HR 2260 IHCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

H. R. 2260CommentsClose CommentsPermalink

To provide for a study by the National Academy of Engineering regarding improving the accuracy of collection of royalties on production of oil, condensate, and natural gas under leases of Federal lands and Indian lands, and for other purposes.CommentsClose CommentsPermalink

IN THE HOUSE OF REPRESENTATIVESCommentsClose CommentsPermalink

June 21, 2011CommentsClose CommentsPermalink

Mrs. MALONEY (for herself, Mr. HINCHEY, and Mr. GRIJALVA) introduced the following bill; which was referred to the Committee on Natural ResourcesCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To provide for a study by the National Academy of Engineering regarding improving the accuracy of collection of royalties on production of oil, condensate, and natural gas under leases of Federal lands and Indian lands, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Study of Ways to Improve the Accuracy of the Collection of Federal Oil, Condensate, and Natural Gas Royalties Act of 2011’.CommentsClose CommentsPermalink

SEC. 2. STUDY OF ACTIONS TO IMPROVE THE ACCURACY OF COLLECTION OF FEDERAL OIL, CONDENSATE, AND NATURAL GAS ROYALTIES.

The Secretary of the Interior shall seek to enter into an arrangement with the National Academy of Engineering under which the Academy, by not later than six months after the date of the enactment of this Act, shall study and report to the Secretary regarding whether the accuracy of collection of royalties on production of oil, condensate, and natural gas under leases of Federal lands (in eluding submerged and deep water lands) and Indian lands would be improved by any of the following:CommentsClose CommentsPermalink





(1) Requiring the installation of digital meters, calibrated at least monthly to an absolute zero value, for all lands from which natural gas (including condensate) is produced under such leases.CommentsClose CommentsPermalink





(2) Requiring that--CommentsClose CommentsPermalink





(A) the size of every orifice plate on each natural gas well operated under such leases be inspected at least quarterly by the Secretary; andCommentsClose CommentsPermalink





(B) chipped orifice plates and wrong-sized orifice plates be replaced immediately after those inspections and reported to the Secretary for retroactive volume measurement corrections and royalty payments with interest of 8 percent compounded monthly.CommentsClose CommentsPermalink





(3) Requiring that any plug valves that are in natural gas gathering lines be removed and replaced with ball valves.CommentsClose CommentsPermalink





(4) Requiring that--CommentsClose CommentsPermalink





(A) all meter runs should be opened for inspection by the Secretary and the producer at all times; andCommentsClose CommentsPermalink





(B) any welding or closing of the meter runs leading to the orifice plates should be prohibited unless authorized by the Secretary.CommentsClose CommentsPermalink





(5) Requiring the installation of straightening vanes approximately 10 feet before natural gas enters each orifice meter, including each master meter and each sales meter.CommentsClose CommentsPermalink





(6) Requiring that all master meters be inspected and the results of such inspections be made available to the Secretary and the producers immediately.CommentsClose CommentsPermalink





(7) Requiring that--CommentsClose CommentsPermalink





(A) all sampling of natural gas for heating content analysis be performed monthly upstream of each natural gas meter, including upstream of each master meter;CommentsClose CommentsPermalink





(B) records of such sampling and heating content analysis be maintained by the purchaser and made available to the Secretary and to the producer monthly;CommentsClose CommentsPermalink





(C) probes for such upstream sampling be installed upstream within three feet of each natural gas meter;CommentsClose CommentsPermalink





(D) any oil and natural gas lease for which heat content analysis is falsified shall be subject to cancellation;CommentsClose CommentsPermalink





(E) natural gas sampling probes be located--CommentsClose CommentsPermalink





(i) upstream of the natural gas meter at all times;CommentsClose CommentsPermalink





(ii) within a few feet of the natural gas meter; andCommentsClose CommentsPermalink





(iii) after the natural gas goes through a Welker or Y-Z vanishing chamber; andCommentsClose CommentsPermalink





(F) temperature probes and testing probes be located between the natural gas sampling probe and the orifice of the natural gas meter.CommentsClose CommentsPermalink





