Energy Policy Act of 2005.--The Secretary shall by regulation establish
transition rules for leases issued before the date of the enactment of
this subsection, including terms under which a lease that is near the
end of its term on the date of enactment of this subsection may be
extended for up to 2 years--
            ``(1) to allow achievement of production under the lease; or
            ``(2) to allow the lease to be included in a producing unit.

    ``(e) Geothermal Lease Overlying Mining Claim.--
            ``(1) Exemption.--The lessee for a geothermal lease of an
        area overlying an area subject to a mining claim for which a
        plan of operations has been approved by the relevant Federal
        land management agency is exempt from annual work requirements
        established under this Act, if development of the geothermal
        resource subject to the lease would interfere with the mining
        operations under such claim.
            ``(2) Termination of exemption.--An exemption under this
        paragraph expires upon the termination of the mining operations.

    ``(f) Termination of Application of Requirements.--Minimum work
requirements prescribed under this section shall not apply to a
geothermal lease after the date on which the geothermal resource is
utilized under the lease in commercial quantities.''.

SEC. 232. ADVANCED ROYALTIES REQUIRED FOR CESSATION OF PRODUCTION.

    Section 5 of the Geothermal Steam Act of 1970 (30 U.S.C. 1004) (as
amended by sections 223, 224, and 230) is further amended by adding at
the end the following:
    ``(f) Advanced Royalties Required for Cessation of Production.--
            ``(1) In general.--Subject to paragraphs (2) and (3), if, at
        any time after commercial production under a lease is achieved,
        production ceases for any reason, the lease shall remain in full
        force and effect for a period of not more than

[[Page 119 STAT. 670]]

        an aggregate number of 10 years beginning on the date production
        ceases, if, during the period in which production is ceased, the
        lessee pays royalties in advance at the monthly average rate at
        which the royalty was paid during the period of production.
            ``(2) Reduction.--The amount of any production royalty paid
        for any year shall be reduced (but not below 0) by the amount of
        any advanced royalties paid under the lease to the extent that
        the advance royalties have not been used to reduce production
        royalties for a prior year.
            ``(3) Exceptions.--Paragraph (1) shall not apply if the
        cessation in production is required or otherwise caused by--
                    ``(A) the Secretary;
                    ``(B) the Secretary of the Air Force;
                    ``(C) the Secretary of the Army;
                    ``(D) the Secretary of the Navy;
                    ``(E) a State or a political subdivision of a State;
                or
                    ``(F) a force majeure.''.

SEC. 233. ANNUAL RENTAL.

    (a) Annual Rental Rate.--Section 5 of the Geothermal Steam Act of
1970 (30 U.S.C. 1004) (as amended by section 223(a)) is further amended
in subsection (a) by striking paragraph (3) and inserting the following:
            ``(3) payment in advance of an annual rental of not less
        than--
                    ``(A) for each of the 1st through 10th years of the
                lease--
                          ``(i) in the case of a lease awarded in a
                      noncompetitive lease sale, $1 per acre or fraction
                      thereof; or
                          ``(ii) in the case of a lease awarded in a
                      competitive lease sale, $2 per acre or fraction
                      thereof for the 1st year and $3 per acre or
                      fraction thereof for each of the 2nd through 10th
                      years; and
                    ``(B) for each year after the 10th year of the
                lease, $5 per acre or fraction thereof;''.

    (b) Termination of Lease for Failure to Pay Rental.--Section 5 of
the Geothermal Steam Act of 1970 (30 U.S.C. 1004) (as amended by
sections 223, 224, 230, and 232) is further amended by adding at the end
the following:
    ``(g) Termination of Lease for Failure to Pay Rental.--
            ``(1) In general.--The Secretary shall terminate any lease
        with respect to which rental is not paid in accordance with this
        Act and the terms of the lease under which the rental is
        required, on the expiration of the 45-day period beginning on
        the date of the failure to pay the rental.
            ``(2) Notification.--The Secretary shall promptly notify a
        lessee that has not paid rental required under the lease that
        the lease will be terminated at the end of the period referred
        to in paragraph (1).
            ``(3) Reinstatement.--A lease that would otherwise terminate
        under paragraph (1) shall not terminate under that paragraph if
        the lessee pays to the Secretary, before the end of the period
        referred to in paragraph (1), the amount of rental due plus a
        late fee equal to 10 percent of the amount.''.

[[Page 119 STAT. 671]]

SEC. 234. <<NOTE: 42 USC 15873.>> DEPOSIT AND USE OF GEOTHERMAL LEASE
            REVENUES FOR 5 FISCAL YEARS.

    (a) Deposit of Geothermal Resources Leases.--Notwithstanding any
other provision of law, amounts received by the United States in the
first 5 fiscal years beginning after the date of enactment of this Act
as rentals, royalties, and other payments required under leases under
the Geothermal Steam Act of 1970, excluding funds required to be paid to
State and county governments, shall be deposited into a separate account
in the Treasury.
    (b) Use of Deposits.--Amounts deposited under subsection (a) shall
be available to the Secretary of the Interior for expenditure, without
further appropriation and without fiscal year limitation, to implement
the Geothermal Steam Act of 1970 and this Act.
    (c) Transfer of Funds.--For the purposes of coordination and
processing of geothermal leases and geothermal use authorizations on
Federal land the Secretary of the Interior may authorize the expenditure
or transfer of such funds as are necessary to the Forest Service.

SEC. 235. ACREAGE LIMITATIONS.

    Section 7 of the Geothermal Steam Act of 1970 (30 U.S.C. 1006) is
amended--
            (1) by striking ``sec. 7.'', and by inserting immediately
        before and above the first paragraph the following:

``SEC. 7. ACREAGE LIMITATIONS.'';

            (2) in the first paragraph--
                    (A) by striking ``two thousand five hundred and
                sixty acres'' and inserting ``5,120 acres''; and
                    (B) by striking ``twenty thousand four hundred and
                eighty acres'' and inserting ``51,200 acres''; and
            (3) by striking the second paragraph.

SEC. 236. TECHNICAL AMENDMENTS.

    The Geothermal Steam Act of 1970 (30 U.S.C. 1001 et seq.) is further
amended as follows:
            (1) <<NOTE: 30 USC 1001, 1002, 1005, 1020, 1022, 1024-
        1026.>> By striking ``geothermal steam and associated geothermal
        resources'' each place it appears and inserting ``geothermal
        resources''.
            (2) Section 2 (30 U.S.C. 1001) is amended by adding at the
        end the following:
            ``(g) `direct use' means utilization of geothermal resources
        for commercial, residential, agricultural, public facilities, or
        other energy needs other than the commercial production of
        electricity; and''.
            (3) Section 21 (30 U.S.C. 1020) is amended by striking ``(a)
        Within one hundred'' and all that follows through ``(b)
        Geothermal'' and inserting ``Geothermal''.
            (4) The first section (30 U.S.C. 1001 note) is amended by
        striking ``That this'' and inserting the following:

``SEC. 1. SHORT TITLE.

    ``This''.
            (5) Section 2 (30 U.S.C. 1001) is amended by striking ``sec.
        2.  As'' and inserting the following:

``SEC. 2. DEFINITIONS.

    ``As''.

[[Page 119 STAT. 672]]

            (6) Section 3 (30 U.S.C. 1002) is amended by striking ``sec.
        3. Subject'' and inserting the following:

``SEC. 3. LANDS SUBJECT TO GEOTHERMAL LEASING.

    ``Subject''.
            (7) Section 5 (30 U.S.C. 1004) is further amended by
        striking ``sec. 5.'', and by inserting immediately before and
        above subsection (a) the following:

``SEC. 5. RENTS AND ROYALTIES.''.

            (8) Section 8 (30 U.S.C. 1007) is amended by striking ``sec.
        8. (a) The'' and inserting the following:

``SEC. 8. READJUSTMENT OF LEASE TERMS AND CONDITIONS.

    ``(a) The''.
            (9) Section 9 (30 U.S.C. 1008) is amended by striking ``sec.
        9. If'' and inserting the following:

``SEC. 9. BYPRODUCTS.

    ``If''.
            (10) Section 10 (30 U.S.C. 1009) is amended by striking
        ``sec. 10. The'' and inserting the following:

``SEC. 10. RELINQUISHMENT OF GEOTHERMAL RIGHTS.

    ``The''.
            (11) Section 11 (30 U.S.C. 1010) is amended by striking
        ``sec. 11. The'' and inserting the following:

``SEC. 11. SUSPENSION OF OPERATIONS AND PRODUCTION.

    ``The''.
            (12) Section 12 (30 U.S.C. 1011) is amended by striking
        ``sec. 12. Leases'' and inserting the following:

``SEC. 12. TERMINATION OF LEASES.

    ``Leases''.
            (13) Section 13 (30 U.S.C. 1012) is amended by striking
        ``sec. 13. The'' and inserting the following:

``SEC. 13. WAIVER, SUSPENSION, OR REDUCTION OF RENTAL OR ROYALTY.

    ``The''.
            (14) Section 14 (30 U.S.C. 1013) is amended by striking
        ``sec. 14. Subject'' and inserting the following:

``SEC. 14. SURFACE LAND USE.

    ``Subject''.
            (15) Section 15 (30 U.S.C. 1014) is amended by striking
        ``sec. 15. (a) Geothermal'' and inserting the following:

``SEC. 15. LANDS SUBJECT TO GEOTHERMAL LEASING.

    ``(a) Geothermal''.
            (16) Section 16 (30 U.S.C. 1015) is amended by striking
        ``sec. 16. Leases'' and inserting the following:

``SEC. 16. REQUIREMENT FOR LESSEES.

    ``Leases''.
            (17) Section 17 (30 U.S.C. 1016) is amended by striking
        ``sec. 17. Administration'' and inserting the following:

[[Page 119 STAT. 673]]

``SEC. 17. ADMINISTRATION.

    ``Administration''.
            (18) Section 19 (30 U.S.C. 1018) is amended by striking
        ``sec. 19. Upon'' and inserting the following:

``SEC. 19. DATA FROM FEDERAL AGENCIES.

    ``Upon''.
            (19) Section 21 (30 U.S.C. 1020) is further amended by
        striking ``sec. 21.'', and by inserting immediately before and
        above the remainder of that section the following:

``SEC. 21. PUBLICATION IN FEDERAL REGISTER; RESERVATION OF MINERAL
            RIGHTS.''.

            (20) Section 22 (30 U.S.C. 1021) is amended by striking
        ``sec. 22. Nothing'' and inserting the following:

``SEC. 22. FEDERAL EXEMPTION FROM STATE WATER LAWS.

    ``Nothing''.
            (21) Section 23 (30 U.S.C. 1022) is amended by striking
        ``sec. 23. (a) All'' and inserting the following:

``SEC. 23. PREVENTION OF WASTE; EXCLUSIVITY.

    ``(a) All''.
            (22) Section 24 (30 U.S.C. 1023) is amended by striking
        ``sec. 24. The'' and inserting the following:

``SEC. 24. RULES AND REGULATIONS.

    ``The''.
            (23) Section 25 (30 U.S.C. 1024) is amended by striking
        ``sec. 25. As'' and inserting the following:

``SEC. 25. INCLUSION OF GEOTHERMAL LEASING UNDER CERTAIN OTHER LAWS.

    ``As''.
            (24) Section 26 <<NOTE: 30 USC 530.>> is amended by striking
        ``sec. 26. The'' and inserting the following:

``SEC. 26. AMENDMENT.

    ``The''.
            (25) Section 27 (30 U.S.C. 1025) is amended by striking
        ``sec. 27. The'' and inserting the following:

``SEC. 27. FEDERAL RESERVATION OF CERTAIN MINERAL RIGHTS.

    ``The''.
            (26) Section 28 (30 U.S.C. 1026) is amended by striking
        ``sec. 28. (a)(1) The'' and inserting the following:

``SEC. 28. SIGNIFICANT THERMAL FEATURES.

