S. 5458 — Supply Relief and Domestic Production Cost Reduction Act

This section directs the Secretary of Energy to certify a supply shortage period when any of five conditions exist, including average retail prices for gasoline, diesel, heating oil, or natural gas exceeding the 5-year average by more than 15 percent for 30 consecutive days, domestic inventories falling below the 5-year seasonal average for 30 days, production constraints, a presidential emergency declaration, or a determination that additional domestic production would reduce shortage risks. A certification lasts 180 days, may be extended or terminated by the Secretary, and must be published in the Federal Register.

This section applies relief available during a supply shortage period to covered upstream production activities initiated, permitted, approved, modified, extended, renewed, drilled, completed, recompleted, or placed into production during the period, and to any related costs, payments, royalties, fees, or expenditures incurred during the period.

This section reduces the royalty rate for oil and gas leases on onshore Federal lands to the lesser of the lease-specified rate or 8 percent during supply shortage periods. It directs the Secretary to offer royalty relief, including reduced rates or suspension volumes, for Outer Continental Shelf production when the relief is likely to increase output, accelerate timing, extend fields, avoid shut-ins, or lower consumer costs. It sets the royalty rate to 0 percent for marginal wells (producing 15 barrels of oil or 90,000 cubic feet of gas per day or less) for 24 months. It reduces the royalty rate by 50 percent for incremental new production from existing leases for the first 36 months. It leaves unchanged all existing obligations for well control, safety, spill prevention, reclamation, bonding, plugging, abandonment, and environmental compliance.

This section reduces by 50 percent the rental payments due on federal oil and gas leases during a supply shortage period when the lessee certifies that the savings will support covered upstream production activity. It sets the minimum acceptable bid for such leases at $2 per acre and authorizes the Secretary to waive, reduce, or defer nonessential administrative fees for permits to drill, rights-of-way, lease reinstatements, and related approvals. Lessees must certify that the relief will fund additional drilling or workover activity, maintain or restore production, avoid shut-ins, lower delivered energy costs, or support related employment and field services.

This section establishes an expedited royalty relief process for federal oil and gas leases in supply-constrained basins during supply shortage periods. It defines a supply-constrained basin as one in which the Secretary of Energy, in consultation with the Secretary of the Interior, determines that additional production would increase domestic supply, faces constraints from costs or permitting, or would reduce regional or national fuel prices. The Secretary of the Interior must approve or deny complete applications within 30 days or grant automatic approval for 24 months.

This section extends by 2 years the primary term of any oil or gas lease during a supply shortage period if production, drilling, completion, or related operations are delayed by federal permitting, administrative protests, litigation, supply-chain disruptions, lack of field services, right-of-way delays, or other causes outside the lessee's control. Extensions require no additional bonus, rental, fee, or other payment.

This section requires covered producers receiving relief under the Act to certify to the applicable Federal agency that the relief supports one or more of the following: increased domestic production, maintenance or restoration of existing production, avoidance of shut-in production, reduction in production costs, expansion of drilling, completion, recompletion, workover, or field-service activity, or reduction of delivered energy costs to refiners, utilities, industrial consumers, commercial consumers, agricultural users, or households. The Secretary of Energy prescribes the certification form, and false statements are subject to penalties under 18 U.S.C. 1001.

This section requires the Secretary of Energy, in consultation with the Secretary and the Secretary of the Treasury, to submit to Congress and make publicly available an annual report beginning 180 days after the first certification of a supply shortage period. The report must describe the Act’s effects on domestic production of covered energy commodities and on consumer fuel and energy costs, the number of permits and approvals issued under the Act, and recommendations for additional legislation to reduce supply shortages and consumer costs.

This section directs the Comptroller General to submit a report to Congress within 2 years of enactment evaluating whether relief under the Act increased domestic supply, reduced production costs, and reduced consumer prices; whether Federal agencies complied with required permitting deadlines; and whether additional reforms are needed to address supply shortages.