b)(1)(B), (b)(2)(C), and (d) to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics; and

(2)

publish each such regulation in the Federal Register.

.

5.

Onshore oil and gas rental rates

The Mineral Leasing Act (30 U.S.C. 181 et seq.) is amended—

(1)

in section 17(d)—

(A)

by striking $1.50 per acre and inserting $3 per acre; and

(B)

by striking $2 per acre and inserting $5 per acre; and

(2)

in section 31(e), by striking $10 and inserting $20.

6.

Penalties

(a)

Mineral Leasing Act

Section 41 of the Mineral Leasing Act (30 U.S.C. 195) is amended—

(1)

in subsection (b), by striking $500,000 and inserting $1,000,000; and

(2)

in subsection (c), by striking $100,000 and inserting $250,000.

(b)

Federal Oil and Gas Royalty Management Act of 1982

The Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701 et seq.) is amended—

(1)

in section 109—

(A)

in subsection (a), by striking $500 and inserting $1,500;

(B)

in subsection (b), by striking $5,000 and inserting $15,000;

(C)

in subsection (c), by striking $10,000 and inserting $25,000; and

(D)

in subsection (d), by striking $25,000 and inserting $75,000; and

(2)

in section 110, by striking $50,000 and inserting $150,000.

(c)

Outer Continental Shelf Lands Act

(1)

Civil penalty, generally

Section 24(b) of the Outer Continental Shelf Lands Act (43 U.S.C. 1350(b)) is amended to read as follows:

(b)

Civil penalties

(1)

In general

Except as provided in paragraph (2), any person who fails to comply with any provision of this Act, or any term of a lease, license, or permit issued pursuant to this Act, or any regulation or order issued under this Act, shall be liable for a civil administrative penalty of not more than $75,000 for each day of the continuance of such failure. The Secretary may assess, collect, and compromise any such penalty.

(2)

Opportunity for a hearing

No penalty shall be assessed until the person charged with a violation has been given an opportunity for a hearing.

(3)

Adjustment for inflation

The Secretary shall, by regulation at least every 3 years, adjust the penalty specified in this paragraph to reflect any increases in the Consumer Price Index (all items, United States city average) as prepared by the Department of Labor.

(4)

Threat of harm

If a failure described in paragraph (1) constitutes or constituted a threat of harm or damage to life, property, any mineral deposit, or the marine, coastal, or human environment, a civil penalty of not more than $150,000 shall be assessed for each day of the continuance of the failure.

.

(2)

Knowing and willful violations

Section 24(c) of the Outer Continental Shelf Lands Act (43 U.S.C. 1350(c)) is amended by striking $100,000 and inserting $1,000,000.

(3)

Officers and agents of corporations

Section 24(d) of the Outer Continental Shelf Lands Act (43 U.S.C. 1350(d)) is amended by striking knowingly and willfully authorized, ordered, or carried out and inserting authorized, ordered, carried out, or through reckless disregard of the law caused.

7.

Royalty relief

(a)

Gulf of Mexico royalty relief

The following provisions of the Energy Policy Act of 2005 (42 U.S.C. 15801 et seq.) are hereby repealed:

(1)

Section 344 (42 U.S.C. 15904) (relating to incentives for natural gas production from deep wells in the shallow waters of the Gulf of Mexico).

(2)

Section 345 (42 U.S.C. 15905) (relating to royalty relief for deep water production).

(b)

Alaska royalty relief

(1)

Provisions relating to planning areas offshore Alaska

Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(a)(3)(B)) is amended by striking and in the Planning Areas offshore Alaska after West longitude.

(2)

Provisions relating to naval petroleum reserve in Alaska

Section 107 of the Naval Petroleum Reserves Production Act of 1976 (42 U.S.C. 6506a) is amended—

(A)

in subsection (i)—

(i)

by striking (1) In general; and

(ii)

by striking paragraphs (2) through (6); and

(B)

by striking subsection (k).

8.

