42 U.S.C. § 15903 — Marginal property production incentives

Page 8726 TITLE 42—THE PUBLIC HEALTH AND WELFARE § 15903 (1) shall consult with a State before con- ducting a royalty in-kind program under this part within the State; (2) may delegate management of any portion of the Federal royalty in-kind program to the State except as otherwise prohibited by Fed- eral law; and (3) shall consult annually with any State from which Federal oil or gas royalty is being taken in-kind to ensure, to the maximum ex- tent practicable, that the royalty in-kind pro- gram provides revenues to the State greater than or equal to the revenues likely to have been received had royalties been taken in- value. (g) Small refineries (1) Preference If the Secretary finds that sufficient sup- plies of crude oil are not available in the open market to refineries that do not have their own source of supply for crude oil, the Sec- retary may grant preference to those refin- eries in the sale of any royalty oil accruing or reserved to the United States under Federal oil and gas leases issued under any mineral leasing law, for processing or use in those re- fineries at private sale at not less than the market price. (2) Proration among refineries in production area In disposing of oil under this subsection, the Secretary may, at the discretion of the Sec- retary, prorate the oil among refineries de- scribed in paragraph (1) in the area in which the oil is produced. (h) Disposition to Federal agencies (1) Onshore royalty Any royalty oil or gas taken by the Sec- retary in-kind from onshore oil and gas leases may be sold at not less than the market price to any Federal agency. (2) Offshore royalty Any royalty oil or gas taken in-kind from a Federal oil or gas lease on the outer Conti- nental Shelf may be disposed of only under section 1353 of title 43. (i) Federal low-income energy assistance pro- grams (1) Preference In disposing of royalty oil or gas taken in- kind under this section, the Secretary may grant a preference to any person, including any Federal or State agency, for the purpose of providing additional resources to any Fed- eral low-income energy assistance program. (2) Report Not later than 3 years after August 8, 2005, the Secretary shall submit a report to Con- gress— (A) assessing the effectiveness of granting preferences specified in paragraph (1); and (B) providing a specific recommendation on the continuation of authority to grant preferences. (j) McAlester Army Ammunition Plant At the request of the Secretary of Defense, the Secretary shall— (1) take in-kind royalty gas from any lease on the McAlester Army Ammunition Plant in McAlester, Oklahoma; and (2) sell such royalty gas to the Department of Defense in accordance with subsection (h)(1), for use only at that plant, only for en- ergy resilience purposes, and only to the ex- tent necessary to meet the natural gas needs of that plant. (Pub. L. 109–58, title III, § 342, Aug. 8, 2005, 119 Stat. 697; Pub. L. 113–188, title XI, § 1101, Nov. 26, 2014, 128 Stat. 2023; Pub. L. 118–159, div. A, title XVII, § 1706, Dec. 23, 2024, 138 Stat. 2209.) Editorial Notes REFERENCES IN TEXT This part, referred to in subsec. (f)(1), was in the original ‘‘this subtitle’’, meaning subtitle E (§§ 341–357) of title III of Pub. L. 109–58, Aug. 8, 2005, 119 Stat. 697, which enacted this part, amended sections 6504, 6506a, 6507, and 6508 of this title, sections 184 and 226 of Title 30, Mineral Lands and Mining, and section 1337 of Title 43, Public Lands, and enacted provisions set out as a note under section 226 of Title 30. For complete classi- fication of subtitle E to the Code, see Tables. AMENDMENTS 2024—Subsec. (j). Pub. L. 118–159 added subsec. (j). 2014—Subsecs. (e) to (j). Pub. L. 113–188 redesignated subsecs. (f) to (j) as (e) to (i), respectively, and struck out former subsec. (e) which required various reports on oil and gas royalties in-kind. § 15903. Marginal property production incentives (a) Definition of marginal property Until such time as the Secretary issues regu- lations under subsection (e) that prescribe a dif- ferent definition, in this section, the term ‘‘mar- ginal property’’ means an onshore unit, communitization agreement, or lease not within a unit or communitization agreement, that pro- duces on average the combined equivalent of less than 15 barrels of oil per well per day or 90,000,000 British thermal units of gas per well per day calculated based on the average over the 3 most recent production months, including only wells that produce on more than half of the days during those 3 production months. (b) Conditions for reduction of royalty rate Until such time as the Secretary issues regu- lations under subsection (e) that prescribe dif- ferent standards or requirements, the Secretary shall reduce the royalty rate on— (1) oil production from marginal properties as prescribed in subsection (c) if the spot price of West Texas Intermediate crude oil at Cush- ing, Oklahoma, is, on average, less than $15 per barrel (adjusted in accordance with the Consumer Price Index for all-urban con- sumers, United States city average, as pub- lished by the Bureau of Labor Statistics) for 90 consecutive trading days; and (2) gas production from marginal properties as prescribed in subsection (c) if the spot