'Crucial' Legislation Passes Senate

The Royalty Resiliency Act, also known as H.R. 7377, passed the Senate without amendment by unanimous consent last week, the Congress.gov website showed.

The bill is sponsored by Congressman Wesley Hunt, was introduced in the House in February, and was received in the Senate in July, the site highlighted. It must now go to the president to become law, the site outlined.

A summary statement on the Congress site notes that the bill modifies the process under which oil and gas leaseholders who have entered into certain joint drilling agreements to drill wells on leased land pay royalties to the Department of the Interior under the Federal Oil and Gas Royalty Management Act of 1982.

“Under current law, Interior must issue a determination of allocations of royalty payments for oil and gas production under a joint agreement within 120 days of a request for determination,” the summary states.

“Generally, the first leaseholder to drill must pay any royalties due to Interior for all oil and gas production on the land subject to the agreement until Interior determines the royalty allocations of each leaseholder,” it adds.

“If Interior fails to issue the determination by that deadline, then it must waive interest due on royalty obligations until the end of the month following the month in which the determination was made,” it continues.

Under the bill, a leaseholder must pay royalties on oil and gas production based on the lessee's proposed allocation of production under the joint agreement until Interior issues a determination of royalty allocations, the summary statement on the Congress site notes.

“After Interior issues the determination, then the lessee must correct, if necessary, the amount of royalties paid by the end of the third month following the month in which the lessee received the determination from Interior,” it adds.

“Subject to the full and timely payment of monthly royalties in accordance with the agreement, Interior must waive interest due on royalty obligations until the end of the third month,” it continues.  

In a release sent to Rigzone by the American Exploration & Production Council (AXPC) recently, AXPC CEO Anne Bradbury said, “the Royalty Resiliency Act is a crucial piece of legislation to help restore commonsense policy to the management of our federal resources for oil and natural gas development”.

“This bill stops the initial overcharging of royalties when the government fails to meet its own statutory deadlines for such royalty allocation agreements, while maintaining assurance that taxpayers still receive the full benefit for the development of these publicly owned resources,” Bradbury added.

“Energy companies then can reinvest capital and resources to expand energy projects, hire additional employees, and contribute more to their communities and the American economy,” Bradbury continued.

In the release, the AXPC CEO said energy projects take years, not weeks or months, of planning, and noted that predictable and transparent capital allocation is critical to laying the groundwork for efficient development today and for future projects.

“The modern American energy economy demands smart, responsible use of our federal energy resources and this legislation does just that,” Bradbury added.

“The Royalty Resiliency Act, coupled with broader permitting reform being discussed in the Senate and House, will only spur American energy security and promote American economic growth,” Bradbury continued.

“We commend Rep. Wesley Hunt’s leadership on this issue, as well as bipartisan efforts in the House and Senate, and we look forward to President Biden signing the Royalty Resiliency Act into law to help ensure that American-produced energy can continue to help our economy, strengthen our national security, and advance global emissions reduction goals,” Bradbury went on to state.

Rigzone has contacted the Department of the Interior and the White House for comment on the Senate passage of the Royalty Resiliency Act and the AXPC’s release. At the time of writing, neither department has responded to Rigzone’s request yet.

The AXPC describes itself as the national trade association that represents the leading independent oil and natural gas exploration and production companies in the United States.

“Our member companies represent 50 percent of the nation’s oil production and more than 50 percent of its natural gas production,” the AXPC release noted.

To contact the author, email andreas.exarheas@rigzone.com