    ``(a)(1) The''.
            (27) Section 29 (30 U.S.C. 1027) is amended by striking
        ``sec. 29. The'' and inserting the following:

``SEC. 29. LAND SUBJECT TO PROHIBITION ON LEASING.

    ``The''.

SEC. 237. INTERMOUNTAIN WEST GEOTHERMAL CONSORTIUM.

    (a) Participation Authorized.--The Secretary, acting through the
Idaho National Laboratory, may participate in a consortium described in
subsection (b) to address science and science policy

[[Page 119 STAT. 674]]

issues surrounding the expanded discovery and use of geothermal energy,
including from geothermal resources on public lands.
    (b) Members.--The <<NOTE: Establishment.>> consortium referred to in
subsection (a) shall--
            (1) be known as the ``Intermountain West Geothermal
        Consortium'';
            (2) be a regional consortium of institutions and government
        agencies that focuses on building collaborative efforts among
        the universities in the State of Idaho, other regional
        universities, State agencies, and the Idaho National Laboratory;
            (3) include Boise State University, the University of Idaho
        (including the Idaho Water Resources Research Institute), the
        Oregon Institute of Technology, the Desert Research Institute
        with the University and Community College System of Nevada, and
        the Energy and Geoscience Institute at the University of Utah;
            (4) be hosted and managed by Boise State University; and
            (5) have a director appointed by Boise State University, and
        associate directors appointed by each participating institution.

    (c) Financial Assistance.--The Secretary, acting through the Idaho
National Laboratory and subject to the availability of appropriations,
will provide financial assistance to Boise State University for
expenditure under contracts with members of the consortium to carry out
the activities of the consortium.

                        Subtitle C--Hydroelectric

SEC. 241. ALTERNATIVE CONDITIONS AND FISHWAYS.

    (a) Federal Reservations.--Section 4(e) of the Federal Power Act (16
U.S.C. 797(e)) is amended by inserting after ``adequate protection and
utilization of such reservation.'' at the end of the first proviso the
following: ``The license applicant and any party to the proceeding shall
be entitled to a determination on the record, after opportunity for an
agency trial-type hearing of no more than 90 days, on any disputed
issues of material fact with respect to such conditions. All disputed
issues of material fact raised by any party shall be determined in a
single trial-type hearing to be conducted by the relevant resource
agency in accordance with the regulations promulgated under this
subsection and within the time frame established by the Commission for
each license proceeding.
Within <<NOTE: Deadline. Regulations. Procedures.>> 90 days of the date
of enactment of the Energy Policy Act of 2005, the Secretaries of the
Interior, Commerce, and Agriculture shall establish jointly, by rule,
the procedures for such expedited trial-type hearing, including the
opportunity to undertake discovery and cross-examine witnesses, in
consultation with the Federal Energy Regulatory Commission.''.

    (b) Fishways.--Section 18 of the Federal Power Act (16 U.S.C. 811)
is amended by inserting after ``and such fishways as may be prescribed
by the Secretary of Commerce.'' the <<NOTE: Deadline.>> following: ``The
license applicant and any party to the proceeding shall be entitled to a
determination on the record, after opportunity for an agency trial-type
hearing of no more than 90 days, on any disputed issues of material fact
with respect to such fishways. All disputed issues of material fact
raised by any party shall be determined in a

[[Page 119 STAT. 675]]

single trial-type hearing to be conducted by the relevant resource
agency in accordance with the regulations promulgated under this
subsection and within the time frame established by the Commission for
each license
proceeding. <<NOTE: Deadline. Regulations. Procedures.>> Within 90 days
of the date of enactment of the Energy Policy Act of 2005, the
Secretaries of the Interior, Commerce, and Agriculture shall establish
jointly, by rule, the procedures for such expedited trial-type hearing,
including the opportunity to undertake discovery and cross-examine
witnesses, in consultation with the Federal Energy Regulatory
Commission.''.

    (c) Alternative Conditions and Prescriptions.--Part I of the Federal
Power Act (16 U.S.C. 791a et seq.) is amended by adding the following
new section at the end thereof:

``SEC. 33. <<NOTE: 16 USC 823d.>> ALTERNATIVE CONDITIONS AND
            PRESCRIPTIONS.

    ``(a) Alternative Conditions.--(1) Whenever any person applies for a
license for any project works within any reservation of the United
States, and the Secretary of the department under whose supervision such
reservation falls (referred to in this subsection as the `Secretary')
deems a condition to such license to be necessary under the first
proviso of section 4(e), the license applicant or any other party to the
license proceeding may propose an alternative condition.
    ``(2) Notwithstanding the first proviso of section 4(e), the
Secretary shall accept the proposed alternative condition referred to in
paragraph (1), and the Commission shall include in the license such
alternative condition, if the Secretary determines, based on substantial
evidence provided by the license applicant, any other party to the
proceeding, or otherwise available to the Secretary, that such
alternative condition--
            ``(A) provides for the adequate protection and utilization
        of the reservation; and
            ``(B) will either, as compared to the condition initially by
        the Secretary--
                    ``(i) cost significantly less to implement; or
                    ``(ii) result in improved operation of the project
                works for electricity production.

    ``(3) In making a determination under paragraph (2), the Secretary
shall consider evidence provided for the record by any party to a
licensing proceeding, or otherwise available to the Secretary, including
any evidence provided by the Commission, on the implementation costs or
operational impacts for electricity production of a proposed
alternative.
    ``(4) <<NOTE: Public information. Records.>> The Secretary concerned
shall submit into the public record of the Commission proceeding with
any condition under section 4(e) or alternative condition it accepts
under this section, a written statement explaining the basis for such
condition, and reason for not accepting any alternative condition under
this section. The written statement must demonstrate that the Secretary
gave equal consideration to the effects of the condition adopted and
alternatives not accepted on energy supply, distribution, cost, and use;
flood control; navigation; water supply; and air quality (in addition to
the preservation of other aspects of environmental quality); based on
such information as may be available to the Secretary, including
information voluntarily provided in a timely manner by the applicant and
others. The Secretary shall also submit, together with the
aforementioned written statement, all studies, data, and

[[Page 119 STAT. 676]]

other factual information available to the Secretary and relevant to the
Secretary's decision.
    ``(5) If the Commission finds that the Secretary's final condition
would be inconsistent with the purposes of this part, or other
applicable law, the Commission may refer the dispute to the Commission's
Dispute Resolution Service. <<NOTE: Deadline.>> The Dispute Resolution
Service shall consult with the Secretary and the Commission and issue a
non-binding advisory within 90 days. The Secretary may accept the
Dispute Resolution Service advisory unless the Secretary finds that the
recommendation will not adequately protect the
reservation. <<NOTE: Records.>> The Secretary shall submit the advisory
and the Secretary's final written determination into the record of the
Commission's proceeding.

    ``(b) Alternative Prescriptions.--(1) Whenever the Secretary of the
Interior or the Secretary of Commerce prescribes a fishway under section
18, the license applicant or any other party to the license proceeding
may propose an alternative to such prescription to construct, maintain,
or operate a fishway.
    ``(2) Notwithstanding section 18, the Secretary of the Interior or
the Secretary of Commerce, as appropriate, shall accept and prescribe,
and the Commission shall require, the proposed alternative referred to
in paragraph (1), if the Secretary of the appropriate department
determines, based on substantial evidence provided by the license
applicant, any other party to the proceeding, or otherwise available to
the Secretary, that such alternative--
            ``(A) will be no less protective than the fishway initially
        prescribed by the Secretary; and
            ``(B) will either, as compared to the fishway initially
        prescribed by the Secretary--
                    ``(i) cost significantly less to implement; or
                    ``(ii) result in improved operation of the project
                works for electricity production.

    ``(3) In making a determination under paragraph (2), the Secretary
shall consider evidence provided for the record by any party to a
licensing proceeding, or otherwise available to the Secretary, including
any evidence provided by the Commission, on the implementation costs or
operational impacts for electricity production of a proposed
alternative.
    ``(4) <<NOTE: Public information. Records.>> The Secretary concerned
shall submit into the public record of the Commission proceeding with
any prescription under section 18 or alternative prescription it accepts
under this section, a written statement explaining the basis for such
prescription, and reason for not accepting any alternative prescription
under this section. The written statement must demonstrate that the
Secretary gave equal consideration to the effects of the prescription
adopted and alternatives not accepted on energy supply, distribution,
cost, and use; flood control; navigation; water supply; and air quality
(in addition to the preservation of other aspects of environmental
quality); based on such information as may be available to the
Secretary, including information voluntarily provided in a timely manner
by the applicant and others. The Secretary shall also submit, together
with the aforementioned written statement, all studies, data, and other
factual information available to the Secretary and relevant to the
Secretary's decision.

    ``(5) If the Commission finds that the Secretary's final
prescription would be inconsistent with the purposes of this part, or
other applicable law, the Commission may refer the dispute to the

[[Page 119 STAT. 677]]

Commission's Dispute Resolution Service. <<NOTE: Deadline.>> The Dispute
Resolution Service shall consult with the Secretary and the Commission
and issue a non-binding advisory within 90 days. The Secretary may
accept the Dispute Resolution Service advisory unless the Secretary
finds that the recommendation will not adequately protect the fish
resources. <<NOTE: Records.>> The Secretary shall submit the advisory
and the Secretary's final written determination into the record of the
Commission's proceeding.''.

SEC. 242. <<NOTE: 42 USC 15881.>> HYDROELECTRIC PRODUCTION INCENTIVES.

    (a) Incentive Payments.--For electric energy generated and sold by a
qualified hydroelectric facility during the incentive period, the
Secretary shall make, subject to the availability of appropriations,
incentive payments to the owner or operator of such facility. The amount
of such payment made to any such owner or operator shall be as
determined under subsection (e) of this section. Payments under this
section may only be made upon receipt by the Secretary of an incentive
payment application which establishes that the applicant is eligible to
receive such payment and which satisfies such other requirements as the
Secretary deems necessary. Such application shall be in such form, and
shall be submitted at such time, as the Secretary shall establish.
    (b) Definitions.--For purposes of this section:
            (1) Qualified hydroelectric facility.--The term ``qualified
        hydroelectric facility'' means a turbine or other generating
        device owned or solely operated by a non-Federal entity which
        generates hydroelectric energy for sale and which is added to an
        existing dam or conduit.
            (2) Existing dam or conduit.--The term ``existing dam or
        conduit'' means any dam or conduit the construction of which was
        completed before the date of the enactment of this section and
        which does not require any construction or enlargement of
        impoundment or diversion structures (other than repair or
        reconstruction) in connection with the installation of a turbine
        or other generating device.
            (3) Conduit.--The term ``conduit'' has the same meaning as
        when used in section 30(a)(2) of the Federal Power Act (16
        U.S.C. 823a(a)(2)).

The <<NOTE: Applicability.>> terms defined in this subsection shall
apply without regard to the hydroelectric kilowatt capacity of the
facility concerned, without regard to whether the facility uses a dam
owned by a governmental or nongovernmental entity, and without regard to
whether the facility begins operation on or after the date of the
enactment of this section.

    (c) Eligibility Window.--Payments may be made under this section
only for electric energy generated from a qualified hydroelectric
facility which begins operation during the period of 10 fiscal years
beginning with the first full fiscal year occurring after the date of
enactment of this subtitle.
    (d) Incentive Period.--A qualified hydroelectric facility may
receive payments under this section for a period of 10 fiscal years
(referred to in this section as the ``incentive period''). Such period
shall begin with the fiscal year in which electric energy generated from
the facility is first eligible for such payments.
    (e) Amount of Payment.--
            (1) In general.--Payments made by the Secretary under this
        section to the owner or operator of a qualified hydroelectric

[[Page 119 STAT. 678]]

        facility shall be based on the number of kilowatt hours of
        hydroelectric energy generated by the facility during the
        incentive period. For any such facility, the amount of such
        payment shall be 1.8 cents per kilowatt hour (adjusted as
        provided in paragraph (2)), subject to the availability of
        appropriations under subsection (g), except that no facility may
        receive more than $750,000 in 1 calendar year.
            (2) Adjustments.--The amount of the payment made to any
        person under this section as provided in paragraph (1) shall be
        adjusted for inflation for each fiscal year beginning after
        calendar year 2005 in the same manner as provided in the
        provisions of section 29(d)(2)(B) of the Internal Revenue Code
        of 1986, except that in applying such provisions the calendar
        year 2005 shall be substituted for calendar year 1979.

