Department of the Interior: Royalty-in-Kind Oil and Gas Preferences
Highlights
This responds to a Congressional request for our opinion regarding the Secretary of Interior's authority, under section 342(j) of the Energy Policy Act of 2005, to "grant a preference" in the disposal of royalty oil or gas received by the United States. 42 U.S.C. 15902(j)(1). The purpose of section 342(j) is to provide "additional resources to any Federal low-income energy assistance program." Id. In this regard, Congress asked whether section 342(j) provides sufficient authority for the Secretary to provide such programs with oil and gas at a discount to fair market value.
B-307767, Department of Interior--Royalty-in-Kind Oil and Gas Preferences, November 13, 2006
The Honorable Wayne Allard
The Honorable Ken Salazar
Subject: Department of Interior—Royalty-in-Kind Oil and Gas Preferences
This responds to your request for our opinion regarding the Secretary of Interior's authority, under section 342(j) of the Energy Policy Act of 2005, to grant a preference in the disposal of royalty oil or gas received by the
The Department of Interior maintains that section 342(j) of the Energy Policy Act does not permit such oil and gas sales at a discount to fair market value. Although not necessarily the only reading of the provision, we agree with Interior that this is the better reading of section 342(j). As we explain below, the issue posed presents a close question of statutory construction. In our, and Interior's view, the phrase grant a preference in section 342 does not mean to grant a discount to fair market value where the same section requires sales or transfers to be at not less than market value and there is no indication that Congress intended preference to include a discount to fair market value.[1]
BACKGROUND
The United States leases federal lands containing oil and gas deposits under two specific programs: the Mineral Land Leasing Act of 1920 (MLLA)[2] governs land deposits and the Outer Continental Shelf Lands Act of 1953 (OCSLA)[3] governs lease of oil and gas deposits from offshore or submerged lands.
The MLLA authorizes the Secretary of the Interior to lease oil and gas deposits, and certain federal lands containing oil and gas deposits, to
Similarly, the OCSLA authorizes the Secretary of the Interior to lease oil and gas deposits from offshore or submerged lands on the outer continental shelf off the
43 U.S.C. sect. 1353. Royalty oil or gas sold under OCSLA must not be sold for more than its regulated price or, if no regulated price applies, must not be sold at less than its fair market value.
Section 342 of the Energy Policy Act of 2005[6] governs Interior's program on oil and gas royalties in kind. It applies to all royalties accepted in kind under any federal oil or gas lease or permit under section 36 of MLLA (30 U.S.C. sect. 192), section 27 of OCSLA (43 U.S.C. sect. 1353), or any other federal law governing leasing of federal land for oil and gas development. 42 U.S.C. sections 15902(a). It requires the Secretary to sell royalties taken in kind at not less than fair market value. 42 U.S.C. sections 15902(b)(3)(A).
Another subsection, section 342(j), permits the Secretary, in the sale of royalty oil and gas, to 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. 42 U.S.C. sect. 15902(j). It is this subsection which is at issue here. Under the Low-Income Home Energy Assistance Program (LIHEAP),[7] the federal government provides block grants to states, the
DISCUSSION
As noted above, section 342(b)(3)(A) clearly states that the Secretary may not sell or dispose of any royalty production taken in kind for less than the market price. Thus, we need to examine whether the phrase grant a preference or the term preference means a discount to fair market value and supersedes the specific provision precluding sale at not less than fair market value.
Neither section 342(j) nor other sections of the Energy Policy Act define the phrase grant a preference or the term preference. Nothing in the Act indicates that
preference means a discount to fair market value. There is little legislative history except for a floor statement by Senator Salazar, who offered his interpretation of the provision when the conference report was being considered. 151 Cong. Rec. S9269 (the Secretary of Interior [to] begin a demonstration program that would provide royalty in kind natural gas to low-income energy consumers at below market cost. In order to do so, the Secretary could enter into agreements with natural gas distribution companies to provide them natural gas at below market value as long as they guarantee [that] such gas will be delivered to low-income energy consumers. In practice, the transfer would occur through accounting mechanisms, not the actual exchange of natural gas molecules.
In the absence of some indication to the contrary, Congress is usually deemed to use words in their common, ordinary sense. B-303495, Jan. 4, 2005, citing Mallard v. United States District Court, 490 U.S. 296, 300–01 (1989). One measure of the common, ordinary meaning of words is a standard dictionary.
We looked at other laws that deal with the
Also, section 9(c) of the Reclamation Project Act of 1939 provides that in sales or leases of electric power or power privileges made by the Secretary, preference shall be given to municipalities and other public corporations or agencies and to cooperatives and other nonprofit organizations. 43 U.S.C. sect. 485h(c). The preference clause requires only that public entities be given a preference over private entities in access to power generated by federal reclamation projects.
