Sec. 347. OIL AND GAS LEASING IN THE NATIONAL PETROLEUM RESERVE IN ALASKA

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## SEC. 347 OIL AND GAS LEASING IN THE NATIONAL PETROLEUM RESERVE IN ALASKA ###

(a)Transfer of Authority ####

(1)Redesignation The Naval Petroleum Reserves Production Act of 1976 (42 U.S.C. 6501 et seq.) is amended by redesignating section 107 (42 U.S.C. 6507) as section 108. ####

(2)Transfer The matter under the heading “EXPLORATION OF NATIONAL PETROLEUM RESERVE IN ALASKA” under the heading “ENERGY AND MINERALS” of title I of Public Law 96–514 (42 U.S.C. 6508) is— #####

(A)transferred to the Naval Petroleum Reserves Production Act of 1976 (42 U.S.C. 6501 et seq.); #####

(B)redesignated as section 107 of that Act; and #####

(C)moved so as to appear after section 106 of that Act (42 U.S.C. 6506). ###

(b)Competitive Leasing Section 107 of the Naval Petroleum Reserves Production Act of 1976 (as amended by subsection (a)(2)) is amended— ####

(1)by striking the heading and all that follows through “ *Provided*, That

(1)activities ” and inserting the following: > > ## “SEC. 107 COMPETITIVE LEASING OF OIL AND GAS > > > ### “(a) In General > > The Secretary shall conduct an expeditious program of competitive leasing of oil and gas in the Reserve in accordance with this Act. > > > ### “(b) Mitigation of Adverse Effects > > Activities” > ; ####

(2)by striking “ Alaska (the Reserve);

(2)the ” and inserting “ Alaska ”. > > ### “(c) Land Use Planning; BLM Wilderness Study > > The” > ; ####

(3)by striking “ Reserve;

(3)the ” and inserting “ Reserve ”. > > ### “(d) First Lease Sale > > The;” > ; ####

(4)by striking “ 4332);

(4)the ” and inserting “ 4321 et seq.) ”. > > ### “(e) Withdrawals > > The” > ; ####

(5)by striking “ herein;

(5)bidding ” and inserting “ under this section ”. > > ### “(f) Bidding Systems > > Bidding” > ; ####

(6)by striking “ 629);

(6)lease ” and inserting “ 629) ”. > > ### “(g) Geological Structures > > Lease” > ; ####

(7)by striking “ structures;

(7)the ” and inserting “ structures ”. > > ### “(h) Size of Lease Tracts > > The” > ; ####

(8)by striking “ Secretary;

(8)” and all that follows through “ Drilling, production, ” and inserting “ Secretary ”. > > ### “(i) Terms > > > #### “(1) In general > > Each lease shall be issued for an initial period of not more than 10 years, and shall be extended for so long thereafter as oil or gas is produced from the lease in paying quantities, oil or gas is capable of being produced in paying quantities, or drilling or reworking operations, as approved by the Secretary, are conducted on the leased land. > > > #### “(2) Renewal of leases with discoveries > > At the end of the primary term of a lease the Secretary shall renew for an additional 10-year term a lease that does not meet the requirements of paragraph

(1)if the lessee submits to the Secretary an application for renewal not later than 60 days before the expiration of the primary lease and the lessee certifies, and the Secretary agrees, that hydrocarbon resources were discovered on one or more wells drilled on the leased land in such quantities that a prudent operator would hold the lease for potential future development. > > > #### “(3) Renewal of leases without discoveries > > At the end of the primary term of a lease the Secretary shall renew for an additional 10-year term a lease that does not meet the requirements of paragraph

(1)if the lessee submits to the Secretary an application for renewal not later than 60 days before the expiration of the primary lease and pays the Secretary a renewal fee of $100 per acre of leased land, and— > > > ##### “(A) > > the lessee provides evidence, and the Secretary agrees that, the lessee has diligently pursued exploration that warrants continuation with the intent of continued exploration or future potential development of the leased land; or > > > ##### “(B) > > all or part of the lease— > > > ###### “(i) > > is part of a unit agreement covering a lease described in subparagraph (A); and > > > ###### “(ii) > > has not been previously contracted out of the unit. > > > #### “(4) Applicability > > This subsection applies to a lease that is in effect on or after the date of enactment of the Energy Policy Act of 2005. > > > #### “(5) Expiration for failure to produce > > Notwithstanding any other provision of this Act, if no oil or gas is produced from a lease within 30 years after the date of the issuance of the lease the lease shall expire. > > > #### “(6) Termination > > No lease issued under this section covering lands capable of producing oil or gas in paying quantities shall expire because the lessee fails to produce the same due to circumstances beyond the control of the lessee. > > > ### “(j) Unit Agreements > > > #### “(1) In general > > For the purpose of conservation of the natural resources of all or part of any oil or gas pool, field, reservoir, or like area, lessees (including representatives) of the pool, field, reservoir, or like area may unite with each other, or jointly or separately with others, in collectively adopting and operating under a unit agreement for all or part of the pool, field, reservoir, or like area (whether or not any other part of the oil or gas pool, field, reservoir, or like area is already subject to any cooperative or unit plan of development or operation), if the Secretary determines the action to be necessary or advisable in the public interest. In determining the public interest, the Secretary should consider, among other things, the extent to which the unit agreement will minimize the impact to surface resources of the leases and will facilitate consolidation of facilities. > > > #### “(2) Consultation > > In making a determination under paragraph (1), the Secretary shall consult with and provide opportunities for participation by the State of Alaska or a Regional Corporation (as defined in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602)) with respect to the creation or expansion of units that include acreage in which the State of Alaska or the Regional Corporation has an interest in the mineral estate. > > > #### “(3) Production allocation methodology > > > #####