    (f) Sunset.--No payment may be made under this section to any
qualified hydroelectric facility after the expiration of the period of
20 fiscal years beginning with the first full fiscal year occurring
after the date of enactment of this subtitle, and no payment may be made
under this section to any such facility after a payment has been made
with respect to such facility for a period of 10 fiscal years.
    (g) Authorization of Appropriations.--There are authorized to be
appropriated to the Secretary to carry out the purposes of this section
$10,000,000 for each of the fiscal years 2006 through 2015.

SEC. 243. <<NOTE: 42 USC 15882.>> HYDROELECTRIC EFFICIENCY IMPROVEMENT.

    (a) Incentive Payments.--The Secretary shall make incentive payments
to the owners or operators of hydroelectric facilities at existing dams
to be used to make capital improvements in the facilities that are
directly related to improving the efficiency of such facilities by at
least 3 percent.
    (b) Limitations.--Incentive payments under this section shall not
exceed 10 percent of the costs of the capital improvement concerned and
not more than 1 payment may be made with respect to improvements at a
single facility. No payment in excess of $750,000 may be made with
respect to improvements at a single facility.
    (c) Authorization of Appropriations.--There are authorized to be
appropriated to carry out this section not more than $10,000,000 for
each of the fiscal years 2006 through 2015.

SEC. 244. ALASKA STATE JURISDICTION OVER SMALL HYDROELECTRIC PROJECTS.

    Section 32 of the Federal Power Act (16 U.S.C. 823c) is amended--
            (1) in subsection (a)(3)(C), by inserting ``except as
        provided in subsection (j),'' before ``conditions''; and
            (2) by adding at the end the following:

    ``(j) Fish and Wildlife.--If the State of Alaska determines that a
recommendation under subsection (a)(3)(C) is inconsistent with
paragraphs (1) and (2) of subsection (a), the State of Alaska may
decline to adopt all or part of the recommendations in accordance with
the procedures established under section 10(j)(2).''.

SEC. 245. <<NOTE: Montana.>> FLINT CREEK HYDROELECTRIC PROJECT.

    (a) Extension of Time.--
Notwithstanding <<NOTE: Applicability. Effective dates.>> the time
period specified in section 5 of the Federal Power Act (16 U.S.C. 798)

[[Page 119 STAT. 679]]

that would otherwise apply to the Federal Energy Regulatory Commission
(referred to in this section as the ``Commission'') project numbered
12107, the Commission shall--
            (1) if the preliminary permit is in effect on the date of
        enactment of this Act, extend the preliminary permit for a
        period of 3 years beginning on the date on which the preliminary
        permit expires; or
            (2) if the preliminary permit expired before the date of
        enactment of this Act, on request of the permittee, reinstate
        the preliminary permit for an additional 3-year period beginning
        on the date of enactment of this Act.

    (b) Limitation on Certain Fees.--Notwithstanding section 10(e)(1) of
the Federal Power Act (16 U.S.C. 803(e)(1)) or any other provision of
Federal law providing for the payment to the United States of charges
for the use of Federal land for the purposes of operating and
maintaining a hydroelectric development licensed by the Commission, any
political subdivision of the State of Montana that holds a Commission
license for the Commission project numbered 12107 in Granite and Deer
Lodge Counties, Montana, shall be required to pay to the United States
for the use of that land for each year during which the political
subdivision continues to hold the license for the project, the lesser
of--
            (1) $25,000; or
            (2) such annual charge as the Commission or any other
        department or agency of the Federal Government may assess.

SEC. 246. SMALL HYDROELECTRIC POWER PROJECTS.

    Section 408(a)(6) of the Public Utility Regulatory Policies Act of
1978 (16 U.S.C. 2708(a)(6)) is amended by striking ``April 20, 1977''
and inserting ``July 22, 2005''.

                       Subtitle D--Insular Energy

SEC. 251. INSULAR AREAS ENERGY SECURITY.

    Section 604 of the Act entitled ``An Act to authorize appropriations
for certain insular areas of the United States, and for other
purposes'', approved December 24, 1980 (48 U.S.C. 1492), is amended--
            (1) in subsection (a)(4) by striking the period and
        inserting a semicolon;
            (2) by adding at the end of subsection (a) the following new
        paragraphs:
            ``(5) electric power transmission and distribution lines in
        insular areas are inadequate to withstand damage caused by the
        hurricanes and typhoons which frequently occur in insular areas
        and such damage often costs millions of dollars to repair; and
            ``(6) the refinement of renewable energy technologies since
        the publication of the 1982 Territorial Energy Assessment
        prepared pursuant to subsection (c) reveals the need to reassess
        the state of energy production, consumption, infrastructure,
        reliance on imported energy, opportunities for energy
        conservation and increased energy efficiency, and indigenous
        sources in regard to the insular areas.'';
            (3) by amending subsection (e) to read as follows:

[[Page 119 STAT. 680]]

    ``(e)(1) The Secretary of the Interior, in consultation with the
Secretary of Energy and the head of government of each insular area,
shall update the plans required under subsection (c) by--
            ``(A) updating the contents required by subsection (c);
            ``(B) drafting long-term energy plans for such insular areas
        with the objective of reducing, to the extent feasible, their
        reliance on energy imports by the year 2012, increasing energy
        conservation and energy efficiency, and maximizing, to the
        extent feasible, use of indigenous energy sources; and
            ``(C) drafting long-term energy transmission line plans for
        such insular areas with the objective that the maximum
        percentage feasible of electric power transmission and
        distribution lines in each insular area be protected from damage
        caused by hurricanes and typhoons.

    ``(2) In carrying out this subsection, the Secretary of Energy shall
identify and evaluate the strategies or projects with the greatest
potential for reducing the dependence on imported fossil fuels as used
for the generation of electricity, including strategies and projects
for--
            ``(A) improved supply-side efficiency of centralized
        electrical generation, transmission, and distribution systems;
            ``(B) improved demand-side management through--
                    ``(i) the application of established standards for
                energy efficiency for appliances;
                    ``(ii) the conduct of energy audits for business and
                industrial customers; and
                    ``(iii) the use of energy savings performance
                contracts;
            ``(C) increased use of renewable energy, including--
                    ``(i) solar thermal energy for electric generation;
                    ``(ii) solar thermal energy for water heating in
                large buildings, such as hotels, hospitals, government
                buildings, and residences;
                    ``(iii) photovoltaic energy;
                    ``(iv) wind energy;
                    ``(v) hydroelectric energy;
                    ``(vi) wave energy;
                    ``(vii) energy from ocean thermal resources,
                including ocean thermal-cooling for community air
                conditioning;
                    ``(viii) water vapor condensation for the production
                of potable water;
                    ``(ix) fossil fuel and renewable hybrid electrical
                generation systems; and
                    ``(x) other strategies or projects that the
                Secretary may identify as having significant potential;
                and
            ``(D) fuel substitution and minimization with indigenous
        biofuels, such as coconut oil.

    ``(3) In carrying out this subsection, for each insular area with a
significant need for distributed generation, the Secretary of Energy
shall identify and evaluate the most promising strategies and projects
described in subparagraphs (C) and (D) of paragraph (2) for meeting that
need.
    ``(4) In assessing the potential of any strategy or project under
paragraphs (2) and (3), the Secretary of Energy shall consider--
            ``(A) the estimated cost of the power or energy to be
        produced, including--
                    ``(i) any additional costs associated with the
                distribution of the generation; and

[[Page 119 STAT. 681]]

                    ``(ii) the long-term availability of the generation
                source;
            ``(B) the capacity of the local electrical utility to
        manage, operate, and maintain any project that may be
        undertaken; and
            ``(C) other factors the Secretary of Energy considers to be
        appropriate.

    ``(5) <<NOTE: Deadline.>> Not later than 1 year after the date of
enactment of this subsection, the Secretary of the Interior shall submit
to the Committee on Energy and Natural Resources of the Senate, the
Committee on Resources of the House of Representatives, and the
Committee on Energy and Commerce of the House of Representatives, the
updated plans for each insular area required by this subsection.''; and
            (4) by amending subsection (g)(4) to read as follows:
            ``(4) Power line grants for insular areas.--
                    ``(A) In general.--The Secretary of the Interior is
                authorized to make grants to governments of insular
                areas of the United States to carry out eligible
                projects to protect electric power transmission and
                distribution lines in such insular areas from damage
                caused by hurricanes and typhoons.
                    ``(B) Eligible projects.--The Secretary of the
                Interior may award grants under subparagraph (A) only to
                governments of insular areas of the United States that
                submit written project plans to the Secretary for
                projects that meet the following criteria:
                          ``(i) The project is designed to protect
                      electric power transmission and distribution lines
                      located in 1 or more of the insular areas of the
                      United States from damage caused by hurricanes and
                      typhoons.
                          ``(ii) The project is likely to substantially
                      reduce the risk of future damage, hardship, loss,
                      or suffering.
                          ``(iii) The project addresses 1 or more
                      problems that have been repetitive or that pose a
                      significant risk to public health and safety.
                          ``(iv) The project is not likely to cost more
                      than the value of the reduction in direct damage
                      and other negative impacts that the project is
                      designed to prevent or mitigate. The cost benefit
                      analysis required by this criterion shall be
                      computed on a net present value basis.
                          ``(v) The project design has taken into
                      consideration long-term changes to the areas and
                      persons it is designed to protect and has
                      manageable future maintenance and modification
                      requirements.
                          ``(vi) The project plan includes an analysis
                      of a range of options to address the problem it is
                      designed to prevent or mitigate and a
                      justification for the selection of the project in
                      light of that analysis.
                          ``(vii) The applicant has demonstrated to the
                      Secretary that the matching funds required by
                      subparagraph (D) are available.
                    ``(C) Priority.--When making grants under this
                paragraph, the Secretary of the Interior shall give
                priority to grants for projects which are likely to--
                          ``(i) have the greatest impact on reducing
                      future disaster losses; and

[[Page 119 STAT. 682]]

                          ``(ii) best conform with plans that have been
                      approved by the Federal Government or the
                      government of the insular area where the project
                      is to be carried out for development or hazard
                      mitigation for that insular area.
                    ``(D) Matching requirement.--The Federal share of
                the cost for a project for which a grant is provided
                under this paragraph shall not exceed 75 percent of the
                total cost of that project. The non-Federal share of the
                cost may be provided in the form of cash or services.
                    ``(E) Treatment of funds for certain purposes.--
                Grants provided under this paragraph shall not be
                considered as income, a resource, or a duplicative
                program when determining eligibility or benefit levels
                for Federal major disaster and emergency assistance.
                    ``(F) Authorization of appropriations.--There are
                authorized to be appropriated to carry out this
                paragraph $6,000,000 for each fiscal year beginning
                after the date of the enactment of this paragraph.''.

SEC. 252. <<NOTE: 42 USC 15891.>> PROJECTS ENHANCING INSULAR ENERGY
            INDEPENDENCE.

