Competitive oil and gas leasing

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[Laws in effect as of January 3, 2006]

[CITE: 42USC6506a]

TITLE 42--THE PUBLIC HEALTH AND WELFARE

CHAPTER 78--NATIONAL PETROLEUM RESERVE IN ALASKA

Sec. 6506a. 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 undertaken pursuant to this Act shall include or provide

for such conditions, restrictions, and prohibitions as the Secretary

deems necessary or appropriate to mitigate reasonably foreseeable and

significantly adverse effects on the surface resources of the National

Petroleum Reserve in Alaska.

(c) Land use planning; BLM wilderness study

The provisions of section 1712 and section 1782 of title 43 shall

not be applicable to the Reserve.

(d) First lease sale

The; \1\ first lease sale shall be conducted within twenty months of

December 12, 1980: Provided, That the first lease sale shall be

conducted only after publication of a final environmental impact

statement if such is deemed necessary under the provisions of the

National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

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\1\ So in original.

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(e) Withdrawals

The withdrawals established by section 6502 of this title are

rescinded for the purposes of the oil and gas leasing program authorized

under this section.

(f) Bidding systems

Bidding systems used in lease sales shall be based on bidding

systems included in section 205(a)(1)(A) through (H) \2\ of the Outer

Continental Shelf Lands Act Amendments of 1978 (92 Stat. 629).

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\2\ See References in Text note below.

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(g) Geological structures

Lease tracts may encompass identified geological structures.

(h) Size of lease tracts

The size of lease tracts may be up to sixty thousand acres, as

determined by the 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

August 8, 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

1602 of title 43) 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, and well reworking operations performed in

accordance with a unit agreement shall be deemed to be performed for

the benefit of all leases that are subject in whole or in part to

such unit agreement.

(5) Pooling

If separate tracts cannot be independently developed and

operated in conformity with an established well spacing or

development program, any lease, or a portion thereof, may be pooled

with other lands, whether or not owned by the United States, under a

communitization or drilling agreement providing for an apportionment

of production or royalties among the separate tracts of land

comprising the drilling or spacing unit when determined by the

Secretary of the Interior (in consultation with the owners of the

other land) to be in the public interest, and operations or

production pursuant to such an agreement shall be deemed to be

operations or production as to each such lease committed 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) 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 August 8, 2005..\1\

(2) Suspension of operations and production

The Secretary may direct or assent to the suspension of

operations and production on any lease or unit.

(3) Suspension of payments

If the Secretary, in the interest of conservation, shall direct

or assent to the suspension of operations and production on any

lease or unit, any payment of acreage rental or minimum royalty

prescribed by such lease or unit likewise shall be suspended during

the period of suspension of operations and production, and the term

of such lease shall be extended by adding any such suspension period

to the lease.

(l) Receipts

All receipts from sales, rentals, bonuses, and royalties on leases

issued pursuant to this section shall be paid into the Treasury of the

United States: Provided, That 50 percent thereof shall be paid by the

Secretary of the Treasury semiannually, as soon thereafter as

practicable after March 30 and September 30 each year, to the State of

Alaska for: (1) planning; (2) construction, maintenance, and operation

of essential public facilities; and (3) other necessary provisions of

public service: Provided further, That in the allocation of such funds,

the State shall give priority to use by subdivisions of the State most

directly or severely impacted by development of oil and gas leased under

this Act.

(m) Explorations

Any agency of the United States and any person authorized by the

Secretary may conduct geological and geophysical explorations in the

National Petroleum Reserve in Alaska which do not interfere with

operations under any contract maintained or granted previously. Any

information acquired in such explorations shall be subject to the

conditions of 43 U.S.C. 1352(a)(1)(A).

(n) Environmental impact statements

(1) Judicial review

Any action seeking judicial review of the adequacy of any

program or site-specific environmental impact statement under

section 102 of the National Environmental Policy Act of 1969 (42

U.S.C. 4332) concerning oil and gas leasing in the National

Petroleum Reserve-Alaska shall be barred unless brought in the

appropriate District Court within 60 days after notice of the

availability of such statement is published in the Federal Register.

(2) Initial lease sales

The detailed environmental studies and assessments that have

been conducted on the exploration program and the comprehensive

land-use studies carried out in response to sections \3\ 6505(b) and

(c) of this title shall be deemed to have fulfilled the requirements

of section 102(2)(c) \4\ of the National Environmental Policy Act

(Public Law 91-190) [42 U.S.C. 4332(2)(C)], with regard to the first

two oil and gas lease sales in the National Petroleum Reserve-

Alaska: Provided, That not more than a total of 2,000,000 acres may

be leased in these two sales: Provided further, That any exploration

or production undertaken pursuant to this section shall be in

accordance with section 6504(a) of this title.

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\3\ So in original. Probably should be ``section''.

\4\ So in original. Probably should be ``102(2)(C)''.