(A)> > The Secretary may use a production allocation methodology for each participating area within a unit that includes solely Federal land in the Reserve. > > > ##### “(B) > > The Secretary shall use a production allocation methodology for each participating area within a unit that includes Federal land in the Reserve and non-Federal land based on the characteristics of each specific oil or gas pool, field, reservoir, or like area to take into account reservoir heterogeneity and area variation in reservoir producibility across diverse leasehold interests. The implementation of the foregoing production allocation methodology shall be controlled by agreement among the affected lessors and lessees. > > > #### “(4) Benefit of operations > > Drilling, production,” > ; ####

(9)by striking “ When separate ” and inserting the following: > > #### “(5) Pooling > > If separate” > ; ####

(10)by inserting “(in consultation with the owners of the other land)” after “determined by the Secretary of the Interior”; ####

(11)by striking “ thereto;

(10)to ” and all that follows through “ the terms provided therein ” and inserting ``to the agreement. > > ### “(k) Exploration Incentives > > > #### “(1) In general > > > ##### “(A) Waiver, suspension, or reduction > > To encourage the greatest ultimate recovery of oil or gas or in the interest of conservation, the Secretary may waive, suspend, or reduce the rental fees or minimum royalty, or reduce the royalty on an entire leasehold (including on any lease operated pursuant to a unit agreement), whenever (after consultation with the State of Alaska and the North Slope Borough of Alaska and the concurrence of any Regional Corporation for leases that include land that was made available for acquisition by the Regional Corporation under the provisions of section 1431(o) of the Alaska National Interest Lands Conservation Act (16 U.S.C. 3101 et seq.)) in the judgment of the Secretary it is necessary to do so to promote development, or whenever in the judgment of the Secretary the leases cannot be successfully operated under the terms provided therein. > > > ##### “(B) Applicability > > This paragraph applies to a lease that is in effect on or after the date of enactment of the Energy Policy Act of 2005.” > ; ####

(12)by striking “ The Secretary is authorized to ” and inserting the following: > > #### “(2) Suspension of operations and production > > The Secretary may” > ; ####

(13)by striking “ In the event ” and inserting the following: > > #### “(3) Suspension of payments > > If” > ; ####

(14)by striking “ thereto; and

(11)all ” and inserting ``to the lease. > > ###### “(l) Receipts > > All” > ; ####

(15)by redesignating subparagraphs (A), (B), and

(C)as paragraphs (1), (2), and (3), respectively; ####

(16)by striking “ Any agency ” and inserting the following: > > ### “(m) Explorations > > Any agency” > ; ####

(17)by striking “ Any action ” and inserting the following: > > ### “(n) Environmental Impact Statements > > > #### “(1) Judicial review > > Any action” > ; ####

(18)by striking “ The detailed ” and inserting the following: > > #### “(2) Initial lease sales > > The detailed” > ; ####

(19)by striking “section 104(b) of the Naval Petroleum Reserves Production Act of 1976 (90 Stat. 304; 42 U.S.C. 6504)” and inserting “section 104(a)”; and ####

(20)by adding at the end the following: > > ### “(o) Regulations > > As soon as practicable after the date of enactment of the Energy Policy Act of 2005, the Secretary shall issue regulations to implement this section. > > > ### “(p) Waiver of Administration for Conveyed Lands > > > #### “(1) In general > > Notwithstanding section 14(g) of the Alaska Native Claims Settlement Act (43 U.S.C. 1613(g))— > > > ##### “(A) > > the Secretary of the Interior shall waive administration of any oil and gas lease to the extent that the lease covers any land in the Reserve in which all of the subsurface estate is conveyed to the Arctic Slope Regional Corporation (referred to in this subsection as the ‘Corporation’); > > > ##### “(B) > > > ######

(i)> > in a case in which a conveyance of a subsurface estate described in subparagraph

(A)does not include all of the land covered by the oil and gas lease, the person that owns the subsurface estate in any particular portion of the land covered by the lease shall be entitled to all of the revenues reserved under the lease as to that portion, including, without limitation, all the royalty payable with respect to oil or gas produced from or allocated to that portion; > > > ###### “(ii) > > in a case described in clause (i), the Secretary of the Interior shall— > > > ###### “(I) > > segregate the lease into 2 leases, 1 of which shall cover only the subsurface estate conveyed to the Corporation; and > > > ###### “(II) > > waive administration of the lease that covers the subsurface estate conveyed to the Corporation; and > > > ###### “(iii) > > the segregation of the lease described in clause (ii)(I) has no effect on the obligations of the lessee under either of the resulting leases, including obligations relating to operations, production, or other circumstances (other than payment of rentals or royalties); and > > > ##### “(C) > > nothing in this subsection limits the authority of the Secretary of the Interior to manage the federally-owned surface estate within the Reserve.” > . ###

(c)Conforming Amendments Section 104 of the Naval Petroleum Reserves Production Act of 1976 (42 U.S.C. 6504) is amended— ####

(1)by striking subsection (a); and ####

(2)by redesignating subsections

(b)through

(d)as subsections

(a)through (c), respectively.

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