2260 112th CONGRESS
H. R. 2260
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
Mrs. MALONEY (for herself, Mr. HINCHEY, and Mr. GRIJALVA)
introduced the following bill; which was referred to the Committee on Natural
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 2011'.
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:
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.
(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.
(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
(6) Requiring that all master meters be inspected
and the results of such inspections be made available to the Secretary and the
(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.
(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
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.
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.
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'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.
(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 (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.
(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.
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
(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
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.
(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.
(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
(29) Requiring that all heating content
analysis of natural gas be conducted to a minimum level of C15.
(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
(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,
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.
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).
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.
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
(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.
(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.