(8)(A) Reinstating the requirement to file Federal Energy Regulatory Commission (FERC) Form 16 in April and September of each year for every natural gas pipeline, including each intrastate pipelines, in addition to the filing of FERC Form 2.CommentsClose CommentsPermalink





(B) Requiring--CommentsClose CommentsPermalink





(i) use of such FERC Form 2 to create FERC Form 16 data for the years beginning April and September, respectively, 1992, and for each year thereafter; andCommentsClose CommentsPermalink





(ii) filing with the Federal Energy Regulatory Commission a FERC Form 16 for April and September that is completed with such data back to April 1992.CommentsClose CommentsPermalink





(9) Requiring that administrative jurisdiction over all natural gas gathering lines, interstate pipelines, and intrastate piplines revert immediately to the Federal Energy Regulatory Commission.CommentsClose CommentsPermalink





(10) Prohibiting the dilution of natural gas with inert nitrogen or inert carbon dioxide gas for royalty determination, sale, or resale at any point.CommentsClose CommentsPermalink





(11) Requiring that both the measurement of the volume of natural gas and the heating content analyses be reported only on the basis of 14.73 PSI and 60 degrees Fahrenheit, regardless of the elevation above sea level of such volume measurement and heating content analysis, for both purchases and sales of natural gas.CommentsClose CommentsPermalink





(12) Prohibiting the construction of bypass pipes that go around the natural gas meter, and imposing criminal penalties for any such construction or subsequent removal including, but not limited to, automatic cancellation of the lease.CommentsClose CommentsPermalink





(13) Requiring that all natural gas sold to consumers have a minimum BTU content of 960 at an atmospheric pressure of 14.73 PSI and be at a temperature of 60 degrees Fahrenheit, as required by the State of Wyoming Public Utilities Commission.CommentsClose CommentsPermalink





(14) Requiring that all natural gas sold in the USA will be on a MMBTU basis with the BTU content adjusted for elevation above sea level in higher altitudes. Thus all natural gas meters must correct for BTU content in higher elevations (altitudes).CommentsClose CommentsPermalink





(15) Issuance by the Secretary of rules for the measurement at the wellhead of the standard volume of natural gas produced, based on independent industry standards such as those suggested by the American Society of Testing Materials (ASTM).CommentsClose CommentsPermalink





(16) Requiring use of the fundamental orifice meter mass flow equation, as revised in 1990, for calculating the standard volume of natural gas produced.CommentsClose CommentsPermalink





(17) Requiring the use of Fpv in standard volume measurement computations as described in the 1992 American Gas Association Report No. 8 entitled Compressibility Factor of Natural Gas and Other Related Hydrocarbon Gases.CommentsClose CommentsPermalink





(18) Requiring that gathering lines must be constructed so as to have as few angles and turns as possible, with a maximum of three angles, before they connect with the natural gas meter.CommentsClose CommentsPermalink





(19) Requiring that for purposes of reporting the royalty value of natural gas, condensate, oil, and associated natural gases, such royalty value must be based upon the natural gas’s, condensate’s, oil’s, and associated natural gases’ arm’s length, independent market value, as reported in independent, respected market reports such as Platts or Bloombergs, and not based upon industry-controlled posted prices.CommentsClose CommentsPermalink





(20) Requiring that royalties be paid on all the condensate recovered through purging gathering lines and pipelines with a cone-shaped device to push out condensate (popularly referred to as a pig) and on condensate recovered from separators, dehydrators, and processing plants.CommentsClose CommentsPermalink





(21) Requiring that all royalty deductions for dehydration, treating, natural gas gathering, compression, transportation, marketing, removal of impurities such as carbon dioxide (CO2), nitrogen (N2), hydrogen sulphide (H2S), mercaptain (HS), helium (He), and other similar charges on natural gas, condensate, and oil produced under such leases that are now in existence be eliminated.CommentsClose CommentsPermalink





(22) Requiring that at all times--CommentsClose CommentsPermalink





(A) the quantity, quality, and value obtained for natural gas liquids (condensate) be reported to the Secretary; andCommentsClose CommentsPermalink