    (a) Project Feasibilty Studies.--
            (1) In general.--On a request described in paragraph (2),
        the Secretary shall conduct a feasibility study of a project to
        implement a strategy or project identified in the plans
        submitted to Congress pursuant to section 604 of the Act
        entitled ``An Act to authorize appropriations for certain
        insular areas of the United States, and for other purposes'',
        approved December 24, 1980 (48 U.S.C. 1492), as having the
        potential to--
                    (A) significantly reduce the dependence of an
                insular area on imported fossil fuels; or
                    (B) provide needed distributed generation to an
                insular area.
            (2) Request.--The Secretary shall conduct a feasibility
        study under paragraph (1) on--
                    (A) the request of an electric utility located in an
                insular area that commits to fund at least 10 percent of
                the cost of the study; and
                    (B) if the electric utility is located in the
                Federated States of Micronesia, the Republic of the
                Marshall Islands, or the Republic of Palau, written
                support for that request by the President or the
                Ambassador of the affected freely associated state.
            (3) Consultation.--The Secretary shall consult with regional
        utility organizations in--
                    (A) conducting feasibility studies under paragraph
                (1); and
                    (B) determining the feasibility of potential
                projects.
            (4) Feasibility.--For the purpose of a feasibility study
        under paragraph (1), a project shall be determined to be
        feasible if the project would significantly reduce the
        dependence of an insular area on imported fossil fuels, or
        provide needed distributed generation to an insular area, at a
        reasonable cost.

    (b) Implementation.--
            (1) In general.--On a determination by the Secretary (in
        consultation with the Secretary of the Interior) that a project

[[Page 119 STAT. 683]]

        is feasible under subsection (a) and a commitment by an electric
        utility to operate and maintain the project, the Secretary may
        provide such technical and financial assistance as the Secretary
        determines is appropriate for the implementation of the project.
            (2) Regional utility organizations.--In providing assistance
        under paragraph (1), the Secretary shall consider providing the
        assistance through regional utility organizations.

    (c) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated to
        the Secretary--
                    (A) $500,000 for each fiscal year for project
                feasibility studies under subsection (a); and
                    (B) $4,000,000 for each fiscal year for project
                implementation under subsection (b).
            (2) Limitation of funds received by insular areas.--No
        insular area may receive, during any 3-year period, more than 20
        percent of the total funds made available during that 3-year
        period under subparagraphs (A) and (B) of paragraph (1) unless
        the Secretary determines that providing funding in excess of
        that percentage best advances existing opportunities to meet the
        objectives of this section.

                         TITLE III--OIL AND GAS

           Subtitle A--Petroleum Reserve and Home Heating Oil

SEC. 301. PERMANENT AUTHORITY TO OPERATE THE STRATEGIC PETROLEUM RESERVE
            AND OTHER ENERGY PROGRAMS.

    (a) Amendment to Title I of the Energy Policy and Conservation
Act.--Title I of the Energy Policy and Conservation Act (42 U.S.C. 6212
et seq.) is amended--
            (1) by striking section 166 (42 U.S.C. 6246) and inserting
        the following:

                    ``authorization of appropriations

    ``Sec. 166. There are authorized to be appropriated to the Secretary
such sums as are necessary to carry out this part and part D, to remain
available until expended.'';
            (2) by striking section 186 (42 U.S.C. 6250e); and
            (3) by striking part E (42 U.S.C. 6251).

    (b) Amendment to Title II of the Energy Policy and Conservation
Act.--Title II of the Energy Policy and Conservation Act (42 U.S.C. 6271
et seq.) is amended--
            (1) by inserting before section 273 (42 U.S.C. 6283) the
        following:

          ``PART C--SUMMER FILL AND FUEL BUDGETING PROGRAMS'';

            (2) by striking section 273(e) (42 U.S.C. 6283(e)); and
            (3) by striking part D (42 U.S.C. 6285).

    (c) Technical Amendments.--The table of contents for the Energy
Policy and Conservation Act is amended--

[[Page 119 STAT. 684]]

            (1) by inserting after the items relating to part C of title
        I the following:

              ``Part D--Northeast Home Heating Oil Reserve

``Sec. 181. Establishment.
``Sec. 182. Authority.
``Sec. 183. Conditions for release; plan.
``Sec. 184. Northeast Home Heating Oil Reserve Account.
``Sec. 185. Exemptions.'';

            (2) by amending the items relating to part C of title II to
        read as follows:

            ``Part C--Summer Fill and Fuel Budgeting Programs

``Sec. 273. Summer fill and fuel budgeting programs.'';

        and
            (3) by striking the items relating to part D of title II.

    (d) Amendment to the Energy Policy and Conservation Act.--Section
183(b)(1) of the Energy Policy and Conservation Act (42 U.S.C.
6250b(b)(1)) is amended by striking ``by more'' and all that follows
through ``mid-October through March'' and inserting ``by more than 60
percent over its 5-year rolling average for the months of mid-October
through March (considered as a heating season average)''.
    (e) Fill <<NOTE: 42 USC 6240 note.>> Strategic Petroleum Reserve to
Capacity.--
            (1) In general.--The Secretary shall, as expeditiously as
        practicable, without incurring excessive cost or appreciably
        affecting the price of petroleum products to consumers, acquire
        petroleum in quantities sufficient to fill the Strategic
        Petroleum Reserve to the 1,000,000,000-barrel capacity
        authorized under section 154(a) of the Energy Policy and
        Conservation Act (42 U.S.C. 6234(a)), in accordance with the
        sections 159 and 160 of that Act (42 U.S.C. 6239, 6240).
            (2) Procedures.--
                    (A) Amendment.--Section 160 of the Energy Policy and
                Conservation Act (42 U.S.C. 6240) is amended by
                inserting after subsection (b) the following new
                subsection:

    ``(c) Procedures.--The <<NOTE: Public
information. Notice.>> Secretary shall develop, with public notice and
opportunity for comment, procedures consistent with the objectives of
this section to acquire petroleum for the Reserve. Such procedures shall
take into account the need to--
            ``(1) maximize overall domestic supply of crude oil
        (including quantities stored in private sector inventories);
            ``(2) avoid incurring excessive cost or appreciably
        affecting the price of petroleum products to consumers;
            ``(3) minimize the costs to the Department of the Interior
        and the Department of Energy in acquiring such petroleum
        products (including foregone revenues to the Treasury when
        petroleum products for the Reserve are obtained through the
        royalty-in-kind program);
            ``(4) protect national security;
            ``(5) avoid adversely affecting current and futures prices,
        supplies, and inventories of oil; and
            ``(6) address other factors that the Secretary determines to
        be appropriate.''.
                    (B) Review of <<NOTE: 42 USC 6240 note.>> requests
                for deferrals of scheduled deliveries.--The procedures
                developed under section 160(c) of the Energy Policy and
                Conservation Act, as added by subparagraph (A), shall
                include procedures and criteria

[[Page 119 STAT. 685]]

                for the review of requests for the deferrals of
                scheduled deliveries.
                    (C) Deadlines.--The Secretary shall--
                          (i) propose the procedures required under the
                      amendment made by subparagraph (A) not later than
                      120 days after the date of enactment of this Act;
                          (ii) promulgate the procedures not later than
                      180 days after the date of enactment of this Act;
                      and
                          (iii) comply with the procedures in acquiring
                      petroleum for the Reserve effective beginning on
                      the date that is 180 days after the date of
                      enactment of this Act.

SEC. 302. NATIONAL OILHEAT RESEARCH ALLIANCE.

    Section 713 of the Energy Act of 2000 (Public Law 106-469; 42 U.S.C.
6201 note) is amended by striking ``4'' and inserting ``9''.

SEC. 303. <<NOTE: Deadline.>> SITE SELECTION.

    Not later than 1 year after the date of enactment of this Act, the
Secretary shall complete a proceeding to select, from sites that the
Secretary has previously studied, sites necessary to enable acquisition
by the Secretary of the full authorized volume of the Strategic
Petroleum Reserve. In such proceeding, the Secretary shall first
consider and give preference to the five sites which the Secretary
previously assessed in the Draft Environmental Impact Statement, DOE/
EIS-0165-D. However, the Secretary in his discretion may select other
sites as proposed by a State where a site has been previously studied by
the Secretary to meet the full authorized volume of the Strategic
Petroleum Reserve.

                         Subtitle B--Natural Gas

SEC. 311. EXPORTATION OR IMPORTATION OF NATURAL GAS.

    (a) Scope of Natural Gas Act.--Section 1(b) of the Natural Gas Act
(15 U.S.C. 717(b)) is amended by inserting ``and to the importation or
exportation of natural gas in foreign commerce and to persons engaged in
such importation or exportation,'' after ``such transportation or
sale,''.
    (b) Definition.--Section 2 of the Natural Gas Act (15 U.S.C. 717a)
is amended by adding at the end the following new paragraph:
            ``(11) `LNG terminal' includes all natural gas facilities
        located onshore or in State waters that are used to receive,
        unload, load, store, transport, gasify, liquefy, or process
        natural gas that is imported to the United States from a foreign
        country, exported to a foreign country from the United States,
        or transported in interstate commerce by waterborne vessel, but
        does not include--
                    ``(A) waterborne vessels used to deliver natural gas
                to or from any such facility; or
                    ``(B) any pipeline or storage facility subject to
                the jurisdiction of the Commission under section 7.''.

    (c) Authorization for Siting, Construction, Expansion, or Operation
of LNG Terminals.--(1) The title for section 3 of the Natural Gas Act
(15 U.S.C. 717b) is amended by inserting ``; lng terminals'' after
``exportation or importation of natural gas''.

[[Page 119 STAT. 686]]

    (2) Section 3 of the Natural Gas Act (15 U.S.C. 717b) is amended by
adding at the end the following:
    ``(d) Except as specifically provided in this Act, nothing in this
Act affects the rights of States under--
            ``(1) the Coastal Zone Management Act of 1972 (16 U.S.C.
        1451 et seq.);
            ``(2) the Clean Air Act (42 U.S.C. 7401 et seq.); or
            ``(3) the Federal Water Pollution Control Act (33 U.S.C.
        1251 et seq.).

    ``(e)(1) The Commission shall have the exclusive authority to
approve or deny an application for the siting, construction, expansion,
or operation of an LNG terminal. Except as specifically provided in this
Act, nothing in this Act is intended to affect otherwise applicable law
related to any Federal agency's authorities or responsibilities related
to LNG terminals.
    ``(2) Upon the filing of any application to site, construct, expand,
or operate an LNG terminal, the Commission shall--
            ``(A) set the matter for hearing;
            ``(B) <<NOTE: Notice.>> give reasonable notice of the
        hearing to all interested persons, including the State
        commission of the State in which the LNG terminal is located
        and, if not the same, the Governor-appointed State agency
        described in section 3A;
            ``(C) decide the matter in accordance with this subsection;
        and
            ``(D) issue or deny the appropriate order accordingly.

    ``(3)(A) Except as provided in subparagraph (B), the Commission may
approve an application described in paragraph (2), in whole or part,
with such modifications and upon such terms and conditions as the
Commission find necessary or appropriate.
    ``(B) Before January 1, 2015, the Commission shall not--
            ``(i) deny an application solely on the basis that the
        applicant proposes to use the LNG terminal exclusively or
        partially for gas that the applicant or an affiliate of the
        applicant will supply to the facility; or
            ``(ii) condition an order on--
                    ``(I) a requirement that the LNG terminal offer
                service to customers other than the applicant, or any
                affiliate of the applicant, securing the order;
                    ``(II) any regulation of the rates, charges, terms,
                or conditions of service of the LNG terminal; or
                    ``(III) a requirement to file with the Commission
                schedules or contracts related to the rates, charges,
                terms, or conditions of service of the LNG terminal.

    ``(C) <<NOTE: Termination date.>> Subparagraph (B) shall cease to
have effect on January 1, 2030.

    ``(4) An order issued for an LNG terminal that also offers service
to customers on an open access basis shall not result in subsidization
of expansion capacity by existing customers, degradation of service to
existing customers, or undue discrimination against existing customers
as to their terms or conditions of service at the facility, as all of
those terms are defined by the Commission.
    ``(f)(1) In this subsection, the term `military installation'--
            ``(A) means a base, camp, post, range, station, yard,
        center, or homeport facility for any ship or other activity
        under the jurisdiction of the Department of Defense, including
        any leased facility, that is located within a State, the
        District of Columbia, or any territory of the United States; and

[[Page 119 STAT. 687]]

            ``(B) does not include any facility used primarily for civil
        works, rivers and harbors projects, or flood control projects,
        as determined by the Secretary of Defense.

