Royalty Resiliency Act
Floor Speech
BREAK IN TRANSCRIPT
Mr. WESTERMAN. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 7377) to amend the Federal Oil and Gas Royalty Management Act of 1982 to improve the management of royalties from oil and gas leases, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 7377
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. SHORT TITLE.
This Act may be cited as the ``Royalty Resiliency Act''. SEC. 2. DETERMINATION OF ALLOCATIONS OF PRODUCTION FOR UNITS AND COMMUNITIZATION AGREEMENTS.
Section 111(j) of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1721(j)), as amended by the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (Public Law 104-185), is amended to read as follows:
``(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.''.
BREAK IN TRANSCRIPT
Mr. WESTERMAN. 7377, the bill now under consideration.
Mr. Speaker, I rise today in support of H.R. 7377, the Royalty Resiliency Act. H.R. 7377, introduced by Congressman Hunt, addresses issues in existing law with respect to how oil and gas royalties are paid to the Federal Government.
When an oil and gas project involving a Federal lease cannot be independently developed because of other State or private assets, the Bureau of Land Management utilizes communitization agreements, or CAs.
Although the BLM is required by law to approve CAs within 120 days of receipt, the agency has failed to meet this standard, with operators experiencing wait times of up to 3 years.
Currently, the Office of Natural Resources Revenue, often referred to as ONRR, requires oil and gas operators to pay a 100 percent royalty for projects all while they await BLM approval of a CA, even if only a fraction of their project involves Federal lands or minerals. As a result, many operators end up significantly overpaying royalties while they wait years for BLM approval.
This bill provides a commonsense fix that would allow operators to pay a royalty to ONRR that is based on the apportionment in their proposed CA.
This bill would not reduce the obligation owed by companies but would prevent overpayments that unnecessarily lock up capital and create a bureaucratic mess for the Department of the Interior. Furthermore, in the rare case that a proposed royalty is found to be incorrect when a CA is approved, the bill requires the lessee to pay the government within 3 months.
I would also like to note that the Committee on Natural Resources worked with the BLM to finalize this bill, and it is supported by the Department of the Interior.
This bill will benefit operators as well as Federal and State Governments while ensuring a fair and more predictable regulatory environment.
Mr. Speaker, I urge my colleagues to join me in support of H.R.
Ms. LEGER FERNANDEZ.
Mr. Speaker, I rise to join my colleague, Chairman Westerman, in support of H.R. 7377, the Royalty Resiliency Act, sponsored by my colleague, Representative Hunt.
I have to say that not many oil and gas bills can make it through the Natural Resources Committee by unanimous consent and to the floor on suspension, so I commend my colleague for working on this reasonable, technical fix that has the support of the Biden administration.
This represents how we should, in fact, get things done, where we come together, where we work things out, and where we include the BLM so that we understand how to get the technical fix done.
As noted, under current law, oil and gas lessees who are on land that is partially Federally owned and partially owned by the State or private owners need to get a communitization agreement, or CA, approved by the Department of the Interior, which outlines how much of the royalty payments should be paid to each landowner.
While a lessee is waiting for approval on that CA from the Department of the Interior, they pay 100 percent of the royalties to the Federal Government, even in cases where the Federal Government does not own 100 percent of the land.
When the CA is finally approved, then the State or private landowners get reimbursed for their share of the royalty payments. However, some Bureau of Land Management field offices are so understaffed right now that they have reportedly taken 800 days, in some cases, to approve a CA, resulting in a delay or loss of royalties to States who rightfully deserve those funds.
For an example, in New Mexico, we have hundreds of oil and gas lessees on Federal lands and State lands. Many of those are in my district in the San Juan and Permian Basin. Indeed, 54 percent of production in New Mexico impacts Federal land. This bill represents a technical fix that would make sure that royalties flow to the State of New Mexico or the State of Colorado or the Dakotas or Texas or the many other places where we have these shared land ownership arrangements, because do you know what, Mr. Speaker?
Our schools and our schoolchildren need that money to flow to them as quickly as possible.
Under the bill, rather than paying 100 percent to the Federal Government while waiting approval, a lessee would pay royalties to each landowner in accordance with the lessee's proposal. If that proposal proves to be wrong, the lessee is then required to backpay any missing royalty revenue.
While I believe we need to work together to find an off-ramp for States and communities that are overly dependent on fossil fuel revenue and we need to work on diversifying our economies, this legislation is straightforward and commonsense.
Mr. Speaker, I support the bill.
BREAK IN TRANSCRIPT
Mr. WESTERMAN. Mr. Speaker, I thank my colleague from Texas (Mr. Hunt) for his work on the bill. H.R. 7377 will provide regulatory certainty and fairness in royalty management. I also thank the minority for their cooperation in passing this commonsense bill.
Mr. Speaker, I urge my colleagues to join us in supporting H.R. 7377, and I yield back the balance of my time.
BREAK IN TRANSCRIPT
Source