Revision of Royalty Policy Committee charter

Not later than one year after the date of enactment of this Act, or March 29, 2021, whichever is earlier, the Secretary of the Interior shall revise the charter of the Royalty Policy Committee (as signed on March 29, 2017) to—

(1)

require that of the 6 members of such Committee who are representatives of the Governors of States, no more than 4 members may be representatives of Governors of the same political party;

(2)

increase to 6 the number of members who are representatives of academia or the public, of whom—

(A)

2 members shall be representatives of academia;

(B)

2 members shall be representatives of public interest groups; and

(C)

2 members shall be representatives of nonprofit environmental groups; and

(3)

require that for a person to be eligible to serve as a member who is a representative of a person who is a mineral stakeholder or energy stakeholder (or both) in Federal and Indian royalty policy, the employer of that member shall provide to the Secretary, who shall publish—

(A)

for the preceding 10-year period—

(i)

aggregated information on all Federal royalty payments made by the employer, by year and by commodity;

(ii)

conclusions from compliance reviews and audits conducted by Federal or State revenue collection entities; and

(iii)

a description of all enforcement actions taken against the employer regarding payment of Federal or State royalties; and

(B)

records of—

(i)

prices charged by the employer for sales of minerals to captive affiliates of the employer; and

(ii)

prices charged by such affiliates for subsequent resales of such minerals.

9.

Royalty in kind

(a)

Onshore oil and gas lease royalties

Section 36 of the Mineral Leasing Act (30 U.S.C. 192) is amended by inserting , except that the Secretary may not demand such payment in oil or gas if the amount of such payment would exceed the amount necessary to fill the strategic petroleum reserve after in oil or gas.

(b)

Offshore oil and gas lease royalties

Section 27(a)(1) of the Outer Continental Shelf Lands Act (43 U.S.C. 1353(a)) is amended by striking the period at the end and inserting , except that the Secretary may not demand such payment in oil or gas if the amount of such payment would exceed the amount necessary to fill the strategic petroleum reserve..

10.

Amendments to definitions

Section 3 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1702) is amended—

(1)

in paragraph (20)(A), by striking : Provided, That and all that follows through subject of the judicial proceeding;

(2)

in paragraph (20)(B), by striking (with written notice to the lessee who designated the designee);

(3)

in paragraph (23)(A), by striking (with written notice to the lessee who designated the designee);

(4)

by amending paragraph (24) to read as follows:

(24)

designee means a person who pays, offsets, or credits monies, makes adjustments, requests and receives refunds, or submits reports with respect to payments a lessee must make pursuant to section 102(a);

;

(5)

in paragraph (25), in subparagraph (B)—

(A)

by striking (subject to the provisions of section 102(a) of this Act); and

(B)

in clause (ii), by striking subclause (IV) and all that follows through the end of the subparagraph and inserting the following:

(IV)

any assignment,

that arises from or relates to any lease, easement, right-of-way, permit, or other agreement regardless of form administered by the Secretary for, or any mineral leasing law related to, the exploration, production, and development of oil and gas or other energy resource on Federal lands or the Outer Continental Shelf;

;

(6)

in paragraph (29), by inserting or permit after lease; and

(7)

by striking and after the semicolon at the end of paragraph (32), by striking the period at the end of paragraph (33) and inserting a semicolon, and by adding at the end the following new paragraphs:

(34)

compliance review means an examination of a lessee’s lease accounts to compare one or all elements of the royalty equation (volume, value, royalty rate, and allowances) against anticipated elements of the royalty equation to test for variances; and

(35)

marketing affiliate means an affiliate of a lessee whose function is to acquire the lessee’s production and to market that production.

.

11.

Compliance reviews

Section 101 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1711) is amended by adding at the end the following new subsection:

(d)

The Secretary may, as an adjunct to audits of accounts for leases, conduct compliance reviews of accounts. Such reviews shall not constitute nor substitute for audits of lease accounts. The Secretary shall immediately refer any disparity uncovered in such a compliance review to a program auditor. The Secretary shall, before completion of a compliance review, provide notice of the review to designees whose obligations are the subject of the review.

.

12.

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)

Liability for royalty payments

(1)

Time and manner of payment

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, easement, right-of-way, permit, or other agreement, regardless of form, or under the mineral leasing laws, shall make such payment in the time and manner as may be specified by the Secretary or the applicable delegated State.

(2)

Designee

Any person who pays, offsets, or credits monies, makes adjustments, requests and receives refunds, or submits reports with respect to payments the lessee must make is the lessee’s designee under this Act.