    ``(2) <<NOTE: Memorandum.>> The Commission shall enter into a
memorandum of understanding with the Secretary of Defense for the
purpose of ensuring that the Commission coordinate and consult with the
Secretary of Defense on the siting, construction, expansion, or
operation of liquefied natural gas facilities that may affect an active
military installation.

    ``(3) The Commission shall obtain the concurrence of the Secretary
of Defense before authorizing the siting, construction, expansion, or
operation of liquefied natural gas facilities affecting the training or
activities of an active military installation.''.
    (d) LNG Terminal State and Local Safety Concerns.--After section 3
of the Natural Gas Act (15 U.S.C. 717b) insert the following:

                 ``state and local safety considerations

    ``Sec. 3A. (a) <<NOTE: Regulations. Deadline. 15 USC 717b-1.>> The
Commission shall promulgate regulations on the National Environmental
Policy Act of 1969 (42 U.S.C. 4321 et seq.) pre-filing process within 60
days after the date of enactment of this section. An applicant shall
comply with pre-filing process required under the National Environmental
Policy Act of 1969 prior to filing an application with the Commission.
The regulations shall require that the pre-filing process commence at
least 6 months prior to the filing of an application for authorization
to construct an LNG terminal and encourage applicants to cooperate with
State and local officials.

    ``(b) The Governor of a State in which an LNG terminal is proposed
to be located shall designate the appropriate State agency for the
purposes of consulting with the Commission regarding an application
under section 3. The Commission shall consult with such State agency
regarding State and local safety considerations prior to issuing an
order pursuant to section 3. For the purposes of this section, State and
local safety considerations include--
            ``(1) the kind and use of the facility;
            ``(2) the existing and projected population and demographic
        characteristics of the location;
            ``(3) the existing and proposed land use near the location;
            ``(4) the natural and physical aspects of the location;
            ``(5) the emergency response capabilities near the facility
        location; and
            ``(6) the need to encourage remote siting.

    ``(c) The State agency may furnish an advisory report on State and
local safety considerations to the Commission with respect to an
application no later than 30 days after the application was filed with
the Commission. Before issuing an order authorizing an applicant to
site, construct, expand, or operate an LNG terminal, the Commission
shall review and respond specifically to the issues raised by the State
agency described in subsection (b) in the advisory
report. <<NOTE: Applicability.>> This subsection shall apply to any
application filed after the date of enactment of the Energy Policy Act
of 2005. A <<NOTE: Deadline. Reports.>> State agency has 30 days after
such date of enactment to file an advisory report related to any
applications pending at the Commission as of such date of enactment.

    ``(d) The State commission of the State in which an LNG terminal is
located may, after the terminal is operational, conduct

[[Page 119 STAT. 688]]

safety inspections in conformance with Federal regulations and
guidelines with respect to the LNG terminal upon written notice to the
Commission. The State commission may notify the Commission of any
alleged safety violations. <<NOTE: Notification.>> The Commission shall
transmit information regarding such allegations to the appropriate
Federal agency, which shall take appropriate action and notify the State
commission.

    ``(e)(1) In any order authorizing an LNG terminal the Commission
shall require the LNG terminal operator to develop an Emergency Response
Plan. The Emergency Response Plan shall be prepared in consultation with
the United States Coast Guard and State and local agencies and be
approved by the Commission prior to any final approval to begin
construction. The Plan shall include a cost-sharing plan.
    ``(2) A cost-sharing plan developed under paragraph (1) shall
include a description of any direct cost reimbursements that the
applicant agrees to provide to any State and local agencies with
responsibility for security and safety--
            ``(A) at the LNG terminal; and
            ``(B) in proximity to vessels that serve the facility.''.

SEC. 312. NEW NATURAL GAS STORAGE FACILITIES.

    Section 4 of the Natural Gas Act (15 U.S.C. 717c) is amended by
adding at the end the following:
    ``(f)(1) In exercising its authority under this Act or the Natural
Gas Policy Act of 1978 (15 U.S.C. 3301 et seq.), the Commission may
authorize a natural gas company (or any person that will be a natural
gas company on completion of any proposed construction) to provide
storage and storage-related services at market-based rates for new
storage capacity related to a specific facility placed in service after
the date of enactment of the Energy Policy Act of 2005, notwithstanding
the fact that the company is unable to demonstrate that the company
lacks market power, if the Commission determines that--
            ``(A) market-based rates are in the public interest and
        necessary to encourage the construction of the storage capacity
        in the area needing storage services; and
            ``(B) customers are adequately protected.

    ``(2) The Commission shall ensure that reasonable terms and
conditions are in place to protect consumers.
    ``(3) If the Commission authorizes a natural gas company to charge
market-based rates under this subsection, the Commission shall review
periodically whether the market-based rate is just, reasonable, and not
unduly discriminatory or preferential.''.

SEC. 313. PROCESS COORDINATION; HEARINGS; RULES OF PROCEDURE.

    (a) In General.--Section 15 of the Natural Gas Act (15 U.S.C. 717n)
is amended--
            (1) by striking the section heading and inserting ``process
        coordination; hearings; rules of procedure'';
            (2) by redesignating subsections (a) and (b) as subsections
        (e) and (f), respectively; and
            (3) by striking ``sec. 15.'' and inserting the following:

    ``Sec. 15.(a) In this section, the term `Federal authorization'--
            ``(1) means any authorization required under Federal law
        with respect to an application for authorization under section

[[Page 119 STAT. 689]]

        3 or a certificate of public convenience and necessity under
        section 7; and
            ``(2) includes any permits, special use authorizations,
        certifications, opinions, or other approvals as may be required
        under Federal law with respect to an application for
        authorization under section 3 or a certificate of public
        convenience and necessity under section 7.

    ``(b) Designation as Lead Agency.--
            ``(1) In general.--The Commission shall act as the lead
        agency for the purposes of coordinating all applicable Federal
        authorizations and for the purposes of complying with the
        National Environmental Policy Act of 1969 (42 U.S.C. 4321 et
        seq.).
            ``(2) Other agencies.--Each Federal and State agency
        considering an aspect of an application for Federal
        authorization shall cooperate with the Commission and comply
        with the deadlines established by the Commission.

    ``(c) Schedule.--
            ``(1) Commission authority to set schedule.--The Commission
        shall establish a schedule for all Federal authorizations. In
        establishing the schedule, the Commission shall--
                    ``(A) ensure expeditious completion of all such
                proceedings; and
                    ``(B) comply with applicable schedules established
                by Federal law.
            ``(2) Failure to meet schedule.--If a Federal or State
        administrative agency does not complete a proceeding for an
        approval that is required for a Federal authorization in
        accordance with the schedule established by the Commission, the
        applicant may pursue remedies under section 19(d).

    ``(d) Consolidated Record.--The Commission shall, with the
cooperation of Federal and State administrative agencies and officials,
maintain a complete consolidated record of all decisions made or actions
taken by the Commission or by a Federal administrative agency or officer
(or State administrative agency or officer acting under delegated
Federal authority) with respect to any Federal authorization. Such
record shall be the record for--
            ``(1) appeals or reviews under the Coastal Zone Management
        Act of 1972 (16 U.S.C. 1451 et seq.), provided that the record
        may be supplemented as expressly provided pursuant to section
        319 of that Act; or
            ``(2) judicial review under section 19(d) of decisions made
        or actions taken of Federal and State administrative agencies
        and officials, provided that, if the Court determines that the
        record does not contain sufficient information, the Court may
        remand the proceeding to the Commission for further development
        of the consolidated record.''.

    (b) Judicial Review.--Section 19 of the Natural Gas Act (15 U.S.C.
717r) is amended by adding at the end the following:
    ``(d) Judicial Review.--
            ``(1) In general.--The United States Court of Appeals for
        the circuit in which a facility subject to section 3 or section
        7 is proposed to be constructed, expanded, or operated shall
        have original and exclusive jurisdiction over any civil action
        for the review of an order or action of a Federal agency (other
        than the Commission) or State administrative agency acting
        pursuant to Federal law to issue, condition, or deny any permit,

[[Page 119 STAT. 690]]

        license, concurrence, or approval (hereinafter collectively
        referred to as `permit') required under Federal law, other than
        the Coastal Zone Management Act of 1972 (16 U.S.C. 1451 et
        seq.).
            ``(2) Agency delay.--The United States Court of Appeals for
        the District of Columbia shall have original and exclusive
        jurisdiction over any civil action for the review of an alleged
        failure to act by a Federal agency (other than the Commission)
        or State administrative agency acting pursuant to Federal law to
        issue, condition, or deny any permit required under Federal law,
        other than the Coastal Zone Management Act of 1972 (16 U.S.C.
        1451 et seq.), for a facility subject to section 3 or section 7.
        The failure of an agency to take action on a permit required
        under Federal law, other than the Coastal Zone Management Act of
        1972, in accordance with the Commission schedule established
        pursuant to section 15(c) shall be considered inconsistent with
        Federal law for the purposes of paragraph (3).
            ``(3) Court action.--If the Court finds that such order or
        action is inconsistent with the Federal law governing such
        permit and would prevent the construction, expansion, or
        operation of the facility subject to section 3 or section 7, the
        Court shall remand the proceeding to the agency to take
        appropriate action consistent with the order of the Court. If
        the Court remands the order or action to the Federal or State
        agency, the Court shall set a reasonable schedule and deadline
        for the agency to act on remand.
            ``(4) Commission action.--For any action described in this
        subsection, the Commission shall file with the Court the
        consolidated record of such order or action to which the appeal
        hereunder relates.
            ``(5) Expedited review.--The Court shall set any action
        brought under this subsection for expedited consideration.''.

SEC. 314. PENALTIES.

    (a) Criminal Penalties.--
            (1) Natural gas act.--Section 21 of the Natural Gas Act (15
        U.S.C. 717t) is amended--
                    (A) in subsection (a)--
                          (i) by striking ``$5,000'' and inserting
                      ``$1,000,000''; and
                          (ii) by striking ``two years'' and inserting
                      ``5 years''; and
                    (B) in subsection (b), by striking ``$500'' and
                inserting ``$50,000''.
            (2) Natural gas policy act of 1978.--Section 504(c) of the
        Natural Gas Policy Act of 1978 (15 U.S.C. 3414(c)) is amended--
                    (A) in paragraph (1)--
                          (i) in subparagraph (A), by striking
                      ``$5,000'' and inserting ``$1,000,000''; and
                          (ii) in subparagraph (B), by striking ``two
                      years'' and inserting ``5 years''; and
                    (B) in paragraph (2), by striking ``$500 for each
                violation'' and inserting ``$50,000 for each day on
                which the offense occurs''.

    (b) Civil Penalties.--

[[Page 119 STAT. 691]]

            (1) Natural gas act.--The Natural Gas Act (15 U.S.C. 717 et
        seq.) is amended--
                    (A) <<NOTE: 15 USC 717u-717w.>> by redesignating
                sections 22 through 24 as sections 24 through 26,
                respectively; and
                    (B) by inserting after section 21 (15 U.S.C. 717t)
                the following:

                        ``civil penalty authority

    ``Sec. 22. (a) <<NOTE: 15 USC 717t-1.>> Any person that violates
this Act, or any rule, regulation, restriction, condition, or order made
or imposed by the Commission under authority of this Act, shall be
subject to a civil penalty of not more than $1,000,000 per day per
violation for as long as the violation continues.

    ``(b) The penalty shall be assessed by the Commission after notice
and opportunity for public hearing.
    ``(c) In determining the amount of a proposed penalty, the
Commission shall take into consideration the nature and seriousness of
the violation and the efforts to remedy the violation.''.
            (2) Natural gas policy act of 1978.--Section 504(b)(6)(A) of
        the Natural Gas Policy Act of 1978 (15 U.S.C. 3414(b)(6)(A)) is
        amended--
                    (A) in clause (i), by striking ``$5,000'' and
                inserting ``$1,000,000''; and
                    (B) in clause (ii), by striking ``$25,000'' and
                inserting ``$1,000,000''.