(B) such reported value be based on fair independent arm’s length market value.CommentsClose CommentsPermalink





(23) Issuance by the Secretary of regulations that prohibit venting or flaring (or both) of natural gas in cases for which technology exists to reasonably prevent it, strict enforcement of such prohibitions, and cancellation of leases for violations.CommentsClose CommentsPermalink





(24) Requiring lessees to pay full royalties on any natural gas that is vented, flared, or otherwise avoidably lost.CommentsClose CommentsPermalink





(25)(A) Requiring payment of royalties on carbon dioxide at the wellhead used for tertiary oil recovery from depleted oil fields on the basis of 5 percent of the West Texas Intermediate crude oil fair market price to be used for one MCF (1,000 cubic feet) of carbon dioxide gas.CommentsClose CommentsPermalink





(B) Requiring that--CommentsClose CommentsPermalink





(i) carbon dioxide used for edible purposes should be subjected to a royalty per thousand cubic feet (MCF) on the basis of the sales price at the downstream delivery point without deducting for removal of impurities, processing, transportation, and marketing costs;CommentsClose CommentsPermalink





(ii) such price to apply with respect to gaseous forms, liquid forms, and solid (dry ice) forms of carbon dioxide converted to equivalent MCF; andCommentsClose CommentsPermalink





(iii) such royalty to apply with respect to both a direct producer of carbon dioxide and purchases of carbon dioxide from another person that is either affiliated or not affiliated with the purchaser.CommentsClose CommentsPermalink





(26) Requiring that--CommentsClose CommentsPermalink





(A) all carbon dioxide produced from Federal and Indian leases be analyzed for carcinogenic benzene; andCommentsClose CommentsPermalink





(B) benzene produced with such carbon dioxide must be filtered out and removed safely as necessary to prevent harm to the environment subjected to such benzene content, in order to create a maximum permissible level (MPL) of 5 parts per billion.CommentsClose CommentsPermalink





(27) Requiring that--CommentsClose CommentsPermalink





(A) royalties be paid on the fair market value of nitrogen extracted from such leases that is used industrially for well stimulation, helium recovery, or other uses; andCommentsClose CommentsPermalink





(B) royalties be paid on the fair market value of ultimately processed helium recovered from such leases.CommentsClose CommentsPermalink





(28) Allowing only 5 percent of the value of the elemental sulfur recovered during processing of hydrogen sulfide gas from such leases to be deducted for processing costs in determining royalty payments.CommentsClose CommentsPermalink





(29) Requiring that all heating content analysis of natural gas be conducted to a minimum level of C15.CommentsClose CommentsPermalink





(30) Eliminating artificial conversion from dry BTU to wet BTU, and requiring that natural gas be analyzed and royalties paid for at all times on the basis of dry BTU only.CommentsClose CommentsPermalink





(31) Requiring that natural gas sampling be performed at all times with a floating piston cylinder container at the same pressure intake as the pressure of the natural gas gathering line.CommentsClose CommentsPermalink





(32) Requiring use of natural gas filters with a minimum of 10 microns, and preferably 15 microns, both in the intake to natural gas sampling containers and in the exit from the natural gas sampling containers into the chromatograph.CommentsClose CommentsPermalink





(33) Mandate the use of a Quad Unit for both portable and stationary chromatographs in order to correct for the presence of nitrogen and oxygen, if any, in certain natural gas streams.CommentsClose CommentsPermalink





(34) Require the calibration of all chromatograph equipment every three months and the use of only American Gas Association-approved standard comparison containers for such calibration.CommentsClose CommentsPermalink





(35) Requiring that natural gas stored during the summer period and marketed during the winter period--CommentsClose CommentsPermalink





(A) be sold on the basis of the purchase price minus a maximum of $0.50 per MMBTU storage charges; orCommentsClose CommentsPermalink





(B) be subject to payment of royalties on the basis of winter sales price minus $0.50 per MMBTU.CommentsClose CommentsPermalink





