HR 7377 — Royalty Resiliency Act

changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

 FEDERAL OIL AND GAS ROYALTY MANAGEMENT ACT OF 1982

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TITLE I--FEDERAL ROYALTY MANAGEMENT AND ENFORCEMENT

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 ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES

 Sec. 111. (a) In the case of oil and gas leases where royalty 
payments are not received by the Secretary on the date that 
such payments are due, or are less than the amount due, the 
Secretary shall charge interest on such late payments or 
underpayments at the rate applicable under section 6621 of the 
Internal Revenue Code of 1954. In the case of an underpayment 
or partial payment, interest shall be computed and charged only 
on the amount of the deficiency and not on the total amount 
due.
 (b) Any payment made by the Secretary to a State under 
section 35 of the Mineral Leasing Act of 1920 (30 U.S.C. 191) 
and any other payment made by the Secretary to a State from any 
oil or gas royalty received by the Secretary which is not paid 
on the date required under section 35 shall include an interest 
charge computed at the rate applicable under section 6621 of 
the Internal Revenue Code of 1954.
 (c) All interest charges collected under this Act or under 
other applicable laws because of nonpayment, late payment or 
underpayment of royalties due and owing an Indian tribe or an 
Indian allottee shall be deposited to the same account as the 
royalty with respect to which such interest is paid.
 (d) Any deposit of royalty funds made by the Secretary to an 
Indian account which is not made by the date required under 
subsection 104(b) shall include an interest charge computed at 
the rate applicable under section 6621 of the Internal Revenue 
Code of 1954.
 (e) Notwithstanding any other provision of law, no State will 
be assessed for any interest or penalties found to be due 
against the Secretary for failure to comply with the Emergency 
Petroleum Allocation Act of 1973 or regulation of the Secretary 
of Energy thereunder concerning crude oil certification or 
pricing with respect to crude oil taken by the Secretary in 
kind as royalty. Any State share of an overcharge, resulting 
from such failure to comply, shall be assessed against moneys 
found to be due and owing to such State as a result of audits 
of royalty accounts for transactions which took place prior to 
the date of the enactment of this Act except that it after the 
completion of such audits, sufficient moneys have not been 
found due and owing to any State, the State shall be assessed 
the balance of that State's share of the overcharge.
 (f) Interest shall be charged under this section only for the 
number of days a payment is late.
 (g) The first sentence of section 35 of the Act of February 
25, 1920 is amended by inserting ``including interest charges 
collected under the Federal Oil and Gas Royalty Management Act 
of 1982'' between ``royalties'' and ``and''.
 (h) 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 date 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 owed on the 
underpaid amount. 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.
 (i)(1) Except as otherwise provided by this subsection--
 (A) a lessee or its designee of a lease in a unit or 
 communitization agreement which contains only Federal 
 leases with the same royalty rate and funds 
 distribution shall report and pay royalties on oil and 
 gas production for each production month based on the 
 actual volume of production sold by or on behalf of 
 that lessee;
 (B) a lessee or its designee of a lease in any other 
 unit or communitization agreement shall report and pay 
 royalties on oil and gas production for each production 
 month based on the volume of oil and gas produced from 
 such agreement and allocated to the lease in accordance 
 with the terms of the agreement; and
 (C) a lessee or its designee of a lease that is not 
 contained in a unit or communitization agreement shall 
 report and pay royalties on oil and gas production for 
 each production month based on the actual volume of 
 production sold by or on behalf of that lessee.
 (2) This subsection applies only to requirements for 
reporting and paying royalties. Nothing in this subsection is 
intended to alter a lessee's liability for royalties on oil or 
gas production based on the share of production allocated to 
the lease in accordance with the terms of the lease, a unit or 
communitization agreement, or any other agreement.
 (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 due 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.
 [(j) 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.]
 (j) The Secretary shall issue all determinations of 
allocations of production for units and communitization 
agreements within 120 days of a request for determination. 
Until the Secretary issues the determination, the lessee or its 
designee of a lease in a unit or communitization agreement 
shall report and pay royalties on oil and gas production for 
each production month in accordance with the terms of the 
proposed allocation of production for the unit or 
communitization agreement. After the Secretary issues the 
determination, the lessee or its designee shall, as necessary, 
correct such reports and the amount of royalties paid on oil 
and gas production under the unit or communitization agreement 
by not later than the end of the third month following the 
month in which the lessee or its designee receives the 
determination from the Secretary. Subject to the full and 
timely monthly payment of royalties to all parties in 
accordance with the terms of the proposed allocation of 
production for the unit or communitization agreement, the 
Secretary shall waive interest due on obligations subject to 
the determination until the end of the third month following 
the month in which the lessee or its designee receives the 
determination from the Secretary. This subsection shall not 
apply to unit or communization agreements containing Indian 
lands.

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