SEC. 315. MARKET MANIPULATION.

    The Natural Gas Act is amended by inserting after section 4 (15
U.S.C. 717c) the following:

                  ``prohibition on market manipulation

    ``Sec. 4A. <<NOTE: 15 USC 717c-1.>> It shall be unlawful for any
entity, directly or indirectly, to use or employ, in connection with the
purchase or sale of natural gas or the purchase or sale of
transportation services subject to the jurisdiction of the Commission,
any manipulative or deceptive device or contrivance (as those terms are
used in section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C.
78j(b))) in contravention of such rules and regulations as the
Commission may prescribe as necessary in the public interest or for the
protection of natural gas ratepayers. Nothing in this section shall be
construed to create a private right of action.''.

SEC. 316. NATURAL GAS MARKET TRANSPARENCY RULES.

    The Natural Gas Act (15 U.S.C. 717 et seq.) is amended by inserting
after section 22 the following:

                 ``natural gas market transparency rules

    ``Sec. 23. (a)(1) <<NOTE: 15 USC 717t-2.>> The Commission is
directed to facilitate price transparency in markets for the sale or
transportation of physical natural gas in interstate commerce, having
due regard for the public interest, the integrity of those markets, fair
competition, and the protection of consumers.

    ``(2) The Commission may prescribe such rules as the Commission
determines necessary and appropriate to carry out the purposes of this
section. The rules shall provide for the dissemination, on a timely
basis, of information about the availability and prices

[[Page 119 STAT. 692]]

of natural gas sold at wholesale and in interstate commerce to the
Commission, State commissions, buyers and sellers of wholesale natural
gas, and the public.
    ``(3) The Commission may--
            ``(A) obtain the information described in paragraph (2) from
        any market participant; and
            ``(B) rely on entities other than the Commission to receive
        and make public the information, subject to the disclosure rules
        in subsection (b).

    ``(4) In carrying out this section, the Commission shall consider
the degree of price transparency provided by existing price publishers
and providers of trade processing services, and shall rely on such
publishers and services to the maximum extent possible. The Commission
may establish an electronic information system if it determines that
existing price publications are not adequately providing price discovery
or market transparency.
    ``(b)(1) Rules described in subsection (a)(2), if adopted, shall
exempt from disclosure information the Commission determines would, if
disclosed, be detrimental to the operation of an effective market or
jeopardize system security.
    ``(2) In determining the information to be made available under this
section and the time to make the information available, the Commission
shall seek to ensure that consumers and competitive markets are
protected from the adverse effects of potential collusion or other
anticompetitive behaviors that can be facilitated by untimely public
disclosure of transaction-specific information.
    ``(c)(1) <<NOTE: Deadline. Memorandum.>> Within 180 days of
enactment of this section, the Commission shall conclude a memorandum of
understanding with the Commodity Futures Trading Commission relating to
information sharing, which shall include, among other things, provisions
ensuring that information requests to markets within the respective
jurisdiction of each agency are properly coordinated to minimize
duplicative information requests, and provisions regarding the treatment
of proprietary trading information.

    ``(2) Nothing in this section may be construed to limit or affect
the exclusive jurisdiction of the Commodity Futures Trading Commission
under the Commodity Exchange Act (7 U.S.C. 1 et seq.).
    ``(d)(1) The Commission shall not condition access to interstate
pipeline transportation on the reporting requirements of this section.
    ``(2) The Commission shall not require natural gas producers,
processors, or users who have a de minimis market presence to comply
with the reporting requirements of this section.
    ``(e)(1) Except as provided in paragraph (2), no person shall be
subject to any civil penalty under this section with respect to any
violation occurring more than 3 years before the date on which the
person is provided notice of the proposed penalty under section 22(b).
    ``(2) Paragraph (1) shall not apply in any case in which the
Commission finds that a seller that has entered into a contract for the
transportation or sale of natural gas subject to the jurisdiction of the
Commission has engaged in fraudulent market manipulation activities
materially affecting the contract in violation of section 4A.''.

[[Page 119 STAT. 693]]

SEC. 317. FEDERAL-STATE LIQUEFIED NATURAL GAS FORUMS.

    (a) In General.--Not <<NOTE: Deadline.>> later than 1 year after the
date of enactment of this Act, the Secretary, in cooperation and
consultation with the Secretary of Transportation, the Secretary of
Homeland Security, the Federal Energy Regulatory Commission, and the
Governors of the Coastal States, shall convene not less than 3 forums on
liquefied natural gas.

    (b) Requirements.--The forums shall--
            (1) be located in areas where liquefied natural gas
        facilities are under consideration;
            (2) be designed to foster dialogue among Federal officials,
        State and local officials, the general public, independent
        experts, and industry representatives; and
            (3) at a minimum, provide an opportunity for public
        education and dialogue on--
                    (A) the role of liquefied natural gas in meeting
                current and future United States energy supply
                requirements and demand, in the context of the full
                range of energy supply options;
                    (B) the Federal and State siting and permitting
                processes;
                    (C) the potential risks and rewards associated with
                importing liquefied natural gas;
                    (D) the Federal safety and environmental
                requirements (including regulations) applicable to
                liquefied natural gas;
                    (E) prevention, mitigation, and response strategies
                for liquefied natural gas hazards; and
                    (F) additional issues as appropriate.

    (c) Purpose.--The purpose of the forums shall be to identify and
develop best practices for addressing the issues and challenges
associated with liquefied natural gas imports, building on existing
cooperative efforts.
    (d) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.

SEC. 318. PROHIBITION OF TRADING AND SERVING BY CERTAIN INDIVIDUALS.

    Section 20 of the Natural Gas Act (15 U.S.C. 717s) is amended by
adding at the end the following:
    ``(d) In any proceedings under subsection (a), the court may
prohibit, conditionally or unconditionally, and permanently or for such
period of time as the court determines, any individual who is engaged or
has engaged in practices constituting a violation of section 4A
(including related rules and regulations) from--
            ``(1) acting as an officer or director of a natural gas
        company; or
            ``(2) engaging in the business of--
                    ``(A) the purchasing or selling of natural gas; or
                    ``(B) the purchasing or selling of transmission
                services subject to the jurisdiction of the
                Commission.''.

[[Page 119 STAT. 694]]

                         Subtitle C--Production

SEC. 321. OUTER CONTINENTAL SHELF PROVISIONS.

    (a) Storage on the Outer Continental Shelf.--Section 5(a)(5) of the
Outer Continental Shelf Lands Act (43 U.S.C. 1334(a)(5)) is amended by
inserting ``from any source'' after ``oil and gas''.
    (b) Natural Gas Defined.--Section 3(13) of the Deepwater Port Act of
1974 (33 U.S.C. 1502(13)) is amended by adding at the end before the
semicolon the following: ``, natural gas liquids, liquefied petroleum
gas, and condensate recovered from natural gas''.

SEC. 322. HYDRAULIC FRACTURING.

    Paragraph (1) of section 1421(d) of the Safe Drinking Water Act (42
U.S.C. 300h(d)) is amended to read as follows:
            ``(1) Underground injection.--The term `underground
        injection'--
                    ``(A) means the subsurface emplacement of fluids by
                well injection; and
                    ``(B) excludes--
                          ``(i) the underground injection of natural gas
                      for purposes of storage; and
                          ``(ii) the underground injection of fluids or
                      propping agents (other than diesel fuels) pursuant
                      to hydraulic fracturing operations related to oil,
                      gas, or geothermal production activities.''.

SEC. 323. OIL AND GAS EXPLORATION AND PRODUCTION DEFINED.

    Section 502 of the Federal Water Pollution Control Act (33 U.S.C.
1362) is amended by adding at the end the following:
            ``(24) Oil and gas exploration and production.--The term
        `oil and gas exploration, production, processing, or treatment
        operations or transmission facilities' means all field
        activities or operations associated with exploration,
        production, processing, or treatment operations, or transmission
        facilities, including activities necessary to prepare a site for
        drilling and for the movement and placement of drilling
        equipment, whether or not such field activities or operations
        may be considered to be construction activities.''.

                   Subtitle D--Naval Petroleum Reserve

SEC. 331. <<NOTE: 10 USC 7420 note.>> TRANSFER OF ADMINISTRATIVE
            JURISDICTION AND ENVIRONMENTAL REMEDIATION, NAVAL PETROLEUM
            RESERVE NUMBERED 2, KERN COUNTY, CALIFORNIA.

    (a) Administration <<NOTE: Effective date.>> Jurisdiction Transfer
to Secretary of the Interior.--Effective on the date of the enactment of
this Act, administrative jurisdiction and control over all public domain
lands included within Naval Petroleum Reserve Numbered 2 located in Kern
County, California (other than the lands specified in subsection (b)),
are transferred from the Secretary to the Secretary of the Interior for
management, subject to subsection (c), in accordance with the laws
governing management of the public lands, and the regulations
promulgated under such laws, including the

[[Page 119 STAT. 695]]

Mineral Leasing Act (30 U.S.C. 181 et seq.) and the Federal Land Policy
and Management Act of 1976 (43 U.S.C. 1701 et seq.).
    (b) Exclusion of Certain Reserve Lands.--The transfer of
administrative jurisdiction made by subsection (a) does not include the
following lands:
            (1) That portion of Naval Petroleum Reserve Numbered 2
        authorized for disposal under section 3403(a) of the Strom
        Thurmond National Defense Authorization Act for Fiscal Year 1999
        (Public Law 105-261; 10 U.S.C. 7420 note).
            (2) That portion of the surface estate of Naval Petroleum
        Reserve Numbered 2 conveyed to the City of Taft, California, by
        section 333.

    (c) Purpose of Transfer.--
            (1) Production of hydrocarbon resources.--Notwithstanding
        any other provision of law, the principal purpose of the lands
        subject to transfer under subsection (a) is the production of
        hydrocarbon resources, and the Secretary of the Interior shall
        manage the lands in a fashion consistent with this purpose. In
        managing the lands, the Secretary of the Interior shall regulate
        operations to prevent unnecessary degradation and to provide for
        ultimate economic recovery of the resources.
            (2) Disposal authority and surface use.--The Secretary of
        the Interior may make disposals of lands subject to transfer
        under subsection (a), or allow commercial or non-profit surface
        use of such lands, not to exceed 10 acres each, so long as the
        disposals or surface uses do not materially interfere with the
        ultimate economic recovery of the hydrocarbon resources of such
        lands. All revenues received from the disposal of lands under
        this paragraph or from allowing the surface use of such lands
        shall be deposited in the Naval Petroleum Reserve Numbered 2
        Lease Revenue Account established by section 332.

    (d) Conforming Amendment.--Section 3403 of the Strom Thurmond
National Defense Authorization Act for Fiscal Year 1999 (Public Law 105-
261; 10 U.S.C. 7420 note) is amended by striking subsection (b).

SEC. 332. <<NOTE: 10 USC 7420 note.>> NAVAL PETROLEUM RESERVE NUMBERED 2
            LEASE REVENUE ACCOUNT.

    (a) Establishment.--There is established in the Treasury a special
deposit account to be known as the ``Naval Petroleum Reserve Numbered 2
Lease Revenue Account'' (in this section referred to as the ``lease
revenue account''). The lease revenue account is a revolving account,
and amounts in the lease revenue account shall be available to the
Secretary of the Interior, without further appropriation, for the
purposes specified in subsection (b).
    (b) Purposes of Account.--
            (1) Environmental-related costs.--The lease revenue account
        shall be the sole and exclusive source of funds to pay for any
        and all costs and expenses incurred by the United States for--
                    (A) environmental investigations (other than any
                environmental investigations that were conducted by the
                Secretary before the transfer of the Naval Petroleum
                Reserve Numbered 2 lands under section 331),
                remediation, compliance actions, response, waste
                management, impediments, fines or penalties, or any
                other costs or expenses

[[Page 119 STAT. 696]]

                of any kind arising from, or relating to, conditions
                existing on or below the Naval Petroleum Reserve
                Numbered 2 lands, or activities occurring or having
                occurred on such lands, on or before the date of the
                transfer of such lands; and
                    (B) any future remediation necessitated as a result
                of pre-transfer and leasing activities on such lands.
            (2) Transition costs.--The lease revenue account shall also
        be available for use by the Secretary of the Interior to pay for
        transition costs incurred by the Department of the Interior
        associated with the transfer and leasing of the Naval Petroleum
        Reserve Numbered 2 lands.