price of natural gas delivered at Henry Hub, Lou- isiana, is, on average, less than $2.00 per mil- lion British thermal units (adjusted in accord- ance with the Consumer Price Index for all- urban consumers, United States city average, as published by the Bureau of Labor Statis- tics) for 90 consecutive trading days. Page 8727 TITLE 42—THE PUBLIC HEALTH AND WELFARE § 15904 (c) Reduced royalty rate (1) In general When a marginal property meets the condi- tions specified in subsection (b), the royalty rate shall be the lesser of— (A) 5 percent; or (B) the applicable rate under any other statutory or regulatory royalty relief provi- sion that applies to the affected production. (2) Period of effectiveness The reduced royalty rate under this sub- section shall be effective beginning on the first day of the production month following the date on which the applicable condition specified in subsection (b) is met. (d) Termination of reduced royalty rate A royalty rate prescribed in subsection (c)(1) shall terminate— (1) with respect to oil production from a marginal property, on the first day of the pro- duction month following the date on which— (A) the spot price of West Texas Inter- mediate crude oil at Cushing, Oklahoma, on average, exceeds $15 per barrel (adjusted in accordance with the Consumer Price Index for all-urban consumers, United States city average, as published by the Bureau of Labor Statistics) for 90 consecutive trading days; or (B) the property no longer qualifies as a marginal property; and (2) with respect to gas production from a marginal property, on the first day of the pro- duction month following the date on which— (A) the spot price of natural gas delivered at Henry Hub, Louisiana, on average, ex- ceeds $2.00 per million British thermal units (adjusted in accordance with the Consumer Price Index for all-urban consumers, United States city average, as published by the Bu- reau of Labor Statistics) for 90 consecutive trading days; or (B) the property no longer qualifies as a marginal property. (e) Regulations prescribing different relief (1) Discretionary regulations The Secretary may by regulation prescribe different parameters, standards, and require- ments for, and a different degree or extent of, royalty relief for marginal properties in lieu of those prescribed in subsections (a) through (d). (2) Mandatory regulations Unless a determination is made under para- graph (3), not later than 18 months after Au- gust 8, 2005, the Secretary shall by regula- tion— (A) prescribe standards and requirements for, and the extent of royalty relief for, mar- ginal properties for oil and gas leases on the outer Continental Shelf; and (B) define what constitutes a marginal property on the outer Continental Shelf for purposes of this section. (3) Report To the extent the Secretary determines that it is not practicable to issue the regulations referred to in paragraph (2), the Secretary shall provide a report to Congress explaining such determination by not later than 18 months after August 8, 2005. (4) Considerations In issuing regulations under this subsection, the Secretary may consider— (A) oil and gas prices and market trends; (B) production costs; (C) abandonment costs; (D) Federal and State tax provisions and the effects of those provisions on production economics; (E) other royalty relief programs; (F) regional differences in average well- head prices; (G) national energy security issues; and (H) other relevant matters, as determined by the Secretary. (f) Savings provision Nothing in this section prevents a lessee from receiving royalty relief or a royalty reduction pursuant to any other law (including a regula- tion) that provides more relief than the amounts provided by this section. (Pub. L. 109–58, title III, § 343, Aug. 8, 2005, 119 Stat. 700.) § 15904. Incentives for natural gas production from deep wells in the shallow waters of the Gulf of Mexico (a) Royalty incentive regulations for ultra deep gas wells (1) In general Not later than 180 days after August 8, 2005, in addition to any other regulations that may provide royalty incentives for natural gas pro- duced from deep wells on oil and gas leases issued pursuant to the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.), the Sec- retary shall issue regulations granting royalty relief suspension volumes of not less than 35 billion cubic feet with respect to the produc- tion of natural gas from ultra deep wells on leases issued in shallow waters less than 400 meters deep located in the Gulf of Mexico wholly west of 87 degrees, 30 minutes west lon- gitude. Regulations issued under this sub- section shall be retroactive to the date that the notice of proposed rulemaking is published in the Federal Register. (2) Suspension volumes The Secretary may grant suspension vol- umes of not less than 35 billion cubic feet in any case in which— (A) the ultra deep well is a sidetrack; or (B) the lease has previously produced from wells with a perforated interval the top of which is at least 15,000 feet true vertical depth below the datum at mean sea level. (3) Definitions In this subsection: (A) Ultra deep well The term ‘‘ultra deep well’’ means a well drilled with a perforated interval, the top of which is at least 20,000 true vertical depth below the datum at mean sea level.