[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 435 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 435
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 12, 2007
Mrs. Maloney of New York (for herself, Mr. Hinchey, and Mr. Grijalva)
introduced the following bill; which was referred to the Committee on
Natural Resources
_______________________________________________________________________
A BILL
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.
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 ``Study of Ways to Improve the
Accuracy of the Collection of Federal Oil, Condensate, and Natural Gas
Royalties Act of 2007''.
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:
(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.
(2) Requiring that--
(A) the size of every orifice plate on each natural
gas well operated under such leases be inspected at
least quarterly by the Secretary; and
(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.
(3) Requiring that any plug valves that are in natural gas
gathering lines be removed and replaced with ball valves.
(4) Requiring that--
(A) all meter runs should be opened for inspection
by the Secretary and the producer at all times; and
(B) any welding or closing of the meter runs
leading to the orifice plates should be prohibited
unless authorized by the Secretary.
(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.
(6) Requiring that all master meters be inspected and the
results of such inspections be made available to the Secretary
and the producers immediately.
(7) Requiring that--
(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;
(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;
(C) probes for such upstream sampling be installed
upstream within three feet of each natural gas meter;
(D) any oil and natural gas lease for which heat
content analysis is falsified shall be subject to
cancellation;
(E) natural gas sampling probes be located--
(i) upstream of the natural gas meter at
all times;
(ii) within a few feet of the natural gas
meter; and
(iii) after the natural gas goes through a
Welker or Y-Z vanishing chamber; and
(F) temperature probes and testing probes be
located between the natural gas sampling probe and the
orifice of the natural gas meter.
(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.
(B) Requiring--
(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; and
(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.
(9) Requiring that administrative jurisdiction over all
natural gas gathering lines, interstate pipelines, and
intrastate piplines revert immediately to the Federal Energy
Regulatory Commission.
(10) Prohibiting the dilution of natural gas with inert
nitrogen or inert carbon dioxide gas for royalty determination,
sale, or resale at any point.
(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.
(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.
(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.
(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).
(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).
(16) Requiring use of the fundamental orifice meter mass
flow equation, as revised in 1990, for calculating the standard
volume of natural gas produced.
(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.
(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.
(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'
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, such as Koch's.
(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.
(21) Requiring that all royalty deductions for dehydration,
treating, natural gas gathering, compression, transportation,
marketing, removal of impurities such as carbon dioxide
(CO<INF>2</INF>), nitrogen (N<INF>2</INF>), hydrogen sulphide
(H<INF>2</INF>S), 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.
(22) Requiring that at all times--
(A) the quantity, quality, and value obtained for
natural gas liquids (condensate) be reported to the
Secretary; and
(B) such reported value be based on fair
independent arm's length market value.
(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.
(24) Requiring lessees to pay full royalties on any natural
gas that is vented, flared, or otherwise avoidably lost.
(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.
(B) Requiring that--
(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;
(ii) such price to apply with respect to gaseous
forms, liquid forms, and solid (dry ice) forms of
carbon dioxide converted to equivalent MCF; and
(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.
(26) Requiring that--
(A) all carbon dioxide produced from Federal and
Indian leases be analyzed for carcinogenic benzene; and
(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.
(27) Requiring that--
(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; and
(B) royalties be paid on the fair market value of
ultimately processed helium recovered from such leases.
(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.
(29) Requiring that all heating content analysis of natural
gas be conducted to a minimum level of C<INF>15</INF>.
(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.
(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.
(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.
(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.
(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.
(35) Requiring that natural gas stored during the summer
period and marketed during the winter period--
(A) be sold on the basis of the purchase price
minus a maximum of $0.50 per MMBTU storage charges; or
(B) be subject to payment of royalties on the basis
of winter sales price minus $0.50 per MMBTU.
(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.
(37) Imposing penalties for the intentional nonpayment of
royalties for natural gas liquids recovered--
(A) from purging of natural gas gathering lines and
natural gas pipelines; or
(B) from field separators, dehydrators, and
processing plants,
including cancellation of oil and natural gas leases and
criminal penalties.
(38) Requiring that the separator, dehydrator, and natural
gas meter be located within 100 feet of each natural gas
wellhead.
(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.
(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.
(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).
(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.
(43) Prohibiting all deductions on royalty payments for
marketing of natural gas, condensate, and oil by an affiliate
or agent.
(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.
(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.
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--
(1) compare royalty payments made under Federal oil and gas
lease provisions for covered lands against data supplied to the
Federal Energy Regulatory Commission;
(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;
(3) determine whether the correct production standard
volume and total heating content analysis was used to calculate
such payments; and
(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.
SEC. 4. DEFINITIONS.
In this Act:
(1) Covered lands.--The term ``covered lands'' means--
(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; and
(B) Indian onshore lands.
(2) Secretary.--The term ``Secretary'' means the Secretary
of the Interior.
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