    (c) Funding.--The lease revenue account shall consist of the
following:
            (1) Notwithstanding any other provision of law, for a period
        of three years after the date of the transfer of the Naval
        Petroleum Reserve Numbered 2 lands under section 331, the sum of
        $500,000 per year of revenue from leases entered into before
        that date, including bonuses, rents, royalties, and interest
        charges collected pursuant to the Federal Oil and Gas Royalty
        Management Act of 1982 (30 U.S.C. 1701 et. seq.), derived from
        the Naval Petroleum Reserve Numbered 2 lands, shall be deposited
        into the lease revenue account.
            (2) Subject to subsection (d), all revenues derived from
        leases on Naval Petroleum Reserve Numbered 2 lands issued on or
        after the date of the transfer of such lands, including bonuses,
        rents, royalties, and interest charges collected pursuant to the
        Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C.
        1701 et seq.), shall be deposited into the lease revenue
        account.

    (d) Limitation.--Funds in the lease revenue account shall not exceed
$3,000,000 at any one time. Whenever funds in the lease revenue account
are obligated or expended so that the balance in the account falls below
that amount, lease revenues referred to in subsection (c)(2) shall be
deposited in the account to maintain a balance of $3,000,000.
    (e) Termination of Account.--At <<NOTE: Certification.>> such time
as the Secretary of the Interior certifies that remediation of all
environmental contamination of Naval Petroleum Reserve Numbered 2 lands
in existence as of the date of the transfer of such lands under section
331 has been successfully completed, that all costs and expenses of
investigation, remediation, compliance actions, response, waste
management, impediments, fines, or penalties associated with
environmental contamination of such lands in existence as of the date of
the transfer have been paid in full, and that the transition costs of
the Department of the Interior referred to in subsection (b)(2) have
been paid in full, the lease revenue account shall be terminated and any
remaining funds shall be distributed in accordance with subsection (f).

    (f) Distribution of <<NOTE: Applicability.>> Remaining Funds.--
Section 35 of the Mineral Leasing Act (30 U.S.C. 191) shall apply to the
payment and distribution of all funds remaining in the lease revenue
account upon its termination under subsection (e).

[[Page 119 STAT. 697]]

SEC. 333. <<NOTE: 10 USC 7420 note.>> LAND CONVEYANCE, PORTION OF NAVAL
            PETROLEUM RESERVE NUMBERED 2, TO CITY OF TAFT, CALIFORNIA.

    (a) Conveyance.--Effective <<NOTE: Effective date.>> on the date of
the enactment of this Act, there is conveyed to the City of Taft,
California (in this section referred to as the ``City''), all surface
right, title, and interest of the United States in and to a parcel of
real property consisting of approximately 220 acres located in the NE\1/
4\, the NE\1/4\ of the NW\1/4\, and the N\1/2\ of the SE\1/4\ of the
NW\1/4\ of section 18, township 32 south, range 24 east, Mount Diablo
meridian, Kern County, California.

    (b) Consideration.--The conveyance under subsection (a) is made
without the payment of consideration by the City.
    (c) Treatment of Existing Rights.--The conveyance under subsection
(a) is subject to valid existing rights, including Federal oil and gas
lease SAC-019577.
    (d) Treatment of Minerals.--All coal, oil, gas, and other minerals
within the lands conveyed under subsection (a) are reserved to the
United States, except that the United States and its lessees, licensees,
permittees, or assignees shall have no right of surface use or occupancy
of the lands. Nothing in this subsection shall be construed to require
the United States or its lessees, licensees, permittees, or assignees to
support the surface of the conveyed lands.
    (e) Indemnify and Hold Harmless.--The City shall indemnify, defend,
and hold harmless the United States for, from, and against, and the City
shall assume all responsibility for, any and all liability of any kind
or nature, including all loss, cost, expense, or damage, arising from
the City's use or occupancy of, or operations on, the land conveyed
under subsection (a), whether such use or occupancy of, or operations
on, occurred before or occur after the date of the enactment of this
Act.
    (f) Instrument of Conveyance.--
Not <<NOTE: Deadline. Records.>> later than 1 year after the date of the
enactment of this Act, the Secretary shall execute, file, and cause to
be recorded in the appropriate office a deed or other appropriate
instrument documenting the conveyance made by this section.

SEC. 334. <<NOTE: Effective date. 10 USC 7420 note.>> REVOCATION OF LAND
            WITHDRAWAL.

    Effective on the date of the enactment of this Act, the Executive
Order of December 13, 1912, which created Naval Petroleum Reserve
Numbered 2, is revoked in its entirety.

                    Subtitle E--Production Incentives

SEC. 341. <<NOTE: 42 USC 15901.>> DEFINITION OF SECRETARY.

    In this subtitle, the term ``Secretary'' means the Secretary of the
Interior.

SEC. 342. <<NOTE: 42 USC 15902.>> PROGRAM ON OIL AND GAS ROYALTIES IN-
            KIND.

    (a) Applicability of Section.--Notwithstanding any other provision
of law, this section applies to all royalty in-kind accepted by the
Secretary on or after the date of enactment of this Act under any
Federal oil or gas lease or permit under--
            (1) section 36 of the Mineral Leasing Act (30 U.S.C. 192);
            (2) section 27 of the Outer Continental Shelf Lands Act (43
        U.S.C. 1353); or

[[Page 119 STAT. 698]]

            (3) any other Federal law governing leasing of Federal land
        for oil and gas development.

    (b) Terms and Conditions.--All royalty accruing to the United States
shall, on the demand of the Secretary, be paid in-kind. If the Secretary
makes such a demand, the following provisions apply to the payment:
            (1) Satisfaction of royalty obligation.--Delivery by, or on
        behalf of, the lessee of the royalty amount and quality due
        under the lease satisfies royalty obligation of the lessee for
        the amount delivered, except that transportation and processing
        reimbursements paid to, or deductions claimed by, the lessee
        shall be subject to review and audit.
            (2) Marketable condition.--
                    (A) Definition of marketable condition.--In this
                paragraph, the term ``in marketable condition'' means
                sufficiently free from impurities and otherwise in a
                condition that the royalty production will be accepted
                by a purchaser under a sales contract typical of the
                field or area in which the royalty production was
                produced.
                    (B) Requirement.--Royalty production shall be placed
                in marketable condition by the lessee at no cost to the
                United States.
            (3) Disposition by the secretary.--The Secretary may--
                    (A) sell or otherwise dispose of any royalty
                production taken in-kind (other than oil or gas
                transferred under section 27(a)(3) of the Outer
                Continental Shelf Lands Act (43 U.S.C. 1353(a)(3)) for
                not less than the market price; and
                    (B) transport or process (or both) any royalty
                production taken in-kind.
            (4) Retention by the secretary.--The Secretary may,
        notwithstanding section 3302 of title 31, United States Code,
        retain and use a portion of the revenues from the sale of oil
        and gas taken in-kind that otherwise would be deposited to
        miscellaneous receipts, without regard to fiscal year
        limitation, or may use oil or gas received as royalty taken in-
        kind (referred to in this paragraph as ``royalty production'')
        to pay the cost of--
                    (A) transporting the royalty production;
                    (B) processing the royalty production;
                    (C) disposing of the royalty production; or
                    (D) any combination of transporting, processing, and
                disposing of the royalty production.
            (5) Limitation.--
                    (A) In general.--Except as provided in subparagraph
                (B), the Secretary may not use revenues from the sale of
                oil and gas taken in-kind to pay for personnel, travel,
                or other administrative costs of the Federal Government.
                    (B) Exception.--Notwithstanding subparagraph (A),
                the Secretary may use a portion of the revenues from
                royalty in-kind sales, without fiscal year limitation,
                to pay salaries and other administrative costs directly
                related to the royalty in-kind program.

    (c) Reimbursement of Cost.--If the lessee, pursuant to an agreement
with the United States or as provided in the lease, processes the
royalty gas or delivers the royalty oil or gas at a point not on or
adjacent to the lease area, the Secretary shall--

[[Page 119 STAT. 699]]

            (1) reimburse the lessee for the reasonable costs of
        transportation (not including gathering) from the lease to the
        point of delivery or for processing costs; or
            (2) allow the lessee to deduct the transportation or
        processing costs in reporting and paying royalties in-value for
        other Federal oil and gas leases.

    (d) Benefit to the United States Required.--The Secretary may
receive oil or gas royalties in-kind only if the Secretary determines
that receiving royalties in-kind provides benefits to the United States
that are greater than or equal to the benefits that are likely to have
been received had royalties been taken in-value.
    (e) Reports.--
            (1) In general.--Not later than September 30, 2006, the
        Secretary shall submit to Congress a report that addresses--
                    (A) actions taken to develop business processes and
                automated systems to fully support the royalty-in-kind
                capability to be used in tandem with the royalty-in-
                value approach in managing Federal oil and gas revenue;
                and
                    (B) future royalty-in-kind businesses operation
                plans and objectives.
            (2) Reports on oil or gas royalties taken in-kind.--For each
        of fiscal years 2006 through 2015 in which the United States
        takes oil or gas royalties in-kind from production in any State
        or from the outer Continental Shelf, excluding royalties taken
        in-kind and sold to refineries under subsection (h), the
        Secretary shall submit to Congress a report that describes--
                    (A) the 1 or more methodologies used by the
                Secretary to determine compliance with subsection (d),
                including the performance standard for comparing amounts
                received by the United States derived from royalties in-
                kind to amounts likely to have been received had
                royalties been taken in-value;
                    (B) an explanation of the evaluation that led the
                Secretary to take royalties in-kind from a lease or
                group of leases, including the expected revenue effect
                of taking royalties in-kind;
                    (C) actual amounts received by the United States
                derived from taking royalties in-kind and costs and
                savings incurred by the United States associated with
                taking royalties in-kind, including administrative
                savings and any new or increased administrative costs;
                and
                    (D) an evaluation of other relevant public benefits
                or detriments associated with taking royalties in-kind.

    (f) Deduction of Expenses.--
            (1) In general.--Before making payments under section 35 of
        the Mineral Leasing Act (30 U.S.C. 191) or section 8(g) of the
        Outer Continental Shelf Lands Act (43 U.S.C. 1337(g)) of
        revenues derived from the sale of royalty production taken in-
        kind from a lease, the Secretary shall deduct amounts paid or
        deducted under subsections (b)(4) and (c) and deposit the amount
        of the deductions in the miscellaneous receipts of the Treasury.
            (2) Accounting for deductions.--When the Secretary allows
        the lessee to deduct transportation or processing costs under
        subsection (c), the Secretary may not reduce any payments to
        recipients of revenues derived from any other Federal oil and
        gas lease as a consequence of that deduction.

[[Page 119 STAT. 700]]

    (g) Consultation With States.--The Secretary--
            (1) shall consult with a State before conducting a royalty
        in-kind program under this subtitle within the State;
            (2) may delegate management of any portion of the Federal
        royalty in-kind program to the State except as otherwise
        prohibited by Federal law; and
            (3) shall consult annually with any State from which Federal
        oil or gas royalty is being taken in-kind to ensure, to the
        maximum extent practicable, that the royalty in-kind program
        provides revenues to the State greater than or equal to the
        revenues likely to have been received had royalties been taken
        in-value.

