§15902 Program on Oil and Gas Royalties In-kind

Summary

The Secretary can require royalty payments as actual oil or gas (called “royalty in-kind”) for any federal oil or gas lease or permit starting August 8, 2005. If the Secretary takes oil or gas instead of money, delivery of the right amount and quality counts as payment. “In marketable condition” means the oil or gas is clean enough and meets normal sales standards. The lessee must make the royalty marketable at no cost to the United States. Transportation and processing charges paid to the lessee can be reviewed. The Secretary may sell, transport, or process in-kind royalties and may use a share of the sale revenues to pay those costs and some program administration costs, but not general federal personnel or travel costs except for administration directly tied to the in-kind program. The Secretary must only take royalties in-kind if it gives benefits at least equal to taking money instead. If a lessee processes or delivers royalty oil or gas off the lease, the Secretary must reimburse reasonable transportation (not gathering) or processing costs, or allow the lessee to deduct those costs when reporting royalties elsewhere. The Secretary must deduct these costs before sharing revenues and deposit the deductions to the Treasury. The Secretary must consult with affected States, may let a State manage parts of the program, and must meet with each State yearly to try to ensure the State gets equal or better revenues than if royalties were taken in money. The Secretary may give sale preferences to small refineries short on crude, may sell onshore royalty to federal agencies at no less than market price, and may favor uses that help federal low-income energy programs (with a report to Congress due 3 years after August 8, 2005). At the Defense Secretary’s request, the Secretary must take in-kind gas from leases on the McAlester Army Ammunition Plant and sell it to the Department of Defense only for that plant’s energy resilience needs.