Interior's Solicitor has concluded that section 342(j) does not provide the Secretary with authority to sell royalty-in-kind oil or gas at less than fair market value. Letter from R.M. Johnnie Burton, Director, Minerals Management Service, to Senator Ken Salazar,
We think section 342 should be read as a whole. The better reading is that it does not authorize the Secretary to dispose of royalty-in-kind oil and gas at less than fair market value. Certainly, section 342(j), standing alone without reference to fair market value, might be read as permitting a price preference.[9] To read section 342(j)
alone, however, would require us to disregard section 342(b), which requires disposal at market price. It is a cardinal principle of statutory construction that a statute ought to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant. TRW Inc. v. Andrews, 534We note that section 342(j) also requires the Secretary to submit a report to Congress assessing the effectiveness of granting preferences under section 342(j) and providing specific recommendations on the continuation of the authority to grant preferences. 42 U.S.C. sect. 15902(j)(2). In implementing section 342(j), the Department of Interior may wish to consult with the Department of Health and Human Services (HHS) on ways to offer an access preference to energy distributors. For example, HHS officials who administer the LIHEAP program explained to us informally that some states which receive LIHEAP block grants negotiate directly with utility vendors to provide discounted utility rates for LIHEAP-eligible households. Interior and HHS may wish to consider, for example, whether granting an access preference in the sale of royalty-in-kind gas to utilities that have offered discounted rates to states may indeed provide additional resources to the LIHEAP program. If, however, the Secretary determines that the section 342(j) preference provision does not effectively provide additional resources for any federal low-income energy assistance programs, the Secretary should report and make recommendations to Congress on legislative reforms to that authority.[10]
CONCLUSION
The issue posed presents a close question of statutory construction. The Department of Interior maintains that section 342(j) of the Energy Policy Act of 2005, which permits it to grant a preference in royalty oil and gas sales to provide additional resources to any federal low-income energy assistance program, does not permit such oil and gas sales at a discount to fair market value. Although not necessarily the only reading of the provision, we agree with Interior that this is the better reading of section 342(j). In our, and Interior's view, the phrase grant a preference in section 342 does not mean to grant a discount to fair market value where the same section requires sales or transfers to be at not less than market value and there is no indication that Congress intended preference to include a discount to fair market value.
Gary L. Kepplinger
General Counsel
B-307767
DIGEST
Section 342(j) of the Energy Policy Act of 2005, 42 U.S.C. sect. 15902(j), does not authorize the Secretary of the Interior to dispose of in-kind royalty oil and gas at a discount to fair market value. Section 342(b)(3)(A) requires the Secretary to sell all royalty oil and gas taken in kind at not less than fair market value. We agree with the Department of the Interior that the phrase grant a preference in section 342 does not mean to grant a discount to fair market value where the same section requires sales or transfers to be at not less than market value and there is no indication that Congress intended preference to include a discount to fair market value.
[1] Our practice when rendering opinions is to obtain the views of the relevant federal agency to establish a factual record and to elicit the agency's legal position on the subject matter of the request. GAO, Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP (
[2] MLLA is codified, as amended, in scattered sections of title 30 of the United States Code.
[3] 43 U.S.C. sections 1331–1356a.
[4] See also 43 C.F.R. part 3100. See generally Department of the Interior, Bureau of Land Management, The Federal Onshore Oil and Gas Leasing System, available at www.blm.gov/nhp/300/wo310/oandg/docs/LeasingBrochure.pdf (last visited
[5] See also 30 C.F.R. parts 256, 260. See generally B-205877,
[6] Pub. L. No. 109-58, title III, subtitle E, sect. 342, 119 Stat. 594, 697 (
[7] The Low-Income Home Energy Assistance Act of 1981, Pub. L. No. 97-35, title XXVI, 95 Stat. 357, 893 (
[8] For a few preference provisions relating to the
[9] For example, both sections 342(h) and (i), regarding sales to small refineries and federal agencies, require sales at not less than market price. We are not persuaded, however, that the lack of a similar requirement from section 342(j) compels a construction of section 342(j) as permitting disposal of royalty oil and gas at less than market price. We will not loosely construe such statutory silence as meaning Congress intended to authorize disposal of federal property at less than market price, particularly where Congress's constitutional prerogative to dispose of United States property is implicated, U.S. Const. Art. IV, sect. 3, Cl. 2. The Property Clause of the Constitution grants Congress power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the
[10] For example, we note a bill pending in the House of Representatives, H.R. 5111, 109th Cong. (2006), which would amend section 342(j) to authorize a discount in the sale of royalty-in-kind oil and gas.