    (h) Small Refineries.--
            (1) Preference.--If the Secretary finds that sufficient
        supplies of crude oil are not available in the open market to
        refineries that do not have their own source of supply for crude
        oil, the Secretary may grant preference to those refineries in
        the sale of any royalty oil accruing or reserved to the United
        States under Federal oil and gas leases issued under any mineral
        leasing law, for processing or use in those refineries at
        private sale at not less than the market price.
            (2) Proration among refineries in production area.--In
        disposing of oil under this subsection, the Secretary may, at
        the discretion of the Secretary, prorate the oil among
        refineries described in paragraph (1) in the area in which the
        oil is produced.

    (i) Disposition to Federal Agencies.--
            (1) Onshore royalty.--Any royalty oil or gas taken by the
        Secretary in-kind from onshore oil and gas leases may be sold at
        not less than the market price to any Federal agency.
            (2) Offshore royalty.--Any royalty oil or gas taken in-kind
        from a Federal oil or gas lease on the outer Continental Shelf
        may be disposed of only under section 27 of the Outer
        Continental Shelf Lands Act (43 U.S.C. 1353).

    (j) Federal Low-Income Energy Assistance Programs.--
            (1) Preference.--In disposing of royalty oil or gas taken
        in-kind under this section, the Secretary may grant a preference
        to any person, including any Federal or State agency, for the
        purpose of providing additional resources to any Federal low-
        income energy assistance program.
            (2) Report.--Not later than 3 years after the date of
        enactment of this Act, the Secretary shall submit a report to
        Congress--
                    (A) assessing the effectiveness of granting
                preferences specified in paragraph (1); and
                    (B) providing a specific recommendation on the
                continuation of authority to grant preferences.

SEC. 343. <<NOTE: 42 USC 15903.>> MARGINAL PROPERTY PRODUCTION
            INCENTIVES.

    (a) Definition of Marginal Property.--Until such time as the
Secretary issues regulations under subsection (e) that prescribe a
different definition, in this section, the term ``marginal property''
means an onshore unit, communitization agreement, or lease not within a
unit or communitization agreement, that produces on average the combined
equivalent of less than 15 barrels of oil per well per day or 90,000,000
British thermal units of gas per

[[Page 119 STAT. 701]]

well per day calculated based on the average over the 3 most recent
production months, including only wells that produce on more than half
of the days during those 3 production months.
    (b) Conditions for Reduction of Royalty Rate.--Until such time as
the Secretary issues regulations under subsection (e) that prescribe
different standards or requirements, the Secretary shall reduce the
royalty rate on--
            (1) oil production from marginal properties as prescribed in
        subsection (c) if the spot price of West Texas Intermediate
        crude oil at Cushing, Oklahoma, is, on average, less than $15
        per barrel (adjusted in accordance with the Consumer Price Index
        for all-urban consumers, United States city average, as
        published by the Bureau of Labor Statistics) for 90 consecutive
        trading days; and
            (2) gas production from marginal properties as prescribed in
        subsection (c) if the spot price of natural gas delivered at
        Henry Hub, Louisiana, is, on average, less than $2.00 per
        million British thermal units (adjusted in accordance with the
        Consumer Price Index for all-urban consumers, United States city
        average, as published by the Bureau of Labor Statistics) for 90
        consecutive trading days.

    (c) Reduced Royalty Rate.--
            (1) In general.--When a marginal property meets the
        conditions specified in subsection (b), the royalty rate shall
        be the lesser of--
                    (A) 5 percent; or
                    (B) the applicable rate under any other statutory or
                regulatory royalty relief provision that applies to the
                affected production.
            (2) Period of effectiveness.--The reduced royalty rate under
        this subsection shall be effective beginning on the first day of
        the production month following the date on which the applicable
        condition specified in subsection (b) is met.

    (d) Termination of Reduced Royalty Rate.--A royalty rate prescribed
in subsection (c)(1) shall terminate--
            (1) with respect to oil production from a marginal property,
        on the first day of the production month following the date on
        which--
                    (A) the spot price of West Texas Intermediate crude
                oil at Cushing, Oklahoma, on average, exceeds $15 per
                barrel (adjusted in accordance with the Consumer Price
                Index for all-urban consumers, United States city
                average, as published by the Bureau of Labor Statistics)
                for 90 consecutive trading days; or
                    (B) the property no longer qualifies as a marginal
                property; and
            (2) with respect to gas production from a marginal property,
        on the first day of the production month following the date on
        which--
                    (A) the spot price of natural gas delivered at Henry
                Hub, Louisiana, on average, exceeds $2.00 per million
                British thermal units (adjusted in accordance with the
                Consumer Price Index for all-urban consumers, United
                States city average, as published by the Bureau of Labor
                Statistics) for 90 consecutive trading days; or
                    (B) the property no longer qualifies as a marginal
                property.

[[Page 119 STAT. 702]]

    (e) Regulations Prescribing Different Relief.--
            (1) Discretionary regulations.--The Secretary may by
        regulation prescribe different parameters, standards, and
        requirements for, and a different degree or extent of, royalty
        relief for marginal properties in lieu of those prescribed in
        subsections (a) through (d).
            (2) Mandatory regulations.--Unless
        a <<NOTE: Deadline.>> determination is made under paragraph (3),
        not later than 18 months after the date of enactment of this
        Act, the Secretary shall by regulation--
                    (A) prescribe standards and requirements for, and
                the extent of royalty relief for, marginal properties
                for oil and gas leases on the outer Continental Shelf;
                and
                    (B) define what constitutes a marginal property on
                the outer Continental Shelf for purposes of this
                section.
            (3) Report.--To the extent the Secretary determines that it
        is not practicable to issue the regulations referred to in
        paragraph (2), the Secretary shall provide a report to Congress
        explaining such determination by not later than 18 months after
        the date of enactment of this Act.
            (4) Considerations.--In issuing regulations under this
        subsection, the Secretary may consider--
                    (A) oil and gas prices and market trends;
                    (B) production costs;
                    (C) abandonment costs;
                    (D) Federal and State tax provisions and the effects
                of those provisions on production economics;
                    (E) other royalty relief programs;
                    (F) regional differences in average wellhead prices;
                    (G) national energy security issues; and
                    (H) other relevant matters, as determined by the
                Secretary.

    (f) Savings Provision.--Nothing in this section prevents a lessee
from receiving royalty relief or a royalty reduction pursuant to any
other law (including a regulation) that provides more relief than the
amounts provided by this section.

SEC. 344. <<NOTE: 42 USC 15904.>> INCENTIVES FOR NATURAL GAS PRODUCTION
            FROM DEEP WELLS IN THE SHALLOW WATERS OF THE GULF OF MEXICO.

    (a) Royalty Incentive Regulations for Ultra Deep Gas Wells.--
            (1) In general.--Not <<NOTE: Deadline.>> later than 180 days
        after the date of enactment of this Act, in addition to any
        other regulations that may provide royalty incentives for
        natural gas produced from deep wells on oil and gas leases
        issued pursuant to the Outer Continental Shelf Lands Act (43
        U.S.C. 1331 et seq.), the Secretary shall issue regulations
        granting royalty relief suspension volumes of not less than 35
        billion cubic feet with respect to the production of natural gas
        from ultra deep wells on leases issued in shallow waters less
        than 400 meters deep located in the Gulf of Mexico wholly west
        of 87 degrees, 30 minutes west longitude. <<NOTE: Effective
        date. Notices. Federal Register, publication.>> Regulations
        issued under this subsection shall be retroactive to the date
        that the notice of proposed rulemaking is published in the
        Federal Register.

[[Page 119 STAT. 703]]

            (2) Suspension volumes.--The Secretary may grant suspension
        volumes of not less than 35 billion cubic feet in any case in
        which--
                    (A) the ultra deep well is a sidetrack; or
                    (B) the lease has previously produced from wells
                with a perforated interval the top of which is at least
                15,000 feet true vertical depth below the datum at mean
                sea level.
            (3) Definitions.--In this subsection:
                    (A) Ultra deep well.--The term ``ultra deep well''
                means a well drilled with a perforated interval, the top
                of which is at least 20,000 true vertical depth below
                the datum at mean sea level.
                    (B) Sidetrack.--
                          (i) In general.--The term ``sidetrack'' means
                      a well resulting from drilling an additional hole
                      to a new objective bottom-hole location by leaving
                      a previously drilled hole.
                          (ii) Inclusion.--The term ``sidetrack''
                      includes--
                                    (I) drilling a well from a platform
                                slot reclaimed from a previously drilled
                                well;
                                    (II) re-entering and deepening a
                                previously drilled well; and
                                    (III) a bypass from a sidetrack,
                                including drilling around material
                                blocking a hole or drilling to
                                straighten a crooked hole.

    (b) Royalty <<NOTE: Deadline.>> Incentive Regulations for Deep Gas
Wells.--Not later than 180 days after the date of enactment of this Act,
in addition to any other regulations that may provide royalty incentives
for natural gas produced from deep wells on oil and gas leases issued
pursuant to the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et
seq.), the Secretary shall issue regulations granting royalty relief
suspension volumes with respect to production of natural gas from deep
wells on leases issued in waters more than 200 meters but less than 400
meters deep located in the Gulf of Mexico wholly west of 87 degrees, 30
minutes west longitude. The suspension volumes for deep wells within 200
to 400 meters of water depth shall be calculated using the same
methodology used to calculate the suspension volumes for deep wells in
the shallower waters of the Gulf of Mexico, and in no case shall the
suspension volumes for deep wells within 200 to 400 meters of water
depth be lower than those for deep wells in shallower
waters. <<NOTE: Effective date. Notices. Federal
Register, publication.>> Regulations issued under this subsection shall
be retroactive to the date that the notice of proposed rulemaking is
published in the Federal Register.

    (c) Limitations.--The Secretary may place limitations on the royalty
relief granted under this section based on market price. The royalty
relief granted under this section shall not apply to a lease for which
deep water royalty relief is available.

SEC. 345. <<NOTE: 42 USC 15905.>> ROYALTY RELIEF FOR DEEP WATER
            PRODUCTION.

    (a) In General.--Subject to <<NOTE: Effective date.>> subsections
(b) and (c), for each tract located in water depths of greater than 400
meters in the Western and Central Planning Area of the Gulf of Mexico
(including the portion of the Eastern Planning Area of the Gulf of
Mexico encompassing whole lease blocks lying west of 87 degrees, 30
minutes West longitude), any oil or gas lease sale under the Outer

[[Page 119 STAT. 704]]

Continental Shelf Lands Act (43 U.S.C. 1331 et seq.) occurring during
the 5-year period beginning on the date of enactment of this Act shall
use the bidding system authorized under section 8(a)(1)(H) of the Outer
Continental Shelf Lands Act (43 U.S.C. 1337(a)(1)(H)).
    (b) Suspension of Royalties.--The suspension of royalties under
subsection (a) shall be established at a volume of not less than--
            (1) 5,000,000 barrels of oil equivalent for each lease in
        water depths of 400 to 800 meters;
            (2) 9,000,000 barrels of oil equivalent for each lease in
        water depths of 800 to 1,600 meters;
            (3) 12,000,000 barrels of oil equivalent for each lease in
        water depths of 1,600 to 2,000 meters; and
            (4) 16,000,000 barrels of oil equivalent for each lease in
        water depths greater than 2,000 meters.

    (c) Limitation.--The Secretary may place limitations on royalty
relief granted under this section based on market price.

SEC. 346. ALASKA OFFSHORE ROYALTY SUSPENSION.

    Section 8(a)(3)(B) of the Outer Continental Shelf Lands Act (43
U.S.C. 1337(a)(3)(B)) is amended by inserting ``and in the Planning
Areas offshore Alaska'' after ``West longitude''.

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 <<NOTE: 42 USC 6506a.>> 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'';

[[Page 119 STAT. 705]]

            (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) <<NOTE: Deadlines.>> 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 <<NOTE: Deadline.>> 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.--

[[Page 119 STAT. 706]]

            ``(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

[[Page 119 STAT. 707]]

                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'';