(36) Requiring payment of royalties on any such natural gas stored on Federal or Indian lands on the basis of corresponding storage charges for the use of Federal or Indian lands, respectively, for such storage service.CommentsClose CommentsPermalink





(37) Imposing penalties for the intentional nonpayment of royalties for natural gas liquids recovered--CommentsClose CommentsPermalink





(A) from purging of natural gas gathering lines and natural gas pipelines; orCommentsClose CommentsPermalink





(B) from field separators, dehydrators, and processing plants,CommentsClose CommentsPermalink





including cancellation of oil and natural gas leases and criminal penalties.CommentsClose CommentsPermalink





(38) Requiring that the separator, dehydrator, and natural gas meter be located within 100 feet of each natural gas wellhead.CommentsClose CommentsPermalink





(39) Requiring that BTU heating content analysis be performed when the natural gas is at a temperature of 140 to 150 degrees Fahrenheit at all times, as required by the American Gas Association (AGA) regulations.CommentsClose CommentsPermalink





(40) Requiring that heating content analysis and volume measurements are identical at the sales point to what they are at the purchase point, after allowing for a small volume for leakage in old pipes, but with no allowance for heating content discrepancy.CommentsClose CommentsPermalink





(41) Requiring that all natural gas produced under such leases be at all times sold to public, industrial, storage, and private customers only on a MMBTU basis of MCF (1000 CF) x MBTU (1000 BTU).CommentsClose CommentsPermalink





(42) Verification by the Secretary that the specific gravity of natural gas produced under such leases, as measured at the meter run, corresponds to the heating content analysis data for such natural gas, in accordance with the Natural Gas Processors Association Publication 2145-71(1), entitled ‘Physical Constants Of Paraffin Hydrocarbons And Other Components Of Natural Gas’, and reporting of all discrepancies immediately.CommentsClose CommentsPermalink





(43) Prohibiting all deductions on royalty payments for marketing of natural gas, condensate, and oil by an affiliate or agent.CommentsClose CommentsPermalink





(44) Requiring that all standards of the American Petroleum Institute, the American Gas Association, the Gas Processors Association, and the American Society of Testing Materials, Minerals Management Service Order No. 5, and all other Minerals Management Service orders be faithfully observed and applied, and willful misconduct of such standards and orders be subject to oil and gas lease cancellation.CommentsClose CommentsPermalink





(45) Requiring that all oil and condensate produced from Federal and Indian lands must be stored and measured in cylindrical tanks, and prohibiting any distortion, such as squeezing or bending of a storage tank, that hinders the true and honest measurement of volume of condensate and oil.CommentsClose CommentsPermalink

SEC. 3. REVIEW OF ROYALTY PAYMENTS.

The Secretary of the Interior, subject to the availability of appropriations, shall award a contract under which the contractor shall--CommentsClose CommentsPermalink





(1) compare royalty payments made under Federal oil and gas lease provisions for covered lands against data supplied to the Federal Energy Regulatory Commission;CommentsClose CommentsPermalink





(2) make such comparison retroactive to June 1, 1974, by integrating existing natural gas analog charts or digital meter results (or both) for each natural gas meter and multiplying the corresponding standard volume results by heating content analysis obtained from corresponding specific gravity measurement relationship;CommentsClose CommentsPermalink





(3) determine whether the correct production standard volume and total heating content analysis was used to calculate such payments; andCommentsClose CommentsPermalink





(4) determine whether such payments were adequate under the terms of such oil and gas leases, by among other procedures comparing the reported royalty values with respected published market price reports, such as Platts or Bloombergs.CommentsClose CommentsPermalink

SEC. 4. DEFINITIONS.

In this Act:CommentsClose CommentsPermalink





(1) COVERED LANDS- The term ‘covered lands’ means--CommentsClose CommentsPermalink





(A) all Federal onshore lands and offshore lands that are under the administrative jurisdiction of the Department of the Interior for purposes of oil and gas leasing; andCommentsClose CommentsPermalink





(B) Indian onshore lands.CommentsClose CommentsPermalink





(2) SECRETARY- The term ‘Secretary’ means the Secretary of the Interior.CommentsClose CommentsPermalink