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(o) Regulations

As soon as practicable after August 8, 2005, the Secretary shall

issue regulations to implement this section.

(p) Waiver of administration for conveyed lands

(1) In general

Notwithstanding section 1613(g) of title 43--

(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.

(Pub. L. 94-258, title I, Sec. 107, formerly Pub. L. 96-514, title I,

Dec. 12, 1980, 94 Stat. 2964; Pub. L. 98-620, title IV, Sec. 402(41),

Nov. 8, 1984, 98 Stat. 3360; Pub. L. 105-83, title I, Sec. 128, Nov. 14,

1997, 111 Stat. 1568; renumbered Pub. L. 94-258, title I, Sec. 107, and

amended Pub. L. 109-58, title III, Sec. 347(a)(2), (b), Aug. 8, 2005,

119 Stat. 704.)

References in Text

This Act, referred to in subsecs. (a), (b), (i)(5), and (l) is Pub.

L. 94-258, Apr. 5, 1976, 90 Stat. 303, known as the Naval Petroleum

Reserves Production Act of 1976, which enacted this chapter and section

7420 of Title 10, Armed Forces, and amended section 6244 of this title

and sections 7421 to 7436 and 7438 of Title 10. For complete

classification of this Act to the Code, see Short Title note set out

under section 6501 of this title and Tables.

December 12, 1980, referred to in subsec. (d), was in the original

``the date of enactment of this Act'', which was translated as meaning

the date of enactment of Pub. L. 96-514, which enacted this section, to

reflect the probable intent of Congress.

The National Environmental Policy Act of 1969, referred to in

subsec. (d), is Pub. L. 91-190, Jan. 1, 1970, 83 Stat. 852, as amended,

which is classified generally to chapter 55 (Sec. 4321 et seq.) of this

title. For complete classification of this Act to the Code, see Short

Title note set out under section 4321 of this title and Tables.

Section 205(a)(1)(A) through (H) of the Outer Continental Shelf

Lands Act Amendments of 1978, referred to in subsec. (f), probably

should have been a reference to section 8(a)(1)(A) through (H) of the

Outer Continental Shelf Lands Act (act Aug. 7, 1953, ch. 345), as

amended by section 205(a) of the Outer Continental Shelf Lands Act

Amendments of 1978 (Pub. L. 95-372), which is classified to section

1337(a)(1)(A)-(H) of Title 43, Public Lands. Subpar. (H) of section

8(a)(1) of act Aug. 7, 1953, was redesignated subpar. (I) and a new

subpar. (H) was added by Pub. L. 104-58, title III, Sec. 303, Nov. 28,

1995, 109 Stat. 565.

Section 1431(o) of the Alaska National Interest Lands Conservation

Act, referred to in subsec. (k)(1)(A), is section 1431(o) of title XIV

of Pub. L. 96-487, Dec. 2, 1980, 94 Stat. 2542, which was not classified

to the Code.

Codification

Section, which consisted of the matter under the heading

``Exploration of National Petroleum Reserve in Alaska'' in title I of

Pub. L. 96-514, as amended, prior to being renumbered section 107 of

Pub. L. 94-258, was formerly classified to section 6508 of this title.

Prior Provisions

A prior section 107 of Pub. L. 94-258 was renumbered 108 and is

classified to section 6507 of this title.

Amendments

2005--Pub. L. 109-58 amended section catchline and revised and

restructured text into subsecs. (a) to (p). Amendments by Pub. L. 109-

58, Sec. 347(b)(2) to (7), were executed by disregarding the second set

of closed quotation marks in each such paragraph to reflect the probable

intent of Congress. Prior to amendment, text related to competitive

leasing of oil and gas and consisted of four undesignated pars.

1997--Pub. L. 105-83, in first par., substituted cls. (8) to (11)

and two concluding provisos for ``(8) each lease shall be issued for an

initial period of up to ten years, and shall be extended for so long

thereafter as oil or gas is produced from the lease in paying

quantities, or as drilling or reworking operations, as approved by the

Secretary, are conducted thereon; and (9) all receipts from sales,

rentals, bonuses, and royalties on leases issued pursuant to this Act

shall be paid into the Treasury of the United States: Provided, That 50

per centum thereof shall be paid by the Secretary of the Treasury

semiannually, as soon as practicable after March 30 and September 30

each year, to the State of Alaska for (a) planning, (b) construction,

maintenance, and operation of essential public facilities, and (c) other

necessary provisions of public service: Provided further, That in the

allocation of such funds, the State shall give priority to use by

subdivisions of the State most directly or severely impacted by

development of oil and gas leased under this Act.''

1984--Pub. L. 98-620 struck out provision in third par. that

required that any proceeding on such action be assigned for hearing at

the earliest possible date and be expedited by the Court.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98-620 not applicable to cases pending on Nov.

8, 1984, see section 403 of Pub. L. 98-620, set out as an Effective Date

note under section 1657 of Title 28, Judiciary and Judicial Procedure.