(3)

Liability

Notwithstanding any other provision of this Act, a designee shall be liable for any payment obligation of any lessee on whose behalf the designee pays royalty under the lease. The person owning operating rights in a lease and a person owning legal record title in a lease shall be liable for that person’s pro rata share of payment obligations under the lease.

.

13.

Recordkeeping

Section 103(b) of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1713(b)) is amended by striking 6 and inserting 7.

14.

Adjustments and refunds

Section 111A of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1721a) is amended—

(1)

in subsection (a)—

(A)

by amending paragraph (3) to read as follows:

(3)
(A)

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.

(B)

Except as provided in subparagraph (C), no adjustment may be made with respect to an obligation after the completion of an audit or compliance review of such obligation unless such adjustment is approved by the Secretary or the applicable delegated State, as appropriate.

(C)

If an overpayment is identified during an audit, the Secretary shall allow a credit in the amount of the overpayment.

; and

(B)

in paragraph (4)—

(i)

by striking six-year and inserting four-year; and

(ii)

by striking period shall and inserting period may; and

(2)

in subsection (b)(1)—

(A)

in subparagraph (C), by striking and;

(B)

in subparagraph (D), by striking the period and inserting ; and; and

(C)

by adding at the end the following:

(E)

is made within the adjustment period for that obligation.

.

15.

Obligation period

Section 115(c) of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1724(c)) is amended by adding at the end the following new paragraph:

(3)

Adjustments

In the case of an adjustment under section 111A(a) in which a recoupment by the lessee results in an underpayment of an obligation, the obligation becomes due on the date the lessee or its designee makes the adjustment.

.

16.

Tolling agreements and subpoenas

(a)

Tolling agreements

Section 115(d)(1) of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1724(d)(1)) is amended by striking (with notice to the lessee who designated the designee).

(b)

Subpoenas

Section 115(d)(2)(A) of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1724(d)(2)(A)) is amended by striking (with notice to the lessee who designated the designee, which notice shall not constitute a subpoena to the lessee).

17.

Appeals

Section 115(h) of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1724(h)) is amended—

(1)

in paragraph (1), in the heading, by striking 33-month and inserting 48-month;

(2)

by striking 33 months each place it appears and inserting 48 months; and

(3)

by striking 33-month each place it appears and inserting 48-month.

18.

Assessments

Section 116 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1724) is repealed.

19.

Pilot project on automatic data transfer

(a)

Pilot project

Not later than 2 years after the date of enactment of this Act, the Secretary of the Interior shall complete a pilot project with willing operators of oil and gas leases on the outer Continental Shelf (as such term is defined in the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.)) that assesses the costs and benefits of automatic transmission of data regarding the volume and quality of oil and gas produced under Federal leases on the outer Continental Shelf in order to improve the production verification systems used to ensure accurate royalty collection and audit.

(b)

Report

The Secretary shall submit to Congress a report on findings and recommendations based on the pilot project not later than 3 years after the date of enactment of this Act.

20.

Penalty for late or incorrect reporting of data

(a)

In general

The Secretary of the Interior shall issue regulations by not later than 1 year after the date of enactment of this Act that establish a civil penalty for late or incorrect reporting of data under the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701 et seq.).

(b)

Amount

The amount of the civil penalty shall be—

(1)

an amount (subject to paragraph (2)) that the Secretary determines is sufficient to ensure filing of data in accordance with that Act; and

(2)

not less than $10 for each failure to file correct data in accordance with that Act.

(c)

Content of regulations

Except as provided in subsection (b), the regulations issued under this section shall be substantially similar to section 216.40 of title 30, Code of Federal Regulations, as most recently in effect before the date of enactment of this Act.

21.

Required recordkeeping for natural gas plants

Not later than 1 year after the date of enactment of this Act, the Secretary of the Interior shall publish final regulations with respect to required recordkeeping of natural gas measurement data as set forth in section 250.1203 of title 30, Code of Federal Regulations (as in effect on the date of enactment of this Act), to include operators and other persons involved in the transporting, purchasing, or selling of gas under the requirements of that rule, under the authority provided in section 103 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1713).

22.

Shared penalties

Section 206 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1736) is amended by striking Any payments under this section shall be reduced by an amount equal to any payments provided or due to such State or Indian tribe under the cooperative agreement or delegation, as applicable, during the fiscal year in which the civil penalty is received, up to the total amount provided or due for that fiscal year..

23.

Applicability to other minerals

Section 304 of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1753) is amended by adding at the end the following new subsection:

(e)

Applicability to other minerals

(1)

Notwithstanding any other provision of law, sections 107, 109, and 110 of this Act and the regulations duly promulgated with respect thereto shall apply to any lease authorizing the development of coal or any other solid mineral on any Federal lands or Indian lands, to the same extent as if such lease were an oil and gas lease, on the same terms and conditions as those authorized for oil and gas leases.

(2)

Notwithstanding any other provision of law, sections 107, 109, and 110 of this Act and the regulations issued under such sections shall apply with respect to any lease, easement, right-of-way, or other agreement, regardless of form (including any royalty, rent, or other payment due thereunder)—

(A)

under section 8(k) or 8(p) of the Outer Continental Shelf Lands Act (43 U.S.C. 1337(k) and 1337(p)); or

(B)

under the Geothermal Steam Act (30 U.S.C. 1001 et seq.), to the same extent as if such lease, easement, right-of-way, or other agreement were an oil and gas lease on the same terms and conditions as those authorized for oil and gas leases.

(3)

For the purposes of this subsection, the term solid mineral means any mineral other than oil, gas, and geo-pressured-geothermal resources, that is authorized by an Act of Congress to be produced from public lands (as that term is defined in section 103 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1702)).

.

24.

Entitlements

(a)

Directed rulemaking

Not later than 180 days after the date of enactment of this Act, the Secretary of the Interior shall publish final regulations prescribing when a Federal lessee or designee must report and pay royalties on—

(1)

the volume of oil and gas such lessee or designee produces or takes under a Federal lease or Indian lease; or

(2)

the volume of oil and gas that such lessee or designee is entitled to based on its ownership interest under a unitization agreement for Federal leases or Indian leases.

(b)

100 percent entitlement reporting and paying

The Secretary shall give consideration to requiring 100 percent entitlement reporting and paying based on Federal or Indian oil and gas lease ownership.

25.

Royalties on all extracted methane

(a)

Assessment on all production

(1)

In general

Except as provided in paragraph (2), royalties otherwise authorized or required under the mineral leasing laws (as that term is defined in the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701 et seq.)) to be paid for gas shall be assessed on all gas produced under the mineral leasing laws, including—

(A)

gas used or consumed within the area of the lease tract for the benefit of the lease; and

(B)

all gas that is consumed or lost by venting, flaring, or fugitive releases through any equipment during upstream operations.

(2)

Exception

Paragraph (1) shall not apply with respect to—

(A)

gas vented or flared for not longer than 48 hours in an acute emergency situation that poses a danger to human health; and

(B)

gas injected into the ground on a lease tract in order to enhance production of an oil or gas well or for some other purpose.

(b)

Conforming amendments

(1)

Mineral Leasing Act

The Mineral Leasing Act is amended—

(A)

in section 14 (30 U.S.C. 223), by adding at the end the following: Notwithstanding any other provision of this Act (including this section), royalty shall be assessed with respect to oil and gas, other than gas described in section 124(a)(2) of the Sustainable Energy Development Reform Act, without regard to whether oil or gas is removed or sold from the leased land.;

(B)

in section 17 (30 U.S.C. 226), by striking removed or sold each place it appears;

(C)

in section 22 (30 U.S.C. 251), by striking sold or removed; and

(D)

in section 31 (30 U.S.C. 188), by striking removed or sold each place it appears.

(2)

Outer Continental Shelf Lands Act

The Outer Continental Shelf Lands Act is amended—

(A)

in section 6(a)(8) (43 U.S.C. 1335(a)(8)), by striking saved, removed, or sold each place it appears; and

(B)

in section 8(a) (43 U.S.C. 1337(a))—

(i)

in paragraph (1), by striking saved, removed, or sold each place it appears; and

(ii)

by adding at the end the following:

(9)

Notwithstanding any other provision of this Act (including this section), royalty under this Act shall be assessed with respect to oil and gas, other than gas described in section 124(a)(2) of the Sustainable Energy Development Reform Act, without regard to whether oil or gas is removed or sold from the leased land.

.

(c)

Application

The provisions of this section and the amendments made by this section shall apply only with respect to leases issued on or after the date of the enactment of this Act.